# LyondellBasell Industries N.V. (LYB) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from LyondellBasell Industries N.V.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1489393/000148939325000008/lyb-20241231.htm
Accession: 0001489393-25-000008
Filing date: 2025-02-27
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/LYB/
All MD&A years: /company/LYB/mda/
Previous year: /company/LYB/mda/fy2023/ (FY 2023)
Next year: /company/LYB/mda/fy2025/ (FY 2025)

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

GENERAL

This discussion should be read in conjunction with the information contained in our Consolidated Financial Statements, and the accompanying notes elsewhere in this report. Unless otherwise indicated, the “Company,” “we,” “us,” “our” or similar words are used to refer to LyondellBasell Industries N.V. together with its consolidated subsidiaries (“LyondellBasell N.V.”).

The discussion summarizing the significant factors affecting the results of operations and financial condition for the year ended December 31, 2022 and for the year ended December 31, 2023 compared to 2022 has been excluded from this Form 10-K and can be found in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023 which was filed with the Securities and Exchange Commission on February 22, 2024 of which Item 7 is incorporated herein by reference.

OVERVIEW

Results for 2024 decreased when compared to 2023 as impairments recognized in 2024 primarily in our Olefins and Polyolefins-Europe, Asia, International (“O&P-EAI”) segment were partially offset by impairment charges recognized in 2023 in our Advanced Polymer Solutions (“APS”) and Intermediates & Derivatives (“I&D”) segments. Throughout 2024, petrochemical markets faced headwinds from soft global demand, rising raw material costs and economic uncertainty. Markets were broadly pressured by weak demand for durable goods, which impacted margins in the company's Olefins and Polyolefins-Americas (“O&P-Americas”), O&P-EAI and I&D segments. Margins for our I&D and Refining segments fell due to lower crude oil prices and gasoline crack spreads. These decreases were offset by industry cracker outages which benefited olefins margins in our O&P-Americas segment. Margin recovery in the APS segment was limited by global declines in automotive production.

We remain committed to our balanced and disciplined capital allocation strategy. During 2024, we generated $3,819 million in cash from operating activities, invested $1,839 million in capital expenditures and returned $1,915 million to shareholders through dividend payments and share repurchases.

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Results of operations for the periods discussed are presented in the table below.

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["Millions of dollars","","2024","","2023"],["Sales and other operating revenues","","$","40,302","","","$","41,107"],["Cost of sales","","35,738","","","35,849"],["Impairments","","949","","","518"],["Selling, general and administrative expenses","","1,663","","","1,557"],["Research and development expenses","","135","","","130"],["Operating income","","1,817","","","3,053"],["Interest expense","","(481)","","","(477)"],["Interest income","","150","","","129"],["Gain on sale of business","","284","","","\u2014"],["Other income (expense), net","","50","","","(58)"],["Loss from equity investments","","(217)","","","(20)"],["Income from continuing operations before income taxes","","1,603","","","2,627"],["Provision for income taxes","","240","","","501"],["Income from continuing operations","","1,363","","","2,126"],["Income (loss) from discontinued operations, net of tax","","4","","","(5)"],["Net income","","1,367","","","2,121"],["Other comprehensive income (loss), net of tax \u2013"],["Financial derivatives","","115","","","(80)"],["Defined benefit pension and other postretirement benefit plans","","(2)","","","(97)"],["Foreign currency translations","","(169)","","","73"],["Total other comprehensive income (loss), net of tax","","(56)","","","(104)"],["Comprehensive income","","$","1,311","","","$","2,017"]]
[[/GREPCENT_TABLE]]

RESULTS OF OPERATIONS

Revenues—Revenues decreased by $805 million, or 2%, in 2024 compared to 2023. Lower average sales prices driven by lower demand resulted in a 2% decrease in revenues.

Cost of Sales—Cost of sales remained relatively unchanged, in 2024 compared to 2023. Fluctuations in our cost of sales are generally driven by changes in feedstock and energy costs. On an annual basis, feedstock and energy related costs generally represent approximately 75% to 80% of cost of sales. Other variable costs account for approximately 10% of cost of sales and fixed operating costs, consisting primarily of expenses associated with employee compensation, depreciation and amortization, and maintenance, account for the remainder.

Impairments—During 2024, we recognized non-cash impairment charges of $949 million, primarily consisting of impairments of property, plant and equipment of $892 million in our O&P-EAI and APS segments. During 2023, we recognized non-cash impairment charges of $518 million, primarily consisting of a goodwill impairment charge of $252 million in our APS segment and an impairment charge of $192 million related to our European PO joint venture recognized in our I&D segment. See Notes 7, 8 and 20 to the Consolidated Financial Statements for additional information regarding impairment charges.

SG&A Expenses—Selling, general and administrative (“SG&A”) expenses increased by $106 million, or 7%, in 2024 compared to 2023, primarily attributable to an increase in employee-related expenses.

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Operating Income—Operating income decreased by $1,236 million, or 40%, in 2024 compared to 2023. In 2024, Operating income decreased for our O&P-EAI, Refining, and I&D segments by $848 million, $434 million and $311 million, respectively. Operating income for our APS, O&P-Americas and Technology segments increased by $213 million, $140 million and $4 million, respectively, in 2024 compared to 2023. Results for each of our business segments are discussed further in the Segment Analysis section below.

Gain on Sale of Business—In the second quarter of 2024, we completed the sale of our Ethylene Oxide & Derivatives (“EO&D”) business and associated production facilities located in Bayport, Texas and recognized a pre-tax gain of $284 million. See Note 20 to the Consolidated Financial Statements for additional information.

Loss from Equity Investments—Losses from equity investments increased $197 million, or 985%, in 2024 compared to 2023. Approximately 82% of the change was driven by our O&P-EAI segment, primarily due to the recognition of a deferred tax valuation allowance charge by our Chinese joint venture. The remaining change was primarily driven by lower polypropylene margins at our Mexican joint venture in our O&P-Americas segment.

Income Taxes—Our effective income tax rates of 15.0% in 2024 and 19.1% in 2023 resulted in tax provisions of $240 million and $501 million, respectively. The lower effective tax rate for 2024 was primarily attributable to changes in earnings in countries with varying statutory tax rates, largely attributable to fourth quarter non-cash impairments decreasing the effective tax rate by 5.5% in comparison to 2023. There was a further decrease in the effective tax rate of 1.7% related to fluctuations in foreign exchange gains and losses, partially offset by an increase in the effective tax rate of 2.6% related to reduced exempt income in 2024. For additional information, see Note 16 to the Consolidated Financial Statements.

Comprehensive Income—Comprehensive income decreased by $706 million in 2024 compared to 2023, primarily due to a decrease in net income. The activities from the remaining components of Comprehensive income are discussed below.

Financial derivatives designated as cash flow hedges, primarily our commodity swaps, led to an increase in Comprehensive income of $195 million in 2024 compared to 2023, reflecting commodity pricing volatility. Defined benefit pension and other postretirement benefit plans led to an increase in Comprehensive income of $95 million in 2024 compared to 2023, primarily due to actuarial gains resulting from higher-than-expected asset returns offset by a decrease in discount rates. Foreign currency translations decreased Comprehensive income by $242 million in 2024 compared to 2023, primarily due to the strengthening of the U.S. dollar relative to the euro in 2024, offset by the effective portion of our net investment hedges. See Notes 13, 14 and 18 to the Consolidated Financial Statements for further discussions.

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Segment Analysis

We use earnings from continuing operations before interest, income taxes, and depreciation and amortization (“EBITDA”) as our measure of profitability for segment reporting purposes. This measure of segment operating results is used by our chief operating decision maker to assess the performance of, and allocate resources to, our operating segments. Intersegment eliminations and items that are not directly related or allocated to business operations, such as foreign exchange gains or losses and components of pension and other post-retirement benefits other than service costs, are included in “Other.” See the table below for a reconciliation of EBITDA to its nearest generally accepted accounting principles (“GAAP”) measure.

The following table presents the reconciliation of Net Income to EBITDA for each of the periods presented:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["Millions of dollars","","2024","","2023"],["Net income","","$","1,367","","","$","2,121"],["(Income) loss from discontinued operations, net of tax","","(4)","","","5"],["Income from continuing operations","","1,363","","","2,126"],["Provision for income taxes","","240","","","501"],["Depreciation and amortization","","1,522","","","1,534"],["Interest expense, net","","331","","","348"],["EBITDA","","$","3,456","","","$","4,509"]]
[[/GREPCENT_TABLE]]

Our continuing operations are managed through six reportable segments: O&P-Americas, O&P-EAI, I&D, APS, Refining and Technology. Revenues and other information for the periods presented are reflected in the tables below for our reportable segments:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["Millions of dollars","","2024","","2023"],["Sales and other operating revenues:"],["O&P-Americas segment","","$","11,533","","","$","11,280"],["O&P-EAI segment","","10,867","","","10,479"],["I&D segment","","10,424","","","11,086"],["APS segment","","3,634","","","3,698"],["Refining segment","","8,559","","","9,714"],["Technology segment","","671","","","663"],["Other, including intersegment eliminations","","(5,386)","","","(5,813)"],["Total","","$","40,302","","","$","41,107"],["Operating income (loss):"],["O&P-Americas segment","","$","1,805","","","$","1,665"],["O&P-EAI segment","","(1,008)","","","(160)"],["I&D segment","","951","","","1,262"],["APS segment","","(48)","","","(261)"],["Refining segment","","(213)","","","221"],["Technology segment","","338","","","334"],["Other, including intersegment eliminations","","(8)","","","(8)"],["Total","","$","1,817","","","$","3,053"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["Millions of dollars","","2024","","2023"],["Depreciation and amortization:"],["O&P-Americas segment","","$","619","","","$","587"],["O&P-EAI segment","","220","","","207"],["I&D segment","","401","","","443"],["APS segment","","90","","","98"],["Refining segment","","150","","","158"],["Technology segment","","42","","","41"],["Total","","$","1,522","","","$","1,534"],["Income (loss) from equity investments:"],["O&P-Americas segment","","$","13","","","$","49"],["O&P-EAI segment","","(217)","","","(55)"],["I&D segment","","(13)","","","(13)"],["APS segment","","\u2014","","","(1)"],["Total","","$","(217)","","","$","(20)"],["Impairments:"],["O&P-Americas segment","","$","\u2014","","","$","25"],["O&P-EAI segment","","892","","","38"],["I&D segment","","2","","","192"],["APS segment","","55","","","252"],["Refining segment","","\u2014","","","11"],["Total","","$","949","","","$","518"],["Gain on sale of business:"],["I&D segment","","$","284","","","$","\u2014"],["Total","","$","284","","","$","\u2014"],["Other income (expense), net:"],["O&P-Americas segment","","$","8","","","$","2"],["O&P-EAI segment","","14","","","(1)"],["I&D segment","","41","","","(13)"],["APS segment","","12","","","2"],["Refining segment","","3","","","\u2014"],["Technology segment","","(1)","","","\u2014"],["Other, including intersegment eliminations","","(27)","","","(48)"],["Total","","$","50","","","$","(58)"],["EBITDA:"],["O&P-Americas segment","","$","2,445","","","$","2,303"],["O&P-EAI segment","","(991)","","","(9)"],["I&D segment","","1,664","","","1,679"],["APS segment","","54","","","(162)"],["Refining segment","","(60)","","","379"],["Technology segment","","379","","","375"],["Other, including intersegment eliminations","","(35)","","","(56)"],["Total","","$","3,456","","","$","4,509"]]
[[/GREPCENT_TABLE]]

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Olefins and Polyolefins-Americas Segment

Overview—EBITDA increased in 2024 relative to 2023 primarily due to improved olefins margins, partially offset by lower polymer margins.

In calculating the impact of margin and volume on EBITDA, consistent with industry practice, management offsets revenues and volumes related to ethylene co-products against the cost to produce ethylene. Volume and price impacts of ethylene co-products are reported in margin.

Ethylene Raw Materials—Ethylene and its co-products are produced from two major raw material groups:

•natural gas liquids (“NGLs”), principally ethane and propane, the prices of which are generally affected by natural gas prices; and

•crude oil-based liquids (“liquids” or “heavy liquids”), including naphtha, condensates and gas oils, the prices of which are generally related to crude oil prices.

We have flexibility to vary the raw material mix and process conditions in our U.S. olefins plants in order to maximize profitability as market prices fluctuate for both feedstocks and products. Although prices of crude-based liquids and natural gas liquids are generally related to crude oil and natural gas prices, during specific periods the relationships among these materials and benchmarks may vary significantly. Ethane made up approximately 75% and 70% of the raw materials used in our North American crackers in 2024 and 2023, respectively.

The following table sets forth selected financial information for the O&P-Americas segment including Income from equity investments, which is a component of EBITDA.

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["Millions of dollars","","2024","","2023"],["Sales and other operating revenues","","$","11,533","","","$","11,280"],["Income from equity investments","","13","","","49"],["EBITDA","","2,445","","","2,303"]]
[[/GREPCENT_TABLE]]

Revenues—Revenues increased by $253 million, or 2%, in 2024 compared to 2023. Higher average sales prices across most of our products resulted in a 5% increase in revenue. Lower co-product volumes driven by unplanned outages resulted in a 3% decrease in revenue.

EBITDA—EBITDA increased by $142 million, or 6%, in 2024 compared to 2023. Higher olefins results led to a 19% increase in EBITDA primarily driven by higher margins resulting from higher ethylene prices due to industry cracker downtime and lower feedstock and energy cost. Lower polymer results led to a 5% decrease in EBITDA primarily due to lower margins reflecting higher monomer cost. During 2024 and 2023, we recognized a LIFO inventory charge of $22 million and benefit of $73 million, respectively, which resulted in a 4% decrease in EBITDA. EBITDA decreased 2% due to lower income from equity investments reflecting lower polypropylene margins at our joint venture in Mexico.

Olefins and Polyolefins-Europe, Asia, International Segment

Overview—EBITDA decreased in 2024 compared to 2023 primarily driven by an $837 million non-cash impairment of property, plant and equipment related assets included in our European strategic review.

In calculating the impact of margin and volume on EBITDA, consistent with industry practice, management offsets revenues and volumes related to ethylene co-products against the cost to produce ethylene. Volume and price impacts of ethylene co-products are reported in margin.

Ethylene Raw Materials—In Europe, naphtha is the primary raw material for our ethylene production and represented approximately 60% and 65% of the raw materials used in 2024 and 2023, respectively.

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The following table sets forth selected financial information for the O&P-EAI segment including Loss from equity investments, which is a component of EBITDA.

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Millions of dollars","2024","","2023"],["Sales and other operating revenues","$","10,867","","","$","10,479"],["Loss from equity investments","(217)","","","(55)"],["EBITDA","(991)","","","(9)"]]
[[/GREPCENT_TABLE]]

Revenues—Revenues increased by $388 million, or 4%, in 2024 compared to 2023. Higher average sales prices and volumes each resulted in a 2% increase in revenue primarily due to higher demand.

EBITDA—EBITDA decreased by $982 million in 2024 compared to 2023. The decrease in EBITDA was largely driven by an $837 million non-cash impairment of property, plant and equipment related to our European assets included in our strategic review. Increase in losses from equity investments of $162 million, driven by a deferred tax valuation allowance recognized in the fourth quarter of 2024 by a Chinese joint venture reduced EBITDA. The remainder of the change was primarily driven by an increase in polymer results as margins improved due to higher average prices coupled with lower energy costs.

Intermediates and Derivatives Segment

Overview—EBITDA decreased in 2024 compared to 2023, primarily driven by lower oxyfuels and related products margins as a result of lower crude oil and gasoline pricing combined with lower blend premiums.

The following table sets forth selected financial information for the I&D segment including Loss from equity investments, which is a component of EBITDA.

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Millions of dollars","2024","","2023"],["Sales and other operating revenues","$","10,424","","","$","11,086"],["Loss from equity investments","(13)","","","(13)"],["EBITDA","1,664","","","1,679"]]
[[/GREPCENT_TABLE]]

Revenues—Revenues decreased by $662 million, or 6%, in 2024 compared to 2023 driven by lower average sales prices for oxyfuels and related products as a result of lower gasoline crack spreads and blend premiums.

EBITDA—EBITDA decreased $15 million, or 1%, in 2024 compared to 2023. Lower oxyfuels and related products margins driven by lower gasoline cracks in the US and Europe and lower oxyfuel prices as compared to the prior year drove a 43% decrease in EBITDA. The decrease was partially offset by increased oxyfuels and related products volumes primarily from our newest PO/TBA plant which drove an 11% increase in EBITDA. During 2024 we recognized a $284 million gain on the sale of our EO&D business which resulted in a 17% increase in EBITDA. During 2023, we recognized a non-cash impairment charge of $192 million related to our equity investment in the European PO joint venture. The absence of a similar charge in 2024 resulted in a 11% increase in EBITDA.

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Advanced Polymer Solutions Segment

Overview—EBITDA increased in 2024 compared to 2023, largely due to a decrease in non-cash impairment charges.

The following table sets forth selected financial information for the APS segment including Loss from equity investments, which is a component of EBITDA.

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Millions of dollars","2024","","2023"],["Sales and other operating revenues","$","3,634","","","$","3,698"],["Loss from equity investments","\u2014","","","(1)"],["EBITDA","54","","","(162)"]]
[[/GREPCENT_TABLE]]

Revenues—Revenues decreased in 2024 by $64 million, or 2%, compared to 2023 as a result of lower average sales prices.

EBITDA—EBITDA increased in 2024 by $216 million, or 133%, compared to 2023. During 2023, we recognized a non-cash goodwill impairment charge of $252 million after the effect of moving our Catalloy and polybutene-1 businesses from our APS segment and reintegrating them into our O&P-Americas and O&P-EAI segments. During 2024, we recognized a non-cash impairment charge of $55 million related to our specialty powders business. The change in impairment charges in 2024 relative to 2023 resulted in a 122% increase in EBITDA. Improved margins primarily driven by lower raw material cost and favorable mix resulted in a 16% increase in EBITDA.

Refining Segment

Overview—EBITDA decreased in 2024 relative to 2023 primarily due to lower margins.

The following table sets forth selected financial information and heavy crude oil processing rates for the Refining segment and the U.S. refining market margins for the applicable periods. “Brent” is a light sweet crude oil and is one of the main benchmark prices for purchases of oil worldwide. “Maya” is a heavy sour crude oil grade produced in Mexico that is a relevant benchmark for heavy sour crude oils in the U.S. Gulf Coast market. References to industry benchmarks for refining market margins are to industry prices reported by Platts, a division of S&P Global.

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Millions of dollars","2024","","2023"],["Sales and other operating revenues","$","8,559","","","$","9,714"],["EBITDA","(60)","","","379"],["Thousands of barrels per day"],["Heavy crude oil processing rates","237","","","237"],["Market margins, dollars per barrel"],["Brent - 2-1-1","$","16.16","","","$","25.71"],["Brent - Maya differential","11.49","","","13.26"],["Total Maya 2-1-1","$","27.65","","","$","38.97"]]
[[/GREPCENT_TABLE]]

Revenues—Revenues decreased by $1,155 million, or 12%, in 2024 compared to 2023 driven by lower product prices reflecting lower margins on refined products.

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EBITDA—EBITDA decreased by $439 million or 116%, in 2024 compared to 2023. Lower margins drove a 152% decrease in EBITDA primarily due to a decrease in the Maya 2-1-1 industry crack spread of approximately $11 per barrel to $28 per barrel. A decrease in costs incurred related to our planned exit from the refining business in 2024 compared to 2023 resulted in a 25% increase in EBITDA.

Technology Segment

Overview—Our Technology segment recognizes revenues related to the sale of polyolefin catalysts and the licensing of chemical and polyolefin process technologies. These revenues are offset in part by the costs incurred in the production of catalysts, licensing and services activities and research and development (“R&D”) activities. In 2024 and 2023, our Technology segment incurred approximately 55% and 50% of all R&D costs, respectively.

EBITDA increased in 2024 compared to 2023 primarily due to higher licensing results partially offset by lower catalyst demand.

The following table sets forth selected financial information for the Technology segment.

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Millions of dollars","2024","","2023"],["Sales and other operating revenues","$","671","","","$","663"],["EBITDA","379","","","375"]]
[[/GREPCENT_TABLE]]

Revenues—Revenues increased by $8 million, or 1%, in 2024 compared to 2023. Higher licensing revenues resulting from a higher number of contracts reaching significant milestones drove a 3% increase in revenue. Higher catalyst prices drove a 1% increase in revenues. Lower catalyst volumes resulting from lower demand drove a 3% decrease in revenues.

EBITDA—EBITDA in 2024 increased by $4 million, or 1%, compared to 2023. Licensing results led to a 6% increase in EBITDA resulting from more contracts reaching significant milestones. Lower catalyst volumes driven by lower demand resulted in a 4% decrease in EBITDA.

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FINANCIAL CONDITION

The following table summarizes operating, investing and financing cash flow activities:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Millions of dollars","2024","","2023"],["Cash provided by (used in):"],["Operating activities","$","3,819","","","$","4,942"],["Investing activities","(1,853)","","","(1,777)"],["Financing activities","(1,895)","","","(1,950)"]]
[[/GREPCENT_TABLE]]

Operating Activities—Cash provided by operating activities of $3,819 million in 2024 primarily reflected earnings adjusted for non-cash items and cash used by the main components of working capital–Accounts receivable, Inventories and Accounts payable.

In 2024, the main components of working capital provided $30 million of cash driven by a decrease in Accounts receivable and Inventories, partially offset by a decrease in Accounts payable. The decrease in Accounts receivable was due to lower average sales prices coupled with timing of sales and customer payments. The decrease in Inventories was primarily driven by higher sales volumes, slightly offset by inventory build in anticipation of turnarounds in the first quarter of 2025. The decrease in Accounts payable was driven by decreased raw material costs, partially offset by timing of payments.

Cash provided by operating activities of $4,942 million in 2023 primarily reflected earnings adjusted for non-cash items and cash provided by the main components of working capital.

In 2023, the main components of working capital provided $269 million of cash driven by a decrease in Accounts receivable and an increase in Accounts payable. The decrease in Accounts receivable was primarily due to lower revenues in our O&P-Americas, O&P-EAI and APS segments, primarily driven by lower average sales prices. The increase in Accounts payable was primarily driven by higher feedstock and energy costs in our O&P-Americas segment.

Investing Activities—Capital expenditures in 2024 totaled $1,839 million compared to $1,531 million in 2023, of which approximately 75% and 70%, respectively, support sustaining maintenance such as turnaround activities at several sites as well as other plant Health, Safety and Environmental projects. The remaining expenditures support profit-generating growth projects. See Note 20 to the Consolidated Financial Statements for additional information regarding capital spending by segment.

In 2024, we sold our EO&D business for $689 million and invested approximately $500 million to acquire a 35% stake in the National Petrochemical Industrial Company (“NATPET”) joint venture. See Notes 8 and 20 to the Consolidated Financial Statements for additional information.

In 2024, foreign currency contracts with an aggregate notional value of €850 million expired. Upon settlement of these foreign currency contracts, we paid €850 million ($921 million at the expiry spot rate) to our counterparties and received $967 million from our counterparties.

In 2023, foreign currency contracts with an aggregate notional value of €750 million expired. Upon settlement of these foreign currency contracts, we paid €750 million ($820 million at the expiry spot rate) to our counterparties and received $903 million from our counterparties.

Financing Activities—We made dividend payments totaling $1,720 million and $1,610 million, in 2024 and 2023, respectively. Additionally, in 2024 and 2023, we made payments of $195 million and $211 million to repurchase outstanding ordinary shares, respectively. For additional information related to our share repurchases and dividend payments, see Note 18 to the Consolidated Financial Statements.

In 2024, we issued $750 million of 5.5% guaranteed notes due 2034. Additionally, we repaid the $775 million remaining of outstanding principal on our 5.75% senior notes due 2024.

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In 2023, we issued $500 million of 5.625% guaranteed notes due 2033. Additionally, we repaid the $425 million remaining of outstanding principal on our 4.0% guaranteed notes due 2023. For additional detail regarding these debt transactions see Note 11 to the Consolidated Financial Statements.

In 2023, we made net repayments of $200 million through the issuance and repurchase of commercial paper instruments under our commercial paper program.

In 2024, foreign currency contracts with an aggregate notional value of €784 million expired. Upon settlement of these foreign currency contracts, which were designated as cash flow hedges, we paid €784 million ($835 million at the expiry spot rate) to our counterparties and received $849 million from our counterparties.

For additional information related to our swaps and currency contracts, see Note 13 to the Consolidated Financial Statements.

Liquidity and Capital Resources

Overview

We plan to fund our working capital, capital expenditures, debt service, dividends and other cash requirements with our current available liquidity and cash from operations, which could be affected by general economic, financial, competitive, legislative, regulatory, business and other factors, many of which are beyond our control. Debt repayment, and the purchase of shares under our share repurchase authorization, may be funded from cash and cash equivalents, cash from short-term investments, cash from operating activities, proceeds from the issuance of debt, or a combination thereof.

As part of our overall capital allocation strategy, we plan to provide returns to shareholders in the form of dividends and share repurchases. Barring any significant or unforeseen business challenges, mergers or acquisitions, over the long-term, we are targeting shareholder returns of 70% of free cash flow, defined as net cash provided by operating activities less capital expenditures. We intend to continue to declare and pay quarterly dividends, with the goal of increasing the dividend over time, after giving consideration to our cash balances and expected results from operations. Our focus on funding our dividends while remaining committed to a strong investment grade balance sheet continues to be the foundation of our capital allocation strategy.

Cash and Liquid Investments

As of December 31, 2024, we had Cash and cash equivalents totaling $3,375 million, which includes $1,172 million in jurisdictions outside of the U.S., primarily held within the European Union. There are currently no legal or economic restrictions that would materially impede our transfers of cash.

Credit Arrangements

At December 31, 2024, we had total debt, including current maturities, of $11,149 million. Additionally, we had $174 million of outstanding letters of credit, bank guarantees and surety bonds issued under uncommitted credit facilities.

We had total unused availability under our credit facilities of $4,650 million at December 31, 2024, which included the following:

•$3,750 million under our $3,750 million Senior Revolving Credit Facility. This facility backs our $2,500 million commercial paper program. Availability under this facility is net of outstanding borrowings, outstanding letters of credit provided under the facility and notes issued under our commercial paper program. At December 31, 2024, we had no outstanding commercial paper and no borrowings or letters of credit outstanding under this facility; and

•$900 million under our $900 million U.S. Receivables Facility. Availability under this facility is subject to a borrowing base of eligible receivables, which is reduced by outstanding borrowings and letters of credit, if any. At December 31, 2024, we had no borrowings or letters of credit outstanding under this facility.

In 2024, we amended some terms of our credit agreements. See Note 11 to the Consolidated Financial Statements for additional details.

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At any time and from time to time, we may repay or redeem our outstanding debt, including purchases of our outstanding bonds in the open market, through privately negotiated transactions or a combination thereof, in each case using cash and cash equivalents, cash from our short-term investments, cash from operating activities, proceeds from the issuance of debt or proceeds from asset divestitures. Any repayment or redemption of our debt will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. In connection with such repurchases or redemptions, we may incur cash and non-cash charges, which could be material in the period in which they are incurred.

In accordance with our current interest rate risk management strategy and subject to management’s evaluation of market conditions and the availability of favorable interest rates among other factors, we may from time to time enter into interest rate swap agreements to economically convert a portion of our fixed rate debt to variable rate debt or convert a portion of our variable rate debt to fixed rate debt.

Share Repurchases

In May 2024, our shareholders approved a proposal to authorize us to repurchase up to 34.0 million ordinary shares, through November 24, 2025, which superseded any prior repurchase authorizations. Our share repurchase authorization does not have a stated dollar amount, and purchases may be made through open market purchases, private market transactions or other structured transactions. Repurchased shares could be retired or used for general corporate purposes, including for various employee benefit and compensation plans. The maximum number of shares that may yet be purchased is not necessarily an indication of the number of shares that will ultimately be purchased. In 2024, we purchased 2.2 million shares under our share repurchase authorization for $198 million.

As of February 25, 2025, we had approximately 31.1 million shares remaining under the current authorization. The timing and amounts of additional shares repurchased, if any, will be determined based on our evaluation of market conditions and other factors, including any additional authorizations approved by our shareholders. For additional information related to our share repurchase authorizations, see Note 18 to the Consolidated Financial Statements.

Capital Budget

In 2025, we are planning to invest approximately $1.9 billion in capital expenditures. Approximately $1.2 billion of the 2025 budget is planned for sustaining maintenance, with the remaining budget supporting profit-generating growth projects. Our profit-generating growth project budget includes approximately $350 million, for projects that support our sustainability goals, including investments in emissions reduction and our CLCS business. Our capital spending plans are aligned with our strategic pillars.

Cash Requirements from Contractual and Other Obligations

As part of our ongoing operations, we enter into contractual arrangements that may require us to make future cash payments under certain circumstances. Our cash requirements related to contractual and other obligations primarily consist of purchase obligations, principal and interest payments on outstanding debt, lease payments, pension and other post-retirement benefits and income taxes. For more information regarding our debt arrangements, lease obligations, pension and other post-retirement benefits and income taxes, see Notes 11, 12, 14 and 16 to the Consolidated Financial Statements, respectively.

We are party to obligations to purchase raw materials, utilities and industrial gases which are designed to ensure sources of supply and are not expected to be in excess of normal requirements. These purchase arrangements include provisions which state minimum purchase quantities or fixed-fees; however, in the event we do not take the contractual minimum volumes, we are obligated to compensate the vendor only for any resulting economic losses they suffer. No material fees were paid to vendors for such losses in 2024. Assuming that contractual minimum volumes are purchased at contract prices as of December 31, 2024, these commitments represent approximately 15% of our annual Cost of sales with a weighted average remaining term of 8 years.

We also have purchase obligations under take-or-pay agreements which require us to either buy and take delivery of a minimum quantity of goods or to pay for any shortfall. These arrangements largely relate to product off-take agreements with a joint venture located in Poland. No material shortfall was paid for quantities not taken under these contracts in 2024. When valued using a contract price as of December 31, 2024, these commitments represent approximately 5% of our annual Cost of sales with a weighted average remaining term of 14 years.

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CURRENT BUSINESS OUTLOOK

In 2025 we remain watchful and prepared for the macroeconomic catalysts that will eventually drive restocking of supply chains, improve demand for durable goods and support a more broad-based economic recovery. One indicator of recovery is that North American domestic demand for polyolefins rebounded in 2024, after two years of declines. Increased driving and summertime gasoline specifications should lead to typical seasonal improvements in oxyfuels margins. We expect a gradual recovery in oxyfuel margins over the summer months, with strong octane premiums and the relatively low cost of butane raw materials supportive of long-term oxyfuels fundamentals. Tariff and trade uncertainties are potential headwinds. Our refining operations will cease in the first quarter of 2025, a strategic milestone paving the way for continued growth in circular and low-carbon feedstocks and products. We are aligning our first quarter operating rates with global demand and expect to operate our O&P-Americas, O&P-EAI and I&D assets at approximately 80%, 75% and 80%, respectively.

Value Enhancement Program (“VEP”)

During 2022, we introduced our VEP, which expands capacity through low-cost debottlenecks and improved reliability, reduces costs and emissions by saving energy and increases margins through improvements in procurement, logistics and customer service. We estimate Net income and recurring annual EBITDA benefits for the VEP based on 2017 through 2019 mid-cycle margins and modest inflation relative to a 2021 baseline year. We believe recurring annual EBITDA is useful to investors because it represents a key measure used by management to assess progress towards our strategy of value creation.

At the end of 2024, we estimated VEP benefits to have a year-end annual run rate of approximately $610 million of Net income which, after adding back income taxes and depreciation and amortization of $155 million and $35 million, respectively, results in approximately $800 million of recurring annual EBITDA. We incurred one-time costs of approximately $200 million per year in 2023 and 2024 related to our Value Enhancement Program.

We anticipate that our VEP will achieve a 2025 year-end annual run rate of approximately $760 million of Net income, which, after adding back income taxes and depreciation and amortization of approximately $190 million and $50 million, respectively, results in approximately $1,000 million of recurring annual EBITDA. We estimate incurring one-time costs of $200 million in 2025 related to our Value Enhancement Program.

RELATED PARTY TRANSACTIONS

We have related party transactions with our joint ventures. We believe that such transactions are affected on terms substantially no more or less favorable than those that would have been agreed upon by unrelated parties on an arm’s length basis. See Note 4 to the Consolidated Financial Statements for additional related party disclosures.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management applies those accounting policies that it believes best reflect the underlying business and economic events, consistent with accounting principles generally accepted in the U.S., see Note 2 to the Consolidated Financial Statements. Inherent in such policies are certain key assumptions and estimates made by management and updated periodically based on its latest assessment of the current and projected business and general economic environment.

Management believes the following accounting policies and estimates, and the judgments and uncertainties affecting them, are critical in understanding our reported operating results and financial condition.

Inventories—We account for our raw materials, work-in-progress and finished goods inventories using the last-in, first-out (“LIFO”) method of accounting.

The cost of raw materials, which represents a substantial portion of our operating expenses, and energy costs generally follow price trends for crude oil and/or natural gas. Crude oil and natural gas prices are subject to many factors, including changes in economic conditions.

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Since our inventory consists of manufactured products derived from crude oil, natural gas, natural gas liquids and correlated materials, as well as the associated feedstocks and intermediate chemicals, our inventory market values are generally influenced by changes in the benchmark of crude oil and heavy liquid values and prices for manufactured finished goods. The degree of influence of a particular benchmark may vary from period to period, as the composition of the dollar value LIFO pools change. An actual valuation of inventory under the LIFO method is performed at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on our estimates of expected inventory levels and costs at the end of the year.

LIFO value is measured at the total pool level. The impact of the measurement of each LIFO pool at the lower of cost or market value (“LCM”) is a function of the current market prices and the composition, or product mix, of inventory within the pool at the balance sheet date. Due to the compositions of our LIFO pools, changes in market prices of the materials within the pool from period-to-period do not necessarily correlate with LCM charges. An LCM condition may arise due to a volumetric or price decline in a particular material that had previously provided a positive impact within a pool.

As indicated above, fluctuation in the prices of crude oil, natural gas and correlated products from period to period may result in the recognition of charges to adjust the value of inventory to the lower of cost or market in periods of falling prices and the reversal of those charges in subsequent interim periods, within the same fiscal year, as market prices recover. Accordingly, our cost of sales and results of operations may be affected by such fluctuations.

We do not believe any of our inventory is at risk for impairment at this time, however as prices for our products and raw materials are inherently volatile, no prediction can be given with certainty. Given the inherent volatility in the prices of our finished goods and raw materials, sustained price declines could result in LCM inventory valuation charges.

Long-Lived Assets Impairment Assessment—The need to test for impairment can be based on several indicators, including a significant reduction in prices of or demand for products produced, a weakened outlook for profitability, a significant reduction in margins, an expectation that a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life, other changes to contracts or changes in the regulatory environment. If the sum of the undiscounted estimated pre-tax cash flows for an asset group is less than the asset group’s carrying value, fair value is calculated for the asset group using an income approach or a market approach when appropriate, and the carrying value is written down to the calculated fair value. For purposes of impairment evaluation, long-lived assets including finite-lived intangible assets must be grouped at the lowest level for which independent cash flows can be identified.

Significant judgment is involved in developing estimates of future cash flows since the results are based on forecasted financial information prepared using significant assumptions which may include, among other things, projected changes in supply and demand fundamentals (including industry-wide capacity, our planned utilization rate and end-user demand), new technological developments, capital expenditures, new competitors with significant raw material or other cost advantages, changes associated with world economies, the cyclical nature of the chemical and refining industries, uncertainties associated with governmental actions and other economic conditions. Such estimates are consistent with those used in our financial planning and business performance reviews.

When an income approach is used to estimate fair value of our long-lived assets, the cash flows are discounted using a rate that is based on a variety of factors, including market and economic conditions, operational risk, regulatory risk and political risk. This discount rate is also compared to recent observable market transactions, if possible.

In conjunction with our fourth quarter 2024 quarterly asset impairment analysis, we recognized non-cash impairment charges related to property, plant and equipment of $837 million in our O&P-EAI segment related to the European assets under strategic review and $55 million in our APS segment related to our specialty powders business. See Note 7 to the Consolidated Financial Statements for additional information.

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The estimated fair values for the European assets and specialty powders business were calculated using a discounted cash flow method under the income approach and assumptions including management’s view on long-term growth rates in our industry, discount rates and other assumptions based on a market participant perspective. In the fourth quarter of 2024 we launched a marketing effort to gauge market interest in the European assets included in our strategic review. Fair value indicators obtained through our marketing efforts were also considered. These estimates required considerable judgment and are sensitive to changes in underlying assumptions such as future commodity prices, margins, operating rates and capital expenditures including repairs and maintenance. As a result, there can be no assurance that the estimates and assumptions made for purposes of our impairment determination will prove to be an accurate prediction of the future. Should our estimates and assumptions significantly change in future periods, it is possible that we may determine future impairment charges.

An estimate of the sensitivity to net income resulting from impairment calculations is not practicable, given the numerous assumptions, including pricing, volumes, discount rates, and market information provided by unrelated third parties that can materially affect our estimates. That is, unfavorable adjustments to some of the above listed assumptions may be offset by favorable adjustments in other assumptions. Property, plant and equipment impairments incurred represent a full write down of the assets, sensitivity analysis would not change the outcome of the impairment assessment.

Equity Method Investments Impairment—Investments in nonconsolidated entities accounted for under the equity method are assessed for impairment when there are indicators of a loss in value, such as a lack of sustained earnings capacity or a current fair value less than the investment’s carrying amount. When it is determined such a loss in value is other than temporary, an impairment charge is recognized for the difference between the investment’s carrying value and its estimated fair value. When determining whether a decline in value is other than temporary, management considers factors such as the duration and extent of the decline, the investee’s financial condition and near-term prospects, and our ability and intention to retain our investment for a period that will be sufficient to allow for any anticipated recovery in the value of the investment. Management’s estimate of fair value of an investment is based on the income approach and/or market approach. For the income approach, the fair value is typically based on the present value of expected future cash flows using discount rates believed to be consistent with those used by principal market participants. For the market approach, since quoted market prices are usually not available, we utilize market multiples of revenue and earnings derived from comparable publicly traded industrial gases companies.

During the fourth quarter of 2023, a trend of adverse financial performance triggered an impairment analysis of our investment in our European PO joint venture. We concluded the asset was impaired and recorded a non-cash impairment charge of $192 million. The fair value of our investment in the joint venture was determined using an income approach which utilized unobservable inputs, which generally consist of market information provided by unrelated third parties. Our fair value estimate was based on significant assumptions including management’s best estimates of the expected future cash flows. These estimates required considerable judgment and are sensitive to changes in underlying assumptions such as future commodity prices and PO/SM margins. As a result, there can be no assurance that the estimates and assumptions made for purposes of our impairment determination will prove to be an accurate prediction of the future.

An estimate of the sensitivity to net income resulting from impairment calculations is not practicable, given the numerous assumptions, including pricing, volumes, discount rates, and market information provided by unrelated third parties that can materially affect our estimates. That is, unfavorable adjustments to some of the above listed assumptions may be offset by favorable adjustments in other assumptions.

Goodwill—As of December 31, 2024, we had goodwill of $1,561 million, primarily relating to the acquisition of A. Schulman Inc. in 2018 and the tax effect of the differences between the tax and book basis of our assets and liabilities resulting from the revaluation of those assets and liabilities to fair value in connection with the Company’s emergence from bankruptcy and fresh-start accounting in 2010.

Effective January 1, 2023, our Catalloy and polybutene-1 businesses were moved from our APS segment and reintegrated into our O&P-Americas and O&P-EAI segments. When moved, a portion of the APS reporting unit’s goodwill was allocated to the O&P-Americas and O&P-EAI segments based on the fair values of the businesses that were reintegrated relative to the fair value of the APS segment. In the first quarter of 2023, we evaluated goodwill for impairment immediately before and after the transfer of these businesses. Our evaluation resulted in the recognition of a non-cash goodwill impairment of $252 million recognized in our APS segment. See Notes 7 and 20 to the Consolidated Financial Statements.

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An estimate of the sensitivity to net income resulting from impairment calculations is not practicable, given the numerous assumptions, including pricing, volumes and discount rates, which could materially affect our estimates. That is, unfavorable adjustments to some of the above listed assumptions may be offset by favorable adjustments in other assumptions.

We evaluate the recoverability of the carrying value of goodwill annually or more frequently if events or changes in circumstances indicate that the carrying amount of the goodwill of a reporting unit may not be fully recoverable. We have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Qualitative factors assessed for each of the reporting units include, but are not limited to, changes in long-term commodity prices, discount rates, competitive environments, planned capacity, cost factors such as raw material prices, and financial performance of the reporting units. If the qualitative assessment indicates that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, a quantitative test is required.

We also have the option to proceed directly to the quantitative impairment test. Under the quantitative impairment test, the fair value of each reporting unit, calculated using a discounted cash flow model, is compared to its carrying value, including goodwill. The discounted cash flow model inherently utilizes a significant number of estimates and assumptions, including operating margins, tax rates, discount rates, capital expenditures and working capital changes. If the carrying value of the reporting unit including goodwill exceeds its fair value, an impairment charge equal to the excess would be recognized, up to a maximum amount of goodwill allocated to that reporting unit.

In the fourth quarter of 2024, we performed a qualitative impairment assessment of our reporting units, which indicated that it was more likely than not that the fair value of our reporting units was greater than their carrying value including goodwill. Accordingly, a quantitative goodwill impairment test was not required.

In the fourth quarter of 2023, management performed a quantitative impairment assessment for our reporting units within our APS segment and a qualitative impairment assessment of our other reporting units, which indicated that the fair values of our reporting units were greater than their carrying values, including goodwill. Based on this assessment, our historical assessment for impairment, and forecasted demand for our products, a quantitative goodwill impairment test in the fourth quarter was not necessary.

Long-Term Employee Benefit Costs—Our costs for long-term employee benefits, particularly pension and other post-retirement medical and life insurance benefits, are incurred over long periods of time, and involve many uncertainties over those periods. The net periodic benefit cost attributable to current periods is based on several assumptions about such future uncertainties and is sensitive to changes in those assumptions. It is management’s responsibility, often with the assistance of independent experts, to select assumptions that in its judgment represent its best estimates of the future effects of those uncertainties and to review those assumptions periodically to reflect changes in economic or other factors.

The current benefit service costs, as well as the existing liabilities, for pensions and other post-retirement benefits are measured on a discounted present value basis. The discount rate is a current rate, related to the rate at which the liabilities could be settled. Our assumed discount rate is based on yield information for high-quality corporate bonds with durations comparable to the expected cash settlement of our obligations. For the purpose of measuring the benefit obligations at December 31, 2024, we used a weighted average discount rate of 5.35% for the U.S. plans, which reflects the different terms of the related benefit obligations. The weighted average discount rate used to measure obligations for non-U.S. plans at December 31, 2024, was 3.66%, reflecting market interest rates. The discount rates in effect at December 31, 2024 will be used to measure net periodic benefit cost during 2025.

The benefit obligation and the net periodic benefit cost of other post-retirement medical benefits are also measured based on assumed rates of future increase in the per capita cost of covered health care benefits. As of December 31, 2024, the assumed rate of increase for our U.S. plans was 6.5%, decreasing to 4.5% in 2033 and thereafter.

The net periodic benefit cost of pension benefits included in expense is affected by the expected long-term rate of return on plan assets assumption. Investment returns that are recognized currently in net income represent the expected long-term rate of return on plan assets applied to a market-related value of plan assets, which is defined as the market value of assets. The expected rate of return on plan assets is a longer-term rate and is expected to change less frequently than the current assumed discount rate, reflecting long-term market expectations, rather than current fluctuations in market conditions.

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The weighted average expected long-term rate of return on assets in our U.S. plans of 7.25% is based on the average level of earnings that our independent pension investment advisor advised could be expected to be earned over time. The weighted average expected long-term rate of return on assets in our non-U.S. plans of 4.14% is based on expectations and asset allocations that vary by region. The asset allocations are summarized in Note 14 to the Consolidated Financial Statements.

The actual rate of return on plan assets may differ from the expected rate due to the volatility normally experienced in capital markets. Management’s goal is to manage the investments over the long term to achieve optimal returns with an acceptable level of risk and volatility.

Net periodic pension cost recognized each year includes the expected asset earnings, rather than the actual earnings or loss. Along with other gains and losses, this unrecognized amount, to the extent it cumulatively exceeds 10% of the greater of the projected benefit obligation or the market related value of the plan assets for the respective plan, is recognized as additional net periodic benefit cost over the average remaining service period of the participants in each plan.

The following table reflects the sensitivity of the benefit obligations and the net periodic benefit costs of our pension plans to changes in the actuarial assumptions:

[[GREPCENT_TABLE]]
[["","Effects on Benefit Obligations in 2024","","Effects on Net Periodic Pension Costs in 2025"],["Millions of dollars","U.S.","","Non-U.S.","","U.S.","","Non-U.S."],["Projected benefit obligations at December 31, 2024","$","1,232","","","$","1,389","","","$","\u2014","","","$","\u2014"],["Projected net periodic pension costs in 2025","\u2014","","","\u2014","","","59","","","54"],["Discount rate increases by 100 basis points","(101)","","","(176)","","","(7)","","","(5)"],["Discount rate decreases by 100 basis points","120","","","205","","","9","","","7"]]
[[/GREPCENT_TABLE]]

The sensitivity of our post-retirement benefit plans obligations and net periodic benefit costs to changes in actuarial assumptions are reflected in the following table:

[[GREPCENT_TABLE]]
[["","Effects on Benefit Obligations in 2024","","Effects on Net Periodic Benefit Costs in 2025"],["Millions of dollars","U.S.","","Non-U.S.","","U.S.","","Non-U.S."],["Projected benefit obligations at December 31, 2024","$","139","","","$","52","","","$","\u2014","","","$","\u2014"],["Projected net periodic benefit costs in 2025","\u2014","","","\u2014","","","(1)","","","3"],["Discount rate increases by 100 basis points","(10)","","","(10)","","","(1)","","","(1)"],["Discount rate decreases by 100 basis points","11","","","13","","","1","","","1"]]
[[/GREPCENT_TABLE]]

Additional information on the key assumptions underlying these benefit costs appears in Note 14 to the Consolidated Financial Statements.

Accruals for Taxes Based on Income—The determination of our provision for income taxes and the calculation of our tax benefits and liabilities is subject to management’s estimates and judgments due to the complexity of the tax laws and regulations in the tax jurisdictions in which we operate. Uncertainties exist with respect to interpretation of these complex laws and regulations.

Deferred tax assets and liabilities are determined based on temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse.

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We recognize future tax benefits to the extent that the realization of these benefits is more likely than not. Our current provision for income taxes is impacted by the recognition and release of valuation allowances related to net deferred tax assets in certain jurisdictions. Further changes to these valuation allowances may impact our future provision for income taxes, which will include no tax benefit with respect to losses incurred and no tax expense with respect to income generated in these countries until the respective valuation allowance is eliminated.

We recognize the financial statement benefits with respect to an uncertain income tax position that we have taken or may take on an income tax return when we believe it is more likely than not that the position will be sustained with the tax authorities.

ACCOUNTING AND REPORTING CHANGES

For a discussion of the potential impact of new accounting pronouncements on our Consolidated Financial Statements, see Note 2 to the Consolidated Financial Statements.

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