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
I
Introduction to LyondellBasell
II
LYB Technology Position
III
Innovation Drivers
IV
Sustainable Innovation (Catalysts, Process, Products)
V
Conclusions
3
LyondellBasell At A Glance
Intermediates & Derivatives
Refining
Technology
• 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
$203
$257
$339
Income from continuing operations
$3,860
$4,172
$4,479
Diluted EPS from continuing operations
$6.76
$8.00
$9.60
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
-
$760
$548
EBITDA excluding LCM1
$6,311
$7,810
$8,081
Diluted EPS from continuing operations
excluding LCM1
$6.76
$8.92
$10.35
Income from equity investments
Diluted weighted average share count
(millions)
LCM adjustment1
1. See reconciliations of non-GAAP measures to their nearest GAAP financial measures provided at the end of this presentation.
Managing Technology for Growth and Profitability
4
We Make Products the World Counts On
Olefins &
Polyolefins
Intermediates & Derivatives
Intermediates &
Derivatives
Refining
Technology
Refining
Technology
Propylene Oxide
Ethylene
Styrene Monomer
•Propylene
•Propylene Oxide
•Gasoline
•Process Licensing
•Polyethylene
•PG and PGE
•Diesel
•Catalyst Sales
•Polypropylene
•Acetyls
•Olefins Feed
•Catalloy process
resins
•Oxyfuels
•Technology
Services
•PP Compounds
•EG and EOD
•Polybutene-1
•BDO &
Derivatives
•Ethylene Oxide
Managing Technology for Growth and Profitability
5
A Safety Leader
TRIR - Year Over Year
• 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.
0.5
0.46
0.42
0.4
0.35
0.3
0.23
0.23
0.23
0.22
0.21
0.2
0.1
0
2009 2010 2011 2012 2013 2014 2015 2016
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.
Managing Technology for Growth and Profitability
6
Agenda
I
Introduction to LyondellBasell
II
LYB Technology Positioning
III
Innovation Drivers
IV
Sustainable Innovation (Catalysts, Process, Products)
V
Conclusions
7
Polymerization Process Technology Portfolio
More Than 30 Years at the Forefront of Innovation
Polybutene-1
Multimodal solution process
1 LYB plant operating since 2003
Managing Technology for Growth and Profitability
8
Polymerization Catalysts Portfolio
More Than 30 Years at the Forefront of Innovation
Managing Technology for Growth and Profitability
9
Agenda
I
Introduction to LyondellBasell
II
LYB Technology Positioning
III
Innovation Drivers
IV
Sustainable Innovation (Catalysts, Process, Products)
V
Conclusions
10
PE & PP Innovation Program Drivers
Customer Needs/Market Trends
•PP & PE market commoditization
•Growing demand & per capita consumption
•Products portfolio upgrade
•Brand Owners approach
Competitors’ activity/Market Share
•R&D intensity of some key players
•High investments rate for technology gap closure
•Bigger average capacities
•Chemical industries consolidation
Innovation in LyondellBasell
Governance & Approach
Maintain
& Defend
Competitive
Advantage
StepChange
Regulatory Changes/Sustainability
•More stringent application driven requirements in
food packaging & cleaner products
•REACH classification
•Circular economy
Managing Technology for Growth and Profitability
Stage-gate process
Priority to step-change vs
Incremental projects
11
Agenda
I
Introduction to LyondellBasell
II
LYB Technology Positioning
III
Innovation Drivers
IV
Sustainable Innovation (Catalysts, Process, Products)
V
Conclusions
12
Sustainable Innovation in Catalysts
(*)
Development of ZN Non-Phthalate Systems
Innovation Program Drivers
Market Trends
Competitive Activity
Regulatory
• Profitability of polymerization
• Increased R&D intensity on
catalysts leading to high
• Increasing concerns on
new donors development
industry innovation efforts
Phthalates (e.g. classification
for PP catalysts
in Europe)
• Brand owner & customer
• Industry consolidation
requests
(Reach effect on the industry efforts)
2009
2013
Donors
Other components
Competitors
Source: Espacenet DB
Managing Technology for Growth and Profitability
Source: Thompson Reuters
(*) ZN = Ziegler-Natta
13
Sustainable Innovation in Catalysts
(*)
Development of ZN Non-Phthalate Systems
Today
From 2000s
From 1990s
From 1980s
LYB
Milestones
Phthalate-based
High isostacticity
Gen. Purpose
Diether-based
High Mileage
Narrow MWD
Succinate-based
High Isotacticity
Broad MWD
General Purpose
non- Phthalate
Diether-Succinate
High Mileage
High Isotacticity
Catalysts are tailored for LYB and third
party polymerization technologies
Managing Technology for Growth and Profitability
(*) ZN = Ziegler-Natta
14
Sustainable Innovation in Catalysts
(*)
Development of ZN Non-Phthalate Systems
Spherical catalyst
support
PP pellets
The non-phthalate catalyst portfolio
allows broader application ranges
w.r.t. current phthalate based systems
Managing Technology for Growth and Profitability
PP Application Fields vs Catalysts
Broad
(qualitative view)
BOPP
Polydispersity Index (MWD)
Pipe
Sheets
Inject.
Molding
Raffia
Cast
Film
TWIM
Narrow
• The successful non-phthalate based
catalyst system development is the
result of a well integrated
catalysts/process/product modeling
know-how
Melt
Blown
Spun Bond
0.1
1
Diether
10
MFR (g/10’)
Phthalate
(*) ZN = Ziegler-Natta
100
1000
Succinate Gen. Purpose
Non - Phthalate
15
Sustainable Innovation in PE Polymerization Process
Hyperzone PE Technology
Innovation Program Drivers
Market Trends
Competitive Activity
• PE growing demand and investments at low • R&D intensity of key players
production costs
• Focus of technology players on process
• Product portfolio upgrade
development
• Shale gas exploitation
• Continuous efforts in reducing capex and
opex
2012-2016 Patent Intensity
PE Per Capita Consumption*
Patent Publications
40
Kg Per Person
35
30
2016
2021
25
20
15
10
5
0
NAM SAM CEP WEP CIS & AFR MDE
Baltic
ISC
NEA
SEA
(Low Pressure Polymerization Process)**
100
90
80
70
60
50
40
30
20
10
0
1
2
3
4
5
LYB
6
7
8
9
10
11
Competitors
*Source: IHS
Managing Technology for Growth and Profitability
**Source: Thomson Reuters
16
Sustainable Innovation in PE Polymerization Process
Hyperzone PE Technology - Design Concepts
Managing Technology for Growth and Profitability
17
Sustainable Innovation in PE Polymerization Process
Hyperzone PE Technology - Design Concepts
Managing Technology for Growth and Profitability
18
Sustainable Innovation in PP Pressure Pipe Applications
PP125 for Hot & Cold Water Transport
Innovation Program Drivers
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)
Hostalen XN (PP125)
Catalyst &
Process
PP 80 & 100
Late ‘90s: Bi-modal
PP-R Copolymer
based improved
PP 80
rheology and
Early ‘80s:Mono- reduced formation
of shark skin
modal PP-R
Copolymer
Managing Technology for Growth and Profitability
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 Spherizone
technology. The increased
Categorized Required
Strength (CRS) enables
potential substantial wall
thickness reduction
Spherizone
Proprietary
Technology
19
Sustainable Innovation in PP Pressure Pipe Applications
PP125 for Hot & Cold Water Transport
Weight 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
Light-weighting Potential
Same Outer Diameter
PP-R
PP-RCT
Drawings are for exemplification only, not in scale
• Standard Dimension Ratio (SDR) from 6
up to 9 for a higher hydraulic capacity
1-Hexene Based PP-RCT Benefits
• Technical advantage vs. traditional
materials (high temperature
performance and weldability)
• Sustainability advantages through light
weighting and increased cross section
flow & hydraulic capacity
(SDR =(OD/wall thickness)
(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)
Managing Technology for Growth and Profitability
20
Agenda
I
Introduction to LyondellBasell
II
LYB Technology Positioning
III
Innovation Drivers
IV
Sustainable Innovation (Catalysts, Process, Products)
V
Conclusions
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 processes
improve 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
Managing Technology for Growth and Profitability
Thank you
www.gpca.org.ae
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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 nonGAAP 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
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Managing Technology for Growth and Profitability
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.
Managing Technology for Growth and Profitability