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VIEWS: 8 PAGES: 23

									Solid Strategy, Confident Execution
      Salomon Smith Barney
       Chemical Conference
        December 3, 2002
            Dan Smith
        President and CEO
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 cyclical nature of the chemical and refining industries; global
economic conditions; industry production capacity and operating rates; the
supply/demand balance for Lyondell’s and it’s joint ventures’ products;
competitive products and pricing pressures; availability, cost and volatility
of raw materials and utilities; access to capital markets; governmental
regulatory actions and political unrest; 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 Company's Annual Report on Form 10-K for the year ended
December 31, 2001, and Lyondell’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2002.




                                     2
   Company Overview
           Lyondell Chemical Company - Intermediate Chemicals and Derivatives (IC&D)
              –     A leading global producer of PO and derivatives
              –     Process technology strength in a well structured industry
           Equistar - Petrochemicals and Polymers
              –     A leading North American producer of ethylene, propylene and polyethylene
              –     Low cost position based on feedstock flexibility and scale
           LCR - Refining
              –     Unique capability to refine heavy crude oils
              –     Contractually stable business; strong cash flow generator


                              ($ MM)             2001                  Lyondell*
                                         Revenues EBITDA               Ownership
                          IC&D            $3,193      $425              100.0%
                          Equistar         5,909       250               70.5
                          LCR              3,284       364               58.75


* Ownership as of August 22
                                                      3
Lyondell Has Built a Balanced Portfolio


      Lyondell



                  IC&D          Stability & Growth


                  LCR           Cash Generation


                 Equistar       Commodity Leverage




                            4
The Recent Years Have Been a Period of
Optimization


        Mid 1990’s                   1999-2002
      Formation years          Position and Optimize

   LCR Contract and JV      Portfolio Adjustments

   Equistar JV              Capacity Rationalization

   IC&D Acquisition         Project Reorientation
                             Organization Effectiveness
                               – Best practices
                               – Organization design


                          5
A Firm Foundation Has Been Established

   Portfolio Adjustments           $2.5B Revenue
                                         – Divestitures - Specialties, polyols
                                         – Acquisitions - Oxy transaction
   Capacity Rationalization        2Blbs of Capacity
                                         – Olefins, Polyethylene

   Project Reorientation           Reinitiate : IC&D projects
                                     Cancel/Delay : Equistar projects


   Organization Effectiveness      Infrastructure Enhanced
                                     Synergies - $300MM




                                     6
      Processes and Systems Have Steadily
      Improved the Capital Utilization Within the
      Enterprise

          Capital Spending                               Days of Working Capital

$MM       Equistar   Lyondell   PO11 Spending                          Lyondell    Equistar
180
                                                    90
                                                    80
150                                                 70
120                                                 60
                                                    50
 90
                                                    40
 60                                                 30
 30
                                                    20
                                                    10
  0                                                  0
            1999                    2002 YTD                 1998                             2002 YTD

                                                           Includes elimination of LYO AR securitization




                                                7
A Snapshot of Operating Metrics Highlights
the Success
     90                       % Improvement*
     80
     70
     60
     50              Safety   Downtime       Environment     Quality

     40
     30
     20
     10
       0
              LYO/EQU          EQU           LYO/EQU       Polymers

 * 1998 to Current

                                         8
A Brief Portfolio Review



   IC&D

   LCR

   Equistar




                      9
  Our Propylene Oxide and Derivatives Business (IC&D)
  Benefits from a Strong Position and a Stable Industry
  Structure

                                                                                     PG
                  Lyondell PO                                                        33%

                    Capacity           Bayer
                                        45%      Lyondell                                   BDO
                                                   55%                 Merchant PO          18%
                                                                           33%




                                                                                           P-Solvents
                                                                                 Deicer       10%
                                                                                  6%

                                               Capacity          Market      Global Share of
                         Product
                                               Position          Growth      “Top 3” Players


                         Merchant PO              1
                         PG                       1              Moderate            62%
                         BDO                      2                High              72%
                         P-Solvents               2                Low               81%
                         Deicers                  1                Low               90%
                             PO                   1              4-5%/yr             65%
Source: LYO databook and SRI
                                                            10
PO Technology is Entering its Third
Generation of Innovation


                       1st Generation    2nd Generation           3rd Generation


 Technology            Chlorohydrin      Peroxidation             Direct Oxidation


 Initial Application   1910              1960/70s                 2000/10


 Key Producers         Dow               POSM - Lyondell, Shell
                       China (several)   POTBA - Lyondell
                                         PO/Cumene - Sumitomo/
                                           Lyondell JV


 Development Efforts                     PO/H2O2 - Dow/BASF       Lyondell



                                             11
LCR Important Cash Generator

    Operating Reliability and Crude Deliveries Drive Performance


        MB/day                                                                                      $MM
           300                                   CSA      Spot Mkt        EBITDA                    140

           250                                                                                      120

                                                                                                    100
           200
                                                                                                    80
           150
                                                                                                    60
           100
                                                                                                    40

            50                                                                                      20

              0                                                                                     0
                   1Q00     2Q00      3Q00 4Q00        1Q01   2Q01 3Q01           1
                                                                          4Q01 1Q02   2Q02   3Q02


    1   4Q01: Scheduled maintenance turnaround




                                                         12
Equistar is a Leading Ethylene Producer

                                            Top 5 North America        65%
                                                                      Nova
                                                                       8%
   #2 in North America
                                                                  ChevronPhillips
   #3 in world                                                        11%

   Leader in industry consolidation              40%              ExxonMobil
                                                 Exxon                12%
   Competitive position based on                  7%
                                              Union Carbide
    feedstock flexibility                          7%                Equistar
                                                  Nova                 15%
                                                   8%

                                                  Dow
                                                  9%               Dow/Carbide
                                                                      19%
                                                  Shell
                                                   9%


                                                 1991                 2001

    Source: CMAI


                                       13
Commodity Exposure Drives Cash Flow




                                                                  Impact of 1 cent/lb. Margin Improvement
                             Capacity (bn lbs.)                    EBITDA ($MM)               LYO EPS
              1
   Equistar
   Ethylene                              11.6                                 $116            $0.34
   Polymers                               5.7                                  $57            $0.17

   IC&D
   Styrene                                 3.7                                $13 2           $0.05 2




     1100% Basis for Equistar
     2Net of minority equity interests
     Note: EPS calculations assume common shares outstanding of 160 million



                                                             14
Significant Cash and Earnings Generation in
Up-Cycle
  Cycle EBITDA Potential
          ($MM)
  $2,500                   LCR         IC&D           41% Equistar                Oxy's 29.5% Share
  $2,000
                                                           $6.20 per share
  $1,500

  $1,000

   $500

         $0
                                    2001                                       1995 Margins¹
     11995 Chem Data/CMAI margins for Ethylene, Polyethylene and Styrene applied to current capacities
     Note: Assumes current capital structure; 160MM shares


                                                      15
          N. American Supply/Demand Imbalance is
          Differential to Global Situation
                                     Ethylene Supply/Demand Balance - WORLD
          400                                                                                                                   100%



          350                                                                                                                   95%
                                                                                                  North America


          300                                                                                                                   90%
                             Effective Operating Rate
                               (94% On Stream Time)




                                                                                                                                       Operating Rate
          250                                                                                                                   85%
Bln lbs




          200                                                                                                                   80%
                    Demand

          150                                                  Nameplate Capacity                                               75%



          100                                                                                                                   70%
                                                                                              Trendline Demand
                                                                                                Growth = 4½%
              50                                                                                                                65%



          -                                                                                                                     60%
                   1990      1992     1994     1996     1998    2000                2002   2004         2006      2008   2010
     Source: CMAI/Equistar
                                                               16
        Effective Ethylene Operating Rates Move
        Above 90% in Early 2003
                                                            U.S. Ethylene Supply/Demand
                                                                   Quarterly - 2002 / 2003
                                     20000                                                                                   100



                                                                                                                             95
                                     18000




                                                                                                                                   Operating Rate, %
             Millions Capacity Lbs




                                                                                                                             90



                                     16000                                                                                   85



                                                                                                                             80
                                     14000
                                                                                                                             75



                                     12000                                                                                   70
                                             Q1    Q2              Q3      Q4          Q1       Q2      Q3             Q4
                                                  Effective Capacity                 Downtime               Operating Rate

                                                         2002                                        2003
CMAI-10/02
                                                                                17
      There are Minimal Capacity Additions on the
      Horizon
                 U.S. & Canada Capacity & Demand Change - MM Lbs

                                       2000    2001    2002   2003   2004

             Ethylene
                    Capacity           3.3%    6.1%    4.2%   0.5%   1.9%


                    Demand             -0.4%   -9.8%   6.0%   4.5%   4.0%

             Polyethylene
                    Capacity           2.7%    4.4%    1.3%   1.5%   0.3%


                    Demand             1.3%    -5.1%   7.5%   4.8%   5.6%




CMAI-10/02
                                        18
Our Financial Strategy is Unchanged



   Maintain Sufficient Liquidity


   Repay Debt




                          19
We Have Maintained Significant Liquidity



                                                       Lyondell            Equistar
       Cash Balance - Sept 30                           $463MM             $19MM
                                                                       1           1
       Revolver - Sept 30                               $350MM             $411MM

                          Total Liquidity               $813MM             $430MM




 1 – does not include 9/30 amounts committed against letters of credit :
    (LYO-$48MM, Equ-$16MM)
                                                  20
During the Trough, Cash Flow Has Supported
the Interest and Dividend Requirements
                       Average 3 Month Cash Flow After Capex
                           Pre-Trough                 Trough
                 100
                  90
                  80
                  70
                  60
 Equistar         50
                                                                     Qtrly. Int.
                  40
                  30                                                 Expense
                  20
                  10
                   0

                          1999-2000 Avg          2001-2002 YTD Avg




                 180
                 160
                 140
                                                                     Qtrly. Int.
                 120
                                                                     Expense +
 IC&D            100
                  80
                                                                     Dividends
 Plus JV          60
                  40

 Distributions    20
                   0

                         1999-2000 Avg           2001-2002 YTD Avg



                                          21
   We Have Actively Managed Our Maturity
   Profile

                        Debt Maturities                                                     Pre-Payable Debt


($MM)                         Lyondell   Equistar                   ($MM)                           Lyondell      Equistar
$2,500                                                              $2,500

$2,000                                                              $2,000
$1,500
                                                                    $1,500
$1,000
                                                                    $1,000
 $500
                                                                        $500
   $0
             2003            2004          2005         2006             $0
                                                    1          2
                                                                                    2003                   2004                   2005

         1. LYO Revolver matures                                               Note: does not include any pre-payable debt with make-whole.
         2. Equ Revolver matures




                                                                   22
Future 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

                                                                    23

								
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