Sustaining a Leading Technology Portfolio Through Innovation€¦ · Sustaining a Leading...

Sustaining a Leading Technology Portfolio Through Innovation Dr. Massimo Covezzi; SVP - R&D (Basell Poliolefine Italia S.r.l.)

Agenda

I Introduction to LyondellBasell

II LYB Technology Position

III Innovation Drivers

IV Sustainable Innovation (Catalysts, Process, Products)

V Conclusions

2

Agenda


II LYB Technology Position



V Conclusions

3

Managing Technology for Growth and Profitability

RefiningIntermediates & Derivatives Technology

4

LyondellBasell At A Glance

• One of the world’s largest plastics, chemical and refining companies

• 13,000 employees worldwide

2013 2014 2015

Sales and other operating revenues $44,062 $45,608 $32,735

Operating income $5,102 $5,736 $6,122

Income from equity investments $203 $257 $339

Income from continuing operations $3,860 $4,172 $4,479

Diluted EPS from continuing operations $6.76 $8.00 $9.60

Diluted weighted average share count

(millions)570 521 466

Cash flow from operations $4,835 $6,048 $5,842

Capital expenditures $1,561 $1,499 $1,440

EBITDA1 $6,311 $7,050 $7,533

LCM adjustment1 - $760 $548

EBITDA excluding LCM1 $6,311 $7,810 $8,081

Diluted EPS from continuing operations

excluding LCM1 $6.76 $8.92 $10.35

1. See reconciliations of non-GAAP measures to their nearest GAAP financial measures provided at the end of this presentation.


We Make Products the World Counts On

Ethylene

•Propylene

•Polyethylene

•Polypropylene

•Catalloy process

resins

•PP Compounds

•Polybutene-1

Propylene Oxide

Styrene Monomer

•Propylene Oxide

•PG and PGE

•Acetyls

•Oxyfuels

•Ethylene Oxide

•EG and EOD

•BDO &

Derivatives

•Gasoline

•Diesel

•Olefins Feed

•Process Licensing

•Catalyst Sales

•Technology

Services

RefiningIntermediates & DerivativesOlefins &

Polyolefins

Technology

RefiningIntermediates &

DerivativesTechnology

5


A Safety Leader

• Safe operations drive

performance results.

• Total Recordable-Injury

Rate (TRIR) is based on

the number of injuries per

200,000 work hours.

It equates roughly to the

number of injuries per 100

full-time annual workers.

According to the AFPM Report of Occupational Injuries and Illnesses for the Year 2010, the U.S. petroleum industry average incidence rate was 0.83. Numbers reflect combined

injuries for employees and contractors.

0.46

0.42

0.35

0.23 0.23 0.23 0.22 0.21

0

0.1

0.2

0.3

0.4

0.5

2009 2010 2011 2012 2013 2014 2015 2016

TRIR - Year Over Year

6

Agenda


II LYB Technology Positioning



V Conclusions

7


Polymerization Process Technology Portfolio

More Than 30 Years at the Forefront of Innovation

8

Polybutene-1Multimodal solution process

1 LYB plant operating since 2003


Polymerization Catalysts Portfolio

More Than 30 Years at the Forefront of Innovation

9

Agenda





V Conclusions

10


PE & PP Innovation Program Drivers

Stage-gate process

Step-Change

Maintain & Defend

Competitive Advantage

•R&D intensity of some key players

•High investments rate for technology gap closure

•Bigger average capacities

•Chemical industries consolidation

•PP & PE market commoditization

•Growing demand & per capita consumption

•Products portfolio upgrade

•Brand Owners approach

•More stringent application driven requirements in

food packaging & cleaner products

•REACH classification

•Circular economy

Innovation in LyondellBasell

Governance & Approach

Priority to step-change vs

Incremental projects

Customer Needs/Market Trends

Competitors’ activity/Market Share

Regulatory Changes/Sustainability

11

Agenda





V Conclusions

12


Sustainable Innovation in Catalysts

Development of ZN Non-Phthalate Systems

Other components

Market Trends Competitive Activity Regulatory

• Profitability of polymerization

catalysts leading to high

industry innovation efforts

• Brand owner & customer

requests

Innovation Program Drivers

Competitors

• Increasing concerns on

Phthalates (e.g. classification

in Europe)

• Increased R&D intensity on

new donors development

for PP catalysts

• Industry consolidation

(Reach effect on the industry efforts)

20132009Donors

Source: Thompson ReutersSource: Espacenet DB

(*) ZN = Ziegler-Natta

(*)

13



Development of ZN Non-Phthalate Systems (*)

(*) ZN = Ziegler-Natta14

From 1980s

Phthalate-basedHigh isostacticity

Gen. Purpose

From 1990s

Diether-basedHigh Mileage Narrow MWD

Today

General Purpose non- Phthalate

Diether-SuccinateHigh Mileage

High Isotacticity

From 2000s

Succinate-basedHigh Isotacticity

Broad MWD

Catalysts are tailored for LYB and third

party polymerization technologies

LYB

Milestones



Development of ZN Non-Phthalate Systems (*)

(*) ZN = Ziegler-Natta15

Inject.

Molding

Cast

Film

Melt

BlownSpun Bond

TWIM

BOPP

Raffia

Pipe

Sheets

Diether

Narr

ow

Bro

ad

Po

lyd

isp

ers

ity

Ind

ex

(M

WD

)

MFR (g/10’)0.1 1 10 100 1000

Phthalate Gen. Purpose

Non - Phthalate

Succinate

PP Application Fields vs Catalysts(qualitative view)

• The successful non-phthalate based

catalyst system development is the

result of a well integrated

catalysts/process/product modeling

know-how

Spherical catalyst

supportPP pellets

The non-phthalate catalyst portfolio

allows broader application ranges

w.r.t. current phthalate based systems

Managing Technology for Growth and Profitability 16

Sustainable Innovation in PE Polymerization Process

Hyperzone PE Technology

0

5

10

15

20

25

30

35

40

NAM SAM CEP WEP CIS &Baltic

AFR MDE ISC NEA SEA

PE Per Capita Consumption*

2016 2021

0

10

20

30

40

50

60

70

80

90

100

1 2 3 4 5 6 7 8 9 10 11

2012-2016 Patent Intensity

Market Trends Competitive Activity

• PE growing demand and investments at low

production costs

• Product portfolio upgrade

• Shale gas exploitation

• R&D intensity of key players

• Focus of technology players on process

development

• Continuous efforts in reducing capex and

opex


LYB

Competitors

Pa

ten

t P

ub

lic

ati

on

s

Kg

Pe

r P

ers

on

(Low Pressure Polymerization Process)**

**Source: Thomson Reuters*Source: IHS



Hyperzone PE Technology - Design Concepts


Sustainable Innovation in PP Pressure Pipe Applications

PP125 for Hot & Cold Water Transport

Catalyst & Process

Early ‘80s:Mono-modal PP-R Copolymer

Late ‘90s: Bi-modal PP-R Copolymer based improved rheology and reduced formation of shark skin

2012: Introduction of an EU application standard, a new PP-RCT class (improved creep/pressure resistance) met by 1-Hexene modified PP-R, made on the Spherizonetechnology. The increased Categorized Required Strength (CRS) enables potential substantial wall thickness reduction

Hostalen XN (PP125)

PP 80

PP 80 & 100

Market Trends Competitive Activity Regulatory

• Durable applications more

resilient in a long market

• Water management is a

key segment

• High patent intensity on

key durable segments of

some competitors

• New EU application class

(PP-RCT)


SpherizoneProprietary

Technology


Sustainable Innovation in PP Pressure Pipe Applications

PP125 for Hot & Cold Water TransportWeight savings potential based on cross

sections geometry calculations, as

prescribed by International Standards

Example:

• weight saving of about 28% at same outer

diameter (OD) for application class 2 (70°C

for hot water) allowed by EN ISO 15874

• Standard Dimension Ratio (SDR) from 6

up to 9 for a higher hydraulic capacity

Light-weighting Potential

Drawings are for exemplification only, not in scale

PP-R PP-RCT

Same Outer Diameter

(Ref.: EN 15874 (2012) – Tab.A.1 Design coeff.; Tab A.2 Design Stress; Tab.A.5/A.6 Scal; max values for PP-R &PP-RCT)

1-Hexene Based PP-RCT Benefits

(SDR =(OD/wall thickness)

• Technical advantage vs. traditional

materials (high temperature

performance and weldability)

• Sustainability advantages through light

weighting and increased cross section

flow & hydraulic capacity

20

Agenda





V Conclusions


Take away…..

• By constantly challenging the status quo through our R&D activities, we continuously develop our technology position

• Our innovation projects and R&D governance processesimprove our know-how and technology position by developing benchmark solutions

• A constantly high level of attention and focus on understanding the customer and market needs, competitor activity, intellectual property and regulatory trends are essential to sustain a leading portfolio of technologies

Conclusions

Thank youwww.gpca.org.ae


Disclaimer

All information (“Information”) contained herein is provided without compensation and is intended to be general in nature. You should not rely on it in making any decision. LyondellBasell accepts no responsibility for results obtained by the application of this Information, and disclaims liability for all damages, including without limitation, direct, indirect, incidental, consequential, special, exemplary or punitive damages, alleged to have been caused by or in connection with the use of this Information. LyondellBasell disclaims all warranties, including, but not limited to, the implied warranties of merchantability and fitness for a particular purpose, that might arise in connection with this information.

This presentation includes industry data that we obtained from third party consultants. We have made no independent verification of, and we make no representations regarding, the accuracy of these data.

This presentation makes reference to certain non-GAAP financial measures, as defined in Regulation G of the U.S. 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 provide useful supplemental information to investors regarding the underlying business trends and performance of the company's ongoing operations and are useful for period-over-period comparisons of such operations. These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the financial measures prepared in accordance with GAAP.

This presentation contains time sensitive information that is accurate only as of the time hereof. Information contained in this presentation is unaudited and is subject to change. We undertake no obligation to update the information presented herein except to the extent required by law.

Before using a product sold by a company of the LyondellBasell family of companies, users should make their own independent determination that the product is suitable for the intended use and can be used safely and legally. SELLER MAKES NO WARRANTY; EXPRESS OR IMPLIED(INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY WARRANTY) OTHER THAN AS SEPARATELY AGREED TO BY THE PARTIES IN A CONTRACT.

LyondellBasell prohibits or restricts the use of its products in certain applications. For further information on restrictions or prohibitions of use, please contact a LyondellBasell representative.

Users should review the applicable Safety Data Sheet before handling the product.

“Avant, Catalloy, Hostalen, Hyperzone, Lupotech, Spherilene, Spheripol, Spherizone are trademarks owned and/or used by the LyondellBasellfamily of companies.

Avant, Hostalen, Spheripol and Spherizone, are registered in the U.S. Patent and Trademark Office.”


Information Related to Financial Measures

This presentation makes reference to certain “non-GAAP” financial measures as defined in Regulation G of the U.S. Securities Exchange Act of

1934, as amended. The non-GAAP measures we have presented include diluted earnings per share excluding LCM, EBITDA and EBITDA

excluding LCM. LCM stands for “lower of cost or market,” which is an accounting rule consistent with GAAP related to the valuation of

inventory. Our inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (“LIFO”) inventory valuation

methodology, which means that the most recently incurred costs are charged to cost of sales and inventories are valued at the earliest

acquisition costs. Market is determined based on an assessment of the current estimated replacement cost and selling price of the inventory. In

periods where the market price of our inventory declines substantially, cost values of inventory may be higher than the market value, which

results in us writing down the value of inventory to market value in accordance with the LCM rule, consistent with GAAP. This adjustment is

related to our use of LIFO accounting and the recent decline in pricing for many of our raw material and finished goods inventories. 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 excluding LCM, provide useful supplemental information to investors regarding the underlying business trends and

performance of the company's ongoing operations and are useful for period-over-period comparisons of such operations. Non-GAAP financial

measures should be considered as a supplement to, and not as a substitute for, or superior to, the financial measures prepared in accordance

with GAAP.

EBITDA, as presented herein, may not be comparable to a similarly titled measure reported by other companies due to differences in the way

the measure is calculated. We calculate EBITDA as income from continuing operations plus interest expense (net), provision for (benefit from)

income taxes, and depreciation & amortization. EBITDA should not be considered an alternative to profit or operating profit for any period as an

indicator of our performance, or as an alternative to operating cash flows as a measure of our liquidity. We have also presented financial

information herein exclusive of adjustments for LCM.

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