Solid Strategy, Confident Execution Merrill Lynch Chemicals Conference March 19, 2003 Kevin DeNicola Senior Vice President and CFO - PowerPoint PPT Presentation

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Solid Strategy, Confident Execution Merrill Lynch Chemicals Conference March 19, 2003 Kevin DeNicola Senior Vice President and CFO

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Merrill Lynch Chemicals Conference March 19, 2003 Kevin DeNicola Senior Vice President and CFO Safe Harbor Language Lyondell Has Built a Balanced Portfolio The Recent ... – PowerPoint PPT presentation

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Title: Solid Strategy, Confident Execution Merrill Lynch Chemicals Conference March 19, 2003 Kevin DeNicola Senior Vice President and CFO


1
Solid Strategy, Confident Execution Merrill
Lynch Chemicals Conference March 19, 2003 Kevin
DeNicola Senior Vice President and CFO

2
Safe Harbor Language
Statements in this presentation relating to
matters that are not historical facts are
forward-looking statements. These forward-looking
statements are just predictions or expectations
and are subject to risks and uncertainties.
Actual results could differ materially, based on
factors including but not limited to the cyclical
nature of the chemical and refining industries
availability, cost and volatility of raw
materials and utilities governmental regulatory
actions and political unrest global economic
conditions industry production capacity and
operating rates the supply/demand balance for
Lyondell's and its joint ventures' products
competitive products and pricing pressures
access to capital markets and technological
developments and other risk factors. For more
detailed information about the factors that could
cause our actual results to differ materially,
please refer to Lyondell Chemical Companys
Annual Report on Form 10-K for the year ended
December 31, 2002, filed in March 2003.
3
Lyondell Has Built a Balanced Portfolio
Lyondell
Stability Growth -- A leading global producer
of PO and derivatives -- Process technology
strength
ICD
Cash Generation -- Unique capability to refine
heavy crude oils -- Contractually stable
business strong cash flow generator
LCR
Commodity Leverage -- A leading North American
producer of ethylene, propylene and
polyethylene -- Low cost position based on
feedstock flexibility and scale
Equistar
4
The Recent Years Have Been a Period of
Optimization
  • Mid 1990s
  • Formation years
  • LCR Contract and JV
  • Equistar JV
  • ICD Acquisition
  • 1999-2002
  • Position and Optimize
  • Portfolio Adjustments
  • Capacity Rationalization
  • Project Reorientation
  • Organization Effectiveness
  • Best practices
  • Organization design

5
Processes and Systems Have Steadily Improved the
Capital Utilization Within the Enterprise
Days of Working Capital
Capital Spending
MM
1999
2002
Based on accounts receivable (including those
sold), inventories and accounts payable as of
12/31, and fourth-quarter days of sales
6
A Snapshot of Operating Metrics Highlights the
Success
Improvement
Quality
Safety
Downtime
Environment
1998 to 2002
7
A Brief Portfolio Review
  • ICD
  • LCR
  • Equistar

8
Our Propylene Oxide and Derivatives Business
(ICD) Benefits from a Strong Position
Lyondell PO Capacity
Lyondell 55
Source LYO databook and SRI Post
PO-11 Project
9
PO Technology Development
Propylene
Chlorohydrin
Electricity
Chlorohydrin
Chlor-Alkali
PO
Salt
Peroxidation
Direct PO
10
LCR Important Cash Generator
Operating Reliability and Crude Deliveries Drive
Performance
MB/day
MM
1
1 4Q01 Scheduled maintenance turnaround
11
Refining Spreads Have Increased By 4-5/Bbl
WTI Crude Oil Refining Margin
Source Platts
12
Equistar is a Leading Ethylene Producer
Top 5 North America
66
Nova 8
  • 2 in North America
  • Competitive position based on feedstock
    flexibility

ChevronPhillips 10
40
ExxonMobil 13
Exxon 7
Union Carbide 7
Equistar 15
Nova 8
Dow 9
Dow/Carbide 20
Shell 9
Source CMAI
13
Significant Cash and Earnings Generation in
Up-Cycle
Cycle EBITDA Potential
(MM)
1.35/share
1 1988/1995 Chem Data/CMAI margins for Ethylene,
Polyethylene and Styrene applied to current
capacities and ownership Note Assumes current
capital structure 160MM shares
14
Liquid Cracking Provides an Advantage
Equistar Capability
NGL
37
Liquid
63
N. American Industry
(ex. Equistar)
Liquid
22
NGL
78
Source CMAI and Lyondell.
15
The Oil/Gas Price Ratio has Moved in Favor of
Liquid Feedstock
CMAI -3/03
16
N. American Supply/Demand Imbalance is
Differential to Global Situation
Ethylene Supply/Demand Balance - North America
130
Effective Operating Rate
World

120
100
110
100
90
N. America
90
Effective Operating Rate
Bln lbs
80
80
Demand
70
Nameplate Capacity
60
70
50
40
60
1994
1996
1998
2000
2002
2004
2006
2008
2010
Capacity Additions
Source CMAI/Equistar
17
Effective Ethylene Operating Rates Move Toward
95 Early in 2003
U.S. Ethylene Supply/Demand Quarterly - 2002 gt
2004
CMAI-2/03
18
As Energy Rose Ethylene Cash Cost Increased
Accordingly
CMAI -3/03
19
Market Prices Have Increased in Recent Months
  • Price Increases
  • Jan. Feb.
  • EQUISTAR
  • Ethylene 2.25 /lb 1.75 /lb
  • Propylene 2.0 /lb 2.0 /lb
  • Polyethylene 2.5 /lb 2.5 /lb
  • MEG 2.0 /lb 4.5 /lb
  • LYONDELL
  • Styrene 2.0 /lb 5.5 /lb

20
Typically It Has Taken Time to Move These
Increases Through The Supply Chain 3 Bbl Impact
At Equistar
Hours Days
Weeks Months
0
Polymers/ Derivatives Rise
Naphtha Impact
(10)
Petro - chemicals Rise
EBITDA Impact ( MM/mo )
NGLs Follow
(20)
Fuel Co-Products Rise
(30)
21
Our Financial Strategy is Unchanged
  • Maintain Sufficient Liquidity
  • Repay Debt

22
We Have Maintained Significant Liquidity
1
1
1 does not include 12/31 amounts committed
against letters of credit (LYO-49MM,
Equ-16MM) As of 12/31/2002
23
De-leveraging Will Benefit All Stakeholders
  • Impact of Lyondell debt reduction at constant
    capitalization1
  • Debt Reduction
  • 1B 2B
  • Debt to capitalization 54 36
  • Avoided interest expense 100MM/Yr 200MM/Yr
  • Earnings improvement 40/share 80/share
  • Share price improvement at
  • constant capitalization 6/share 12/share

1 Capitalization debt book value of equity
minority interest
24
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