Lyondell Basell 3Q15 Earnings Call Notes

LyondellBasell Industries NV (LYB) Bhavesh V. Patel on Q3 2015 Results

Rebalancing in Olefins markets in 3Q as industry came off of outages

“The third quarter was characterized by rebalancing in both Olefins and Polyolefins markets, as the industry came off the high rate of outages that defined the second quarter. Volume continued to remain at second quarter levels, but margins in September closed lower than where they started the quarter. To this point, October margins, as forecasted by IHS, are located on the lower-left side of slide 10, have come off of the levels of the third quarter.”

Continue to see balance ethylene markets

” Overall, we continue to see ethylene markets that are balanced.”

The force majeure remains in polypropylene

“the force majeure remains in place in polypropylene. As we look ahead into the first half of 2016, we remain encouraged by what we see. The next several slides help explain our optimism. First, as shown on slide 14, the current oil-to-gas ratio remains healthy and well above the pre-shale average. This represents the U.S. shale advantage, and we remain well positioned to continue benefiting from it. Along with this cost advantage, we continue to benefit from an abundant supply of natural gas and NGLs.”

Demand for our products remained steady

” Demand for our products, approximately two-thirds of which go into consumable end users, remained steady. Our products are relied upon for fuel, food packaging and other diverse everyday end uses.”

Global demand has grown every year for 25 years except for in 2008

“In the past 25 years, global polyethylene and polypropylene demand has grown year-over-year in all but one year, 2008, and we know how severe that recession was.”

Operating rates should be similar in 2016

“Operating rates in 2016 are projected to be very similar to 2015, with ethylene effective operating rates, again, above 90%”

May see supply tightness in 1H16

“As the fourth quarter trends lower due to seasonality, we typically see a demand increase during spring and restocking occurs. This pickup in demand coincides with planned maintenance and we could again see another period of supply tightness in the first half of 2016. It would not be unreasonable for the first half of 2016 to look similar to the first half of 2015.”

Ethane demand increased during Q3 as propane fell out of favor

“Our sense is that ethane demand increased as Q3 progressed, as propane fell more out of favor, propane prices rising through the quarter, so demand increased and I think the rejection rates that you quoted are in line with our views, 400,000 to 500,000 barrels a day. ”

Weak Euro good for European competitiveness

“a weaker euro, lower naphtha price does increase competitiveness of Europe. So, our end use customers are more competitive in export markets, for example, for film. So, we’ve seen, polypropylene demand grow very solidly year-over-year, and polyethylene is incrementally higher year-over-year. I think those are all the factors and with lower oil price and weak euro, we expect that Europe should do pretty well.”

I think inventories are average at best. Customers aren’t buying ahead.

“as we sit here today, Arun, I think inventories are average at best, maybe below average in the value chain. We see buyers only buying what they need. We don’t see them buying ahead. Seasonally, as I mentioned in my remarks, that we tend to see demand decline in November/December, fourth quarter seasonal effects. Easily, we see spring pickup, not only in demand but then restocking of inventory to meet that higher level of demand”

Polypropylene has been underinvested but we’re seeing growth now

“Polypropylene has been underinvested for the past few years, especially in the U.S. and in Europe. And this is the first year we’ve seen really significant growth, globally, in polypropylene. A part of that could be that polypropylene price has come down some and it’s more competitive with ethylene, especially in the U.S. But we’re definitely seeing demand growth in polypropylene”

Styrene demand had been shrinking for some time

“in terms of supply/demand for styrene, as you know, it’s been very underinvested for years. In fact, demand was shrinking for styrene and derivatives for some time. We now see demand increasing year-over-year. It’s been underinvested for quite a long time.”

Spot ethylene is a very thin market

“spot ethylene market accounts for about 10% from the total volume produced in the U.S. Now that includes both paper and physical trades. If you just look at the physical volume, it’s like 5% to 7% of the total production, so that’s quite small. It’s a very thin market in the end. And so, near-term price movements, like we saw in the second half or the third quarter, those can be influenced by very local logistics-type issues, different producer issues, or whatever that might be. But I don’t see this as being something that’s structural.”

Oil prices should probably come up

” It’s difficult to predict where oil price will go on the near term; but longer term, certainly. There’s a lot of production in the world that’s underwater at $45. So, my sense is that longer term oil price should come up, it’s a question of when and the time that we take to get there. ”

Polyethylene expansions coming on in second half of next year

“The polyethylene expansions, I think they’re in the second half of next year; most of them are. And those expansions, in the month that they start up, there may be a little bit of disruption, but our sense is if you look at markets at a global basis, there’s enough demand growth based on the trend that we’ve been on to absorb that new capacity.”

Dow Chemical 3Q15 Earnings Call Notes

Expect ongoing weakness in Ag to continue for the next 1-2 years

“Overall, the ag market continues to be challenged with high inventory levels and currency pressures, more than offsetting higher volume gains in Europe, Middle East, Africa, India as well as North America. We do expect ongoing weakness to continue over the next 12 to 24 months’

Important to be vertically integrated in polyolefins because its hard to predict where value will be captured

“we want to illustrate the importance overtime of owning the full polyolefin value chain. As you can see, the source of income has shifted overtime. It’s hard to predict, which bucket value will come from in any given period.”

“In the 2002 trough, for example, the ethylene to naphtha spread was high in very weak markets, with some contribution from the oil to gas spread.”…”In the strong markets of 2005, there was virtually no oil to gas spread. In 2009, Dow retained market share and decent trough margins due to product differentiation, while competitors that didn’t own the differentiation or the feedstock flexibility struggled to the brink of insolvency.”…”In 2014, the oil to gas spread was the main driver of margins, but full chain integration and differentiation played an important role…differentiation for Dow is based on unique polymers, catalyst, process and comonomer combinations.”

Polyethylene and elastomer balances are tight today

Integrated polyethylene and elastomer balances are tight today and the outlook indicates these balances will stay tight for at least the next several years. Additional, tightness is likely to come from an industry operating reliability issues, both at the monomer and polymer stages of the value chain.”

Portfolio work has been to exit commodity businesses

“Dow’s portfolio work of these last five years has been to methodically exit commodity cyclical value change, such as those in styrene, butadiene, chlorine and all their derivatives.’

This company is going to be a cash flow machine

“I think the way we should all think about the company is that it’s going to be a cash flow machine these next several years. As you can already see, our cash flows are being boosted substantially.”

People in China are starting to look for different quality products

“if you think about where China is, they’ve exited this heavy industry phase, and it really is all about light industry/consumer. So you think about our materials, whether it’s RO membranes in water, whether it’s our elastomers, whether it’s our architectural paints, where 10 years ago you would sell very low-end paint to a developer who would look to spray an entire building. Today you’ve got people in China who have been in their apartments or their homes for 10 years, they are making the choice, and their value proposition is going to be very different from a developer.”

“This company has delivered”

“This is a company that has delivered on its promises…Those who worried about low oil, look at our results. Those who worried about China going away, look at our results. The results of the company and the consistency of performance enables us, as a Board, and management team to continue to deliver that growth in terms of earnings and cash flow. We are strong cash flow machine, getting stronger back to you.”

Lyondell Basell 2Q15 Earnings Call Notes

Demand for polyolefins has been pretty strong around the world

“I mean at this point we still see demand as being relatively strong. Arun, as you know when we have periods of macro volatility, oil price going up or down, it does impact sentiment. And so there are many inventory cycles that we see throughout the year. But if you step back from that demand has grown through the first half year over year in polyolefins globally in the 3% to 4% range. And the U.S. demand growth has been quite strong as has Asia. Europe I would argue has been constrained in Q2 because of less supply. So we’re generally constructive on demand for the remainder of the year.”

The industry did not have to operate at capacity when the economy was weak, but then as the dollar strengthened, European plants were asked to produce more, which led to more downtime

“When you think about Europe, the last two years, three years have been very difficult years. And it was not really a call on all of the capacity for most of the industry. Now we’ve been running more differentially in terms of operating rates over there. My sense is that since reliability was not at a premium, perhaps some of the maintenance were delayed. And so as demand became stronger this year with the weaker euro and some infrastructure spending coming back in Europe, the units didn’t respond to the higher call on demand. So will that continue? Difficult to say. But my sense is that the units in Europe especially probably weren’t prepared to run at very high rates. In our case – as you know I was over there for a few years, and we maintained our assets to run at full rates. And in fact we did run at full rates for the past two years.”

It’s possible that there will be more investment in crackers, but it takes a long time to realize that investment

“It’s possible. But you have to remember that investment in crackers takes a long time to realize, even if it is maintenance of existing crackers. Because if it’s – if they have to order long lead equipment, it takes months, maybe a year to get some of the equipment in. And then they have to take a fairly substantial outage. So I suspect that if that were to happen structurally, we wouldn’t see a shift until next year some time.”

WD 40 FY 3Q15 Earnings Call Notes

You will hear…

“You will hear that we reported net sales of $92.5 million for the third quarter which is a 3% decline from the third quarter of last fiscal year. Year-to-date net sales were $286.2 million which is a slight increase year-over-year. You will hear that the Americas performed very well in the third quarter with a 10% increase in net sales.”

“You will hear that Asia-Pacific is on track for a great year despite a product quality challenge we encountered during the quarter. You will hear that EMEA’s base business is strong, but reported sales continue to be impacted by significant currency headwinds and political and economic instability in Eastern Europe.”

Currency having a big impact

“In the third quarter nearly 40% of our revenues were generated in currencies other than the U.S. dollar, which means we are experiencing significant foreign currency headwinds particularly in EMEA. However, if you peel back the onion, our underlying business is performing well and in local currencies, seeing growth in all but a fuel-bound markets globally.”

What is “constant currency” anyways

“Since our results fluctuate due to the changes in foreign currency exchange rates, we also discussed our sales in what we call constant currency. For that we translate the current period results from the foreign subsidiary functional currency in the U.S. dollars at the same period last year exchange rates. ”

“But wait, there is more.”

It takes 90-120 days for lower commodity prices to impact COGS

“As we’ve shared with you in the past it takes considerable time, approximately 90 to 120 days for change in commodity prices to impact our cost of goods sold. All three trading blocks are net positive impacts to gross margin due to lower crude oil prices one of the primary feedstock’s of our petroleum-based specialty chemicals.”

Tell em what you told em

“In summary what did you hear from us on this goal? You heard that the Americas performed very well in the third quarter with 10% growth rate overall in revenue. You heard that Asia-Pacific is on track for a great year despite minor hiccup in the quarter there are up 9% year-to-date.”

Let me close with a quote

“So in closing, I’d like to share a quote with you with you from Mike Gafka. To be successful, you must accept full challenges that come your way. You can’t just accept the ones you like. “

Dupont 1Q15 Earnings Call Notes

6% headwind from currency

“Consolidated net sales were $9.2 billion, a decline of 9% versus the prior year with six percentage points of that decline due to currency as the dollar continue to strengthen against most of our currencies particularly the Euro, Brazilian Real, and the Japanese Yen. ”

Higher currency headwind than initially expected

“we now expect an $0.80 per share headwind from currency for the full year 2015 based on last weeks rate assumptions. Increased from the $0.60 per share headwind previously communicated in our fourth quarter 2014 earnings call. We are working aggressively to mitigate the stronger currency headwinds by accelerating cost savings from the operational redesign and other corporate in business actions.”

2015 is a transformational year for Dupont

“2015 is a pivotal year for DuPont to the upcoming separation of Chemours as the most significant and visible step in our ongoing transformation to a higher growth, higher value company.

The vision of our strategy is reflected in 19% compound annual growth rate of adjusted operating earnings from 2008 to 2014. From our post-spin business, that comprised the next generation DuPont. This new portfolio will continue to build momentum as we leverage our leading positions in three strategic focused areas where we have robust opportunities and strong well established competitive advantages where our science and engineering capabilities can deliver the greatest value for our shareholders.”

Dupont 4Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

A science company

“In 2015 DuPont will continue its transformation as a dynamic science company driven by innovation, executions and global reach.

stronger dollar will be a substantial headwind

“the U.S. dollar continues to strengthen against most currencies and will be a substantial headwind for us in 2015

Agriculture fundamentals are challenging

“In agriculture the fundamentals are challenging. Farmer net income has declined and we anticipate lower corn planted area as farmers favor soybeans over corn.

Hard to say how much corn acres will be down

“Yes so as we look at ‘15 clearly we’re expecting corn acres that the soybean corn price still favors soybean, so we’re expecting corn acres to be down, but it’s very difficult to size and those final decisions are being made by growers closer and closer to the season. So it’s hard to size the shift, but we do expect the decline in corn acres and a slight increase in soybeans

No impact to solar from lower energy prices

“We haven’t heard that yet and I think first of all solar is still pretty small, so having growth rates of 20% still can occur. They’re also being put in the places where it is from a grid parity standpoint in places like China where they are just a — and they have come out to say that by 2030 they’re going to be capping CO2 emissions and some of that start to come from an increase in their renewable energy sources, and solar is a big part of that as they’re the largest producer of solar modules. So we don’t see that, a short-term blip in oil is taking the PV industry office long-term kind of projection.

LyondellBasell 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Management change ahead

“After five and half years of non-stop work, it’s time for me to retire. Our supervisory board of directors has established a committee to choose my successor. I will continue to serve as CEO and chairman at the management board to ensure an orderly transition pending the selection of my replacement.”

Not seeing fall in Polyethelene prices with oil as would often be the case

“Polyethylene seems to be quite tight right now and is not available like that. Orders don’t get fill by some of our competitors. We have seen very strong demand, order books are full, so supply-demand in America seems pretty tight. In Europe is that same tightness seems to be there. We haven’t seen cancellation of orders on the fall in crude prices like sometimes happens. It’s seems to be pretty solid. I think because inventory levels have been very, very short in the convertors. So that kind of dynamic the market seems to be reasonably tight still. In Asia, prices have come down a bit but definitely not in line with fall in Naphtha prices at this point. Over time, we will see what happens in supply-demand.”

I think inventories are running pretty lean, watching closely in case theres a destocking, but don’t expect it

“I think the customer inventory should pretty lean. Usually, we see that pattern by now in the month and I have been watching order books very closely would have expected that in Europe first and we just haven’t been seen in the United States because of the number of outages of Ethylene, Polyethylene has been particularly short’

10-K Tuesdays: CF Industries

We are taking a look at CF Industries this week, a name that popped up in Avondale’s proprietary quantitative value screen.  The screen looks at historical financial data to potentially identify high quality companies trading at low valuations.  The screen is an important part of Avondale’s investment process, but this post should not be taken as an investment recommendation.

Fundamental Data

Price: $213.64
Market Cap: $12.2 B

Revenue: $6.1 B
Gross Profit: $3.1 B
EBIT: $2.95 B
D&A: $420 M
Net Income: $1.8 B

Cash: $2.3 B
Total Assets: $10.1 B
Debt: $1.6 B

Notes from the 10-K (Filed 2/27/13)

We are one of the largest manufacturers and distributors of nitrogen and phosphate fertilizer products in the world.

two business segments:

1) nitrogen segment (13 m tons, $2.9 B gross profit): ammonia, granular urea, urea ammonium nitrate solution, or UAN, and ammonium nitrate, or AN

2) phosphate segment (2 m tons, $200 m gross profit): diammonium phosphate, or DAP, and monoammonium phosphate, or MAP


five nitrogen fertilizer manufacturing facilities
75.3% interest in Terra Nitrogen Company, L.P.
a 66% economic interest in the largest nitrogen fertilizer complex in Canada
one of the largest integrated ammonium phosphate fertilizer complexes in the United States
recently constructed phosphate rock mine
an extensive system of terminals and associated transportation equipment
joint venture investments that we account for under the equity method


founded in 1946 as a fertilizer brokerage operation by a group of regional agricultural cooperatives.

operated as a traditional manufacturing and supply cooperative until 2002, when we adopted a new business model that established financial performance as our principal objective, rather than assured supply to our owners.

2005, we completed our initial public offering

2010, we acquired Terra Industries Inc. (Terra), a leading North American producer and marketer of nitrogen fertilizer products for a purchase price of $4.6 billion

Nitrogen Segment

We operate seven nitrogen fertilizer production facilities in North America… the combined production capacity of these seven facilities represented approximately 39%, 34%, 47% and 22% of North American ammonia, granular urea, UAN and ammonium nitrate production capacity, respectively. Each of our nitrogen fertilizer production facilities in North America has on-site storage to provide flexibility to manage the flow of outbound shipments without impacting production.

Sales and Production Data


Nitrogen Segment Financials


Nitrogen Capacity

Implied capacity utilization: Gross ammonia: 87.5%, UAN: 92.6%, Urea: 93.3%, AN: 48.9%

Total cost of sales in our nitrogen segment averaged approximately $168 per ton

Expenditures on natural gas, including realized gains and losses, comprised approximately 39% of the total cost of sales for our nitrogen fertilizer products in 2012 down from 45% in 2011. Natural gas costs represented a higher percentage of cash production costs (total production costs less depreciation and amortization)

A $1.00 per MMBtu change in the price of natural gas would change the cost to produce a ton of ammonia, granular urea and UAN (32%) by approximately $33, $22 and $14, respectively

The Donaldsonville nitrogen fertilizer complex is the largest nitrogen fertilizer production facility in North America. It has five world-scale ammonia plants, four urea plants, three nitric acid plants and two UAN plants.

Our nitrogen fertilizer production facilities have access to multiple transportation modes by which we ship fertilizer to terminals, warehouses and customers…truck and rail…The North American waterway system is also used extensively…also have access to pipelines for the transportation of ammonia.

In our nitrogen segment, our primary North American-based competitors include Agrium and Koch Nitrogen. There is also significant competition from products sourced from other regions of the world, including some with lower natural gas costs.

Phosphate Segment

Sales and Production DataPhosphate Production

Phosphate Segment Financials

Phosphate Capacity

Phosphate Capacity


Implied capacity utilization: 99.5% of the mine, 90.8% of sulfuric acid, 92.4% of Phosphoric acid, 90.1% of DAP/MAP

Phosphate segment cost of sales averaged $397

Our Plant City phosphate fertilizer complex is one of the largest phosphate fertilizer facilities in North America. At one million tons per year, its phosphoric acid capacity represents approximately 10% of the total U.S. capacity.

All of Plant City’s phosphoric acid is converted into ammonium phosphates (DAP and MAP), representing approximately 13% of U.S. capacity for ammonium phosphate fertilizer products in 2012.

Phosphate rock is the basic nutrient source for phosphate fertilizers. Approximately 3.5 tons of phosphate rock are needed to produce one ton of P2O5

Plant City phosphate fertilizer complex typically consumes in excess of three million tons of rock annually.

As of December 31, 2012, our Hardee rock mine had 76.9 m tons total reserves.

Sulfur is used to produce sulfuric acid, which is combined with phosphate rock to produce phosphoric acid. Approximately three quarters of a long ton of sulfur is needed to produce one ton of P2O5. Our Plant City phosphate fertilizer complex uses approximately 800,000 long tons of sulfur annually when operating at capacity. We obtain molten sulfur from several domestic and foreign producers under contracts of varied duration. In 2012, Martin Sulphur, our largest molten sulfur supplier, supplied approximately 61% of the molten sulfur used at Plant City

In our phosphate segment, our primary North American-based competitors include Agrium, Mosaic, Potash Corp. and Simplot. The domestic phosphate industry is tied to the global market through its position as the world’s largest exporter of DAP/MAP.


The principal customers for our nitrogen and phosphate fertilizers are cooperatives and independent fertilizer distributors. CHS Inc. was our largest customer in 2012 and accounted for ten percent of our consolidated net sales. Sales are generated by our internal marketing and sales force.

In the fourth quarter of 2012, we announced plans to invest $1.7 billion in an expansion project at our Port Neal, Iowa facility which is projected to be completed by 2016. When completed, this project will increase our annual capacity of ammonia by approximately 0.8 million tons and granular urea by approximately 1.3 million tons.

In November 2012, we announced plans to construct new ammonia and urea/UAN plants at our Donaldsonville, Louisiana complex and new ammonia and urea plants at our Port Neal, Iowa complex. Our Board of Directors authorized expenditures of $3.8 billion for these projects. In combination, these two new facilities will be able to produce 2.1 million tons of gross ammonia per year and upgraded products ranging from 2.0 to 2.7 million tons of granular urea per year and up to 1.8 million tons of UAN 32% solution per year, depending on product mix. The $3.8 billion cost estimate includes: engineering and design; equipment procurement; construction; associated infrastructure including natural gas connections, power supply; and product storage and handling systems.

approximately $886.0 million of our consolidated cash and cash equivalents balance of $2.3 billion was held by our Canadian subsidiaries

we had $1.6 billion of senior notes outstanding in two series of $800 million each. The first series carries an interest rate of 6.875% and is due in the aggregate in 2018. The second series carries an interest rate of 7.125% and is due in the aggregate in 2020.

We manage the risk of changes in natural gas prices primarily through the use of derivative financial instruments covering periods of generally less than 18 months. The derivative instruments that we use currently are natural gas swaps and options.

Back of the Envelope Math

Nitrogen Capacity:

Total average selling price per ton: $393
Cost of sales per ton: $168, 39% of cost is natural gas => implies $102.5 in fixed cost per ton
Costs increase by ~$23/ton for $1 increase in price of nat gas => Implies ~$193 cost per ton at $4.50 nat gas

Hold selling price constant, 14.2m tons of capacity yield $5.5 B annual rev => $2.8 B gross profit at $4.50 nat gas

Nitrogen price sensitivity (bearish fertilizer price scenario):

Assume LT gross margin falls to 20%, costs at $193 per ton ($4.50 gas) => implies selling price per ton of $241

=> $241 price per ton yields $48 gross profit per ton => $48 gross profit per ton yields $681 m gross profit on 14.2 m tons of capacity

Replacement Cost:

Company disclosed two capex projects:

$1.7 B in capex for 2.1 million tons of incremental capacity => $809 per ton

$3.8B in capex for 6.3 million tons of incremental capacity => $622 per ton

At midpoint capex per ton ($715), 14.2 m tons worth $10.2 B

Phosphate Segment:

Value of company’s phosphate rock reserves:

20 years of reserves: 76m tons of rock => 22 m tons of Phosphoric acid => 44m tons DAP/MAP => $21.7 B rev => $4.3 B gross profit over 20 years at current margins

Value Relative to Current Price:

Company currently trades at 12.2 B market cap.  What is that discounting?

17 m tons of fertilizer capacity across whole business (nitrogen & phosphate) => implies $717 per ton of capacity

If you assume that company sells for 10x normalized EBIT, normalized EBIT would be ~$1.2 B, which is equal to $70 in operating profit per ton of capacity.  If you assume $198 cost per ton, back into long term average fertilizer price per ton in $268 range, 26% operating margin.

CF Industries 3Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.

“Total planted area in North America was high in 2013 and is projected to be at a similar level in 2014. We forecast that 92 million acres of corn will be planted in 2014, below the estimated 97 million acres planted this year, due to lower expected corn prices in 2014. However, to provide a bit of context, that 92 million acres would be equal to the most recent 5-year average.

For 2014, planted area for wheat, the second-largest crop for nitrogen consumption, is forecast to be 56.5 million acres, slightly higher than the 2013 planted area. Nitrogen application rates on most crops are expected to increase in 2014 due to lower fertilizer product prices and continued profitable farm economics. Nitrogen use in 2014 is forecast to be 13.3 million nutrient tons for the fertilizer year, a slight decline from 2013, primarily because of lower projected corn acreage.”

“I don’t think you can discount the impact of the potash debacle on the overall market for NP&K. The disruption that, that caused and the — because it was so immediate and big, having an announcement — at the time potash was probably trading at $400 to $420, to announce that it was falling to $300, anybody holding inventory positions, those very quickly became negative positions. And so, with P&K generally trading together and applied together, that then drove distributor positions to just step out of the market, and we saw this worldwide. And then there was a carryover effect into nitrogen.”

“This is my 33rd and final quarterly conference call as CEO of CF Industries.”

“a few lines that sum up Steve’s philosophy include: We are going to do things the right way, and we are going to do what we say and we’re not going to say it until we’re ready. He has created a culture with ethical standards that are a very bright line. Steve has always treated the company’s shareholders, resources as though they were his own and given his Pennsylvania Dutch tendencies, those resources were never in safer hands.”

Lyondell Basell 2Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Our raw material mix also established a new record as 90% of our ethylene was produced from NGLs. Approximately 70% of the production was from ethane, while propane accounted for 14%. The balance was butane, which became a very competitive feedstock.”

“our Olefins plant operating rates averaged greater than 90%, and our ethylene volumes increased by approximately 9%. These rates were differential to the industry as we were able to take advantage of scheduled and unscheduled downtime at competitors’ facilities.”

“our feedstock mix benefited from processing the substantial percentage of liquefied petroleum gas, or LPG. Approximately 37% of our European ethylene production was sourced from propane and butane at production costs less than naphtha costs. Versus naphtha cracking, we estimate this benefited results by approximately $45 million. It is common for us to process LPGs during the summer months, but the volume and benefit received exceeded historic levels.”

“While second quarter results were strong, this was partially related to industry pricing conventions and significant industry maintenance. Underlying economic fundamentals within Europe remain weak. We should not assume that the relatively strong first half performance will continue into the third quarter. Within this environment, we continue to focus on costs and efficient management of our feed mix.”

” As you know, my longer-term view is that propane will trade more in line with crude oil type metrics on heating value basis, given that you can put it on a boat and transport it. And so I’ve not been as enthusiastic about PDH units as some of our competitors.”

“I’m hoping that our Congress is seeing that the market is so distorted that the ability to blend that extra ethanol into the system doesn’t exist, and it’s hurting consumers at the pump. There’s a good reason to fix it now and save everybody a bit of money and stop this market distortion. It’s also forcing refineries to move product overseas, which is — in a peak driving season with gasoline prices going up, isn’t the right thing for our country. So I’m hoping people pay attention, make some adjustments and we see less of it.”

“Remember, that as we reduce headcount and all, it takes a year or 2 for that to show up because of severance programs in Europe and how that operates versus the United States. So the payouts are a little longer.”

” If we could get a realistic target for ethanol in the blend, refiners would still blend it. There’d still be business conducted, but it’s all artificial at this point in time. And it’s driving up the price for the consumer, and there’s really no point in that…I mentioned there’s too much exporting going on. That’s being driven by misguided regulation.”