In his letter to investors, CEO Peter Vanacker reflects on the accomplishments detailed in our 2023 annual report and how they’re set to shape future performance.
Dear shareholders:
It is with great pride in our global team that I present our company’s 2023 results. Against last year’s challenging market conditions, we stood firm in our commitment to safe operations, robust cash generation and disciplined capital allocation. In addition, we announced our new, value-focused strategy, aligned with our purpose of creating solutions for everyday sustainable living.
Generating value in dynamic times
Throughout 2023, petrochemical markets faced headwinds from soft global demand, capacity additions and economic uncertainty. Markets were broadly pressured by weak demand for durable goods which impacted margins in our Olefins & Polyolefins, Intermediates & Derivatives and Advanced Polymer Solutions segments. In contrast, oxyfuels margins benefited from tight supply and strong summertime gasoline crack spreads.
Despite this challenging landscape, we delivered resilient results, bolstered our liquidity and delivered strong shareholder returns.
Implementing our strategy
March 2023 marked a turning point for LYB. We revealed our new, long-term strategy, which leverages our existing strengths and involves all employees to focus on value creation while still being cost conscious. Our strategy is differential because it entails simultaneous actions across three pillars:
- Growing and upgrading the core
- Building a profitable Circular and Low Carbon Solutions (CLCS) business
- Stepping up performance and culture
A cornerstone of this strategy is our Value Enhancement Program (VEP), an evergreen process embedded within the culture of LYB. It empowers employees through engagement, ownership and inclusion, enabling them to identify and implement value generating initiatives. Examples of successful VEP-project outcomes include capacity creep, reliability improvements, GHG emissions reductions, improved customer support and optimized logistics.
The VEP delivered a 2023 year-end run rate of more than $400 million of recurring annual EBITDA. We aim to generate up to $1 billion in recurring annual EBITDA by the end of 2025, a 33% increase from our original goal.
Another foundational element to our long-term goals is our commitment to sustainability, which I am pleased to see recognized by MSCI’s recent upgrade of our ESG rating to “leader” with a score of “AA.” LYB also received an “A-” rating in the latest CDP Climate Change disclosure, placing us in the leadership category for climate action. Accolades like these recognize our company’s progress in executing this new strategy.
Growing and upgrading the core
The first pillar of our strategy is focused on taking decisive action to grow and upgrade the businesses aligned with our competitive advantages and long-term vision. In 2023, we made great progress, including:
Successful PO/TBA startup — In 2023 we started up the world’s largest propylene oxide/tertiary butyl alcohol (PO/TBA) unit in Texas with an annual nameplate capacity of 470 thousand metric tons of propylene oxide. This asset upgraded our core capabilities and capitalized on favorable oxyfuels margins throughout the year.
Planned divestitures — We made difficult but necessary decisions to divest businesses which are not part of our core, including plans to close one of our Italian polypropylene units and sell our Texas-based ethylene oxide and derivatives business.
Refining business exit — Plans to close our Houston refinery by no later than the end of the first quarter of 2025 are underway. The site’s prime location gives us more options for advancing our future strategic objectives, including our CLCS business. The shutdown of refining operations is expected to reduce our scope 1 and scope 2 greenhouse gas (GHG) emissions by more than 3 million metric tons annually. In addition, it is expected to reduce scope 3 GHG emissions by approximately 40 million metric tons.
These strategic moves embody our resolve to upgrade the company’s portfolio around core businesses with leading positions, favorable end markets and access to advantaged feedstocks. We expect this focused approach will deliver attractive returns and pave the way for a more sustainable future.
Building a profitable Circular and Low Carbon Solutions (CLCS) business
Our CLCS business is a leader in our industry’s transition to a circular economy. We are creating solutions and addressing rising demand for more sustainable products from our customers and society. Our goal of producing and marketing at least 2 million metric tons of recycled and renewable-based polymers annually by 2030 is backed by actions and investments. In 2023, these included the continued expansion of our global CLCS footprint through joint ventures and acquisitions in Europe, Asia and North America.
In 2023, we grew our CLCS business by investing across the value chain to establish LYB as a full solution provider with the ability to scale critical recycling technologies. Our actions focused on advancing development of our planned circularity hubs in Germany and Texas, including investments in processing and sorting facilities for plastic waste, as well as mechanical and advanced recycling infrastructure.
In November 2023 we took the final investment decision to build our first industrial-scale advanced recycling plant at our Wesseling, Germany site. The plant will use our MoReTec advanced catalytic recycling technology to convert hard-to-recycle plastics into feedstock for production of new plastic materials. Once operational, it is designed to recycle the amount of post-use plastic packaging generated by 1.2 million German citizens every year.
I am pleased to report we are also advancing our industry-leading carbon reduction strategy to reach net zero scope 1 and 2 GHG emissions from global operations by 2050. As part of this ambitious journey, by 2030 we aim to lower scope 1 and 2 GHG emissions by 42%, and scope 3 GHG emissions by 30% — all relative to a 2020 baseline. Our progress last year included reaching nearly 90% of our 2030 target to secure at least half of global electricity from renewable sources. This milestone achievement will reduce scope 2 GHG emissions by more than 1.3 million metric tons.
We are convinced our commitment to reducing GHG emissions is aligned with our customers’ needs and will generate value for LYB, our shareholders and society. We are implementing several other GHG emissions reduction initiatives by 2030, which will begin in the near future. I invite you to learn more about our pursuit of sustainable growth and value generation in our 2023 Sustainability Report, coming out in April.
Stepping up performance and culture
The third pillar of our strategy focuses on transforming the culture of LYB to embrace a more comprehensive view of value creation. This shift is reflected in the competencies we cultivate within our workforce: building partnerships, delivering results, driving innovation and growing capabilities while promoting inclusion.
We recognize a diverse, equitable and inclusive culture is critical to achieving our goals. I am pleased with our progress, including improved hiring practices, lower attrition and increased advancement of females and individuals from underrepresented populations into senior leadership roles.
In our 2023 employee survey, more than 80% of respondents reported feeling treated fairly and having a strong sense of belonging at LYB. This feedback demonstrates our cultural evolution is well underway, and we are creating a workplace which harnesses the full potential of our global talent.
Focused on the future
Alongside the board of directors, I am grateful for what our team accomplished last year. Our people are the driving force behind our progress, positioning the company as an innovative market leader and industry shaper. The achievements across each of our strategic pillars reflect the hard work of our global team.
Despite geopolitical and market uncertainties, I am optimistic about what we can accomplish in 2024. With our strategy in place, we are poised to deliver value by creating solutions for everyday sustainable living for a long time to come.
Peter
Certain disclosures in this annual report may be considered “forward-looking statements.” These are made pursuant to “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The “Cautionary Statement” on page 2 of LyondellBasell’s Form 10-K for the fiscal year ended Dec. 31, 2023, should be read in conjunction with such statements. See page 144 of our 2023 annual report linked here for information about our non-GAAP financial measures and discussion of the company’s use of these measures, including recurring annual EBITDA.