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LyondellBasell (LYB) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Materials· Jul 31, 2026

Source: earnings call transcript

Executive summary

LyondellBasell Q2 FY26 — Strong Earnings Amidst Market Disruption and Portfolio Transformation

LyondellBasell capitalized on significant market disruptions stemming from the Middle East conflict, delivering strong Q2 FY26 profitability with a 23% EBITDA margin, driven by favorable market conditions and operational execution. The company continued its strategic portfolio transformation through asset divestitures and closures, alongside progress on its cash improvement plan. Despite operational challenges like the Bayport outage and acetyls reliability issues, management remains focused on disciplined capital allocation and long-term value creation, anticipating gradual market normalization primarily through supply recovery.

Highlights

5

  • Achieved an impressive company-wide EBITDA margin of 23% in Q2 FY26, more than tripling sequentially.

  • Olefins and Polyolefins Americas segment delivered $1.3 billion in EBITDA, a 4x increase year-over-year, with a 36% EBITDA margin.

  • Olefins and Polyolefins Europe, Asia and International segment generated $331 million in EBITDA, its strongest quarterly result since 2021.

  • Maintained robust cash balances of $2.6 billion and available liquidity of $7.1 billion at quarter end.

  • Successfully completed the divestiture of 4 European O&P assets, advancing portfolio transformation.

Concerns

5

  • Experienced unplanned downtime at the Bayport PO/TBA asset, resulting in an estimated EBITDA impact of approximately $250 million in Q2 FY26.

  • Encountered ongoing reliability issues in the acetyls syngas unit at La Porte, affecting acid and VAM production.

  • Anticipates normalization of catalyst demand and substantially slower global polyolefins capacity growth towards the end of the decade, impacting Technology segment licensing opportunities.

  • Projected Q3 FY26 operating rates for O&P Europe, Asia and International to be approximately 70% due to typical summer seasonality and potential impact from low Rhine water levels.

  • Noted that approximately 6 million tons of polyethylene capacity (20-25% of Middle East supply) sustained damage from the conflict and will not restart until at least 2027.

Guidance & targets

CategoryTargetConfidence
Full-year Capital Expenditure
$1.2 billion
high materiality
High
Sustaining Capital Expenditure
decrease by approximately $100 million
medium materiality
High
Incremental Cash Flow
$500 million
high materiality
High
O&P Americas Operating Rates
approximately 85%
medium materiality
High
O&P Europe, Asia and International Operating Rates
approximately 70%
medium materiality
High
I&D Operating Rates
approximately 85%
medium materiality
High
Technology EBITDA
moderate from second quarter levels while remaining more in line with typical run rate results
low materiality
Medium
MoReTec 1 Facility Start-up
towards the end of 2027
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Olefins and Polyolefins Americas
Integrated margins expanded substantially due to global supply disruptions. Achieved highest domestic sales quarter for polyethylene since Q1 2022. Strong reliability and operating performance maximized production.
EBITDA margin: 36% (excluding identified items)Polyethylene contract prices: +$0.30 per pound in AprilPolyethylene contract prices: -$0.15 per pound in JuneDomestic sales volumes (Polyethylene): +3.5%Operating rates: ~90%Crackers operating rates: ~95%Polypropylene spreads to propylene: +$0.07 per pound beginning in April
—4x higher—$1.3 billion EBITDA
Olefins and Polyolefins Europe, Asia and International
Strongest quarterly result since 2021. Margins improved significantly as supply chain disruptions reduced product availability. Divestiture of 4 European assets completed, strengthening portfolio competitiveness.
Gain on sale of European emissions credits: ~$50 millionOperating rates: ~75%Olefins crackers utilization: ~85%
——$337 million increase$331 million EBITDA
Intermediates & Derivatives
Stronger margins across several businesses despite unplanned downtime at Bayport PO/TBA. Oxyfuels benefited from strong seasonal demand and near-record refinery gasoline crack spreads. Methanol gained from lower Gulf Coast natural gas prices. Bayport asset safely restarted and ramped to full rates in June.
Unplanned downtime at Bayport PO/TBA: ~$250 million EBITDA impactOverall operating rates: ~65%
——sequentially increased$386 million EBITDA
Advanced Polymer Solutions
Margins improved through disciplined pricing actions and cost optimization. Automotive demand remained stable. Focus on customer centricity and portfolio improvement continues to strengthen earnings profile.
EBITDA H1 2026: +50% compared to H1 2025
———$78 million EBITDA
Technology
EBITDA was relatively in line with prior guidance. Profitability improved over the quarter driven by licensing revenue milestones and improved catalyst demand. Revenue increased due to higher-value contracts reaching significant milestones.
———$74 million EBITDA

Deals & partnerships

Multiple European entities 4 European Olefins and Polyolefins assets

Completed the divestiture of 4 O&P assets in May, marking an important milestone in portfolio transformation and strengthening competitiveness.

Brindisi site Closure of Brindisi O&P site

Intends to close the Brindisi site by the end of 2026 for further reshaping the portfolio toward more advantaged assets.

NATPET, Saudi Arabia 35% stake in NATPET

Acquisition of a 35% stake in NATPET with the purpose of expanding capacity, as part of portfolio actions over the last three years.

Capital programs

MoReTec 1 Facility progressing well

Benefit:vast majority of that capacity is already being presold

Construction at Wesseling is progressing well and will benefit from direct integration with crackers, supporting circular and low-carbon solution strategy. New markets are being created, and value captured is higher than anticipated.

MoReTec 2 Unit delayed

The project to build the second MoReTec 2 unit in the United States has been delayed because regulation was not as advanced as in Europe.

NATPET Expansion underway

The company continues to work on the expansion of the NATPET joint venture project, which helps in further advancing its lowest cost delivered portfolio in polypropylene.

Risks & headwinds

Global disruption from Middle East conflict Beyond this year, recovery measured in quarters, not months.

Approximately 6 million tons of polyethylene capacity (20-25% of Middle East supply) sustained damage and will not restart until at least 2027.

Mitigation:Leveraging cost-advantaged asset base and commercial expertise to generate attractive margins in dynamic scenarios.

Unplanned downtime at Bayport PO/TBA asset Q2 FY26

Estimated EBITDA impact of approximately $250 million during Q2 FY26.

Mitigation:Asset safely restarted and ramped to full rates in June, positioning to capture improved market opportunities.

Reliability issues in acetyls syngas unit Ongoing, expected to be resolved in Q3 FY26

Affecting both acid production and VAM production at the La Porte site.

Mitigation:Teams are working diligently to get both acid and VAM back to full rates in Q3.

Low Rhine water levels in Europe Q3 FY26 and potentially beyond

Could further impact O&P Europe operating rates, which are projected at approximately 70% utilization for Q3 FY26.

Mitigation:Proactively managing operating rates and adapting production plans to minimize disruptions to customers.

Slower global polyolefins capacity growth Towards the end of this decade.

New licensing opportunities are almost nonexistent.

Mitigation:Focus on catalyst sales and existing contracts; Technology EBITDA expected to normalize to typical run rates.

Higher raw material costs Expected to persist.

Related to global supply disruptions.

Mitigation:Disciplined pricing execution and cost management in the Advanced Polymer Solutions segment to mitigate impacts.

What to watch in Q3 FY26

Polyethylene Pricing Trend

Q3 FY26
Current Prices came off April peak but are still well above pre-conflict levels.
Target Price settlement to be flat and potentially move up throughout the quarter.

Why it matters

Polyethylene pricing is a major driver of O&P Americas profitability, and management's outlook differs from external forecasts.

I hear them, but I also think there's a lot of factors that say that there's the potential for price settlement to be flat and potentially move up throughout the quarter.

Find out whether LYB delivers this. Inve re-checks your case every morning.

Q&A highlights

Why does management disagree with consultant forecasts for a $0.10 decline in polyethylene prices for July?

Management believes the market remains exceptionally dynamic due to the ongoing Middle East conflict, leading to higher crude oil and feedstock prices, increased export demand, and potential supply constraints from factors like low Rhine water levels and hurricane season. They see potential for prices to remain flat or even increase.

“I hear them, but I also think there's a lot of factors that say that there's the potential for price settlement to be flat and potentially move up throughout the quarter.”

asked by David Begleiter · answered by Kimberly Foley

3 min read 6 chapters

Detailed narrative

Impact of Middle East Conflict on Petrochemical Markets

The conflict in the Middle East has caused an unprecedented disruption to bulk petrochemical markets, impacting production, feedstock availability, logistics, and trade flows. Approximately 6 million tons of polyethylene capacity, representing 20% to 25% of Middle East supply, sustained damage and is not expected to restart until at least 2027. This has led to elevated pricing and volatility, with a significant increase in Asian freight rates closing arbitrage opportunities and increasing demand for U.S. and European materials. The recovery time is anticipated to be measured in quarters, not months.

Portfolio Transformation and Strategic Asset Management

LyondellBasell is actively reshaping its portfolio to become a more advantaged and focused company. This quarter, the company completed the divestiture of four European O&P assets and intends to close its Brindisi site by the end of 2026. These actions aim to strengthen the competitiveness and resilience of the portfolio, aligning with criteria for core businesses such as leading positions, attractive returns, advantaged feedstocks, and a focus on circular and low-carbon solutions. The remaining European asset base is well-positioned to support long-term strategy.

Cash Improvement Plan and Cost Discipline

The company is on track to achieve $500 million of incremental cash flow by the end of 2026 through its cash improvement plan, primarily driven by fixed cost reductions and lower capital expenditures. Since the beginning of last year, LyondellBasell has reduced headcount by approximately 3,400 employees, or 17% of its workforce, through portfolio changes and organizational streamlining. These measures are enhancing financial flexibility and positioning the company for value creation across market cycles.

Oxyfuels Business Performance and Advantage

The Oxyfuels business demonstrated strong profitability in Q2 FY26, benefiting from exceptionally favorable market conditions. These conditions included higher crude oil prices supporting attractive feedstock differentials, strong seasonal demand, and near-record refinery gasoline crack spreads. The company's proprietary PO/TBA technology and integrated production of methanol from low-cost natural gas provide a structural feedstock advantage, particularly in the U.S. The successful restart of the Bayport PO/TBA asset in June positions the company to fully capture these market opportunities.

MoReTec Project Updates and Circular Economy Strategy

Construction of the MoReTec 1 facility at Wesseling, Germany, is progressing well, with start-up expected towards the end of 2027. The vast majority of its capacity has already been presold through agreements with brand owners, supported by advancing plastic waste and mass balancing regulations in Europe. In contrast, the MoReTec 2 project in the United States has been delayed due to less advanced regulatory frameworks compared to Europe, reflecting a strategic decision to prioritize investments where regulatory support for circular solutions is stronger.

Market Outlook and Demand Dynamics

Management anticipates resilient underlying demand in key end markets such as packaging, healthcare, and infrastructure, with no broad demand destruction observed. While housing and automotive demand remain subdued, they are not worsening. The overall market recovery is expected to be gradual, driven primarily by supply chain normalization and inventory rebuilding rather than a significant change in underlying demand. Constrained global operating rates, lean inventory buffers, and ongoing geopolitical risks are expected to support elevated margins through Q3 FY26.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.