A $337 million increase over the first quarter. These results also reflect a gain on the sale of the European emissions credits of approximately $50 million. It is the strongest quarterly result of the segment since 2021. Market conditions improved significantly during the quarter as supply chain disruptions stemming from the conflict in the Middle East reduced product availability, and supported both olefins and polymer margin expansion. To capture the improved margins, we increased operating rates to approximately 75% for the quarter with our olefins crackers operating at approximately 85% utilization. Our Middle East joint ventures continued to operate safely through the period, but at times were limited by feedstock impacting operating rates. As Peter previously mentioned, We completed the divestiture of four European assets during the quarter, marking an important milestone in our portfolio transformation. These actions further strengthen the competitiveness of our portfolio while improving our resilience through the cycle. Looking ahead into the third quarter, demand is expected to soften due to the typical summer seasonality. While geopolitical uncertainty may continue to contribute to market volatility, We remain focused on disciplined commercial and operational execution. Additionally, we continue to monitor the Rhine water levels in the region as they remain low and are proactively managing operating rates as needed. We continue to adapt production plans and minimize disruptions to our customers. As we align production with market demand, we expect to operate the segment at approximately 70% utilization during the third quarter. though prolonged low groundwater levels could further impact operating rates. With a more focused and competitive asset base, we are better positioned to navigate market volatility while capturing value. And with that, I will turn the call over to Aaron.

Thank you, Kim. Please turn to slide 12 as we look at the intermediates and derivatives segment. During the second quarter, segment EBITDA sequentially increased to $386 million. Driven by stronger margins across several businesses, supported by improving market conditions despite unplanned downtime at our Bayport POTBA asset in Houston. Global supply tightness from the conflict in the Middle East drove margin expansion in most of our businesses. Oxyfuels further benefited from strong seasonal demand and near record level refinery gasoline crack spreads. Methanol gained from lower Gulf Coast natural gas prices in the quarter. These favorable conditions were partially offset by unplanned downtime at our Bayport POTBA asset. The outage had an estimated EBITDA impact of approximately $250 million during the quarter. As a result, overall IND operating rates were impacted and ran at approximately 65% utilization. I am pleased to report that our team safely restarted the Bayport asset and ramped to full rates in June. The successful restart reflects the dedication of our operation and maintenance teams and positions us to capture improved market opportunities moving forward. Looking ahead to the third quarter, we expect oxyfuels and POND volumes to improve following the restart of the Bayport asset. Oxyfuels margins should benefit from seasonal demand strength and ongoing elevated crack spreads. In POND, we continue to see soft but stable demand for durables, while our market share gains and margin improvements from industry rationalizations should continue to support future earnings. Across the segment, we are targeting approximately 85% operating rates during the third quarter as we align production with market demand while maximizing the value of our integrated portfolio. On slide 13, I'd like to spend a moment on our oxyfuels business and why we continue to view it as a differentiated advantage within the portfolio. Oxyfuels are a clean, burning, high-octane gasoline blend stock. They are used to increase the octane level in gasoline and to help meet increasing fuel quality standards in global markets. Our proprietary POTBA technology allows us to produce oxyfuels, including MTBE and ETBE produced with bioethanol, as well as a range of high-value C4 chemical products. Unlike traditional gasoline components produced from crude oil, Oxifuels are manufactured using butane and methanol, creating a structural feedstock advantage, particularly in the United States where we make roughly 75% of our oxifuels. This positioning is further enhanced by our integrated production of methanol derived from low-cost natural gas. There are four primary drivers of oxifuel profitability. Butane and methanol feed costs relative to crude oil, gasoline crack spreads, and Octane Values or Blend Premiums. Together, these factors determine the economics of supplying oxyfuels into the gasoline pool. During the second quarter, market conditions were exceptionally favorable as higher crude oil prices supported attractive feedstock differentials. As we have previously disclosed, a $1 per barrel change in crude oil has approximately $20 million of annualized earnings impact to oxyfuels with butane to Brent spread being the primary driver. Adding to that rule of thumb, gasoline crack spreads are near record levels as the conflict in the Middle East and refinery disruptions stemming from the Ukraine war, which have idled approximately 40% of Russian refining capacity, have tightened global supplies of refined products. The chart on the right highlights how each of the key profitability drivers improved materially from February to the second quarter levels, creating one of the strongest oxyfuel margin environments we have seen in recent years. Importantly, with Bayport POTBA back in operation, we are able to capture the full benefits of our integrated value chain. With that, I will turn the call over to Torkel.

Thank you, Aaron. Please turn to slide 14 as we review results for the advanced polymer solution segment. Second quarter EBITDA was $78 million. APS margins improved through disciplined pricing actions and cost optimization. Automotive demand remains stable despite geopolitical uncertainty, while our customer focus continues to generate tangible results through new business wins across the portfolio. Looking ahead, we expect seasonal demand to moderate across automotive and other end markets, including the typical third quarter downtown at automotive OEMs. We also expect higher raw material costs related to global supply disruptions to persist. Nonetheless, we remain focused on disciplined pricing execution and cost management to mitigate these impacts where possible. Despite these near-term market dynamics, we continue to transform APS into a more customer-centric and resilient business. Our focus on customer centricity, cost optimization and portfolio improvement continues to strengthen our earnings profile. With these changes, we have seen EBITDA for the first half of 2026 increased by over 50% compared to the same period last year. We remain confident that the actions we are taking will continue to improve competitiveness, profitability, and transform the APS business over the long term. With that, I will return the call to Peter.

Thank you, Torkel.

Please turn to slide 15, and I will discuss the results for the technology segment. Second quarter EBITDA of $74 million was relatively in line with our prior guidance. Profitability improved over the quarter driven by licensing revenue milestones and improved catalyst demand. Revenue increased as a greater number of higher value contracts reached significant milestones while catalyst sales benefited from strong demand during the quarter. Looking ahead, we expect catalyst demand to normalize following the high number of shipments during the first half of the year. In addition, New licensing opportunities, or almost non-existent, amid substantially slower global polyolefins capacity growth towards the end of this decade. As a result, we estimate that third quarter technology EBITDA will moderate from second quarter levels while remaining more in line with typical run rate results. Let me share our views on our key regional and product markets on slide 16. The conflict in the Middle East will continue to shape Thank you very much. and where we saw sequential improvement in demand in both polyethylene and polypropylene in the second quarter. We anticipate demand to remain resilient into the third quarter. While we did see prices come off their April peak, we're still well above pre-conflict levels. Both Europe and Asia are entering a typically weaker seasonal demand period. Additionally, rising NAFTA prices could pressure margins in those regions. From an end-markets perspective, we see a differentiated demand environment. Packaging and other consumable applications remain resilient, supported by food, healthcare, and stable everyday consumer demand. Infrastructure-related demand also remains a bright spot, while building and construction is stable but subdued as any housing recovery remains delayed. Automotive is softer, reflecting affordability and broader macroeconomic pressures. On fuels, we are experiencing a consistently strong U.S. driving season despite higher gasoline prices. We expect gasoline cracks to remain elevated through the summer while crude price fluctuates with the conflict in the Middle East. The overall takeaway is that constrained global operating rates, lean buffers, further risk of setbacks in the Middle East, and resilient consumable demands should support elevated margins through the third quarter. with any eventual market recovery taking quarters, not months, to resolve. As we conclude today's call, I would like to acknowledge that throughout the second 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.

Thank you. Ladies and gentlemen, at this time, we'll begin the question and answer session. As a reminder, if you have a question, please press the star followed by the one on your phone. If you'd like to withdraw your question, please press the star followed by the number two. We do ask that you limit yourself to one question. Our first question comes from the line of David Begleiter with Deutsche Bank.

Thank you. Good morning. Peter, Polyethylene and the consultants are calling for a 10-cent decline in July. I suspect you disagree with that forecast, and maybe you can tell us why you disagree with that forecast. Thank you.

Hi, David. Good question, of course, and me to start the call with. As I mentioned in the prepared remarks, the backdrop remains, of course, exceptionally dynamic. We look forward to a peaceful resolution to the conflict, but the timing of that remains, of course, difficult to predict. Let me point out that clearly normalization isn't a straight line. As you know, we've seen the conflict cool down, heat back up again a few times over the past months, and prices have reacted in response. The last few weeks, we've seen increasing prices for crude oil, feedstocks, polymers, as the conflict seems to be ongoing, and the traffic through the Strait of Hormuz is still far below pre-conflict levels. with the conflict spreading to other areas such as also the Red Sea. So let me point out, as you know, that our global cost advantage asset base and the commercial expertise, as was demonstrated in our second quarter results, enable us to generate attractive margins in a range of different scenarios. Now, to your specific question around the pricing outlook, let me hand over to Kim.

Thank you, Peter. I think as it relates to July, as you know how this works, the consultants went out there forecasting. They do create a sentiment. But to Peter's comments, we've seen a lot of movement in the month of July. We've seen export pricing increase. We've seen export volumes increase. Not only in the U.S., we've seen it all around the world. So I think as we think about the outlook and this potential escalation or re-escalation, We see higher crude. We see higher demand. We do not see China exporting, which is what they had done in the second quarter. Typically, they have stronger demand or seasonal demand in the third quarter, so we see them importing. I think the other thing that you have to think about from a global supply perspective or things that could constrain global supply, you've got a rainwater level in Europe now, and you are still in hurricane season in the U.S. Gulf Coast. So I hear them, but I also think there's a lot of factors that say that there's the potential for price settlement to be flat and potentially move up throughout the quarter.

Thank you. Our next question is from the line of Vincent Andrews with Morgan Stanley. Please proceed.

Thank you, and good morning, everyone. Waring, if you could talk a little bit about the feedstock mix. It looked like both in the U.S. and in EMEA or EAI, there was some flexibility on the feedstock mix to capture what I believe were attractive co-product values. So if you could maybe talk about that and what you think is going to happen in the third quarter to date and where the best co-product opportunities are, that would be great. Thank you.

Thank you, Vincent, for your question. Before I hand over to Kim to talk about more specifics, you know that we have flexible crackers. And of course, we have also done all our work in terms of the consolidation in Europe. So Europe is mainly focused now on our whistling operations in OMP. But we continue to optimize our feedstock mix based upon the flexibility that we have in our crackers. Now with that, Kim?

Yeah, I'll just add a little bit more color. You know, particularly in Channelview and Vesling where they were historically not the crackers and we've added some flexibility to them. As you have a rising crude environment, you have the increase in your hydrocarbon value, whether that's propylene, butadiene, or other fuel components. So that's where you're seeing The co-product credits and the rising crude environment. Thank you.

Our next question is from the line of Patrick Cunningham with Citi. Please proceed.

Hi, good morning. Thanks for taking my question. I wanted to dig into a little bit more on just the supply disruption. I think the ability for China to sell out of inventory and some of the buyer behavior were bigger factors than we had previously anticipated. And now we're starting to see some re-escalation, strengthening the export markets. Do you expect any higher prices could potentially be met with higher operating rates in China in relatively short order? or do you see additional constraints on crude and feedstock inventory and their ability to produce? I guess what I'm driving at is, is there a risk that there may be additional production, demand destruction, and perhaps they don't have to import as much in the second half?

Yeah, thank you, Patrick. Good question, of course, around China. I mean, if you would ask the question differently, I mean, what surprised us the most during the second quarter, it is definitely, I mean, China. because China did not just endure the conflict, it actually did structurally adapt in ways that surprised, I mean, even the most conservative forecasters, external consultants, players in the industry because what they were effectively doing is decoupling the chemical production from Middle Eastern oil volatility. The starting inventory in China Thank you very much. But coal costs were, of course, unaffected by the conflict and it offset some reduction in NAFTA crackers. Everybody on the call knows that China is traditionally an importer of polyethylene, but it has shown in the second quarter greater than expected ability to increase exports and reduce its apparent consumption. We believe that that is temporary. Thank you very much. We see already indications of that is coming back into the markets. That means they start importing again. We didn't see a lot of the exports coming out of China in the second quarter in the global value chain, but it was mainly geared to Southeast Asia, which could have a side effect. And you see some indications of that as well already, especially in South Korea. It increases the pressure. on NAFTA-based production to actually accelerate the consolidation. Kim, anything you want to add?

No, I think you've covered it. I think that's good. Thank you.

Our next question is from the line of Jeff Sikoskis with J.P. Morgan. Please go ahead.

Thanks very much. Can you update us on the status of Moratech? Is the initial facility complete or do you expect it to be complete this year and selling product? And can you update us on your acetyl assets in the United States? How are they functioning in acetic acid and VAM?

Thank you, Jeff. Good question. Let me cover the first one on Moratec One. and Aaron will cover your specific asset deals question. So, Morotech 1 continued to be progressing as planned and that is the investments in Wesseling. Startup is expected towards the end of 2027. Assets as scheduled as planned were progressing quite well. The commercial team has done a fantastic job, so quite a big part of that capacity, actually the vast majority of that capacity is already being pre-sold through agreements with brand owners. The regulation, as you know, is advancing very positively in Europe as well. So with plastic and plastic waste regulation, as well as a mass balancing regulation, the so-called SUPD. So we're very confident about our strategy because new markets are being created. The value that we are able to capture is actually higher than what we have anticipated and communicated previously. in March 2023 in our Capital Markets Day. When I shift gears, I mean to the United States with the Moritech 2 investment, as you know, in the context of the Cash Improvement Plan, but even more so because we saw that regulation was not as advanced as in Europe. We have delayed the project to build the second Moritech 2 unit. Tyrone Acetyls?

Yeah, thanks, Peter. And thanks for the question, Jeff. On Acetyls, we continue to experience reliability issues in our syngas unit, which is affecting both of our acid production and our VAM production at our LaPorte site. Remember this, though, as part of our Acetyls business, methanol is included. And at LaPorte, we are running beyond benchmark rates right now in our methanol business. which as I mentioned in some of my plan remarks benefited us tremendously in the second quarter as we saw pricing peak in April and while prices have come off their peak levels in methanol they still remain elevated certainly from the beginning of this year. As we look ahead to the third quarter we do hope to get both ACID and VAM back to full rates and the teams are working diligently to do so.

So let me Then also summarize this if you look at our excellent results that we had in the second quarter. And I will keep on repeating, I mean, a 23% EBITDA margin, which fantastic work that our teams have done. But we didn't have the full benefits out of our Acetyls production units investments. And we didn't, of course, have the benefits in POTBA because everybody knows that we had this fire incident in Bayport which had a drastic impact on our second quarter results. So it shows also the potential that we have in our business portfolio after all the work that we have done on portfolio rationalization, value enhancement program and cash improvement plan because Q2 was exceptional in terms of EBITDA but it was not perfect.

The next question is from the line of Josh Spector with UBS. Please, go ahead.

Yeah, hi, good morning. I just wanted to follow up on the America's Oliphants margin improvement specifically. I think, you know, when we looked at the spreads movements, you know, we thought EBITDA would be up, call it like 600 million-ish, plus or minus. You did a few hundred million better than that, and I'm just wondering if you could help decompose that between, you know, what you'd attribute that to in terms of cost savings versus co-products. and trying to think about what's structural in there versus temporary. Thank you.

Well, Josh, there was definitely an element and you can see a bit of that in the SG&A. You saw clearly that our SG&A is coming down and these are the results that are coming out of our cash improvement plan. Let me maybe also take the chance to point out that with the latest phase in streamlining our organization, We are talking about a 30% of reduction in management, not just in the executive committee, but in the entire management structure. And that was possible because we have done these portfolio changes. We have delegated authority deeper in the organization based upon our value enhancement program. so that entire streamlining we've done quite a lot of training during the last three years in executive development programs so that actually that delegation of authority would that our management knows what it actually means and how to take up more responsibility and work together along the value chains work together inside of the company along processes. So that part, I mean, you only see a part of that in SG&A because, of course, another big part is actually in our total fixed costs.

Yeah, and Peter, I would just reiterate, you know, our volumes were up, ethylene price was up, propylene price was up, ethane was down, natural gas was down. It was a very perfect alignment.

and actually 36% EBITDA margin in O&P Americas, excluding identified items. Fantastic work, Kim.

Thank you. The next question is from the line of Kevin McCarthy with Vertical Research Partners. Please go ahead.

Thank you, and good morning. I appreciate the detail you offered on slide four regarding polyethylene. Asset damage and other constraints due to the Middle East conflict. Welcome. Any comments that you have on other pieces of the portfolio, whether it's the propylene chain or other assets that have been dislocated by the conflict? Perhaps tough to quantify off the cuff, but certainly would welcome how you're thinking about that at this juncture.

Excellent question. This is Kim. I'll try to give you a quick answer on that one. You know, as we think of the polypropylene markets, we think of the LPG that comes out of the Middle East that goes to Asia. I'll just say Asia generically, whether that's China or North or Southeast Asia. And what we saw at the beginning, I think you'll remember in last quarter, we were probably even more bullish about the amount of capacity impacted. But what we have seen is we have seen the U.S. import or exports of LPGs into the region temper that impact. So we've seen operating rates in North and Southeast Asia excluding China at about 50 percent versus we probably thought a quarter ago that it would be more like zero or 25. So there is an impact there. And the longer the strait stays closed, the U.S. can only partially close that gap. Hope that answers your question.

Let me add, I mean, on polypropylene as well. Here, what one needs to take into consideration is, again, also that portfolio management that we have undertaken, because especially, I mean, in Europe, with the sale that we concluded successfully in the second quarter, that means that also here, not just in polyethylene, but also in polypropylene, we have moved up Let's say or move down actually in the cash cost curve. So our portfolio in polypropylene is more in the low cost delivered area. In addition to that, of course, we have our NetPak joint venture in Yanbu, which has during the conflict, very steady, very high performance, continued to run and continues to run as we speak. Thank you very much.

20% of global methanol capacity is served out of the Middle East with 50% of that volume coming from Iran. So obviously that is a significant impact. And while there's plenty of disruption, we don't know exactly how long it's going to take to get that capacity back online. Most of that Iranian capacity goes into China for a variety of different products, methanol to olefins or even MTBE. So we've seen that disruption. I also mentioned in my planned remarks, with Ukraine targeting Russian refining capacity, over 40% of Russian refining capacity is now offline, and we're not seeing exports of distillate out of Russia. They're the largest exporter of diesel today, and so that's impacting refinery rates and runs globally.

And we pointed it out on slide number four. We do not see that demand is getting weaker. So packaging demand continues to remain strong. Certain areas, health care infrastructure, data centers, very strong demand. And the areas where we have weak demand, it hasn't actually weakened even further. So here I'm talking about housing and automotive, for example.

The next question is from the line of Frank Mitch with Fermium Research. Please proceed.

Thank you. Good morning. Aaron, I wanted to come back to the $250 million negative impact in 2Q from the Bayport outage. I'm assuming that that's, you know, at the elevated oxyfuel margins that were in the second quarter. So I'm just trying to figure out a couple things in terms of a jumping off point as we start thinking about the third quarter in IND. I mean, if you just add that 250 to what you reported, you're around 630-ish million of EBITDA in the third quarter. Now, obviously, there's movement in pricing, et cetera, although it sounds like you might be a little bit more optimistic on the STL side. So how should we be thinking about, A, the jumping off point for the third quarter and some of the puts and takes relative to the second and IND? Thank you.

Sure. Thanks, Frank, and I appreciate the question. Maybe a couple of things just to start. As Bayport POTBA was down, we ramped up Channelview POSM rates to help satisfy some of the PO demand that was being displaced as a result of the outage. Keep in mind that POSM is a second quartile asset on the cost curve, so we displaced a first quartile asset with a second quartile asset. So as Bayport has come back online, we've reduced the rates of our possum unit, and we are now running Bayport POTBA full. So the TBA margins are far greater than the styrene margins. We'll see that impact in the third quarter. You can't just simply take the 250 and add it to the second quarter for a variety of different reasons. It's tough to predict where Crude oil prices are going to go for the balance of this quarter, where gas cracks are going to go for the balance of this quarter. We will, however, see improved volumes, specifically in the derivatives chain from a PO perspective, as well as with MTBE.

And I would like to add to that, Frank, as well, fantastic work. You remember, I mean, when we invested in Channelview in this holy grail of POTBA, facilities, our so-called SKU units. That ran at 112%, Aaron?

Yeah, in Channelview, we were able to push rates. So I've mentioned in the past, we've demonstrated 108% of benchmark rates in Channelview. We've actually tested those rates and demonstrated that we can run now 112%. So that's a CapEx-free capacity creep.

Our next question is from the line of Matthew Dale with Bank of America. Please go ahead.

Thanks. I had two. One, why did you only take operating rates to 90% in 2Q? Why not more? And as you ramp down from 2Q to 3Q, what's the headwind to EBITDA just from operating rates? And then if I could, The comments on China that it's burned through like 30% of its inventories. Can you give us an idea how you got to this number and your confidence in it? But candidly, I kind of would have thought it would have been more than 30%, but also you probably can't functionally go to zero either. So just some framework is helpful.

Okay, this is Kim. So let's start with the 30% Chinese operating rate first. or inventory pull, sorry. The inventory we get that is published is from the two biggest SOEs in the region. And we get that inventory every two weeks in arrears. So when we captured that snapshot, it was about a week ago and it was a pull of about 30%. And remember that's coming off the high that they had coming out of Chinese New Year's. As it relates to operating rates, Are you asking me about second quarter or third quarter? Could you clarify? And you're talking about OPAM, correct? The Americas?

Maybe it's hard to run the whole fleet flat out. But, you know, you just talked about Channelview running above 100, etc. So why weren't the rates better in the second quarter? And why didn't you run them better? And as you move from 2Q to 3Q, There's a planned rate reduction. I'm just kind of wondering what the headwind is incrementally from 2Q to 3Q, just given lower operating rates.

Yeah, right. So the quarter-on-quarter sequential decrease is the Clinton turnaround, which is a 70-day outage, which would include an olefins unit and a cracker, which you heard from ourselves and from our competitors. that, you know, some of the increase in inventory in the second quarter in the U.S. system was just that. We were building inventory to support our customers' needs during these third quarter turnarounds.

But Crackers ran, I mean, in Q2 at full capacity. Right. So we were running at 95%, if I remember well, of Cracker capacity.

Cracker capacity, yes.

So the 90% is not the correct capacity.

Correct.

Thank you. Our last question is from the line of John Roberts with Mizuho. Please go ahead.

Thank you. I believe one of your large competitors in Europe on their call talked about all the increased industry M&A and their interest in bolt-on acquisitions. As your balance sheet improves here, is that something Lyondell might be interested in as well?

John, thank you. Good question. That allows me also to lead to Agustin so that Agustin can talk about our capital allocation strategy.

Sure. John, thank you very much for your question. Yeah, really, our capital allocation strategy remains unchanged. Investment grade continues to be paramount. And then we'll obviously focus on maintenance capex to run safely and reliable. Our dividends as well continues to be an important piece of it. Then any growth capex and, you know, at the end we would look very opportunistically if there's anything on the M&A front. But priority for now is to rebuild the balance sheet, improve our credit metrics and fortify, as I said, our position as we go here through the cycle. We've had a nice deleveraging for this quarter and we'll keep strengthening our balance sheet as we go through the year.

Remember, we navigated very well, I mean, through this down cycle by having $3.4 billion Thank you again for all your thoughtful questions. The events over the past months have transformed the global landscape with the economic and logistical impacts Thank you very much. Our LYB team demonstrated this impressively by delivering 23% EBITDA margin during the quarter. Clearly shows that the margin potential of the renewed LYB portfolio and lean organization set up. All our actions through our portfolio measures, our value enhancement program, and our cash improvement plan result in a stronger operating leverage. You can be confident LYB will remain focused on our strategic priorities and long-term value creation in this dynamic environment. We thank you for your questions, your interest, continuous support of our company. Hope that you have a great and safe weekend. Stay well. Thank you.

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