利安德巴塞爾 (LYB) 2026 年第三季財報電話會議：創紀錄的 I&D EBITDA 與強勁現金流

重點摘要

• 利安德巴塞爾 (LyondellBasell) 公布 2026 年第三季每股稀釋盈餘為 2.54 美元（不含特定項目），EBITDA 為 15 億美元。EBITDA 較 2025 年第三季大幅成長超過 80%。
• 自由現金流達 14 億美元，約相當於 EBITDA 的 100%。來自營運活動的現金流約為 17 億美元。
• 中間體與衍生品部門創下 7.95 億美元的歷史新高 EBITDA，季增超過一倍，受惠於含氧燃料利潤率提升及 Bayport PO/TBA 廠區復工。
• 現金增加約 6 億美元至 32 億美元，可用流動性升至 77 億美元。LYB 還在本季償還了 5 億歐元的大額票據。
• 公司已同意以 3.205 億美元現金，將前休士頓煉油廠舊址及相關資產出售給威樂石油 (Valero)。在取得監管批准並滿足慣例條件後，該交易預計於 2026 年底前完成。
• 管理層預計第四季業績將呈現季節性放緩，北美聚乙烯需求的韌性與強勁的燃料基本面，將被原料成本上漲與歐洲市場面臨挑戰的壓力所抵銷。

關鍵財務數據

在過去 12 個月內，利安德巴塞爾將約 84% 的 EBITDA 轉化為營運現金流。公司持續推動其 5 億美元的現金改善計劃，主要驅動力為資本支出降低與固定成本減少。受投資組合調整與重組影響，其員工人數較 2025 年初減少了約 18%。

業務與營運表現

美洲烯烴與聚烯烴部門

美洲 O&P 部門創造了 6.41 億美元的 EBITDA。由於聚合物、烯烴與副產品價格下跌壓縮了利潤率，業績自第二季的高點回落，但仍大幅高於去年同期。

北美聚乙烯與聚丙烯銷量分別年增約 6% 及 5%。美國國內聚乙烯價格在 9 月每磅上漲 0.05 美元，今年以來累計上漲 0.25 美元。管理層亦提及國內與出口訂單強勁、生產商庫存較低以及出口價格上漲。

該部門產能利用率約為 85%，而裂解裝置運轉率約為 90%。柯林頓 (Clinton) 廠區的大修計畫如期完成，且支出低於預算。

歐洲、亞洲及國際烯烴與聚烯烴部門

該部門創造了 1300 萬美元的 EBITDA。季減反映出 5 月出售四項歐洲資產後銷量下滑、聚合物價格走弱以及利潤率大幅壓縮。

萊茵河水位偏低限制了 9 月的物流運送。高企的能源與物流成本亦持續對整合利潤率造成壓力，而裂解裝置運轉率則接近技術最低限度。

中間體與衍生品部門

中間體與衍生品部門 EBITDA 季增超過一倍，創下 7.95 億美元的歷史新高。汽油裂解價差擴大、汽油供應緊張以及辛烷值走強，推升了歐洲與美國含氧燃料的利潤率。

Bayport 廠區復工恢復了 TBA 與 PO 產能，而可靠性的提升則支持了乙醯基與甲醇的生產。公司還增加了 Channelview 廠區的氧氣進料，有助於維持 PO/TBA 產量高於銘牌產能。

先進聚合物解決方案部門

APS 部門創造了 4500 萬美元的 EBITDA，與 2025 年第三季大致持平，但低於上一季。下滑反映出汽車銷量季節性走弱、採購態度謹慎以及競爭壓力。

管理層表示，用於資料中心擴建與電網建設的電子零件需求維持強勁。特種粉末與歐洲聚丙烯複合材料的成本降低及投資組合優化工作仍在持續進行。

技術部門

技術部門 EBITDA 為 2900 萬美元。業績季減是由於第二季採購異常強勁後催化劑需求放緩，以及 Ferrara 廠區停工前的催化劑產品組合與庫存準備所致。

管理層表示，過去三年對新授權的需求走弱，預示著在本十年末之前新增產能的速度將顯著放緩。

投資組合管理

利安德巴塞爾同意以 3.205 億美元現金，將前休士頓煉油廠舊址及相關資產出售給威樂石油。交易完成後，威樂石油將承擔廠區營運、環境責任、退休金成本及相關員工義務。

管理層預計該交易將改善每年約 5000 萬至 1 億美元的現金流。公司將此筆出售定性為房地產與資本配置決策，符合其退出煉油業務並專注於核心 O&P 與 I&D 資產的策略。

管理層展望

管理層預計第四季業績將呈現季節性放緩，不同地區與業務線之間存在顯著差異。

• 美洲 O&P：營運率預計約為銘牌產能的 85%。北美聚乙烯需求預計將保持韌性，儘管原料成本上升與年底季節性因素可能會對利潤率造成壓力。
• 歐洲、亞洲及國際 O&P：目標營運率約為 60%，低於第三季的約 65%。能源與物流成本增加、聚合物利差收窄以及原料靈活性受限，預計將對業績造成拖累。
• 中間體與衍生品：目標營運率約為 75%，相比第三季約為 85%。獲利能力預計將從創紀錄的季度下滑，但含氧燃料利潤率應保持在高於典型季節性水準。
• 先進聚合物解決方案：第四季通常是季節性最疲弱的時期。管理層預計汽車產量放緩，且其他耐用品終端市場將繼續承壓。
• 技術部門：EBITDA 預計將與上一季大致持平，具體取決於授權里程碑的時間點。
• 稅率：由於美國獲利能力更強，公司預計其 2026 全年有效稅率將處於先前指引的高端。

管理層表示，全球石化市場走向正常化可能需要數個季度而非數月。包裝和其他必需應用領域預計將保持韌性，而房屋與汽車需求則將維持低迷。

風險與關注焦點

• 中東衝突持續影響原料可用性、生產、物流及貨運流量。
• 乙烷、丁烷和丙烷成本上升可能會壓縮美國乙烯和含氧燃料的利潤率。
• 歐洲營運面臨能源成本高企、物流限制以及萊茵河水位偏低的問題。
• 聚合物價格競爭可能會限制已宣佈提價帶來的效益。
• 包括房屋和汽車在內的耐用品終端市場依然疲軟。
• 2027 年第一季將包括償還 9 億美元到期債務，以及通常較高的營運資金、稅務、保險與薪酬現金支出。
• 市場正常化的時間點仍存在不確定性，因為供應鏈、庫存和貿易流可能需要多個季度才能調整完畢。

分析師問答重點

• 含氧燃料與 MTBE：管理層表示，隨著汽油裂解價差和 MTBE 溢價走弱，9 月創紀錄的利潤率在 10 月有所回落。丁烷價格上漲帶來額外壓力，但供應緊張與辛烷值需求仍提供支撐。
• 北美乙烷：第三季乙烷成本較第二季上漲 14%。在電話會議舉行時，乙烷價格約為每加侖 0.30 美元，比第三季平均價格高出 24%。管理層預計短期內乙烯利潤率將承壓，但表示第四季新增的兩座分餾塔應能支持增量供應。
• 聚乙烯價格與庫存：據管理層表示，全球庫存仍低於衝突前水準。利安德巴塞爾 9 月聚乙烯銷量月增 7%、年增 12%，而 10 月的業務活動表現接近或高於 9 月。
• 循環經濟投資：管理層表示，在從 MoReTec 1 累積經驗後，MoReTec 2 目前更有可能設在歐洲。在美國的任何部署將取決於更明確的需求與法規支持。
• 資本配置：管理層表示其優先事項維持不變：維持投資級別資產負債表、降低淨槓桿率、維持資產安全與可靠、提高股利，並最終透過買回庫藏股來抵銷股權稀釋。
• 運費曝險：利安德巴塞爾的大部分出口產品均在港口交貨銷售，從而限制了直接運費曝險。管理層指出，從其他地區發貨的競爭對手向共同出口目的地發貨時面臨更高的到岸成本。

電話會議完整逐字稿

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完整財報電話會議逐字稿

管理層陳述

Operator

Hello, and welcome to the Lynda Basel Teleconference. At the request of Lyondell, this conference is being recorded for replay purposes. [Operator Instructions] I would now like to turn the call over to Mr. David Denison, Head of Investor Relations. Sir, you may begin.

分析師問答

Jeffrey Zekauskas

Thank you, operator, and welcome, everyone, to today's call. Before we begin the discussion, I would like to point out that a slide presentation accompanies the call and is available on our website at investors.liondelbasell.com.

Today, we will be discussing our third quarter results while making reference to some forward-looking statements and non-GAAP financial measures. We believe the forward-looking statements are based upon reasonable assumptions and the alternative measures are useful to investors.

Nonetheless, the forward-looking statements are subject to significant risk and uncertainty. We encourage you to learn more about the factors that could lead our actual results to differ by reviewing the cautionary statements in the presentation slides and regulatory filings which are also available on our Investor Relations website.

Comments made on this call will be in regard to our underlying business results using non-GAAP financial measures, such as EBITDA and earnings per diluted share, excluding identified items.

Additional documents on our Investor website provide reconciliations of non-GAAP financial measures to GAAP financial measures, together with other disclosures, including the earnings release and our business results discussion. A recording of this call will be available by telephone beginning at 1:00 p.m. Eastern Time today until November 30 by calling (877) 660-6853 in the United States and (201) 612-7415 outside the United States. The access code for both numbers is 13746219.

Joining today's call will be Peter Vanacker, LyondellBasell's Chief Executive Officer; our CFO, Augustin Eskierdo; Kim Foley, our Executive Vice President of Global Olefins and Polyolefins, Aaron Lade, our EVP of Intermediates and Derivatives and Torkel Redman, our EVP of Advanced Polymer Solutions. With that being said, I would now like to turn the call over to Peter.

Peter Z. Vanacker

Thank you, David, and thank you all for joining today's call as we discuss our third quarter results. I continue to be impressed by the passion and motivation from our employees to deliver excellent results in this volatile market environment.

Petrochemical and energy markets continue to be impacted by the conflict in the Middle East, affecting production, feedstock availability, logistics and freight flows. Nevertheless, in this environment where uncertainty has persisted longer than many expected, the LYB team kept unwavering focus on our key priorities: maintaining safe and reliable operations, leveraging our commercial agility and a disciplined execution of our value enhancement program and cash improvement plan.

This helped the company to deliver strong EBITDA and cash generation in the third quarter with 18% EBITDA margins $1.4 billion in free cash flow had an impressive 100% of EBITDA and a $600 million increase in our cash position after having paid back a EUR 500 million bond. It is clear that our successful portfolio transformation, our value enhancement program and our cash improvement plan are helping to improve our results.

In polyolefins, margins fluctuated through the quarter. Over the summer, customers who restocked earlier in the conflict slowed down purchases impacting pricing. However, from September prices were boosted by strong demand, reemerging supply concerns and higher feedstock costs.

This shows that a return to a post-conflict normal is unlikely to occur in a linear fashion. Another highlight from the quarter has been the benefit of our diversified portfolio. The polymer margins were sequentially weaker, this impact was largely offset by higher oxyfuel margins and the restart of our Bayport PO/TBA operations, which led to a record EBITDA in our Intermediates and Derivatives segment. Our diversified end market exposure helps balance cyclical demand cycles and stable demand growth.

Even as the outlook remains uncertain, we continue to believe that any eventual normalization in markets is likely to take quarters, not months. However, maintaining focus on our strategic priorities, controlling what we can control along with our disciplined capital allocation, support our ability to create long-term value for shareholders. With that being said, let's take a moment to review LYB safety performance.

Safety is foundational to how we operate. Our year-to-date total recordable incident rate of 0.12 remains among the best in our sector. Our team continues to successfully navigate external uncertainty and internal improvements while delivering some of the best safety performance in our corporate history.

This demonstrates safety is truly in our DNA and reflects the strong commitment and focus of our employees and contractors. Next, I would like to spend a few minutes on our recently announced agreements to sell the site of the former Houston refinery and the implications for our business.

As you may all know, we announced that LyondellBasell has entered into an agreement with Valero to sell the site and associated assets as part of our ongoing portfolio management efforts. The transaction value is $320.5 million, all cash and payable at closing and is expected to close by the end of 2026 and subject to regulatory approvals and customary closing conditions.

Post closing, Valero is assuming responsibility for ongoing site operations, environmental liabilities and pension costs and related employee obligations. This transaction aligns the site with an owner whose core business is refining. -- creating an opportunity for the sites assets and infrastructure to support future operations. This site has been an important part of the company's history and success for many decades. -- and we are grateful for the contributions of our employees, contractors and leaders who help operate the site safely and reliably throughout its history, including to save an orderly shutdown of operations in 2025.

Since Capital Markets Day, we have taken deliberate actions to strengthen our portfolio, including investing in advantaged assets exiting businesses that are noncore and transforming the APS business. And ultimately, this is another step in creating a more focused and streamlined portfolio. Since announcing our decision to seize refining operations, we have said that future investments and opportunities for the site would depend on market conditions, capital allocation priorities, regulatory developments and our investment criteria.

We thoroughly evaluated a range of potential opportunities that could leverage the site's existing infrastructure. As market conditions evolve, selling the site emerged as the most attractive opportunity to create value from the site. At the same time, we remain committed to pursuing attractive circular and low-carbon opportunities in regions where market conditions and regulatory frameworks support long-term investments.

We continue to advance our investment in Maritech 1 demonstrating this commitment. From a financial perspective, the proceeds help support balance sheet strength and financial flexibility increasing our optionality over time. Beyond the proceeds, this next step helps support our broader focus on strengthening the LYB portfolio and improving our cash flow by approximately $50 million to $100 million annually, while creating additional flexibility to focus our capital and resources on our core priorities.

Overall, this is another important step in building a more focused and resilient LYB. It simplifies our portfolio, while allowing us to focus capital on long-term value creation. Now I would like to highlight how the breadth of markets we serve is an important strength for our portfolio on our next slides.

Our diversified portfolio is balanced across durable and consumable applications, each with different demand drivers and economic cycles. This reduces our reliance on any single market or economic cycle. LYB is well positioned across end markets with building and construction representing only about 5% of our overall end market exposure.

At the same time, we participate in areas such as infrastructure that offer more attractive current growth. This diversification provides different sources of earnings and growth potential across the cycle. The stable demand from consumables provides the foundation for the portfolio, while more cyclical markets, such as housing and consumer goods can provide meaningful upside as conditions improve.

We're seeing this dynamic play out currently, where strong octane values have supported attractive margins and record EBITDA in the I&D segment, demonstrating the earnings power embedded in our diversified portfolio.

Now turning to the next slide, which puts our end market exposure into the broader context of different economic cycles. As the chart on the left illustrates, the relative strength of consumables, durables and gasoline demand rotates over time. Consumables have historically provided a more consistent source of demand, supported by everyday applications such as packaging and have demonstrated greater resilience through periods of economic weakness.

We're also seeing attractive growth in areas such as health care providing additional opportunities. Our oxyfuels business adds another differentiated demand driver, growing faster than gasoline has fuel quality requirements and biofuel regulation increase. Strong octane values are supporting attractive margins today, providing burning strength even as several durable markets remain challenged.

This demonstrates the benefit of how differentiated market exposures can contribute to LYB's earnings power at different points in the cycle. Certain durable applications tend to be more cyclical. Housing and automotive markets have remained muted for several years but continue to represent a big potential.

Other durable demand was elevated during the pandemic as consumers pulled forward purchases. While the timing of recovery remains uncertain, replacement cycles create near-term demand uplift opportunity. At the same time, infrastructure and data center investment globally is supporting strong demand growth across applications such as pipe, conduit and wire and cable.

Each of these markets have experienced periods of relative strength and weakness at different times. A broad portfolio does not remove cyclicality, but it reduces our dependence on any single demand driver and helps provide earnings resilience through the cycle.

Turning to our financial performance. I'll walk through our results for the quarter. During the third quarter, Earnings were $2.54 per diluted share with EBITDA of $1.5 billion. Cash increased by approximately $600 million to $3.2 billion and our liquidity increased to $7.7 billion at quarter end. I will now hand over to Augustin to discuss our financial performance in more detail.

Robert Koort

Thank you, Peter, and good morning, everyone. Let me begin with outlining our cash generation. Cash conversion for the third quarter was very strong, reflecting underlying profitability alongside continued working capital discipline. We have further rationalized inventory volumes through incremental sales to attractive spot markets in September.

This has more than offset the headwind from higher prices on receivables. Over the past 12 months, LyondellBasell converted EBITDA into cash from operations at approximately 84%. We continue to exceed our long-term target, which is noteworthy, even prices remain higher than we would have expected at the beginning of this year.

As Peter mentioned, in the third quarter, our cash balance increased to $3.2 billion, and our available liquidity increased to $7.7 billion. Now let's turn to the next slide and review the details of our third quarter capital allocation.

During the quarter, we generated approximately $1.7 billion of cash from operating activities, a result of robust profitability and strong cash conversion. We continue to execute on our capital allocation priorities this quarter. Our capital expenditures in our operations were $303 million.

We returned $224 million to shareholders in dividends. As planned, we also repaid a EUR 500 million note in September using the earmarked funds we raised in our $1.5 billion bond offering last year, and we strengthened our balance sheet by increasing our cash balance by approximately $600 million.

Despite the highly dynamic environment, our capital allocation priorities remain unchanged. We are committed to strengthening our assets by investing in safe and reliable operations through our sustaining CapEx program and selective investment in profit-generating growth. We will remain disciplined in how and when we deploy any additional capital in investments that strengthen our competitive position.

We continue to prioritize our investment-grade balance sheet as the foundation of our disciplined capital allocation framework. We also continue to make progress on our $500 million cash improvement plan goal driven primarily by lower capital expenditures and fixed cost reductions.

Our streamlining of the organization continues as our workforce is approximately 18% smaller now compared to the beginning of last year driven by portfolio changes and ongoing restructuring. We are maintaining a strong discipline on working capital as demonstrated this quarter. However, the full year change in working capital will remain dependent on year-end prices.

These actions are enhancing financial flexibility while positioning LYB to create value across the cycle. Now I'll provide a brief overview of our segment results on the following slides.

During the third quarter, our business portfolio generated $1.5 billion of EBITDA, which was a step down from the second quarter, but up over 80% from the third quarter 2025. Profitability fell in our O&P segments, largely due to lower polymer prices, record EBITDA in IND partially offset this with material benefits from higher oxyfuel margins and the restart of Bayport PO TBA.

Given stronger profitability in the U.S., we now expect to be at the upper end of our prior guidance for effective tax rate for the full year 2026. With that, I will turn the call over to Kim.

Kimberly Foley

Thank you, Augustine. Let's now turn to the performance of the Olefins and Polyolefins Americas segment. During the third quarter, O&P Americas EBITDA was $641 million. Market conditions were dynamic throughout the quarter. In the summer, demand was weaker and prices fell as a result of some consumer destocking and the expectations of further price declines.

Overall, lower prices for polymers olefins and other co-products caused our margins to fall from record highs in the second quarter, but still remains substantially above last year. However, starting in August, the conflict in the Middle East escalated and concerns about product availability returned.

U.S. domestic polyethylene prices rose $0.05 per pound in September driven by stronger domestic and export demand and lower producer inventories. Year-to-date, prices are up $0.25 per pound. North America demand for polyethylene and polypropylene strengthened with domestic sales volumes up approximately 6% and 5% year-on-year, respectively.

Industry price initiatives for polyethylene continue with price increases of $0.05 per pound announced for both October and November. These price initiatives are well supported by our strong domestic and export order books and higher polyethylene export prices, which are up $0.10 to $0.12 per pound versus July lows but rising feedstock costs may partially offset price increases.

Polypropylene market dynamics were similar with a $0.03 per pound spread compression in August followed by increasing concerns on product availability in the fall. Strong export demand for North American polypropylene is supportive of $0.03 per pound spread increase for November.

Our third quarter operating rate for the segment was approximately 85%, with our crackers operating at approximately 90% during the quarter. Operating rates were impacted by our Clinton turnaround which we completed on time and below budget during the quarter.

Our investments and operating improvements through our value enhancement program support higher productivity. An example of this in the quarter was at Morris where we increased high-density polyethylene production through our new operating mode, allowing us to better meet customer demand with minimal capital investment.

In the fourth quarter, we plan to operate our assets in line with market demand and complete planned maintenance activities at the Lake Charles polypropylene site. As a result, the fourth quarter operating rates across the segment are projected to be approximately 85% of nameplate capacity.

With that, let's turn to the results of Olefins and Polyolefins Europe, Asia and International segment. During the third quarter, the segment generated EBITDA of $13 million. The sequential decline reflects the expected reduction in volumes following the sale of our 4 European assets in May, along with significant margin compression.

Polymer pricing weakened as customers purchased cautiously following stronger buying in the second quarter. Conditions were challenging in September as low Rhine water levels constrained logistics. Results also reflected the absence of the second quarter gain from the sale of the emissions credits.

Looking ahead, we expect European market conditions to remain challenged as elevated energy and logistics costs continue to pressure integrated margins. Low Rhine water levels are expected to constrain logistics and keep our crackers near technical minimum operating rates. Across the segment, we are targeting operating rates of approximately 60% in the fourth quarter, slightly below the approximate 65% in the third quarter. We will continue to align production with market demand while actively managing feedstock availability, inventories and customer requirements.

Our portfolio actions are reducing the structural cost base of the business. Following the sale of 4 European assets, we are continuing to rightsize corporate and support costs for the smaller footprint. Our teams are also optimizing feedstock and production plans to manage Rhine and broader logistics constraints.

Through BEP, we are also improving maintenance execution, including the expanded use of faster, low-cost access methods to reduce operating costs. These actions should improve the resilience of the remaining portfolio and position the segment for stronger performance as the European industry conditions recover. And with that, I will turn the call to Aaron.

Unknown Executive

Thank you, Kim. Turning to the Intermediates and Derivatives segment. Third quarter EBITDA more than doubled sequentially to a record level of $795 million. This outstanding performance reflected both strong operational execution and favorable market conditions.

As we outlined in the slide last quarter, Oxyfuels margins benefit from higher crude prices, but that is not the whole story. In the third quarter, Oxyfuels margins were driven by tighter gasoline supply which drove higher crack spreads and favorable gasoline pool economics leading to improved octane values.

These factors contributed to significant margin expansion in both Europe and the U.S. including into the fall where margins are usually seasonally weaker. PO&D, methanol and acetyls also performed well, with margins remaining well above pre-conflict levels. Our record third quarter performance also demonstrates the strength of our operational execution.

The safe restart of Bayport restored meaningful TBA and PO production capacity allowing us to fully participate in exceptionally strong oxyfuels markets. We have improved reliability across our acetyls and methanol assets and through VP increased oxygen feed at Channelview is helping us to sustain PO/TBA production above nameplate capacity.

Looking ahead, we expect profitability to moderate following the exceptional third quarter. PO&D and methanol margins should normalize from elevated levels. However, seasonal de-icing demand should provide some support for propylene glycol. The Oxyfuels outlook remains particularly constructive. Although gasoline cracks typically moderate following the summer driving season, tight global product supply and continued octane demand should support fourth quarter margins.

Overall, while results may moderate sequentially, the fourth quarter outlook remains historically strong. Across the segment, we are targeting operating rates of approximately 75% in the fourth quarter compared with approximately 85% in the third quarter. This reflects some planned maintenance and normal seasonality as we align production with market demand and maximize the value of our integrated portfolio. With that, I'll turn the call over to Torkel.

Torkel Rhenman

Thank you, Aron. Let's now turn to the results for the Advanced Polymer Solutions segment. Third quarter EBITDA was $45 million, broadly consistent with the prior year period but lower sequentially from a particularly strong second quarter.

The sequential decline primarily reflected seasonally lower automotive volumes, including typical OEM downtown in Europe. Purchasing also remained cautious across several end markets. Our favorable product mix provided some support but did not fully offset weaker volumes and competitive market conditions.

Looking ahead, the fourth quarter is typically the seasonally weakest period for APS. We expect automotive production to moderate towards year-end with continued softness across other durable end markets. Competitive conditions are also expected to place additional pressure on margins.

While automotive demand remains soft, we are seeing strong demand for electrical components supporting data center expansion and grid build-out. Against this backdrop, our teams remain focused on the factors within our control. We continue to advance cost reduction and operational improvements while taking actions to optimize our specialty powders and European polypropylene compounds portfolios.

Together, these actions are creating a leaner, more responsive APS organization and a stronger operating foundation. Despite some headwinds, we expect to see a meaningful improvement in full year EBITDA compared to 2025. With that, I will return the call to Peter.

Peter Z. Vanacker

Thank you, Tore. I will now discuss the results for the Technology segment. Third quarter results declined sequentially to $29 million, reflecting lower catalyst demand following unusually strong second quarter buying, particularly in Asia and the Americas. Catalyst mix and inventory preparation ahead of the plant Ferrara shutdown also affected results.

Looking ahead, we expect catalyst demand to improve across Asia and the Americas. Licensing and services revenue should also increase, although milestone timing remains dependent on customer and project developments. That said, we continue to see increasingly weaker demand for new licenses over the past 3 years, which indicates a dramatic slowdown of new capacity additions by the end of the decade. Overall, we expect technology EBITDA to remain flat sequentially with some variability related to the timing of licensing milestones.

Turning to the near-term outlook. We expect some seasonal moderation in the fourth quarter, but conditions vary significantly by region. Geopolitical uncertainty continues to influence costs, trade flows and market behavior and could moderate some normal seasonal patterns. In North America, we expect polyethylene demand to remain resilient across domestic and export markets. Recent order activity has been unseasonably strong and reduced inventories, elevated freight costs and plant industry outages are contributing to firmer market conditions.

At the same time, competitive pricing and higher feedstock costs could impact margins and demand is likely to moderate as we approach year-end. Europe presents a more challenged outlook as customers navigate tighter supply while managing purchases cautiously, higher energy and logistics costs, lower polymer spreads and reduced feedstock flexibility could compress integrated margins.

Seasonality and ongoing logistics constraints are also expected to weigh on operating rates, likely driving a sequential decline for OPEAI. In Asia, we expect conditions to remain weak but relatively stable. Inventories remain relatively lean, likely limiting further downside. However, soft downstream demand should keep customers cautious and purchasing could be contained to near-term demand.

Looking across our key end markets, packaging, which represents a substantial portion of polyethylene demand should remain resilient due to its exposure to essential food, health care and consumer applications.

In Building & Construction, affordability should continue to constrain housing activity. However, infrastructure investment should provide some resilience, particularly in pipe conduit and wire and cable applications, supporting data centers, power transmission, and water management.

Automotive demand is expected to remain subdued across the major regions. Affordability pressures and year-end production patterns should limit near-term improvements, particularly for polypropylene compounds.

Finally, fuel fundamentals should remain strong despite normal seasonal moderation, although gasoline cracks are expected to decline sequentially, patio remained historically strong for the fourth quarter. Tight supply, robust demand for octane and continued constraints in global product markets should support margins above typical seasonal levels.

Overall, we expect a constructive but measured outlook in North America, continued resilience in essential end markets and fuels and significantly greater pressure across European markets. As we conclude today's call, I would like to acknowledge that throughout the third quarter, our team continued to make smart decisions to successfully navigate a rapidly changing environment and ensure that we continue to serve our customers.

We remain heavily focused on delivering lasting value for all our stakeholders. Now with that, we're pleased to take your questions.

Operator

Our first question comes from the line of Kevin McCarthy with Vertical Research Partners.

Kevin McCarthy

I appreciate your your forward commentary on the Intermediates and Derivatives segment, given the relative strength in the third quarter. Maybe you can walk us through some of the structural strength we're seeing in MTBE lately, which has been on a bit of a roller coaster last 4 weeks or so relative to the seasonal weakness. Just kind of the puts and takes here and a little bit more color would be helpful on the sequential move into 4Q.

Unknown Executive

Yes. Thanks for the question, Kevin. I appreciate it. As we said in our planned remarks, margins were at record levels coming out of September, and we have seen a steady decline throughout October and that's primarily driven by declining gas cracks and MTV premiums coming off.

Add to that an increase in butane prices. If you look at butane as a percentage of crude, it's almost in the U.S. and close to 90% in Europe. Both of those regions are seeing margins compressed as a result of the higher butane. Now Europe hasn't declined quite as much as the U.S. has in October with continued logistics constraints associated with Orion.

But again, butane prices are putting downward pressure on margins in the region. Just a reminder, and Peter mentioned it in his planned remarks that seasonality does play a role in the fourth quarter. And from a demand perspective, we are seeing that impact some of our volumes in Q4.

Operator

Our next question comes from the line of Salvator Tiano with KeyBanc Capital Markets.

Unknown Analyst

Yes. Thank you very much. I wanted to ask a little bit about the refinery sales. Also, you said you examined everything, and I believe it was going to be part of potentially alongside that facility where you may have more it does this mean that MoReTec 2 is pushed further to the right or potentially canceled and -- are there any other implications with regard to, I guess, your supply chain from the refinery being sold?

Any other assets like the hydrocrackers that you may have been -- wanted to use 1 way or another. And -- on the other hand, could there be any tailwinds by the refinery starting? Could you get cheaper feedstock supply from Valero? Is there any such agreement?

Peter Z. Vanacker

Thank you, Salvator, for your question. This is Peter here and nice to meet you. Well, you know that we have announced a while ago that we continue to invest in circularity because we believe that it has an attractive value proposition.

And while our overall strategy for Sustainable Solutions remains consistent, executing strategy in a value-accretive way means that we are adopting to the new information that we are gaining from engaging with brand owners, with policymakers, other stakeholders in the value chain. We also mentioned in our latest sustainability report, that achieving our strategy for circularity is dependent on 3 key enablers.

Let me repeat them. I mean, first of all, supportive regulation, secondly, customer demand entered investment and infrastructure capability. You rightfully noted that we delayed the final investment decision for Maritech 2 last year. And earlier this year, we also updated our volume and value goals for circularity.

And of course, I mean, before we updated those goals, we took a hard look at regulation and how that could impact demand over the next few years. In Europe, there is a strong regulatory support for circularity. You know that we are progressing with Mortech 1 in Europe. In the U.S., we do not yet see strong regulatory support that would eventually enable an investment in Moretto 2.

So as a result, if you look at the dynamics in the different regions, we currently are more assuming that MoReTec 2, once, of course, we have successfully started at Marathon -- and we have learned out of MoReTec 1. Remember, it's a semi industrial plants that we're building in Westling.

So we're assuming that MoReTec 2 would also be in Europe and any more tech deployment in the United States would be aligned, I mean, to demand visibility and also progress on regulation.

To your other questions, of course, a strategic decision was our exit from refining. And you know that we announced the exit from refining in 2025. We also executed it in 2025. And since then, -- the site has been a nonoperating assets. We have, of course, evaluated a range of potential future users.

You mentioned a couple of them. But this transaction, as we have now announced this morning, emerge for us as the most attractive opportunity to create value from the site while, of course, also reducing further obligations in the future, as well as complexity.

We view this deal here primarily from a line of Basel point of view as a real estate and a capital allocation decision rather than a change in our corporate strategy. So the transaction allows us, of course, to realize value from a noncore assets while maintaining focus on our existing strategic priorities -- remember what we have flagged in the past, I mean when we said we are shutting down the refinery.

The refinery had, of course, substantial investments that needed to take place and we rather prefer, I mean, to do investments in our core assets, especially here O&P and as, of course, also in IND, so the sale is consistent with our disciplined approach to portfolio management as well as capital allocation. And therefore, we will continue to drive value from our core businesses and the existing growth priorities.

Operator

Our next question comes from the line of Duffy Fisher with Goldman Sachs.

Unknown Analyst

Just a question on feedstocks, in particular, ethane in North America. It's kind of traded up fairly meaningfully off the methane floor recently -- what's your sense for kind of the supply-demand balance in ethane? What do you think has changed, let's say, in the last half year?

And do you think it's structural that it will continue to trade a little bit higher than methane? And is there a chance that it trades up towards the propane ceiling in your view?

Kimberly Foley

So thank you for your question. This is Kim. Let me just talk a little bit about ethane and NGLs as it relates to what we're seeing in the second quarter, third quarter and most importantly, how it's going into the fourth quarter. .

At the onset of the conflict, we didn't see a lot of increase. But second quarter to third quarter, we did see ethane increased 14%, and it continues to rise due to strong domestic demand supported by fewer turnarounds and higher North American operating rates, a steady flow of ethane exports and preparations for as we all know, the new capacity that will start up here on the Gulf Coast shortly.

The broader NGL complex has also strengthened in the third quarter due to the LPG supply that's not getting out through the Strait of Hormuz . For example, butanes, to your questions, they've increased over 7% quarter-on-quarter, respectively, reflecting the stronger export demand, the shift into the gasoline pool and these tighter inventories.

So as we think about feedstocks, we really think about them as your question implies to the fourth quarter because ethane exports are going to continue to increase as there's more VLECs coming online and the demand for ethane in China strengthens.

Today, ethane is sitting at about $0.30 a gallon, which is 24% higher than the third quarter average. In the short term, we think ethylene margins will compress as most of the U.S. NGLs, whether that's ethane, butane and propane are continuing to become more expensive. That said, there is some optimism -- there are 2 new fractionators that are going to be brought online in the fourth quarter, which should support the incremental ethane supply needed.

So we believe that North America will remain structurally advantaged that ethane price will moderate back down and it will benefit from the integration and the feedstock flexibility that we have.

Operator

Our next question comes from the line of Patrick Cunningham with Citi.

Unknown Analyst

Just in terms of outlook the you have the additional October, November increases on the table. I guess what gives you confidence in getting these price increases through? And then maybe just in terms of inventories, both at the producer level and the downstream level. Do you see them as elevated? Do you see any heightened risk of destocking into year-end?

Peter Z. Vanacker

Well, Patrick, good question, of course. Let me say that -- if you look at -- and I think Kim said it in the prepared remarks, demand is extremely good. It's very good. I mean, in the month of October, both domestically as well as in export -- so with that, I hand over to Kim to give you a little bit more background.

Kimberly Foley

Thank you, Peter. Let me start by saying global inventories remain below pre-conflict levels. Demand is strong in cost advantaged regions like North America, and it's obviously softening in high-cost regions like Europe.

And I think the other thing that's important to remember is logistics are constrained and quite expensive. With all the price volatility, customers basically across the entire value chain have basically been operating with very, very lean inventories. Supply is also challenged in different regions of the world due to feedstock availability, some of what we just talked about or affordability.

And trade flows continue to change. For example, today, China is importing polyethylene again versus the approach they took in the second quarter where they were exporting. The other key point about China is price is increasing.

Earlier in the conflict, their crude levels and their finished product inventory levels enabled them to dampen or lessen the price volatility. They don't have those levels anymore today. So they too must pass on the higher feedstock pricing into the downstream markets.

So yes, we believe demand is stronger than anticipated by many because of the demand deferral that happened over the summer when consumers felt that the conflict was over and they were waiting for additional price decreases.

As Peter said, September PE sales are up 7% month-on-month and 12% versus September 25. For LYB, it's our strongest sales month and October is looking like it might meet or beat September. Additionally, if you look at ACC data, it would tell you year-on-year, quarter-on-quarter and month-on-month days on hand is down.

And lastly, with the higher feedstocks and the freight rates that I've already alluded to Other regions of the world just can't meet export demand right now. So we see a combination of healthy end market demand, strong export activity, low inventories and this ongoing logistics constraint to continue to support the current market conditions.

And as you said, LYB, like others have price increases in the market but ultimately, that price will remain very dynamic and very responsive to the feedstock costs, demand durability, supply chain constraints and inventory levels.

Operator

Our next question comes from the line of Chris Parkinson with Wolfe Research.

Unknown Analyst

I just want to dive into that a little bit more, just given where export dynamics were during the beginning of this year and given all the moving pieces on a sequential basis over the last few quarters, it seems like things have evolved fairly constructively, and it's going to take time for the market to normalize or reverse. I'd love to hear your thoughts on how you think that's going to generally occur where you think -- where you ultimately believe things are going to fall into place for the first half of '27 and perhaps longer term just in terms of relative spreads by region?

Peter Z. Vanacker

Well Chris, let me take I mean first try on your question without giving, of course, any guidance. Well, as usual, I mean if I go back a little bit when the conflict started we've been saying consistently that we don't expect that this is going to be something that is going to last for months, not even quarters, but it will take substantially more time until market supply and demand, logistics, everything turns out.

Again, as it is as it was in the past. Having said that, of course, in the meantime, there has been also capacities that have suffered, I mean, from the conflicts that not immediately or expected to come online as well. So if you look at all the dynamics, then I don't believe that on January 1, we're going to just fall off a cliff, so to say, and the market is going to be completely different. On the contrary, just like we said in the past, I mean, this is going to take the quarters.

This is not going to take months in order to have, again, a situation as it was in beginning of 2026. Kim, anything you want to add?

Kimberly Foley

No, I would just say, I mean, look at some of the things that we've already said today to think about the duration of the impacts. We talked about LPGs. We didn't see that spike in price at the onset of the conflict. -- but we're seeing it now.

We just talked about China had an inventory cushion to help soften the blow of the disruption in the beginning. Now it's 6 months later and you see the price impacts flowing through there. So it will take time for all of this to unwind as well.

Operator

Our next question comes from the line of John McNulty with BMO Capital Markets.

Frank Mitsch

Peter, it was highlighted, you've got your liquidity up to $7.7 billion. You've got cash on hand at $3.2 million. And I think before kind of the windfall fourth quarter that you normally get and the Houston refinery sales. So your balance sheet is in a much better position in your leverage levels than we've seen in quite some time.

I guess how do you think about deploying that going forward? Do you loosen things up a little bit, just given that there may be assets available out there right now? Do you still keep them tight because while things may last a while, there's still maybe a negative direction over time. I guess how are you thinking about capital deployment at this point?

Peter Z. Vanacker

Let me make a comment, John, and I appreciate, I mean, that you asked this question because we have the question you recognize, I mean, all the hard work that our teams actually have been doing. And you clearly see that liquidity management, cash conversion is part of our DNA.

It's a muscle that we have developed in the organization. It's part, I mean, of how the businesses are running their business, not just looking at EBITDA, but also looking at the cash that they are generating and the cash conversion actually. So you may expect I mean to see us continue on that, of course, because it's part of our standard operating procedures in the company demonstrated by very high cash conversions as we have demonstrated consistently since 2022. So with that, Augustin,

Unknown Executive

Sure. I'll just add that on that cash balance and strength of the liquidity, you're absolutely right, we've been very diligent and disciplined. But also remember that here in Q1, we'll have the maturity of $900 million that we'll repay to continue with our deleveraging efforts also Q1 is the quarter where traditionally we consume most of our working capital. We have tax payments, insurance payments, compensation, et cetera.

So we will continue to be very prudent and diligent and as you've heard also from the questions before, the uncertainty remains quite high. So nothing really will change in our capital allocation strategy.

Operator

Our next question comes from the line of Abel Evers with Wells Fargo.

Unknown Analyst

Just given the commentary on ethane and ethylene prices, your crackers are running at about 90% capacity this quarter. What are your expectations for rates as you look to the fourth quarter?

Kimberly Foley

On the crackers 90, across O&P, we've guided to 85% in the Americas.

Operator

Our next question comes from the line of Josh Spector with UBS.

Joshua Spector

I wanted to just ask about freight rates in general, just considering a lot of your exports out of the U.S. Golf Coast and that how much of the freight rate do you guys pass through directly to customers? How much do you need to get? Basically, is that something we need to watch as either a cost item or something an opportunity from a spread perspective?

Kimberly Foley

Josh, it's Kim. I would say I'll try to make it simple. When you think about LYBs export, most of it is sold at the port. And I think most of our competitors are also doing the same. The challenge for others is that we're a backhaul.

So the others are paying higher rates from different regions of the world to go to some of the same export destinations as we are, and they have to include that in their price.

Unknown Analyst

Our next question comes from the line of Vincent Andrews with Morgan Stanley.

Vincent Andrews

I wanted to ask on, I guess, on APS as well as your broader polypropylene portfolio with the automobile exposure the shift of China to putting a quota on Chinese imports of automobiles.

Is that going to be positive to you in any way? Or has that sort of change in trade flows in the past than a negative?

Conditions in 2027 or have conditions changed?

And repeater in terms of use of cash flows, when you talk to the Board. Does the Board seem more interested in increasing the dividend or buying back shares with excess cash flow, if you can tell?

Peter Z. Vanacker

Jeff, good to see you or at least hear you online. So you said Kim for the first question, so I'm going to hand over to Kim. .

Kimberly Foley

So Jeff, I think that the rate of imports that we're seeing in '26 into China is very volatile depending on what inventory they had and just the different things that have occurred throughout the year, as I mentioned earlier, whether they were depleting inventories in order to try to minimize the inflationary impact of cost increases or whether they've just been trying to capture different price spikes when they were exporting into the regional markets that they could export to.

They've also got quite a bit of capacity as we all know, coming online in 27, 28. So I think from a planning perspective, we should think in the $750 million to $1 million kind of range, -- but the real thing around the market is really supply and demand. And what kind of growth are we going to have in plastics. We continue to see strong growth in a lot of the areas that we mentioned in our prepared remember whether that's infrastructure, wire and cable, health care, packaging, et cetera. So I think it's fair to assume that it won't be the last 9 years but it won't be as lean as it was in the second quarter.

Peter Z. Vanacker

So to your second question, Jeff, of course, a very good question, but I want to elaborate a little bit rather than just the question around, I mean, dividends. and outline a little bit more on what are all the actions and how does it all fit together? And how is that eventually translating in a structurally higher through-cycle earnings, more cash generation and so on because that's directly linked, of course, then to our -- what do we do with the cash to the capital allocation question.

So -- as you know, I mean, we've taken actions to improve our long-term earnings power, cash generation, the resilience as well. It consisted out of upgrading the portfolio, the latest evidence being the sale of the assets of the Houston refinery with reduced exposure to structurally disadvantaged assets, I mean, the work that we have done in Europe, we're not done yet. We're still discussing with union representatives on Brindisi. We've improved, I mean, cost competitiveness, strengthened also operational performance.

I mean partly through the cash improvement plan, partly to the value enhancement program. If you look, for example, and we mentioned that in the prepared remarks, in terms of head count, -- that's now compared to the -- to last year, it's now 18% lower.

But if you would, for example, look, I mean, to fixed costs, our run rate is about, in total, 10% lower then if you compare it, I mean, to the previous years, and that's the run rate that we are talking about. So you see that all these activities were very tangible and then, of course, leading to a better EBITDA and also leading as a consequence to a better cash generation.

Of course, I mean, in the value enhancement program, we gave a couple of examples during the call. whereby the PO/TBA facility, the new facility and Channelview, through our value enhancement program, we've been able to increase our capacity to 110% of design.

And if you look at current forecast for 2026 and you annualize, I mean, the current actuals for that unit, it means, I mean, a $65 million in additional value. So here, again, tangible results coming out of the VDP. Morris, the example was given by Kim as well, tangible results, $20 million in value -- so it's starting to come now all the hard work during the last 4 years.

You see all these elements are starting to come together to ensure that the cash machine, so to say, that we have built up, continue to generate not just better EBITDAs, but also based upon a very good cash conversion, better cash generation and -- now all of that is helping us, I mean, to offset in place. I mean the vast majority, if I would, for example, look at the value enhancement program, the way I look at it is about 2/3 is offsetting inflation. -- and about 1/3 is sticking of what we are doing, and that is just the value enhancement program.

So now I lead them into capital allocation and pretty much me with a previous question, the answer has been given by August. So to say, nothing has changed, I mean, in how we look at capital allocation. And let's be sure. I mean, also at the time, I met Michael was around as CFO, we've been very diligent in making sure that we had sufficient cash on the bank. So we had about EUR 3.4 billion every year since 2022 at the end of the year on the bank. And that continues to be something that we are aspiring we're not there yet because I said it's a $900 million bond that we want to pay back at the beginning of next year. Avon?

Torkel Rhenman

Very investment grade, very important, making sure net leverage comes down maintenance on our assets to run them safe and reliably, dividend growth and eventually buybacks to offset dilution and that will be our philosophy.

Operator

Thank you. Ladies and gentlemen, that concludes our time allowed for questions. I'll turn the floor back to Mr. Manager for final comments. .

Peter Z. Vanacker

Okay. Great. I mean thank you again for all the thoughts for questions. The events over the past months have transformed the global landscape with the economic and logistical impacts of this conflict likely to persist many quarters beyond the eventual end of the disruption. While volatility and uncertainty remain part of the current environment, our focus continues to be on the actions we can control and through disciplined capital allocation, active portfolio management and a relentless focus on operational excellence, we're building a stronger and more resilient LYB.

Our employees demonstrated this impressively by delivering 18% EBITDA margin during the quarter. Actually, OPM was 20% and IND was 27% and -- it clearly shows the margin potential of the renewed LYB portfolio and lean organization set up, and you can be confident that LYB will remain focused on our strategic priorities and long-term value creation in this dynamic environment as we are developing further opportunities to create shareholder value. We hope you all have a great weekend, stay well and stay safe. Thank you.

Operator

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation. .