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Edited Transcript of LYB earnings conference call or presentation 1-Feb-19 4:00pm GMT

Q4 2018 LyondellBasell Industries NV Earnings Call

HOUSTON Feb 4, 2019 (Thomson StreetEvents) -- Edited Transcript of LyondellBasell Industries NV earnings conference call or presentation Friday, February 1, 2019 at 4:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Bhavesh V. Patel

LyondellBasell Industries N.V. - CEO & Director

* David Kinney

LyondellBasell Industries N.V. - Director of IR

* Thomas Aebischer

LyondellBasell Industries N.V. - EVP & CFO

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Conference Call Participants

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* Aleksey V. Yefremov

Nomura Securities Co. Ltd., Research Division - Research Analyst

* Arun Shankar Viswanathan

RBC Capital Markets, LLC, Research Division - Analyst

* David L. Begleiter

Deutsche Bank AG, Research Division - MD and Senior Research Analyst

* Dylan Scott Carter Campbell

Goldman Sachs Group Inc., Research Division - Research Analyst

* Frank Joseph Mitsch

BB&T Capital Markets, Research Division - Former MD and Senior Equity Research Analyst for Commercial & Industrial Group

* Hassan Ijaz Ahmed

Alembic Global Advisors - Partner & Head of Research

* Ian Matthew Bennett

BofA Merrill Lynch, Research Division - Associate

* Jeffrey John Zekauskas

JP Morgan Chase & Co, Research Division - Senior Analyst

* John Ezekiel E. Roberts

UBS Investment Bank, Research Division - Executive Director and Equity Research Analyst, Chemicals

* Jonas I. Oxgaard

Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst

* Kevin William McCarthy

Vertical Research Partners, LLC - Partner

* Matthew Robert Lovseth Blair

Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - MD of Refining and Chemicals Research

* P.J. Juvekar

Citigroup Inc, Research Division - Global Head of Chemicals and Agriculture and MD

* Patrick Duffy Fischer

Barclays Bank PLC, Research Division - Director & Senior Chemical Analyst

* Vincent Stephen Andrews

Morgan Stanley, Research Division - MD

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Presentation

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Operator [1]

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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 (Operator Instructions)

I'd now like to turn the conference over to Mr. David Kinney, Director of Investor Relations. Sir, you may begin.

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David Kinney, LyondellBasell Industries N.V. - Director of IR [2]

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Thank you, Jaclyn. Hello, and welcome to LyondellBasell's Fourth Quarter 2018 Teleconference. I'm joined today by Bob Patel, our Chief Executive Officer; and Thomas Aebischer, our Chief Financial Officer.

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

I would also like for you to note that statements made on this call relating to matters that are not historical facts are forward-looking statements. These forward-looking statements are based on 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, please refer to the cautionary statements in the presentation slides and our financial reports, which are available at www.lyondellbasell.com/investorrelations.

Reconciliations 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 at www.lyondellbasell.com.

Finally, I would like to point out that a recording of this call will be available by telephone beginning at 1:30 p.m. Eastern time today until 1:59 a.m. Eastern time on April 2 by calling (866) 444-9039 in the United States and (203) 369-1136 outside of the United States. The passcode for both numbers is 6482.

During today's call, we will focus on the fourth quarter and full year results, the current environment, our near-term outlook and provide an update on our growth initiatives.

With that being said, I would now like to turn the call over to Bob.

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [3]

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All right. Thank you, Dave. Good day to all of you participating around the world, and thank you for joining our 2018 year-end earnings call.

Let's begin with Slide 3 and review the highlights for 2018 and our progress in advancing our value-driven growth strategy.

Record-setting earnings in our Intermediates & Derivatives and Technology segments partially offset declines, primarily in our Olefins and Polyolefins Europe, Asia and International segment to provide $4.7 billion of net income and $6.9 billion of EBITDA for the year. Increased cash generation helped to fund growth investments while we improved our free cash flow yield by over 200 basis points and posted a strong 27% return on our invested capital during 2018.

The acquisition of A. Schulman in August made LyondellBasell the world's largest plastics compounding company. In conjunction with this acquisition, we launched our Advanced Polymer Solutions business segment to provide focus and visibility for this new global platform and quickly went to work on integration that achieved an annualized synergy run rate of $47 million by the end of the year. Progress continues, and we remain confident that we will meet or exceed our target to capture $150 million of integration-related synergies within 2 years of the closing date.

In March, we launched an innovative plastics recycling joint venture with SUEZ. That provides a meaningful and sustainable solution for plastic waste. We are pleased with initial market demand for these premium recycled plastics and continue to optimize the operational and commercial performance of the business model with an eye toward replicating this model in other parts of Europe.

We advanced our pipeline of organic growth projects during 2018 with our new Hyperzone HDPE plant scheduled for startup in the third quarter of this year and construction of the world's largest PO/TBA plant on track for completion in the latter part of 2021. These projects not only increase our production capacity but also represent milestones for the commercialization of proprietary technologies such as our new Hyperzone process for polyethylene and the latest developments from our advantaged propylene oxide coproduct technologies.

We continue to actively manage our business portfolio with several small acquisitions and divestitures around the world while we evaluate other opportunities including a potential acquisition of Braskem.

In the meantime, our cash flow has enabled us to opportunistically repurchase 19.2 million shares of LyondellBasell's stock and return over $3.4 billion to shareholders in the form of dividends and share repurchases.

In 2018, our company continued to deliver on our promise of value-driven growth through our balanced strategy of operational excellence, profitable organic expansions, accretive M&A and significant shareholder returns.

Please turn to Slide 4, where I'm proud to report that LyondellBasell's employees and contractors finished the year with a significant 14% improvement in our safety performance. During 2018, our injury rate was challenged by the need to improve upon the safety performance at the facilities we acquired from A. Schulman. We are diligently working to ensure all of our employees, contractors, assets and the communities in which we operate finish the day in the same or better condition than they were at the start of the day. Our goal remains 0 incidents for injuries every day of the year.

Let's turn to Slide 5 and review some of the detail behind our fourth quarter and annual results. Diluted earnings were $1.79 per share for the quarter, and we earned $12.01 during the full year. As shown in the chart on the left, after excluding significant nontax -- noncash tax benefits in 2017 and 2018, earnings per share increased by approximately 10% in 2018. For the fourth quarter of 2018, we incurred $20 million of integration costs related to the Schulman acquisition that impacted quarterly earnings by $0.04 per share. Transaction and integration costs impacted the full year results by $0.14 per share.

In addition to typical fourth quarter seasonal headwinds seen in our industry, our business was challenged by the substantial 40% fall in the price of crude oil that began in early October. Customers often delay orders and destock inventories during periods of declining oil prices in expectations of lower petrochemical and plastics prices.

Volumes declined in nearly every business across our 6 segments during the fourth quarter. As crude prices rebounded in late December and January, our order volumes have improved. We've seen European and Asian industrial demand impacted by disruptions in the automotive sector, arising from issues with Chinese consumer lending, new vehicle testing standards in Europe and trade uncertainties. We believe that global consumer demand remains strong, and we'll be closely watching trends in Asia after the Lunar New Year holidays in early February.

During our third quarter earnings call, I outlined 3 major planned maintenance outages that were estimated to impact fourth quarter earnings by a total of $95 million. Extended maintenance, low Rhine river water levels and feedstock supply disruptions had one of our suppliers increase the fourth quarter impact to our O&P-EAI segment by approximately $110 million. Additionally, results were impacted by approximately $20 million by unplanned events in our Intermediates & Derivatives and Refining segments. All together, planned and unplanned downtime impacted our fourth quarter earnings by approximately $225 million. We do not expect such high levels of maintenance over the coming months. During the first half of 2019, our only planned maintenance is scheduled for the first quarter at our O&P-Americas segment. We expect that first quarter downtime will impact earnings for the whole company by approximately $60 million to $70 million.

And now Thomas will provide more detail on our financial highlights for the fourth quarter and the year.

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Thomas Aebischer, LyondellBasell Industries N.V. - EVP & CFO [4]

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Thank you, Bob, and good day to all of you. Please turn to Slide 6, which illustrates the developments of our business segments over the past 2 years.

In 2018, LyondellBasell's business portfolio demonstrated remarkable resilience to changing market environments. Our Intermediates & Derivatives segment profitability improved by approximately 35% and, for the first time, exceeding $2 billion in EBITDA. Our technology group granted 16 licenses for new polyolefin plant designs that helped improve segment EBITDA by 47%. As seen in the chart, these improvements helped to offset declines in O&P-EAI. The profitability offsets provided by the geographic and product diversity of our business portfolio is a recurring theme for LyondellBasell and an attribute that we seek to maintain, manage and extend as we consider strategic options for the company.

In Olefins and Polyolefins - Americas, high industry margins for polyethylene helped to offset the majority of the decline in olefin margins. Our business continues to benefit from strong demand and advantaged shale-based feedstocks that enabled us to retain 95% of our prior year profitability for the segment.

The results for our new Advanced Polymer Solutions segment includes contributions from the A. Schulman acquisition beginning in late August 2018. Our progress towards our goal of $150 million in synergies is on schedule and will become more apparent during 2019.

Our Houston refinery ran very well during 2018, and we completed all major scheduled maintenance for the next 2 years. We expect refining market conditions to rebalance during the first half of 2019 and look forward to strong refinery runs that will capture expected benefits of new sulfur regulations for marine fuels in late 2019 and 2020.

Now please turn to Slide 7, where you can see that our businesses generated $1.3 billion of cash from operating activities during the fourth quarter, which contributed to $5.5 billion of cash generation for the year.

During the quarter, investment in capital expenditures increased to approximately $700 million as we ramped up construction of our PO/TBA plant and continued to move our Hyperzone plant forward towards startup.

As the stock market entered a correction during the fourth quarter, we significantly increased our share repurchases in response to lower share prices. In the fourth quarter, we repurchased 11.5 million shares, the most in any quarter since 2016. We returned $1.4 billion to shareholders in dividends and share purchases during the fourth quarter. In 2018, our opportunistic buyback strategy allowed us to repurchase 8% more shares than would have occurred if we deployed the same amount of cash in equal amounts every trading day of the year.

The quarter closed with over $1.8 billion of cash and liquid investment on the balance sheet. We approximately -- with approximately $2.5 billion of unused and available credit facilities, we completed the quarter with a total liquidity in excess of $4 billion.

Turning to Slide 8. Let's review our capital deployment over the past 6 years. The light blue bars depict our cash generation from operating activities, which has ranged between $4.8 billion to $6 billion since 2013. The stack bars on the right depict our uses of cash ranked in order of priority. Our highest priorities, represented by the dark blue on the bottom, are progressively growing dividend. During 2018, we increased our dividend by 11%. The strong increase reflected and improved -- reflected an improved outlook after we updated our views on tax reform and the petrochemical industry. We have a top quartile dividend that is currently yielding approximately 4.6% return.

Our next priority is maintenance capital to support the safety and reliability of our operations. Going forward, this baseline investment is approximately $1.1 billion per year. The remainder of the orange bar is allocated to profit-generating capital investment to support growth projects. We estimate this investment will increase to $1.7 billion in 2019. The gray bars reflect our share repurchases. We have returned over $18 billion in share repurchases since inception of the program. Our buybacks add up to over 280 million -- 208 million shares or 36% of the shares that were outstanding in 2013 at the inception of the program. Opportunistic share repurchase will continue to be a component of our capital deployment. The green bar represents last year's A. Schulman transaction, our first significant acquisition. We continue to maintain a conservative balance sheet that provides optionality to pursue value-creating opportunities, and we will continuously reevaluate the relative merits of organic projects, growth to M&A and share repurchases to optimize returns for our investors.

Now please turn to Slide 9, where I would like to address some of your annual modeling questions for 2019. Regarding capital, we are currently planning to invest approximately $2.8 billion during 2019 to support both our base maintenance and growth programs. Approximately 60% is targeted towards profit-generating growth. The majority of this growth investment in 2019 will be dedicated to the new PO/TBA plant. Although not all plans are finalized, we estimate capital spending will average $2.8 billion annually to 2021.

For 2019, we have a fairly typical planned maintenance schedule. Activities during the year will impact annual EBITDA by approximately $160 million to $200 million. In addition to the first quarter planned maintenance in O&P-Americas mentioned by Bob, the segment will also have a cracker turnaround in the third quarter that is expected to impact EBITDA by approximately $70 million to $80 million. In our Intermediates & Derivatives segment, we have planned maintenance event that will impact EBITDA by approximately $30 million to $40 million in each of the third and fourth quarters. Our net cash interest expense for 2019 is expected to be approximately $400 million. 2019 annual booked depreciation and amortization should be approximately $1.3 billion. We plan to make regular pension contribution in 2019 that total $110 million, and we estimate the pension expense of approximately $90 million. We currently expect the 2019 effective tax rate of approximately 20% and that our cash tax rate will be slightly lower than the effective tax rate.

I will now turn the call back to Bob for a more detailed discussion of our segment results. Thank you.

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [5]

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Thank you, Thomas. Let's turn to Slide 10 and review our segment results.

In our Olefins and Polyolefins - Americas segment, fourth quarter EBITDA was $631 million, a $73 million decrease versus the third quarter. For the full year, segment EBITDA was approximately $2.8 billion. Relative to the third quarter 2018, olefins results improved by approximately $70 million due to higher ethylene prices and declining Gulf Coast ethane costs. Our cracker operating rates averaged 93% during the fourth quarter, exceeding the average industry performance of 87%. Approximately 80% of our ethylene production was from ethane and 94% came from NGLs. Polyolefin results were approximately $115 million lower than the prior period, primarily due to a $0.04 per pound decline in polyethylene spread over ethylene. For the full year, results decreased by $137 million. Olefin results declined by approximately $445 million, primarily due to a $0.06 per pound reduction in ethylene price. Spread improvements in polyethylene and polypropylene of $0.07 per pound and $0.03 per pound, respectively, drove an approximately $360 million improvement in polyolefins to mostly offset the declines in olefins.

IHS is currently forecasting relatively stable polyethylene chain margins for the first quarter. We are optimistic that 2019 will offer earnings growth for this segment as the pace of polyethylene capacity additions slows while global demand growth remains steady.

Please turn to Slide 11 as we review the performance of our Olefins and Polyolefins - Europe, Asia and International segment. During the fourth quarter, EBITDA was $127 million or $135 million lower than the third quarter. For the full year, EBITDA was $1.2 billion. We continued to optimize our portfolio in the fourth quarter by divesting a carbon black subsidiary in France. This benefited the quarter by $36 million.

Compared to the third quarter, olefins results decreased by approximately $75 million, primarily driven by a decline in volume. Combined polyolefin results decreased approximately $35 million, driven by decreased margins. Equity income decreased by $43 million, primarily due to planned maintenance at our Polish, Korean and Saudi joint ventures. Full year EBITDA results were $764 million lower than 2017. 2017 benefited from a gain of $108 million on the sale of our interest in Geosel. 2018 results included the benefit from the sale of our carbon black subsidiary and a favorable impact of approximately $95 million due to an increase in the euro versus the U.S. dollar exchange rate relative to 2017.

Olefin results for the full year decreased approximately $370 million compared to 2017. Increased feedstock cost during most of the year resulted in margin declines, while planned and unplanned maintenance and low Rhine river levels resulted in a volume decrease of approximately 10%. Combined polyolefins results decreased approximately $345 million due to $0.03 per pound and $0.02 per pound lower spreads in polyethylene and polypropylene, respectively. Joint venture equity income decreased by $46 million, primarily due to lower polyolefin spreads. In January, demand is improving, following the typical seasonal declines and destocking of the fourth quarter.

On Slide 12, let's take a look at our Intermediates & Derivatives segment. Fourth quarter EBITDA was $379 million, a decline of $125 million from the prior quarter. For the full year, the segment generated over $2 billion, setting an annual record and improving over the prior year by $521 million. Fourth quarter PO and derivatives results decreased by approximately $10 million when compared with the prior period, primarily due to lower volumes partially offset by higher margins. Intermediate Chemicals decreased $65 million, primarily due to reduced styrene and acetyls margins. Oxyfuels and related products results decreased approximately $40 million, driven by margin declines due to higher ethanol pricing relative to crude oil and a volume decline due to planned maintenance.

During 2018, the $521 million improvement in EBITDA was largely driven by margin improvements across all products due to tight market conditions and improved contracting strategies. We're very proud of the team's accomplishments in 2018, and we expect continued benefits from this work in future years.

While IHS is forecasting some moderation in methanol pricing for the first quarter, we should see improved PO and derivatives volumes for the segment due to the completion of the planned maintenance at our Bayport, Texas facility during the fourth quarter.

Slide 13 charts the full year results from I&D business improvements we discussed during our second quarter earnings call. You might recall that while the majority of the increased profitability was attributable to tight market conditions and reduced maintenance downtime in our facilities, we also described LyondellBasell's improved contracting strategies and reliability as sources of durable improvements that should persist beyond 2018.

Historically, our Intermediates & Derivatives segment generated relatively consistent EBITDA that average approximately $1.5 billion per year. We believe our new midpoint in typical markets will be approximately $1.7 billion. While the strong market seen in 2018 may moderate, we do not believe these improved margins will fully revert in 2019. In addition, we've not stopped pursuing self-help within this business. This year, we expect I&D contracting improvements to provide an additional $100 million of annual EBITDA for the segment starting in mid-2019.

On Slide 14, let's review the results of our Advanced Polymer Solutions segment. Fourth quarter EBITDA was $86 million, a $16 million improvement over the prior period. For the full year, EBITDA was $400 million. Fourth quarter transaction and integration costs were $20 million. Compounding and solutions results improved approximately $15 million over the third quarter as we realize the full quarter of contribution from the addition of A. Schulman product lines. This was partially offset by volume and margin declines in polypropylene compounds. Advanced Polymers results decreased approximately $15 million due to lower margins and volumes. Full year EBITDA results for the segment were $38 million lower than 2017. Transaction and integration costs related to the acquisition impacted the segment by $69 million in 2018.

Compounding and solutions results improved approximately $15 million with higher volumes from new product lines partially offset by lower volume and margin in propylene compounds. Advanced polymers results increased approximately $15 million due to higher volumes.

Integration activities are well underway, and we have captured $47 million in forward annualized run rate synergies as of December 31. We expect to see continued improvement in this segment as we begin 2019, with the return of higher seasonal volumes and our continued focus on capturing value from integration activities.

Turning to Slide 15, let's discuss the performance of our Refining segment. Fourth quarter EBITDA was negative $84 million, a $168 million decline from the third quarter. For the full year, EBITDA was $167 million or a $10 million improvement over 2017.

Planned maintenance on 1 of our 2 crude and coker trains was completed in November. As a result, the average crude throughput was 184,000 barrels per day or 48,000 barrels per day less than the third quarter. With this work behind us, the refinery is prepared to run full rates for the next 2 years and benefit from expected market opportunities.

In the fourth quarter, the Maya 2-1-1 crack spread declined significantly, averaging less than $11 per barrel for the first quarter and only $9.57 during November. Over the previous 12 years, the Maya 2-1-1 has been below $10 for only 1 month in December of 2011. The average over this time period is more than $22 per barrel. Spreads are improving as Pemex adjusts the monthly K factor of the Maya crude oil price formula to ensure that Mexican crude remains competitively priced for the U.S. Gulf Coast refining market.

For the full year, refining margins increased when compared with 2017 due to discounted Canadian crude pricing and improved fluid catalytic cracker conversion rates. Crude throughput was 231,000 barrels per day in 2018, slightly lower than 2017. Absent our recent planned maintenance, throughput would have averaged 256,000 barrels per day for the full year. I'd like to congratulate our refinery team for their diligent work and dedication to improve our refinery reliability. With our planned maintenance completed, we look forward to stronger contributions from our refinery in 2019 as we continue to benefit from improved reliability and an increased Maya 2-1-1 crack spread.

I would now like to turn to Slide 16 and speak with you about a topic of growing global concern, the management of plastic waste. I think most of you are well aware of how billions of people benefit from advances in plastic. In fact, our products are well aligned with the United Nations' sustainable development goals such as reducing hunger and food security with durable packaging, delivering safe drinking water with plastic pipes and reducing energy consumption with innovative materials. However, we now face the growing problem of what to do with the plastic once it has served its initial purpose. The concern over plastic waste management is leading governments and consumers to consider bans on plastics straws and bags, but these products make up only a small fraction of the plastic waste that ends up in our oceans. Some suggest that we should replace all plastics with alternative materials, but most alternatives bring higher overall environmental and economic costs.

On Slide 17, I'm very proud to highlight an alliance formed by LyondellBasell, along with more than 25 of our industry peers and other participants across the value chain that make, use, sell, process, collect and recycle plastics. Together, we have committed over $1 billion with the goal of investing $1.5 billion over the next 5 years in collaborative partnerships to advance meaningful solutions that eliminate plastic waste in our environment. The alliances approach is based on 4 pillars: infrastructure that stops plastic waste from entering the environment; innovation in materials, technology and business models that increase the value of plastic waste; engagement with partners in government, business and consumers to enable solutions; and meaningful projects to clean up plastic waste that has already escaped into our environment. New re-infrastructure to prevent and clean up plastic waste is especially important in emerging economies where collection practices often lag the developed world.

Once plastic is collected and appropriately sorted, the waste can become a valuable feedstock for technology that create versatile, new materials from these post-use plastics. LyondellBasell's QCP recycling joint venture with SUEZ is an example of an innovative business model that embraces this vision for a circular plastics economy. Education and engagement with governments, businesses and communities is critical to the success of these initiatives. The collaborative work of our alliance will be more powerful and efficient than fragmented efforts by each member company working alone.

A survey showed that 10 rivers transport more than 90% of the river-based plastics to the ocean, and more than 50% of land-based plastic waste leakage comes from only 5 countries. There will be a focus on developing solutions that stop this leakage at their sources and clean up areas with existing plastic waste by recognizing the value of reusing plastic. While we certainly have an immense challenge ahead of us, I'm confident that our alliance will find meaningful solutions to help end plastic waste and create a sustainable future for our industry and our planet.

Now let's turn to Slide 18 and discuss the outlook for 2019. Ethylene feedstocks were volatile during the second half of 2018 with U.S. Gulf Coast ethane prices spiking up in September and then reverting in November. As we discussed during our third quarter earnings call, LyondellBasell has optionality across our U.S. assets with ethylene production from both low-cost Midwest ethane and feedstock flexibility at our Gulf Coast crackers. NGL prices are likely to show some volatility during 2019, with increased demand from the remaining new ethylene crackers likely to arrive ahead of planned NGL pipeline and fractionation capacity additions. We expect that this pattern of prolonged startups for ethylene crackers, along with NGL supply additions, will smooth the path forward towards forecast for a return to plentiful feedstock availability within the next year. We're encouraged by forecast for polyethylene demand growth to continue with long-term historical ranges of 4% to 5%.

Over the past 3 years, capacity additions have surpassed demand and moderated operating rigs. With less global capacity scheduled to start up during 2019 and 2020, we believe that LyondellBasell's new Hyperzone HDPE capacity will find favorable markets as we ramp up during the second half of this year.

Turning to Slide 19. Let me summarize the year's highlights. In 2018, our strong earnings were supported by record annual EBITDA in our Intermediates & Derivatives and Technology segments. We'll continue to benefit from some of the improvements for both segments through contracting changes in I&D and licensing growth in technology. Our company generated approximately $5.5 billion of cash from operating activities. This strong cash generation contributed to growth through profit-generating capital investments and the acquisition of A. Schulman.

Furthermore, we continue to provide significant shareholder returns through our growing top quartile dividend and $1.9 billion in share repurchases. By completing the acquisition of A. Schulman, we have created the world's largest plastics compounding business, and we are well underway with integration activities that are capturing significant synergies in our new Advanced Polymer Solutions segment. Our strong cash flows and healthy balance sheet leave us well positioned to take advantage of additional value-creating inorganic opportunities.

In 2018, we advance on the construction of our Hyperzone polyethylene plant, and we look forward to the added profitability it will contribute to our O&P-Americas segment following the startup in the third quarter.

Last August, we also began construction of our PO/TBA plant that will start up in 2021, providing further earnings growth for our I&D segment.

We move forward on sustainable solutions for our company by forming quality circular polymers, our premium plastics recycling joint venture with SUEZ. And in collaboration with our industry leaders, we formed the alliance in plastic waste to generate sustainable, global solutions for plastic waste that will benefit our industry and the environment.

Going into 2019, we look forward to increased production and availability of shale-based feedstocks and a moderation in the pace of capacity additions that should provide a favorable environment for our new HDPE capacity and that allow us to maximize value from our diverse global business portfolio.

With that said, we're now pleased to take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Duffy Fischer.

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Patrick Duffy Fischer, Barclays Bank PLC, Research Division - Director & Senior Chemical Analyst [2]

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First question, IHS is calling last year polyethylene demand up about 7%, which is pretty meaningfully higher than, say, the 20-year run rate. One, would you agree with that? And two, where was that extra demand coming from? What caused that to accelerate, in your mind?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [3]

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So Duffy, we, in fact, did see that especially in the first 3 quarters of the year. Quite a bit of it was in the pipe and packaging segment of the business. So not only here in the U.S. but more exports as well, which drove global demand growth.

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Patrick Duffy Fischer, Barclays Bank PLC, Research Division - Director & Senior Chemical Analyst [4]

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Okay. And then on the supply side, again, several of the global consultants now have list -- that would have in excess of 20 new naphtha plants coming online in China, and they kind of call it 2021 and beyond. Obviously, you guys got some insight into that with your licensing business. How should we think about -- with the knowledge base you have kind of across that space, what will that wave look like? Obviously, it's not going to be that many. But is it 10? Is it 15? How many in that mid-20s period should we think about naphtha crackers in China?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [5]

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Yes, Duffy. As we have our discussions, we don't see that magnitude in that time frame. A lot of them are under consideration, but I would say the time line is much later than what's described. And so we'll look for those updates as those projects reach final investment decisions, but we expect that those will go forward further in terms of timing.

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Operator [6]

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Our next question comes from David Begleiter.

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David L. Begleiter, Deutsche Bank AG, Research Division - MD and Senior Research Analyst [7]

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Bob, just on Braskem, is there a point where you need to make decision either way and just move forward as this has been, sorry to say, dragging on for quite a while here?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [8]

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Yes. Well, David, we've -- it's a very -- as I've talked about in the past, it's a very complex transaction. And in terms of the time line, the part of the protracted time line has been the pause because of the change in government and given sort of the shareholder ownership that you all know about Braskem. So I can tell you that we've completed very high-quality due diligence. We have a few follow-up items. But I think as we sit here today, we better understand issues and value-creation drivers. We have been in discussions with relevant stakeholders including auto brush. We don't know whether these discussions will lead to an agreement, and I can tell you, we'd only move forward at the right price and if we believe a transaction creates a significant value for all of our stakeholders.

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David L. Begleiter, Deutsche Bank AG, Research Division - MD and Senior Research Analyst [9]

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Very helpful. And just one last thing, Bob. On O&P–Americas EBITDA in 2019, I think you said you think you can grow this business in '19 versus '18. Can you provide a little more color on that thought process given against new capacity coming on stream and low polyethylene prices in Q4?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [10]

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Yes. I think a lot of that, David, is the Hyperzone plant, our new polyethylene capacity coming online. If you'll recall today, ethylene margins are -- have been very thin. To the extent that we can integrate downstream and capture more of the ethane to polyethylene chain margin, that will contribute. And it's a world-scale plant, so it'll make a difference in terms of the O&P-Americas profitability.

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Operator [11]

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Our next question comes from Vincent Andrew.

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Vincent Stephen Andrews, Morgan Stanley, Research Division - MD [12]

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Bob, are you -- looking at your table 2 with the volume that you sold. Obviously, in polyethylene in the U.S., it was the lowest number on that page, and I'm assuming the same is true in many of the other products around the world. So are you carrying a lot of inventory into 2019? And assuming you run it in a usual production rate, should we -- should 2019 be a much bigger volume year on an organic basis?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [13]

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Yes. So in terms of inventory, no, we're not carrying unusually high amounts of inventory across our entire system. So I think there's some inventory build for turnaround that we're expecting here in the U.S. of our largest polyethylene plant. It's a 2 billion pound per year polyethylene plant that will have a turnaround in Q1. Otherwise, inventories, we don't see as being high across the system. And frankly, downstream because the destocking happened we think that inventories are quite moderate or kind of below average downstream as well.

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Thomas Aebischer, LyondellBasell Industries N.V. - EVP & CFO [14]

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When you look at the inventory difference year-over-year on a cash basis, it's about a $90 million change versus 2017. So really small.

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Vincent Stephen Andrews, Morgan Stanley, Research Division - MD [15]

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Okay. And in the I&D business, one of the bright spots in 2018 was the acetyls chain and the spot margins, if you look at those. They just come in considerably since the third quarter of '18. What are your expectations where those margins can get back to in 2019?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [16]

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Well, Vince, I mean, it's difficult to predict where they'll go. But you've seen the potential in '18, and the correction has been fairly significant. So we'll have to see how that develops. I think when you think about our I&D business, the methanol and the acetyls and the styrene margins tend to be the most dynamic part of the portfolio. But as I mentioned in my prepared remarks, underlying all of that, we have more contracting improvements that will accrue to the earnings of I&D starting about midyear. So I think we've reset sort of the base in I&D from 1.5 to 1.7. And if styrene and methanol markets turn out to be directionally what they were in '18, then we should have another very strong year in I&D.

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Operator [17]

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Our next question comes from Aleksey Yefremov.

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Aleksey V. Yefremov, Nomura Securities Co. Ltd., Research Division - Research Analyst [18]

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You indicated on one of the slides where your -- you expect PO/TBA earnings to be based on the average for 2014, 2018 margins. Where are the margins today relative to that historical average?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [19]

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I don't know where the margins are today versus the historical average, but we tend to take periods of time when we communicate. Because if we take narrower time frames, price -- margins can be much higher or lower. So we're very constructive about the market. And if you think about TBA, and specifically MTBE, last year, especially in the second half, gasoline demand and gasoline margins were quite low. So we think some improvement in that, in addition to lower butane prices which we saw during the winter, we think those bode very well for the MTBE part of our I&D business.

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Aleksey V. Yefremov, Nomura Securities Co. Ltd., Research Division - Research Analyst [20]

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And you spent some time on recycling. How strong is the business case for some capital deployment into recycling today? And also, do you see sort of some for that to plastics demand in the near term and over the next 12, 24 months especially in Europe from government policies here?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [21]

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Well, so first of all, what we've learned from our QCP joint venture is that collection and segregation are very important. And in the past, what has ailed the recycling business is that the input is very mixed, and so I think that's what's differential about our joint venture with SUEZ as we get relatively segregated polyolefin waste that is further segregated in our venture and then washed and then recycled. In terms of impact on demand, I think it'll take a bit of time for the infrastructure to get in place and to be built out. So in the near term, we don't expect -- meaning the next 2, 3, 4 years, we don't expect meaningful impact, and we'll just have to watch and see the pace of infrastructure growth. In terms of Europe, I can tell you that even in recent meetings with -- that my team has had with leadership in Brussels, the focus is more on the circular economy rather than deselection of plastics, and that was again reaffirmed in recent discussions. So we think that our approach with the QCP venture is very well placed, and the idea for us is to now build out that platform throughout Europe, and we're focused on doing that.

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Operator [22]

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Our next question comes from Robert Koort.

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Dylan Scott Carter Campbell, Goldman Sachs Group Inc., Research Division - Research Analyst [23]

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This is Dylan Campbell on for Bob. Quick question. One of your competitors is pushing a price increase for -- or they were for January and they are for February for polyethylene in Americas. I guess what is LyondellBasell's expectation for the first quarter here for the polyethylene pricing given that at least one consultant is saying that inventory levels are at the highest level in maybe a decade?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [24]

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Well, first of all, I don't want to comment on directional prices here on the call. But I can tell you that as we look at January, we are seeing in the U.S. more -- return to more normal demand. And we expect as February, March and April progress seasonally, we tend to see an uptick in demand because of packaging and so on. And what we hear from our customers is that, that seasonal uptick in demand should be expected. And if you think about downstream inventories, because of the destocking that occurred with the reducing the oil price, we think downstream inventory are quite lean. So when you look at inventories, you really have to look at the inventories in the chain rather than just in one part of the chain. And so I think all this will normalize. And our sense is if you step back and look at operating rates globally, they still look to be among the highest we've seen in polyethylene in the past 4 years. So I think the setup is very constructive for the entire year given that demand typically grows in the first 2 or 3 quarters of the year. And so I mean I think our operating rates are high, and that points to a very constructive market.

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Dylan Scott Carter Campbell, Goldman Sachs Group Inc., Research Division - Research Analyst [25]

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Got it. And I guess a quick clarification question. You guys mentioned polyethylene to ethylene spreads declined $0.04 per pound sequentially quarter-over-quarter. But I guess if I look in your data supplement, polyethylene prices declined only $0.01 to $0.02 per pound, and ethylene was fairly flat quarter-to-quarter. I guess was Lyondell selling at a bigger discount versus the market? Or could you just help working through that math?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [26]

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Sure. So that -- you're referring to the polyethylene to ethylene margin for us, and the way we transfer ethylene price internally is it's a spot -- it's a blend of contract and spot. And you'll note that in Q4, we saw a rising spot price of ethylene. So really, there was more margin in olefins and a little bit less in polyethylene. It's not a reflection on the revenue of polyethylene.

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Operator [27]

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Our next question comes from Arun Viswanathan.

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Arun Shankar Viswanathan, RBC Capital Markets, LLC, Research Division - Analyst [28]

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So first off, just wanted to ask about kind of the level of earnings here, kind of deteriorated pretty substantially in Q4 to $1.2 billion, $1.3 billion. I guess we saw like a $1.4 billion, $1.5 billion in Q4 of '16. I guess what gives you guys the confidence in the snapback in Q2 through Q4? And I guess I'm just curious on Europe in Refining as well. Feedstocks have come down in Europe. Is there a possibility that you could see some recovery there? Or would be -- or pricing be challenged to take in a lower feedstock environment like that?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [29]

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Yes. Thanks, Arun. First of all, so if you think about Q4, there were kind of 3 big drivers that we think are kind of one-offs. First of all, we talked about the environment of declining crude oil price and the related destocking and how price moves in that kind of environment. A 40% decline in 1 quarter is really enormous, and that's largely played out, and oil prices rebounded. So we think that's constructive as we look at first half of '19. In terms of Europe and EAI, just from one cracker turnaround that extended past our planned window and the Rhine river and some -- we had one of our supplier of the feedstock had a disruption. That all, we think, impacted earnings by about $100 million in Q4 largely behind us. Rhine river is back to normal levels. Our cracker is expected to be, for most of the quarter, at full rates. So $100 million impact, we think, is really isolated to Q4. And then in Refining, we were sitting here with Maya 2-1-1 spreads that are the lowest we've seen since the '08 time frame, and what's driven that is a few factors. First of all, you will recall that the K -- the so-called K factor is what determines the delta between Mexican crude and light crude, if you will. That K factor has been slow to adjust. So the light heavy differential has been almost 0 of late. So we think that will revert. We're already seeing some correction into the K factor, and we expect more to come and the -- the long gasoline ethylene market that I described, which may persist. I don't know. But I do think the light heavy differential, and in particular how Maya is priced, we should see improvement as the quarter progresses. So largely, the maintenance impacting Europe were isolated to one unit, and they're kind of behind us.

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Arun Shankar Viswanathan, RBC Capital Markets, LLC, Research Division - Analyst [30]

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Great. And as a follow-up, maybe could you -- I don't know what you can say on this. But maybe if you could just explain maybe some high level some of the strategic benefits in a potential Braskem deal? Would it allow you to reduce your long ethylene position? And obviously, we'll grow in polypropylene. But -- and then also, how do you feel about the vinyl's chain and -- participating there? Is that something that is -- would be considered core to you guys?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [31]

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Yes. So in terms of strategic merits, I mean I think, in -- first of all, when you think about Brazil, the outlook for Brazil continues to improve and the expectations are positive under the new government. So -- and it's an economy. If we look at the IMF reports, it's one of the few in the world that's expected to grow at reasonably good rates. We think longer term, the economy there holds good potential. It's an area where we don't have much of a position. So it makes us even more of a global producer and seller of polyolefins. In the case of the U.S. and Europe, there's in part a consolidation opportunity, and also a lot of our technology is deployed within Braskem. So those are just a few of the merits -- strategic merits of a transaction like that. As I mentioned earlier, it's got to be at the right price, and it has to be significantly value-creating for our shareholders.

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Operator [32]

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Our next question comes from P.J. Juvekar.

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P.J. Juvekar, Citigroup Inc, Research Division - Global Head of Chemicals and Agriculture and MD [33]

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On refining, you did mention IMO 2020, and we are getting some mixed reviews about the benefit of IMO 2020 to GRMs. I was wondering if you could comment on that.

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [34]

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Well, thank you for asking that. I was hoping somebody would ask me so I could work it into my commentary. And I mean I think, P.J., IMO, we still see meaningful impact, especially because we have such a heavy crude processing refinery. Yes, recent press suggests that maybe some of the impact will be muted. We actually think if we look at forward curves. Now perhaps the expectations have corrected to the low side, whereas perhaps at the end of last year, there was a little bit more enthusiasm. We do continue to believe that there will be a positive impact from IMO starting in late Q3 into Q4 as the inventories rotated into the lower sulfur, diesel, and that's deployed across the network around the world. And then 2020, we do expect some meaningful impact from IMO 2020. So -- but the thing we can control is we've got to operate well, and I think we've positioned ourselves by completing all of our maintenance to run at full rates and capture whatever opportunity lies ahead. And I continue to think that there will be a meaningful benefit in late this year into 2020.

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P.J. Juvekar, Citigroup Inc, Research Division - Global Head of Chemicals and Agriculture and MD [35]

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Great. And secondly, I'm glad to see you're taking the lead on plastic recycling issue. I think the industry needed to do something there. I guess when you look at plastic recycling, the issue has been the economics of recycling. And recycling never made any money in developed markets like in the U.S. Maybe it makes money in emerging markets because of cheaper labor. But can you talk about the economics of that? And how do you work that into the solution?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [36]

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Well, I think, P.J., first of all, I appreciate the recognition in terms of the momentum around the alliance and so on, and the credit goes to a lot of companies who have been really catalysts for getting this going. In terms of the economics of recycling, as I mentioned earlier, really, better collection and segregation at the source is critical to the economics and then building up scale and doing the recycling closer to where the waste is collected because it's adding cost by moving waste around the world, detracts from the economics. So I can tell you that's where we're focused on with the QCP venture in Europe, and we believe it's a model that can be replicated certainly within Europe. And as we develop that further, we'll think about other jurisdictions around the world.

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Operator [37]

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Our next question comes from Jonas Oxgaard.

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Jonas I. Oxgaard, Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst [38]

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If we're sticking to the plastic waste here, you have a slide there, 17, you showed 4 different pillars. Can you talk a little bit about how do you actually intend to -- or how does the alliance intend to invest here? Are they giving grants to companies, universities? Is that -- you're expected to do it in-house? And can you give us a little bit of a breakdown on how much do you think it's going to be focused on each of the 4 pillars?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [39]

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Well, so definitely, in terms of the allocation, there will be -- we'll move in parallel on all 4. There's not weighting more strongly towards one or the other. But if you were to go to the website endplasticwaste.org, you can see the initial action the alliance will take, which we're backing and supporting an effort through a company called Greenology. That is converting waste plastic into fuel. There's a fund called Circulate Capital that's funding initiatives around the world that directionally end plastic waste. So Jonas, I'd encourage you to look at that, and that's going to be -- we want to move on all 4 fronts. We do believe that we've got to slow down and stop what's entering the environment. We need to address what's already in the environment, and education and innovation are going to be what's going to make this more sort of structural and sustainable, pardon the pun, over a long period of time.

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Operator [40]

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Our next question comes from John Roberts.

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John Ezekiel E. Roberts, UBS Investment Bank, Research Division - Executive Director and Equity Research Analyst, Chemicals [41]

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Slide 18 talks about the expected volatility in ethane, which I assume is even after the Sasol cracker has been pushed out towards the back end of this year, do you think the industry needs to do additional [here] in the short term to maybe pulling forward some downtime to ease up on the ethane pressures that might cause another spike?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [42]

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Yes. So John, some of the news around the delays is quite fresh, and we've not included that in our analysis here. But indeed, you're right, that what I've read certainly says that there are some incremental delays in some of the new crackers coming. So our view is that in a lower oil price environment like we have, and you will recall last year, we said that more of the NGLs that are coming from the Permian contain more butane and propane as ethane was rejected, which caused kind of this run-up in ethane. All of this is to say that alternative feedstocks like propane, butane, liquids will be very competitive. At lower oil price, more propane and butane available, especially after we get through the winter season. And export capacity in the near term is -- we don't know of any really big new capacity coming for propane. So I think that in the environment that we're in, you could say that the volatility should be less, if at all, especially with the delays. So -- and you saw some evidence of that in Q4. When oil price dropped, you actually saw propane and butane become a lot cheaper, and they were very competitive as feedstocks.

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Operator [43]

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Our next question comes from Kevin McCarthy.

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Kevin William McCarthy, Vertical Research Partners, LLC - Partner [44]

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Bob, I was wondering if you could elaborate on your outlook for Olefins and Polyolefins-EAI. If we look back to the prior oil collapse in late '14, that segment really enjoyed a nice year in 2015, up nearly $450 million. And listening to you today, it doesn't sound as though you're as constructive on that segment relative to the Americas, for example, notwithstanding some of the onetimers, Rhine river, et cetera. So would you compare and contrast the current environment versus what we saw in the following oil collapse or the previous one, sorry?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [45]

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Right. So Kevin, in the Q4, we had a significant reset in prices, and I think that's because of oil price declining. That's occurred, and my team tells me that January orders look very good in Europe. So we've seen demand come back. And so I'm actually quite constructive about the supply-demand balance in Europe. So -- and I think there will be some impetus to improve profitability as the year goes on. Again, if you step back and you look at global operating rates rising this year, and now that supply chain did reset because of the declining oil price, we're coming into a seasonally strong period. This is -- all of this is a setup for improving profitability as we work through the first half of the year. And I think EAI should benefit from the higher global operating rates, and the oil price correction behind us. So I'm actually quite positive about EAI.

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Operator [46]

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Our next question comes from Frank Mitsch.

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Frank Joseph Mitsch, BB&T Capital Markets, Research Division - Former MD and Senior Equity Research Analyst for Commercial & Industrial Group [47]

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Bob, I guess I now have to start watching your interaction at industry events with Frank Bozich. You said earlier that you're closely watching Asia post Chinese New Year. Obviously, it starts in less than a week. And I'm curious as to what your best guess is as to what you'll see, particularly with respect to the automotive markets, obviously very important for polypropylene. What are your expectations that we're going to see in a few weeks' time there?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [48]

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Well, I think, ultimately, we'll see what happens in about 10 days or 14 days. But I think, Frank, given that we've been through a pretty big destocking cycle, and my view, at least on packaging and the non-durables side, is that demand is growing. And all of sort of the demographic factors that we've discussed in the past, they're still in place. In terms of automotive, I think credit is loosening over there, and the middle class is growing. So it seems to me that demand for automobiles should be constructive barring some event that none of us can predict. So I'm quite optimistic and hopeful about what we'll see post Chinese New Year.

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Operator [49]

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And our next question comes from Hassan Ahmed.

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Hassan Ijaz Ahmed, Alembic Global Advisors - Partner & Head of Research [50]

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I have a question on the U.S. SME market. As we took a look at the '18, obviously, there was extreme volatility. I'd actually even call it a fairly sloppy market. Beyond, obviously, oil doing what it did, I think one of the main reasons was, obviously, a mismatch between ethylene plastic coming online, derivatives not sort of following suit immediately. It seems now that as we look at '19, both ethylene and derivative capacity seems to be coming online in lockstep. So is it fair to assume that the ethylene market in the U.S. should not actually see the sort of volatility we saw last year?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [51]

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Indeed. I mean I think Hassan, the volatility could come from the degree of reliability we see in the various crackers. And as new, very large world-scale units come online, you can imagine if one 3 billion pound cracker comes offline, that could cause a significant change in the supply-demand balance. The other thing that I think we'll have to watch is the timing of derivative expansions versus cracker expansions. If derivative expansions come sooner, that could actually cause more firmness in the ethylene market. I think the opposite is unlikely. But if anything, derivatives could come a little bit earlier especially in 1 or 2 projects that are more integrated in terms of their setup.

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Thomas Aebischer, LyondellBasell Industries N.V. - EVP & CFO [52]

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It's not just polyethylene. It's glycols. It's alpha olefins, a lot of other ethylene consumers as well.

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Operator [53]

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Our next question comes from Jeff Zekauskas.

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Jeffrey John Zekauskas, JP Morgan Chase & Co, Research Division - Senior Analyst [54]

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Oil's rebounded since the beginning of the year from roughly 50 to 60 in Brent terms, but propylene really hasn't moved in the United States. Maybe polymer grade is still a little bit under $0.40, and it's come down from $0.60. Can you talk about some of the dynamics that have pushed propylene down? What are your expectations for it this year? And are you surprised that it hasn't moved?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [55]

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Well, I think, Jeff, as we see more PDH capacity come into the market, it'll probably reduce the volatility in propylene because now you have a bigger base that generally runs and is not dependent on feedstock flexibility, right? So that's been part of the source of propylene price volatility, is when feedstocks change, in the past, it had a big impact on the amount of propylene volume that was available. But now as the base of PDH capacity grows, it'll probably act to stabilize and maybe reduce some of the volatility.

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Operator [56]

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Our next question comes from Steve Byrne.

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Ian Matthew Bennett, BofA Merrill Lynch, Research Division - Associate [57]

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This is Ian Bennett on for Steve. The past couple of quarters, as Lyondell's EBITDA has been declining, your net debt has been increasing to buy back more stock, and I think that sends a strong message about your view of the longer-term trajectory of the earnings and value of this business. If EBITDA were to continue to decline, how willing are you to continue to increase net debt to buy back stock? And does that affect your ability at all to pursue Braskem?

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [58]

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Yes. I'll have -- Thomas will take the question.

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Thomas Aebischer, LyondellBasell Industries N.V. - EVP & CFO [59]

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No. Thank you, Ian, for the question. So I think if you look -- so first of all, we took significant advantage of attractive share price, especially in the fourth quarter. We have always said that we are buying back our own share opportunistically. I think it's -- then you asked your question, it's important to note that we obviously increased net debt. You're absolutely right. But the main reason to increase net debt or the reason is actually the Schulman acquisition. So if you look at cash flow from operating activity, it's $5.5 billion for the year, we have CapEx of $2.1 billion and dividend and share buybacks of $3.1 billion (sic) [$3.4 billion]. So for the share buyback program, we actually did what we always said, that we are using excess cash flow to buy back our own shares. Now we are at the point where we have to make decisions as the share price stays attractive to actually raise debt in order to replenish our debt portfolio which we have used the cash to -- for the acquisition of Schulman. So we have sufficient funds. As I said, the liquidity is above $4 billion. We have sufficient fund to pursue our growth initiatives as well as to continue with our share buybacks opportunistically.

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [60]

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Yes. And Ian, if you think -- step back and strategically look at what we've been doing, we've been looking to create shareholder value by pulling a number of levers. We had meaningful organic growth in '18, inorganic growth with the Schulman acquisition, and we bought back a meaningful number of our shares. So I think you ought to look for that to continue because this is a company that has many levers, and we'll look for the one that creates the most value as we think about deploying our operating cash flow or our balance sheet.

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Operator [61]

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And our last question comes from Matthew Blair.

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Matthew Robert Lovseth Blair, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - MD of Refining and Chemicals Research [62]

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So last quarter, Enterprise announced a couple of new PDH plants. We're wondering if you can say whether you're a customer here and how might this affect your potential polypropylene and I guess potential PDH plant as well.

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [63]

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Yes. So with all the other initiatives we've had going on, we've kind of -- with the PP plant, we're still considering it. And certainly, the buy versus build scenario on propylene is one that we're contemplating today. And as you know, from your conference, I know Jim very well, and I spent some time with him, so that's an option depending on the economics of buy versus build. We'll continue to evaluate that.

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Operator [64]

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And we have no other questions at this time.

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Bhavesh V. Patel, LyondellBasell Industries N.V. - CEO & Director [65]

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Okay. Great. Well, let me offer a few closing remarks, if I may.

So after a challenging fourth quarter, where typical seasonality was exacerbated by declines in crude oil, we're looking forward to rebounding demand from restocking of supply chains. In 2019, we'll continue to accrue synergies in our APS segment from the Schulman acquisition. We look forward to growth from our new Hyperzone production and anticipate an improving refining market. With a lighter planned maintenance schedule in 2019, we're really well prepared to maximize production to meet the needs of growing markets, and our global business portfolio provides resilience. We're well positioned to pursue any other value-creating opportunities.

So thank you for your interest, and we look forward to updating you in April on our first quarter results.

With that, we're adjourned.

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Operator [66]

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Thank you for your participation in today's conference. You may now disconnect at this time, have a wonderful day.