LyondellBasell Industries' CEO Discusses Q4 2011 Results - Earnings Call Transcript

LyondellBasell Industries NV (LYB)

Q4 2011 Earnings Conference Call

February 10, 2012 11:00 ET

Executives

Doug Pike – Vice President, Investor Relations

Jim Gallogly – Chief Executive Officer

Karyn Ovelmen – Chief Financial Officer

Sergey Vasnetsov - Senior Vice President, Strategic Planning and Transactions

Analysts

David Begeleiter – Deutsche Bank

Bob Koort – Goldman Sachs

P.J. Juvekar – Citi

Duffy Fischer – Barclays Capital

Jeff Zekauskas – JPMC

Don Carson – Susquehanna Financial

Vincent Andrews – Morgan Stanley

Laurence Alexander – Jefferies

Hassan Ahmed – Alembic Global

Kevin McCarthy – Bank of America Merrill Lynch

Gregg Goodnight – UBS

Ed Mally – Imperial Capital

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 conference over to Mr. Doug Pike, Vice President, Investor Relations. Sir, you may begin.

Doug Pike – Vice

President, Investor Relations

Thanks, Brad. Hello and welcome to LyondellBasell's Fourth Quarter 2011 teleconference. I am 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. 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 slide 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 11 pm Eastern Time on March 10, by calling 888-568-0611 in the United States and 203-369-3197 outside of the United States, and the pass code for both numbers is 6565. During today's call, we'll focus on fourth quarter and full year 2011 performance, the current environment, and the near-term outlook.

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

J

im

Gallogly

–

C

hief Executive Officer

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 take a look at page 4 and review a few financial highlights. 2011 was a strong year for LyondellBasell. We generated net income of $2.1 billion and EBITDA of $5.3 billion. If we take into account all of the items we don't believe reflect underlying business results including the unique financing costs associated with our balance sheet restructuring, charges related to the suspension of operations at the Berre refinery, and our European restructuring, the underlying net income would be $2.7 billion and EBITDA would be $5.4 billion. The corresponding earnings were $4.71 per share excluding items of this nature.

In the fourth quarter, prices and margins in the olefins chain and refining declined from strong earlier levels. As a result of this and several charges, our fourth quarter EBITDA declined to $536 million or $675 million exclusive of charges. While the magnitude of the quarterly decline is significant, there is positive momentum building in a number of our businesses at present. I attribute most of the weakness in the fourth quarter to global economic conditions, particularly in Europe, unusual crude pricing movements in refining and typical seasonal trends. However, the quarter was also impacted by other items including turnarounds in the Intermediates & Derivatives segment.

Karyn and I will discuss all the details later in the call but first, I want to discuss some of our 2011 accomplishments. If you turn to page 5 of the presentation, I'll begin with our 2011 environmental health and safety performance. Our safety statistics have continued to improve. While we typically only speak to you regarding our employee and contractor safety performance, I would also like to highlight the improvement in our process safety and environmental performance. These are all indicators of focus and investment in our operations. I am quite proud of our results and the continued improvement to levels that rival the best in the industry.

Unfortunately, though, I must report that in mid-January, we had an incident in one of our low-density polyethylene lines in Wesseling, Germany. There were no injuries and the damage was limited to an older 130 million pound per year line. The line is currently out of service and we are still investigating the cause and assessing damages.

On Page 6, we have outlined some of the key establishments. I will highlight just a few of the many achievements. First, as a relatively young Company, establishing strong governance has been an important focus. During the year, we expanded our Supervisory Board, adding world-class expertise. We have always emphasized cost management, and 2011 was not an exception. Our underlying fixed costs were flat compared to 2009. I'm also pleased to say that LyondellBasell shares outperformed the market delivering a 10% return to our shareholders. In the financial area, we undertook an important balance sheet restructuring. This unlocked the value of our significant cash generation as we both reduced debt and paid a $2.6 billion special dividend.

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