LyondellBasell Industries N: Q3 2022 Presentation Slides
INFORMATION ON FINANCIAL MEASURES
Statements in this presentation regarding matters that are not historical facts are forward-looking statements. These forward-looking statements are based on assumptions made by LyondellBasell’s management that were believed to be reasonable at the time they were made and are subject to significant risks and uncertainties. When used in this presentation, the words “estimate”, “believe”, “continue”, “could”, “intend”, “may”, “plan”, “potential”, “predict” , “should”, “will”, “expect” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Actual results could differ materially depending on depending on factors such as, but not limited to, market conditions, the cyclical nature of the activities of the chemical, polymer and refining industries; the availability, cost and price volatility of raw materials and utilities, in particular the cost of oil, natural gas and associated natural gas liquids; uncertainties and impacts related to the extent and duration of the pandemic; competitive pressures on products and prices; conditions working I; our ability to attract and retain key personnel; business interruptions (including leaks, explosions, fires, weather-related incidents, mechanical failures, unplanned downtime, service interruptions, labor shortages, strikes, work stoppages or other labor difficulties, transportation disruptions, spills and releases and other environmental hazards); supply/demand balances for our products and those of our joint ventures, and the related effects of production capacities and industry operating rates; our ability to manage costs; future financial and operating results; benefits and synergies of any proposed transaction; legal and environmental proceedings; tax rulings, consequences or procedures; technological developments and our ability to develop new products and processes; our ability to achieve our sustainability goals, including the ability to operate safely, increase production of recycled and renewable polymers to meet our goals and forecasts, and reduce our emissions and achieve emissions net zero within the timeframes set out in our respective objectives; our ability to obtain energy from renewable sources; the successful shutdown and closure of the Houston refinery, including on schedule; our ability to successfully implement the initiatives identified as part of our value improvement program and generate anticipated benefits; potential governmental regulatory actions; political unrest and terrorist acts; risks and uncertainties posed by international operations, including foreign currency fluctuations; and our ability to meet covenants and repay our debt. Other factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in the “Risk Factors” section of our Form 10-K for the year ended December 31, 2021, available at www. LyondellBasell.com on the Investor Relations page and on the Securities and Exchange Commission’s website at www.sec.gov. There can be no assurance that the actions, events or results in the forward-looking statements will occur, or if any of them occur, what impact they will have on our results of operations or financial condition. Forward-looking statements speak only as of the date they are made and are based on the estimates and opinions of LyondellBasell management at the time the statements are made. LyondellBasell undertakes no obligation to update forward-looking statements if circumstances or management’s estimates or opinions change, except as required by law.
This presentation contains urgent information which is accurate only as of the date hereof. The information contained in this presentation is unaudited and is subject to change. We assume no obligation to update the information presented here, except as required by law.
INFORMATION ON FINANCIAL MEASURES
This presentation makes reference to certain “non-GAAP” financial measures as defined in Regulation G of the US Securities Exchange Act of 1934, as amended.
We report our financial results in accordance with U.S. generally accepted accounting principles, but believe that certain non-GAAP financial measures, such as EBITDA and EBITDA, net income and diluted EPS excluding identified items provide additional information useful to investors regarding the underlying business. trends and performance of the company’s ongoing operations and are useful for period-to-period comparisons of those operations. Non-GAAP financial measures should be considered supplemental to, and not a substitute for or superior to, financial measures prepared in accordance with GAAP. We calculate EBITDA as income from continuing operations plus (net) interest expense, provision for (profit) income taxes and depreciation and amortization. We also present EBITDA, net income and diluted EPS excluding identified items. Items identified include lower of cost or market (“LCM”) adjustments, depreciation and refinery exit costs. LCM is a GAAP accounting rule related to inventory valuation. Our inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (“LIFO”) inventory valuation method, which means that the most recently incurred costs are charged to cost of sales and inventory is valued at first acquisition costs. Fluctuations in crude oil, natural gas and related commodity prices from period to period may result in the accrual of charges to adjust the value of inventory to the lower of cost or market during periods of declining prices and waiver of these fees in subsequent periods. interim periods, within the same fiscal year as the royalty, as market prices recover. Property, plant and equipment are recorded at historical cost. If it is determined that the undiscounted future cash flows of an asset or group of assets will not be sufficient to recover the carrying amount, an impairment charge is recognized to return the asset to its fair value. estimated. In April 2022, we announced our decision to cease operating our Houston refinery no later than the end of 2023. As part of exiting the refining business, we began incurring costs consisting primarily of accelerated lease amortization costs, personnel costs and asset depreciation. retirement costs.
Free operating cash flow, net debt to EBITDA excluding LCM, and depreciation and conversion to cash are common measures used by investors to assess liquidity. For the purposes of this presentation, free cash flow from operations is defined as net cash provided by operating activities less sustaining capital expenditures (maintenance and health, safety and environment). Net debt to EBIDA excluding LCM and impairment means total debt less cash and cash equivalents, restricted cash and short-term investments divided by EBITDA excluding LCM and impairment. Cash conversion means net cash provided by operating activities divided by EBITDA excluding LCM and depreciation.
Return on invested capital is a measure commonly used by investors to assess how efficiently a company’s capital is allocated to generate income over a given period. Return on invested capital is defined as income from continuing operations, adjusted for interest expense, net of tax and items affecting comparability between periods, divided by a two-year average of invested capital adjusted for items affecting comparability.
These measures as presented herein may not be comparable to similarly titled measures presented by other companies due to differences in the way the measures are calculated. Reconciliations of our non-GAAP measures are available on our website at www.LyondellBasell.com/investorrelations.