LyondellBasell Industries Q3 Earnings Call Highlights

Key Points

• Strong third-quarter performance: LyondellBasell reported $1.5 billion in EBITDA, $2.54 in adjusted diluted EPS and $1.4 billion in free cash flow. Record Intermediates and Derivatives results offset weaker polymer pricing.
• Portfolio and financial actions: The company agreed to sell its former Houston refinery site to Valero for $320.5 million, a transaction expected to improve annual cash flow by $50 million to $100 million. LyondellBasell also continues cost reductions, debt repayment and efforts to support its dividend.
• Cautious fourth-quarter outlook: Polyethylene demand is expected to remain resilient, but higher feedstock costs may pressure margins, while European operations face energy, logistics and Rhine-related constraints. Intermediates and Derivatives profitability is expected to moderate from exceptional third-quarter levels.

LyondellBasell Industries NYSE: LYB reported third-quarter EBITDA of $1.5 billion and earnings of $2.54 per diluted share, excluding identified items, as record results in its Intermediates and Derivatives business partly offset weaker polymer pricing.

Chief Executive Officer Peter Vanacker said the company generated $1.4 billion of free cash flow, equal to 100% of EBITDA, during the quarter. Cash rose by approximately $600 million to $3.2 billion after the company repaid a €500 million bond, while available liquidity increased to $7.7 billion.

Vanacker said petrochemical and energy markets remained affected by the Middle East conflict, including impacts on production, feedstock availability, logistics and trade flows. He said the company expects any eventual normalization in markets to take “quarters, not months.”

The company reported a year-to-date total recordable incident rate of 0.12, which Vanacker said remained among the strongest safety results in the sector.

Portfolio Actions and Cash Priorities

LyondellBasell said it has agreed to sell the site of its former Houston refinery and associated assets to Valero for $320.5 million in cash. The transaction is expected to close by the end of 2026, subject to regulatory approvals and customary closing conditions.

Following the closing, Valero will assume responsibility for site operations, environmental liabilities, pension costs and related employee obligations. LyondellBasell said the transaction is expected to improve its cash flow by approximately $50 million to $100 million annually, while allowing the company to focus capital on its core businesses.

Vanacker said the company evaluated several potential uses for the site after ceasing refining operations in 2025, but concluded that a sale represented the most attractive option. He characterized the agreement as a real estate and capital-allocation decision rather than a shift in the company’s corporate strategy.

During the question-and-answer session, Vanacker said the company continues to pursue circularity investments where customer demand, regulation and infrastructure support returns. While LyondellBasell is advancing its MoReTec-1 project in Wesseling, Germany, he said any MoReTec-2 project is now more likely to be located in Europe because the U.S. lacks comparable regulatory support.

Chief Financial Officer Agustin Izquierdo said cash from operating activities totaled approximately $1.7 billion in the third quarter. Capital expenditures were $303 million and dividend payments totaled $224 million. Over the past 12 months, the company converted approximately 84% of EBITDA into cash from operations, he said.

Izquierdo said LyondellBasell’s workforce is approximately 18% smaller than at the start of last year, reflecting portfolio changes and restructuring. The company continues to target $500 million of improvements through its Cash Improvement Plan, primarily through lower capital spending and fixed-cost reductions.

Segment Performance

• Olefins and Polyolefins Americas: EBITDA was $641 million. Lower polymer, olefin and co-product pricing reduced margins from second-quarter record levels, though profitability remained substantially above the prior year. North American polyethylene and polypropylene domestic sales volumes rose about 6% and 5%, respectively, year over year.
• Olefins and Polyolefins Europe, Asia and International: EBITDA was $13 million. The decline reflected lower volumes following the sale of four European assets in May, margin compression, low Rhine water levels and the absence of a second-quarter gain from emissions-credit sales.
• Intermediates and Derivatives: EBITDA more than doubled sequentially to a record $795 million. The performance was supported by stronger oxyfuels margins, tight gasoline supply, higher octane values and the restart of Bayport PO/TBA operations.
• Advanced Polymer Solutions: EBITDA was $45 million, broadly in line with the prior-year period but below a particularly strong second quarter. The company cited seasonally lower automotive volumes, European original equipment manufacturer downtime and cautious customer purchasing.
• Technology: EBITDA was $29 million. Results declined sequentially because of lower catalyst demand after unusually strong second-quarter buying, particularly in Asia and the Americas.

Vanacker said the company’s diversified end-market exposure helped cushion cyclicality in individual businesses. Strong demand from consumables, including packaging and healthcare applications, has provided a more stable base, while oxyfuels benefited from fuel-quality requirements and biofuel regulations. The company also cited infrastructure and data-center investment as sources of demand for pipe, conduit, wire and cable applications.

Fourth-Quarter Outlook

LyondellBasell expects North American polyethylene demand to remain resilient in domestic and export markets, supported by lean inventories, elevated freight costs and planned industry outages. However, the company said higher feedstock costs and competitive pricing could pressure margins as demand moderates toward year-end.

Kim Foley, executive vice president of Global Olefins and Polyolefins, said U.S. domestic polyethylene prices increased by $0.05 per pound in September, while export prices were up $0.10 to $0.12 per pound from July lows. Industry price increases of $0.05 per pound were announced for October and November, although rising feedstock costs could offset some of the benefit.

Foley said the company expects fourth-quarter operating rates of about 85% in O&P Americas, compared with an approximately 85% segment rate and 90% cracker rate in the third quarter. O&P Europe, Asia and International is expected to operate at roughly 60% of capacity, below approximately 65% in the third quarter, amid high energy and logistics costs and Rhine-related constraints.

For Intermediates and Derivatives, Executive Vice President Aaron Ledet said fourth-quarter profitability should moderate from exceptional third-quarter levels as gasoline cracks and MTBE premiums ease and butane costs rise. Still, he said tight product supply and continued octane demand should support historically strong fourth-quarter margins. The segment is targeting operating rates of approximately 75%, compared with about 85% in the third quarter.

Vanacker said the company’s capital-allocation priorities remain unchanged: maintaining an investment-grade balance sheet, reducing leverage, funding reliable operations, supporting dividend growth and using buybacks to offset dilution. LyondellBasell plans to repay a $900 million debt maturity in the first quarter, Izquierdo said.

About LyondellBasell Industries (NYSE:LYB)

LyondellBasell Industries N.V. is a global chemical company that produces polymers, chemicals and related products used in packaging, transportation, construction, healthcare, consumer goods and other industries. Its portfolio includes polyethylene, polypropylene, advanced polymers, propylene oxide, solvents, acetyls and other chemical intermediates.

The company also operates businesses involved in refining and in the development and licensing of chemical and polymer technologies. Its products are used to manufacture items such as food and beverage packaging, automotive components, medical products, coatings, adhesives and household goods.

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