LyondellBasell sells plastics, chemical ingredients and fuel additives to manufacturers, and licenses technology used to make them. In the second quarter of 2026, supply disruptions helped it raise prices and lift net income to $559 million from $115 million a year earlier. Yet higher-priced customer bills and inventories absorbed cash during the first half, while leaving part of Europe required an additional cash payment. The company has regained earning power, but rebuilding its cash cushion still depends on collecting those sales and controlling spending.
Analysis period: second quarter and first half ended June 30, 2026. Research cutoff: October 18, 2026, New York date. Later developments are identified separately; the financial statements measure conditions at June 30.
Source: LyondellBasell second-quarter 2026 Form 10-Q, income and cash-flow statements, pp. 1 and 5; management discussion, pp. 30–42.
1. Higher selling prices widened the gap between sales and production costs
The earnings rebound came mainly from better prices and margins, rather than a broad increase in sales volumes. Second-quarter revenue rose 19.8% from the same quarter of 2025. Operating profit rose much faster because production costs increased far less than sales.
The distinction matters for a chemical producer. Customers pay for materials such as polyethylene used in packaging, polypropylene used in molded products, and chemicals used in other manufacturing processes. LyondellBasell’s earnings depend heavily on the difference between the selling price of those materials and the cost of making them. A shortage can widen that difference even when customers are not buying much more material.
| Consolidated results; USD millions except margins and EPS | Second quarter 2025 | Second quarter 2026 | First half 2025 | First half 2026 |
|---|---|---|---|---|
| Revenue from continuing operations | 7,658 | 9,177 | 15,335 | 16,374 |
| Operating profit | 285 | 1,543 | 399 | 1,782 |
| Operating margin, calculated | 3.7% | 16.8% | 2.6% | 10.9% |
| Income from continuing operations | 155 | 572 | 178 | 711 |
| Consolidated net income | 115 | 559 | 292 | 684 |
| Diluted earnings per ordinary share, USD | 0.34 | 1.71 | 0.88 | 2.10 |
Reporting basis: Revenue and operating profit exclude the discontinued refining business. Net income and EPS include it. The European disposal loss appears below operating profit; operating margin therefore does not include that loss.
Source: 2026 Form 10-Q, income statement, p. 1, and Note 12, pp. 24–25. Margins are calculated from the displayed figures.
Management’s revenue explanation is clearest over the first half. Higher prices added approximately 9% of prior-year revenue, currency translation added 3%, and lower volumes subtracted 5%. Much of the volume reduction followed the European divestiture. These rounded contributions explain the reported 6.8% revenue increase; they do not establish growth in customer demand across the whole company.
The rise accelerated within 2026. Compared with the first quarter, second-quarter revenue increased 27.5%. Management attributed approximately 33% to higher prices and a 5% reduction to volumes, mainly following the asset sale. It linked the pricing strength to industry supply constraints caused by the Middle East conflict.
The first-half cost comparison also benefited from lower feedstock costs and a charge recorded in the prior year. Cost of sales fell to $13.635 billion from $13.999 billion, reflecting lower feedstock costs and the absence of $117 million of Dutch plant shutdown costs recorded in early 2025. Administrative and selling expenses fell by $38 million, which management attributed to reduced employee expenses under its cash improvement program. Thus, stronger selling margins, a prior-year closure charge and cost reductions all contributed; the improvement should not be assigned entirely to one cause.
Growth was geographically uneven. Sales to customers in the United States increased by $787 million in the first half, while sales to customers in China fell by $249 million. These figures describe customer locations, not where LyondellBasell produced the goods. They show why the global revenue increase should not be read as a uniform recovery in all markets.
Source: 2026 Form 10-Q, Note 4, p. 11; management discussion, pp. 31–33.
2. North American plastics supplied most of the improvement
The Americas plastics business was the main earnings engine, with a smaller recovery elsewhere. Its plants benefited from stronger product prices, while fewer outages helped first-half volumes. That combination is more favorable than a price rise accompanied by lost production.
Management evaluates its businesses using EBITDA: earnings before interest, taxes, depreciation and amortization. This measure helps compare their performance before financing costs and the accounting charges that spread asset costs over time. It is not cash flow, and the figures below still include the disposal and impairment charges assigned to each business.
| Reported segment EBITDA; USD millions | Second quarter 2025 | Second quarter 2026 | First half 2025 | First half 2026 |
|---|---|---|---|---|
| Olefins and Polyolefins—Americas | 313 | 1,183 | 564 | 1,510 |
| Olefins and Polyolefins—Europe, Asia, International | 2 | -432 | 19 | -467 |
| Intermediates and Derivatives | 286 | 377 | 380 | 601 |
| Advanced Polymer Solutions | 32 | 77 | 78 | 135 |
| Technology | 33 | 73 | 85 | 91 |
| Other and intersegment eliminations | -13 | -9 | -14 | -15 |
| Continuing operations total | 653 | 1,269 | 1,112 | 1,855 |
Reporting basis: These are company-reported segment measures, including the company’s recognized share of joint-venture earnings. The final row includes eliminations and excludes discontinued operations. Internal transactions are eliminated to avoid counting business within the group twice.
Source: 2026 Form 10-Q, Note 13, pp. 25–29.
LyondellBasell can change the raw-material mix in its U.S. crackers, the plants that turn feedstocks into basic chemicals. Ethane accounted for approximately 70%–80% of North American cracker inputs in the periods discussed. European plants relied much more on naphtha, an oil-derived feedstock, at approximately 70%–85%. Those different inputs help explain why regions respond differently when oil, gas and product prices move.
The Americas recovery also extends beyond a comparison with a particularly weak 2025. First-half segment EBITDA was $1.191 billion in 2024, fell to $564 million in 2025, and reached $1.510 billion in 2026. The latest result was 26.8% above the same period of 2024. The 2025 filing attributed the earlier decline to weaker margins and higher energy costs. The history supports a substantial recovery, while also demonstrating how quickly this business can swing.
Sources: 2026 Form 10-Q, pp. 36–37; second-quarter 2025 Form 10-Q, Americas segment discussion, p. 37.
Competitor results support the explanation that pricing improved across the industry. Dow reported that second-quarter 2026 local prices in Packaging & Specialty Plastics increased 30% from a year earlier, while volumes fell 4%, partly because of maintenance. The similar pattern strengthens the explanation that supply conditions lifted prices across producers, even where volumes were lower.
Source: Dow second-quarter 2026 results, July 23, 2026, Packaging & Specialty Plastics discussion.
The other businesses present a mixed picture. Intermediates and Derivatives benefited from stronger margins in fuel additives and propylene oxide products. However, $117 million of its $221 million first-half EBITDA improvement came from the absence of the prior-year Dutch closure charge. An unplanned outage at Bayport also reduced chemical volumes; the plant restarted in June.
Advanced Polymer Solutions, which makes tailored plastic compounds, earned more despite weaker demand. Lower volumes reduced first-half revenue by approximately 4% of prior-year sales, while prices and currency translation more than offset that reduction. Technology’s stronger second quarter depended partly on recording licensing revenue as contracts reached significant milestones. Its first-half EBITDA increase was only $6 million, much smaller than the $40 million increase between the two second quarters.
A later customer announcement illustrates how LyondellBasell is seeking business beyond bulk-material sales. On October 7, it described supplying several materials for exoIQ’s wearable back-support equipment, combining expertise from its plastics and compounds businesses. This provides a concrete example of selling a package of materials for a specific design. The announcement gives no contract value or profit contribution, so it does not change the assessment that higher market prices drove the reported recovery.
Sources: 2026 Form 10-Q, pp. 38–40; LYB–exoIQ collaboration, October 7, 2026.
3. Leaving selected European plants required cash as well as an accounting loss
Management sold four European sites to concentrate resources on assets with stronger cost advantages. The May 1 sale to AEQUITA covered businesses in France, Germany, the United Kingdom and Spain. The sale advances that strategy, but its immediate financial effect was a cash outflow.
The company recorded a $734 million pretax loss, including a $310 million cash contribution to the businesses at closing. The loss also included $329 million of accumulated currency translation losses. Those losses arose from translating foreign operations into dollars and had already been recorded elsewhere in shareholders’ equity; selling the businesses moved them into the income statement. That reclassification reduced reported profit without creating another $329 million cash payment.
The sold businesses remained within continuing operations for accounting purposes. Their disappearance therefore reduces the size of the business included in later sales comparisons. By contrast, the Houston refining business, which ceased operating in February 2025, is presented separately as discontinued operations for all periods shown.
Sources: 2026 Form 10-Q, Notes 1, 11 and 13, pp. 9, 22–23 and 29; European sale completion announcement, May 1, 2026.
The European business was improving operationally even as it recorded the sale loss. Its operating result moved from a $68 million loss in the first quarter to a $158 million profit in the second. Improved polymer margins helped operating profit. Earnings from joint ventures and a separate $52 million gain from selling excess European emissions credits also supported segment EBITDA. Both of those items were recorded below operating profit.
The disposal loss was largely nondeductible for tax. It therefore did not produce the tax saving that might be expected from multiplying the entire loss by a standard tax rate. The continuing-operations tax rate was 29.2% in the quarter and 24.8% in the first half. Management attributed the lower first-half rate versus 2025 mainly to where profits were earned, currency effects and exempt income; these are distinct from improvements in production.
Source: 2026 Form 10-Q, Note 9, pp. 18–19; management discussion, pp. 32–34 and 37.
Management-adjusted second-quarter net income rose from $202 million to $1.401 billion; the calculation notes show the bridge. The improvement extends beyond the disposal charge. However, the adjusted result still includes the emissions-credit gain, which is separate from earnings on product sales.
Sources: Second-quarter 2026 earnings release, Table 2, July 31, 2026; 2026 Form 10-Q, p. 32.
4. Higher-priced sales increased the cash needed to run the business
First-half operating cash improved, but it did not cover capital spending and dividends. Cash from operations reached $483 million, compared with a $228 million outflow a year earlier. More profit helped, but customers had not yet paid for a substantial part of the higher-priced sales.
Customer bills awaiting payment, called receivables, absorbed $1.692 billion of cash. Management linked this mainly to higher selling prices. Inventories absorbed another $521 million because the company held more material and paid higher prices for it. Supplier bills also rose as feedstock prices and purchased volumes increased. The increase in unpaid bills left $721 million in the business until those bills are settled, partly offsetting the cash demands. Together, these three movements absorbed $1.492 billion.
The company’s estimate of uncollectible customer balances remained $3 million. Management’s explanation points to higher invoice values as the main funding issue: more money is needed between purchasing material and receiving payment from customers.
| Cash generation and allocation; USD millions | First half 2025 | First half 2026 |
|---|---|---|
| Operating cash flow | -228 | 483 |
| Cash capital spending | 1,022 | 539 |
| Free cash flow, calculated | -1,250 | -56 |
| Cash contribution to sold businesses | 0 | 310 |
| Common dividends paid | 878 | 448 |
| Ordinary share repurchases paid | 201 | 0 |
| Remainder after these uses, calculated | -2,329 | -814 |
Calculation notes: Spending, dividends and repurchases are shown as positive cash uses. Free cash flow means operating cash flow minus cash expenditures for property, plant and equipment. The final row also subtracts the three subsequent cash uses; it excludes other investing and financing flows and currency effects. It is not the total change in cash.
Source: 2026 Form 10-Q, cash-flow statement, p. 5; Notes 5–6, pp. 11–12; cash discussion, p. 41.
The prior-year comparison needs context. First-half 2025 included $235 million of U.S. federal tax payments postponed from 2024 under Hurricane Beryl relief. It also included a $433 million cash outflow as the company paid down supplier bills. Part of the improvement in operating cash therefore reflects payment timing, alongside better earnings.
The second quarter itself was stronger than the first-half total suggests. Operating cash of $752 million exceeded $270 million of cash capital spending, leaving $482 million. After $224 million of dividends and the $310 million contribution to the sold businesses, the remainder was negative $52 million before other movements. This shows that current operations were beginning to fund investment and dividends during the quarter, even though the exit payment still used cash.
Sources: 2026 Form 10-Q, p. 41; first-quarter 2026 Form 10-Q, cash-flow statement. Second-quarter operating cash is calculated as first-half inflow of $483 million minus first-quarter outflow of $269 million; the July earnings release confirms $752 million.
Cash and restricted cash together fell from $3.449 billion at year-end to $2.640 billion at June 30. The complete cash reconciliation appears below. The company’s challenge is to retain the earnings improvement while turning outstanding customer bills into cash; further price increases could initially require still more funding.
Source: 2026 Form 10-Q, cash-flow statement, p. 5.
5. Spending cuts protect liquidity while slowing some growth projects
Management’s cash improvement program is intended to preserve funding through difficult industry conditions. Lower spending is already visible, but part of the saving comes from postponing investment. First-half cash capital spending fell 47.3% from the prior year.
The filing identifies the spending’s purpose. Approximately 65% of the $539 million spent in the first half of 2026 supported maintenance, plant turnarounds, safety and environmental work; the remainder supported growth projects. That is approximately $350 million for sustaining operations and $189 million for growth. The comparable 2025 amounts were approximately $715 million and $307 million. Both categories declined, with the larger reduction in sustaining work.
Source: 2026 Form 10-Q, investing activities, p. 41. Purpose estimates are calculated from management’s approximate percentages, not inferred from depreciation.
Management targets $500 million of additional cash improvement in 2026 relative to 2025 actual results. Its planned annual capital investment is approximately $1.2 billion on an accrued basis, including $800 million for sustaining operations and $400 million for growth. An accrued budget records investment when incurred; it is not directly comparable to the cash spending table above. The plan continues to fund the German MoReTec-1 chemical recycling plant, while Flex-2 propylene expansion work and a final decision on the U.S. MoReTec-2 project have been deferred.
Source: 2025 annual-report CEO letter, April 10, 2026, cash improvement discussion and footnotes 1–3. These are management targets and plans.
The cost of that slower timetable became visible in the second quarter. LyondellBasell fully wrote off its 50% investment in a Houston plastic-waste sorting facility, recording a $74 million impairment. Management linked the loss principally to slower U.S. circularity investment, including the postponed MoReTec-2 decision. The charge did not use cash in the quarter, but it shows that delaying a downstream recycling plant can weaken the economics of a related investment already made.
Source: 2026 Form 10-Q, Note 13, p. 29.
There is also concrete evidence of customer use for recycled materials. In July, LyondellBasell announced that its CirculenRevive polymers were being used in Marabou chocolate packaging developed with Mondelez, Amcor and Taghleef. The company currently obtains recycled feedstock from outside producers and plans to supply future material through MoReTec-1. That plant is designed to produce 50,000 metric tons of feedstock annually; the April CEO letter targeted operations during 2027.
This makes the business purpose clear: supplying its own recycled feedstock could connect waste processing with existing chemical and plastics plants and customer orders. The decisive conditions are completing the plant and selling enough output at profitable prices. The packaging announcement establishes a commercial application, but gives no volume commitment or profit forecast for the plant.
Sources: Marabou packaging announcement, July 7, 2026, supply-chain and MoReTec-1 discussion; April 2026 CEO letter, portfolio investments.
6. Liquidity is substantial, but less cash now stands behind the debt
The company has funding capacity, although its cash cushion declined during the first half. At June 30 it held $2.630 billion of unrestricted cash and had $4.450 billion of unused committed credit capacity, totaling $7.080 billion. Available credit consists of a $3.750 billion revolver expiring in July 2029 and a $700 million receivables facility expiring in June 2027. The receivables facility had been reduced from $900 million. Neither facility was drawn.
Financing debt was almost unchanged at $12.910 billion, versus $12.938 billion at year-end. Subtracting unrestricted cash gives calculated net debt of $10.280 billion, up from $9.495 billion. In everyday terms, the borrowing balance scarcely moved, but the cash available to offset it fell. Supplier payables, leases and other operating obligations are separate from this financing-debt calculation.
| Selected debt obligations at June 30, 2026 | Carrying amount, USD millions | Coupon or disclosed interest rate |
|---|---|---|
| Euro notes due 2026; €500 million face amount | 569 | 0.875% |
| Dollar notes due 2027; originally issued at $300 million | 300 | 8.1% |
| Dollar notes due 2027; originally issued at $1 billion | 589 | 3.5% |
| Total current maturities of long-term debt | 1,461 | Not applicable |
| Short-term precious-metal financing | 234 | 2.8% weighted average |
Reporting basis: The first three rows are selected securities, not a full maturity schedule. Their carrying amounts reflect applicable discounts and hedge adjustments; original issuance amounts are not remaining principal. The current-maturities row overlaps those securities and must not be added to them. Precious-metal financing is separate short-term debt.
Source: 2026 Form 10-Q, balance sheet, p. 4; Note 7, pp. 13–14; liquidity discussion, p. 42.
The €500 million note’s coupon implies €4.375 million of annual interest before swaps; the $300 million note implies $24.3 million. These examples show why equal amounts of debt can carry very different costs. Total first-half interest expense rose to $276 million from $225 million. The filing also describes interest-rate swaps, so individual coupons alone do not measure the company’s final borrowing cost.
Management planned to repay the September 2026 maturity. The reviewed materials do not establish the completed repayment or a post-payment cash balance. At June 30, the larger near-term funding requirement was visible in current maturities, which had risen from $588 million at year-end as more debt moved within the following twelve months.
Source: 2026 Form 10-Q, income statement, p. 1; Note 7, pp. 13–14; outlook, p. 42. Coupon interest is calculated; the September repayment is a stated plan.
Debt agreements also limit flexibility. The contractual net-debt-to-earnings ceiling is 4.50 times through June 2027, then falls to 4.25 times in September 2027, 4.00 in December 2027 and 3.50 thereafter. Dividend increases are restricted at ratios of at least 4.00 times. These use agreement-specific definitions, so ordinary net debt divided by the article’s EBITDA is not a covenant test. The company reported compliance at June 30.
Leases require future payments for using assets. At December 31, 2025, undiscounted operating-lease payments totaled $2.076 billion, including $418 million scheduled for 2026 and $335 million for 2027. June’s $1.310 billion balance-sheet lease liability covers only the noncurrent portion.
Sources: 2025 Form 10-K, Notes 13–14, pp. 89–92; 2026 Form 10-Q, p. 4 and Note 7, p. 14.
Capital distributions have already adjusted to that funding pressure. First-half common dividends fell to $448 million from $878 million following the February reduction. The company spent nothing on share repurchases, versus $201 million a year earlier. Its credit agreement restricts repurchases to offsetting dilution, despite the shareholder authorization to buy back shares.
Employee share programs released 919,265 treasury shares into circulation during the first half, increasing outstanding shares by about 0.3%. No shares were repurchased or retired during the period. First-half weighted-average diluted shares rounded to 323 million in both years, so the EPS improvement came from higher earnings rather than a shrinking share count. Share-based compensation added back in operating cash flow was $66 million; paying employees with shares preserves immediate cash but increases claims on future earnings.
After the filing, the August 14 dividend announcement maintained the reduced quarterly rate of $0.69 per share. That supports the interpretation that management was retaining the lower cash-distribution policy despite the earnings rebound.
Sources: 2026 Form 10-Q, cash-flow statement, p. 5; Notes 11–12, pp. 20–25; dividend announcement, August 14, 2026.
7. The next stage depends on plant reliability and the return of competing supply
The recovery’s main uncertainty is how much pricing strength remains as disrupted supply returns. In its July outlook, management expected the supply recovery to extend into 2027. It did not expect material deterioration in its main end markets, but warned that uncertainty about prices could interrupt normal customer buying patterns. Those are management expectations, not observed third-quarter results.
The operating outlook has opposing influences. Bayport’s restart should restore chemical volumes, while planned work at Clinton should reduce second-half polyolefin volumes. Management’s third-quarter operating-rate targets were 85% for North American plastics and basic chemicals, 70% for European assets in that business, and 85% for Intermediates and Derivatives. North American assets had run at approximately 90% in the second quarter. Planned lower utilization limits how much of the second-quarter earnings level should be carried forward mechanically.
The same price changes can affect earnings and cash in different directions. If prices retreat, LyondellBasell could need less money in inventories and customer bills, releasing cash. But lower selling margins could reduce profit at the same time. Successful cash collection would therefore strengthen funding without, by itself, proving that the pricing recovery continues.
Sources: 2026 Form 10-Q, outlook, p. 42; July 31 earnings release, second-quarter operating discussion. The price-and-cash relationship is analytical inference.
Environmental obligations remain relevant after plant sales and closures. Recorded remediation liabilities fell from $178 million at year-end to $98 million, but the earlier balance included $74 million within liabilities held for sale. Most of that headline decline therefore concerns the disposal group; it is not evidence of an equivalent cleanup saving. The company says additional environmental losses are reasonably possible but cannot estimate an amount or range.
Management did not expect pending lawsuits to have a material adverse effect. It also reported no significant accrued indemnification obligations from transactions. These are management assessments, rather than guarantees that future tax, environmental or contractual claims will cost nothing.
Source: 2026 Form 10-Q, Note 10, pp. 19–20.
Tax disputes are another existing exposure. At December 31, 2025, the company recorded $239 million for tax benefits that authorities might reject, plus $82 million of interest and penalties. The 10-Q does not update those balances.
Source: 2025 Form 10-K, Note 18, pp. 113–114.
On October 5, LyondellBasell scheduled its third-quarter results for October 30. The reviewed post-filing announcements establish continued customer development and the maintained dividend rate, but do not update quarterly earnings, working capital or debt repayment. Those financial outcomes remain outside this report’s verified results.
Source: Third-quarter results announcement, October 5, 2026.
8. A stronger operating business still has to rebuild financial room
LyondellBasell has improved its ability to earn money, but the first-half cash position has not yet caught up. Higher margins in North America and lower employee expenses strengthen current operations. The European exit concentrates future spending on a smaller set of assets. Second-quarter cash generation also shows that operations can fund investment and the reduced dividend under the stronger conditions seen in that period.
The remaining test is whether those advantages produce cash after plant spending as supply conditions change. Reliable production, collection of higher-priced sales and completion of selected projects would support a stronger balance sheet. A rapid return of competing supply, renewed outages or further investment write-offs would weaken that progress. Management’s reduced distributions and slower investment pace provide breathing room, while the postponed projects show the business cost of preserving it.
Sources: 2026 Form 10-Q, Notes 11 and 13 and management discussion, pp. 20–42. The overall assessment is an interpretation of the evidence discussed above.
Reporting basis and calculation notes
Reporting basis: The principal source is LyondellBasell Industries N.V.’s unaudited consolidated U.S. GAAP Form 10-Q, CIK 0001489393, accession 0001489393-26-000061, filed July 31, 2026. The quarter covers April 1–June 30, 2026; the first half covers January 1–June 30, 2026. Comparisons use the corresponding 2025 periods, and balance-sheet comparisons use December 31, 2025. The analysis uses consolidated accounts, including controlled subsidiaries, rather than the holding company alone. Monetary amounts are U.S. dollars unless euros are expressly identified.
Source: SEC filing, cover and Note 1; SEC company submissions; SEC company financial facts. Machine-readable checks used the selected accession, correct start/end dates and USD or share units, and were reconciled to the statements.
A. Checking the change in financial condition
The balance sheet shows where the company’s money was held and what it owed on each date. Receivables include trade and related-party customer balances; supplier payables likewise include both categories.
| Consolidated balance sheet; USD millions | December 31, 2025 | June 30, 2026 |
|---|---|---|
| Cash and cash equivalents | 3,443 | 2,630 |
| Restricted cash | 6 | 10 |
| Receivables, net | 2,517 | 3,968 |
| Inventories | 3,533 | 4,079 |
| Prepayments and other current assets | 612 | 978 |
| Assets held for sale | 757 | 0 |
| Property, plant and equipment, net | 15,833 | 15,687 |
| Equity investments | 3,963 | 3,875 |
| Goodwill | 708 | 705 |
| Intangible assets, net | 450 | 394 |
| Total assets | 34,003 | 34,482 |
| Financing debt, including short-term debt | 12,938 | 12,910 |
| Supplier payables | 2,694 | 3,233 |
| Accrued and other current liabilities | 1,956 | 2,179 |
| Liabilities held for sale | 665 | 0 |
| Noncurrent operating-lease liabilities | 1,327 | 1,310 |
| Other noncurrent liabilities | 1,900 | 1,704 |
| Deferred income-tax liabilities | 2,316 | 2,352 |
| Total liabilities, calculated | 23,796 | 23,688 |
| Redeemable non-controlling interests | 114 | 114 |
| Total equity | 10,093 | 10,680 |
Reporting basis: Selected asset rows do not include every asset and should not be summed to obtain total assets. Liability rows do reconcile to total liabilities. Redeemable non-controlling interests belong to outside owners of a consolidated subsidiary. They are shown separately because those owners can require repayment.
The main asset shift was toward unpaid customer bills and inventory. Net plant assets declined by $146 million despite new investment, while goodwill and other intangible assets declined by $3 million and $56 million. Those two categories represent acquisition premiums and assets without physical form, rather than inventory or machinery. The $74 million Houston impairment concerns an equity investment, so it should not be assigned to the plant-asset decline. Likewise, the disappearance of assets already classified as held for sale should not be subtracted from plant assets a second time.
Calculation notes: June assets reconcile as $23,688 million liabilities + $114 million redeemable interests + $10,680 million equity = $34,482 million. December reconciles as $23,796 million + $114 million + $10,093 million = $34,003 million. Calculated net debt equals financing debt less unrestricted cash: $10,280 million in June and $9,495 million in December, an increase of $785 million.
Source: 2026 Form 10-Q, balance sheets, pp. 3–4; Note 13, p. 29.
B. Checking how profit became operating cash
The adjustments below remove income-statement items that did not represent operating cash receipts or payments in the same period. The disposal loss is added back here because its cash contribution is recorded under investing activities; this does not erase the payment.
| Operating cash reconciliation; USD millions | First half 2025 | First half 2026 |
|---|---|---|
| Net income | 292 | 684 |
| Depreciation and amortization | 655 | 689 |
| Impairments | 32 | 89 |
| Debt-cost amortization | 5 | 6 |
| Share-based compensation | 55 | 66 |
| Remove equity-investment earnings | -8 | -52 |
| Add cash distributions of investment earnings | 18 | 13 |
| Deferred income-tax benefit | -30 | -48 |
| Loss on sale of business | 0 | 734 |
| Increase in customer receivables | -81 | -1,692 |
| Increase in inventories | -85 | -521 |
| Change in supplier payables | -433 | 721 |
| Other operating changes, net | -648 | -206 |
| Operating cash flow | -228 | 483 |
Calculation notes: Receivable, inventory and payable cash movements together equal negative $599 million in 2025 and negative $1,492 million in 2026. These cash movements differ from balance-sheet changes because currency translation and businesses leaving the group can also change reported balances. Deferred taxes record tax effects assigned to future periods. This adjustment does not represent an extra cash receipt to add to the tax-payment discussion.
| Total cash reconciliation; USD millions | First half 2025 | First half 2026 |
|---|---|---|
| Opening cash including restricted cash | 3,388 | 3,449 |
| Operating cash flow | -228 | 483 |
| Investing cash flow | -934 | -794 |
| Financing cash flow | -598 | -469 |
| Currency effect on cash | 76 | -29 |
| Closing cash including restricted cash | 1,704 | 2,640 |
For 2026, investing cash equals negative $539 million capital spending, negative $310 million contributed to sold businesses and positive $55 million of other investing flows. Financing cash equals negative $448 million common dividends and negative $21 million of other financing flows. Closing cash consists of $2,630 million unrestricted and $10 million restricted cash.
Source: 2026 Form 10-Q, cash-flow statement, p. 5.
C. Checking management’s adjusted earnings
Add the signed adjustments to reported net income. Expense adjustments are pretax; the tax row supplies their combined tax effect. Discontinued operations are removed on a pretax basis.
| Net-income bridge; USD millions | Second quarter 2025 | Second quarter 2026 |
|---|---|---|
| Reported net income | 115 | 559 |
| Disposal loss | 0 | 734 |
| Asset write-downs | 32 | 74 |
| Cash Improvement Plan costs | 20 | 31 |
| Site closure costs | 0 | 30 |
| European transaction costs, net of transition-service income | 10 | -11 |
| Remove discontinued results, pretax | 47 | 17 |
| Related income-tax benefit | -22 | -33 |
| Management-adjusted net income | 202 | 1,401 |
Source: July 31, 2026 earnings release, Table 2. This is a non-GAAP measure.
For the separate first-half comparison, 2025 discontinued earnings included a $196 million after-tax benefit from selling older, lower-cost refinery inventory under last-in, first-out accounting. This helps explain why the first-half improvement in continuing earnings was larger than the improvement in total net income. The second-quarter 2025 $36 million precious-metal sale gain remains in management-adjusted income, as does the 2026 emissions-credit gain.
Sources: 2026 Form 10-Q, Note 6, p. 12, and other-income discussion, p. 32; earnings release, Table 2.
D. Checking equity, shares and reported margins
Shareholders’ equity is the owners’ accounting balance after obligations. It increased by $587 million, even though cash declined, because profit and gains recorded outside net income exceeded distributions.
| Equity reconciliation; USD millions | First half 2026 |
|---|---|
| Opening total equity | 10,093 |
| Net income | 684 |
| Gains recorded outside net income | 288 |
| Employee share-plan equity entries | 68 |
| Common dividends | -448 |
| Redeemable-interest dividends | -3 |
| Other non-controlling distributions | -2 |
| Closing total equity | 10,680 |
Retained earnings track profits kept after distributions. They reconcile from $6,812 million to $7,044 million by adding $684 million net income and subtracting $448 million common dividends, $3 million redeemable-interest dividends and a $1 million employee-plan entry. Employee share programs reduced paid-in capital, the account for capital contributions, by $18 million. They also reduced the deduction for treasury shares—shares previously bought back—by $87 million; issued share capital stayed at $19 million. These were releases of existing treasury shares, not a reduction in issued shares.
Gains recorded outside net income, called other comprehensive income, totaled $288 million: $262 million from currency translation, $37 million from financial contracts used to manage risk and negative $11 million from pension-related items. The currency component includes the $329 million disposal reclassification explained in section 3. Moving that old loss from one equity category into earnings does not create cash or impose the same loss on total equity twice.
Source: 2026 Form 10-Q, equity statements, pp. 6–7; Note 11, pp. 21–23.
Calculation notes: Revenue growth is current revenue divided by comparable prior revenue, minus one. Operating margin is operating profit divided by continuing revenue. Second-quarter operating margin increased by 13.1 percentage points; first-half margin increased by 8.3 points. Percentages use unrounded calculations before display rounding.
EPS uses the company’s two-class method, which assigns some earnings to share awards entitled to dividends. First-half 2026 ordinary-share earnings were $704 million from continuing operations and negative $27 million from discontinued operations, after the relevant allocations. Consequently, dividing the headline consolidated net income by the rounded share count does not exactly reproduce reported EPS.
Sources: 2026 Form 10-Q, income statement, p. 1, and Note 12, pp. 24–25.
This analysis is for information and education. It is not investment advice or a recommendation to trade any security.