Positioned For The Cyclical Upturn 15 th Annual Smith Barney Citigroup Chemical Conference December 7, 2004 Dan F. Smith President and Chief Executive Officer. Safe Harbor Language.
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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 subsidiaries’ and 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 Company’s Annual Report on Form 10-K for the year ended December 31, 2003, Lyondell’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, Lyondell’s Annual Report on Form 10-K for the year ended December 31, 2004, which will be filed in March 2005, Millennium Chemicals Inc.’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2003 and Millennium’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.
Reconciliations of GAAP financial measures to non-GAAP financial measures are provided at the end of this presentation.
Business to Bayer
PO & BDO
LYO & MCH
From OxychemLyondell Has Followed A Consistent Path Over The Years
Purchase of LDPE
& PP Assets
ARCO Olefins, Houston Refinery
Share of Equistar
Pounds / Share
Notes: Lbs refers to capacity times ownership percentage.
19942004Post-closing share assumption
Share Count 80 MM 177 MM 242 MM
1 Source: Capacities as of January 2004, CMAI, SRI
2 Does not include refinery-grade material or production from the product flexibility unit at Equistar’s Channelview facility.
3 Based on 1¢/gal change
SG&A + R&D, %Sales
0Operational Excellence Is A Priority
LYO & EQU Incident Rate
Average SG&A and R&D, % Sales
2000 - 2003
1st Quartile ’03 0.97
Recordable Injury Rate
Days of Working Capital *
* Based on accounts receivable (including those sold), inventories & accounts payable as of 12/03, and fourth-quarter days of sales.
2003 Sales Revenue
* Includes Millennium and proportional share of LCR
2003 Sales ($ in millions)
Pro Forma Lyondell
Le Havre, France
Paraiba, Brazil (Mine)
Capacity – ~4.8 MM mtpa
TiO2 Demand and Supply
Source: Lyondell Estimates and Published Information
Source: Lyondell, Published Information
End use dependent
Better purity and particle size control
Finishing is similar
Fewer process steps
Smaller facility footprint
Less waste producedApproximately 75 Percent Of Our TiO2 Capacity Is Based On Chloride Technology
Source: CMAI / Lyondell (September 2004)
U.S. Ethylene Supply/Demand
Liquid Cracking Variable Cost Advantage vs. NGL
Ethane – Light Naphtha Cost of Ethylene Spread
N. American Industry
Source: CMAI, Chem Data, and Lyondell
Crude Oil-Based Raw Materials
Naphtha Cracking Product Yield
Source: CMAI, Lyondell Estimates
2004 – 2009
2003 Demand Olefins Plant
Demand Growth Supply Growth Δ
Ethylene 226 56 55 (1)
Propylene 134 38 15 (23)
Propylene 1.7 1.5 3.7 --
Source: CMAI September 2004
WTI Crude Oil Refining Margin
WTI Crude Minus Maya Crude
* Excludes $103 MM of asset impairment charges at Millennium.
Cycle EBITDA potential (current ownership)
1 CMAI industry and LYO margin conditions for IC&D and Equistar products (ex. MTBE) applied to current capacities and ownership, LCR 2003 EBITDA, Millennium 2003 EBITDA. Note: Assumes 2003 debt levels and 242 MM shares.
2 Same as 1995 except 1988 CMAI industry margins for Ethylene, PE and Styrene.
3 Combined pre-acquisition EBITDA.
Impact of Lyondell debt reduction at constant capitalization1$3 Billion Debt Reduction
Debt to Capitalization 45%
Avoid Interest Expense $300MM / Year
Earnings Improvement 80¢ / share
Share Price Improvement at $12.40 / share 2
1 Capitalization = debt + book value of equity + minority interest
2 Assumes 242MM shares outstanding