LyondellBasell Industries NV (LYB)

Q2 2012 Earnings Call

July 27, 2012 11:00 am ET

Executives

Douglas J. Pike – Investor Relations

Karyn Ovelmen – Executive Vice President and Chief Financial Officer

James L. Gallogly – Chief Executive Officer

Sergey Vasnetsov – Senior Vice President, Strategic Planning and Transactions

Analysts

Jeff Zekauskas – JPMC

David Begleiter – Deutsche Bank

Robert Koort – Goldman Sachs

P.J. Juvekar – Citigroup

Don Carson – Susquehanna Financial

Duffy Fischer – Barclays Capital

Laurence Alexander – Jefferies & Company

Vincent Andrews – Morgan Stanley

Kevin McCarthy – Bank of America/Merrill Lynch

Bill Hoffman – RBC Capital Markets

Nils Wallin – CLSA

Gregg Goodnight – UBS

Presentation

Operator

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Hello, and welcome to the LyondellBasell Teleconference. At the request of LyondellBasell, this conference is being recorded for instant replay purposes. Following today's presentation, we will conduct a question-and-answer session. (Operator Instructions)

I’d now like to turn the call over to your host, Mr. Doug Pike, Vice President, Investor Relations. Sir, you may begin.

Douglas J. Pike

Thank you, Brian. Well, hello and welcome to LyondellBasell’s second quarter 2012 teleconference. I’m joined today by Jim Gallogly, our CEO; Karyn Ovelmen, our CFO; and Sergey Vasnetsov, our Senior Vice President of Strategic Planning and Transactions.

Before we begin the business discussion, I'd like to point out that a slide presentation accompanies today's call, and is available on our website at

www.lyondellbasell.com

. I'd also like you to note that statements made in this call relating to matters that are not historical facts are forward-looking statements, and these forward-looking statements are based upon assumptions of management, which are believed to be reasonable at the time made, and are subject to significant risks and uncertainties. Actual results could differ materially from those forward-looking statements. And for more detailed information about the factors that could cause our actual results to differ materially, please refer to the cautionary statements in the presentation slides and our financial reports, which are available at

www.lyondellbasell.com/investorrelations

. A reconciliation of non-GAAP financial measures to GAAP financial measures together with any other applicable disclosures, including the earnings release, are currently available on our website, lyondellbasell.com.

Finally, I'd like to point out that a recording of this call will be available by telephone beginning at 2 pm Eastern Time today until 7 pm Eastern Time on August 27, by calling 866-418-8384 in the United States and 203-369-0754 outside the United States, and the passcode for both numbers is 2378. And during today's call, we'll focus on second quarter 2012 performance, the current environment, and the near-term outlook.

With that being said, I'd now like to turn the call over to Jim.

James J. Gallogly

Thank you for joining our earnings call. As Doug mentioned, a set of presentation slides accompany this call, and are available on our website.

Let’s begin by taking a look at page 4 and reviewing a few financial highlights. Net income was $768 million and EBITDA was $1.77 billion. The quarter included some charges and gains that are not reflective of the underlying business and exclusive of these, net income was $939 million.

Our earnings per share were $1.33 or $1.66 exclusive of the charges and gains that I referenced. Karyn and I will discuss the quarter in detail, but I thought I would quickly summarize a few highlights and trends.

The North American olefins, we benefited from increased ethylene margins. Raw material costs declined as the quarter progressed. European olefins results exceeded expectations as raw material costs declined in advance of product price declines resulting in margin expansion.

All the olefins sales volumes declined reflecting weak economic conditions. Intermediate and derivative results remain strong and were consistent with the first quarter. We’ve restructured our reporting. Oxyfuels are now part of the I&D segment. Karyn will provide more color on this.

Our earnings release also includes an attachment with additional details. Houston refinery spreads increased as the Maya 2-1-1 averaged approximately $23.15 per barrel. However, byproduct values remain weak. Our Berre refinery is now accounted for as a discontinued operation.

During the quarter, we resolved a past insurance claim related to Hurricane Ike, and recognized a gain of $100 million, and we raised our interim dividend by 60% to $0.40 per quarter. The second quarter was challenging for the entire chemical industry in terms of a sluggish economy and volatile energy costs. However, our company met this challenge with highly focused, disciplined, and effective execution, and delivered very strong results. In fact, the second quarter was the all-time record underlying EBITDA quarter for the company.

We also had record quarterly profits for three out of four of our main segments; Americas O&P, EAI, and I&D. However, there are some items, such as the changes in reporting and premiums paid for financing that may create some confusion. Karyn and I will address these during the call.

In addition to continued strong financial results, our environmental health and safety results have been very good. On slide number 5, we've updated our safety data and you can see a continuing trend. I believe that our safety record is very near to best-in-class.

Now, I'd like to turn the call over to Karyn to discuss some key elements of our financial performance.

Karyn F. Ovelmen

Thanks, Jim. Please turn to slide number 6, which charts our first quarter and last 12 months segment EBITDA, the almost $1.8 billion of EBITDA reflects a $550 million increase over the first quarter.

From a segment perspective during the second quarter, O&P Americas EBITDA was $776 million. The Olefins products alone generated approximately $615 million, even while one of our largest plants was in turnaround for a month during the quarter. O&P-EAI produced over $330 million of EBITDA, including $59 million from JV dividends. The Olefins plants benefited as declining naphtha cost outpaced the product price declines.

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