LyondellBasell Reports 2017 Earnings

HOUSTON and LONDON, Feb. 2, 2018 /PRNewswire/ --

2017 Full Year Highlights

• Strong Earnings
• Income from continuing operations: $4.9 billion
• Diluted earnings per share: $12.28 per share
• U.S. tax reform provided an $819 million one-time, non-cash benefit in the fourth quarter
• EBITDA: $7.1 billion
• Strong Operations and Advancement of the Growth Program
• Strong volume growth with a 13% increase in global ethylene production and a 17% improvement in refining crude volumes over prior year
• Began construction of our 1.1 billion pound Hyperzone HDPE plant in La Porte, Texas
• Reached final investment decision and began site preparation for our new PO/TBA plant in Texas
• Opened a new polypropylene compounds plant in China and entered into a premium polymer recycling joint venture with SUEZ
• Strong Cash Flow and Return to Shareholders
• Full year cash generation from operations totaled $5.2 billion for a free cash flow yield of 8.4%
• Implemented our ninth dividend increase to $0.90 per share in the second quarter
• Dividends totaled $1.4 billion; $1.5 billion invested in capital expenditures
• Repurchased 10 million shares, returning $866 million to shareholders
• Senior unsecured debt ratings raised to BBB+ by S&P Global

Fourth Quarter 2017 Highlights

• Income from continuing operations: $1.9 billion
• Diluted earnings per share: $4.80 per share, including benefits of U.S. tax reform
• EBITDA: $1.7 billion

Comparisons with the prior quarter, fourth quarter 2016 and full year 2016 are available in the following table:

LyondellBasell Industries (NYSE: LYB) today announced earnings from continuing operations for the fourth quarter 2017 of $1.9 billion, or $4.80 per share. Fourth quarter 2017 EBITDA was $1.7 billion.  The quarter included an $819 million one-time, non-cash benefit from U.S. tax reform that reduced net deferred tax liabilities and increased earnings by $2.07 per share.  Full year 2017 income from continuing operations was $4.9 billion, or $12.28 per share, and EBITDA was $7.1 billion. During the first quarter, the company refinanced $1 billion in bonds at an after-tax cost of $106 million.  The full year was positively impacted by an after-tax gain of $103 million in September on the sale of our interest in the Geosel pipeline and storage system in France and the fourth quarter one-time, non-cash benefit of $819 million from the reduction of net deferred tax liabilities.  Combined, the net effect of the bond refinancing, Geosel gain and tax reform benefit positively impacted full year 2017 earnings by $2.05 per share. 

"In 2017 we demonstrated the strength of our earnings performance under dynamic market conditions.  Against a backdrop of substantial new capacity in our industry, LyondellBasell increased volumes, improved EBITDA and raised earnings.  The complementary performance of our two global Olefins and Polyolefins segments combined with the relative stability of our Intermediates and Derivatives business portfolio provided a resilient platform for profitability during 2017.  Outstanding performance by our Olefins and Polyolefins — Europe, Asia and International segment provided a fourth consecutive year of record EBITDA.  In 2017, global operating rates remained strong due to delays in new capacity, a volume shortfall from Hurricane Harvey and an improving Chinese market.  LyondellBasell captured market opportunities by operating our plants safely and reliably.  We advanced our growth program by starting up a new polypropylene compounding plant in China, entering a premium polymer recycling joint venture with SUEZ, breaking ground on our new Hyperzone HDPE plant in La Porte, Texas and reaching a final investment decision for the world's largest PO/TBA plant," said Bob Patel, LyondellBasell chief executive officer. 

OUTLOOK
"Over the past several months, strong global demand and delays in capacity additions across our industry have improved the outlook for 2018.  We look forward to realizing the benefits of strong operating rates across our global portfolio of assets and continuing the upward trajectory in reliability and profitability for the Houston refinery.  Over the coming years, LyondellBasell will continue to advance our growth by increasing the pace of organic business investments while diligently pursuing value-adding inorganic opportunities," Patel said. 

LYONDELLBASELL BUSINESS RESULTS DISCUSSION BY REPORTING SEGMENT
LyondellBasell manages operations through five operating segments: 1) Olefins and Polyolefins — Americas; 2) Olefins and Polyolefins — Europe, Asia and International (EAI); 3) Intermediates and Derivatives; 4) Refining; and 5) Technology. 

Olefins and Polyolefins — Americas (O&P-Americas) – Our O&P — Americas segment produces and markets olefins and co-products, polyethylene and polypropylene.

Three months ended December 31, 2017 versus three months ended September 30, 2017 – EBITDA increased $168 million versus the third quarter 2017.  Fourth quarter results were impacted by a last-in, first-out (LIFO) inventory charge of $22 million.  Compared to the prior period, olefins results increased approximately $160 million.  This increase was driven by a margin improvement of approximately 5 cents per pound due to higher ethylene prices, higher co-product contribution and lower feedstock costs.  Volumes improved in the fourth quarter as plants returned to normal operation post Hurricane Harvey.  Combined polyolefins results increased by approximately $40 million primarily due to an improvement in the polyethylene price spread over ethylene of approximately 2 cents per pound. 

Three months ended December 31, 2017 versus three months ended December 31, 2016 – EBITDA increased $221 million versus the fourth quarter 2016, which included a $23 million pension settlement. Olefins results increased approximately $100 million versus the fourth quarter 2016.  Ethylene margins improved approximately 5 cents per pound primarily due to improved co-product pricing.  Combined polyolefins results increased approximately $75 million.  Polyethylene spreads improved approximately 7 cents per pound as polyethylene price increases outpaced ethylene price increases. 

Full year ended December 31, 2017 versus full year ended December 31, 2016 – EBITDA increased $105 million versus 2016, which included a $57 million gain on the sale of the Petroken polypropylene business and a $23 million pension settlement.  2017 results include a $31 million gain on the sale of property in Lake Charles, Louisiana.  Olefins results increased by approximately $170 million from the prior year.  Production was approximately 17 percent higher primarily due to 2016 scheduled plant maintenance and the expansion at Corpus Christi.  Ethylene margins improved slightly with tighter market conditions.  Combined polyolefins results decreased approximately $70 million versus the prior year.  Polypropylene spreads over propylene declined approximately 5 cents per pound compared to high levels seen in 2016.  This was partially offset by polyethylene spreads over ethylene increasing approximately 2 cents per pound.  Joint venture equity income decreased by $17 million versus the prior year.

Olefins and Polyolefins — Europe, Asia, and International (O&P-EAI) – Our O&P — EAI segment produces and markets olefins and co-products, polyethylene and polypropylene, including polypropylene compounds.

Three months ended December 31, 2017 versus three months ended September 30, 2017 – EBITDA decreased $342 million versus the third quarter 2017, which included a gain of $108 million on the sale of our interest in Geosel.  Fourth quarter results were negatively impacted by a pension settlement charge of $20 million and a LIFO inventory charge of $20 million.  Compared to the prior period, olefins results decreased approximately $100 million. Ethylene margins declined approximately 6 cents per pound primarily due to increased feedstock costs.  Volume declined primarily due to unplanned maintenance in October 2017 at our Wesseling, Germany cracker.  Combined polyolefins results declined by approximately $75 million due to margin declines in polyolefins and seasonal sales volume declines for both polyethylene and polypropylene.  

Three months ended December 31, 2017 versus three months ended December 31, 2016 – EBITDA decreased by $42 million versus the fourth quarter 2016.  The fourth quarter 2017 was negatively impacted by an additional $12 million of pension settlement charges relative to 2016.  Compared to the prior period, olefins results were relatively unchanged.  Combined polyolefins results declined by approximately $25 million primarily due to a decrease in polyethylene margin. 

Full year ended December 31, 2017 versus full year ended December 31, 2016 – The segment achieved record EBITDA for 2017.  EBITDA increased $215 million versus 2016, which included gains totaling $32 million from the sale of the Petroken polypropylene business, restructuring of Asian polypropylene joint ventures and the sale of idled Australian polypropylene assets.  2017 results included a benefit of $108 million from the gain on the sale of our interest in Geosel which was partially offset by pension charges that were $12 million higher than 2016.  Olefins results increased by approximately $190 million.  This increase was driven by margins which improved primarily due to an ethylene price increase of approximately 6 cents per pound.  Volumes improved 4% in the absence of planned maintenance which occurred at two of the European crackers in 2016.  Combined polyolefins results decreased approximately $50 million compared to the prior year driven by a polyethylene spread decline of approximately 3 cents per pound which was partially offset by an increase in polyolefin sales volumes. Joint venture equity income decreased by $31 million.

Intermediates and Derivatives (I&D) – Our I&D segment produces and markets propylene oxide (PO) and its derivatives, oxyfuels and related products and intermediate chemicals, such as styrene monomer, acetyls, ethylene oxide and ethylene glycol.   

Three months ended December 31, 2017 versus three months ended September 30, 2017 – EBITDA increased $8 million versus the third quarter 2017.  Fourth quarter results were impacted by a $17 million LIFO inventory charge.  PO and derivatives results increased approximately $35 million.  Volumes increased approximately 5% with the absence of Hurricane Harvey impacts and margins improved due to market tightness.  Intermediate chemicals results were relatively unchanged from the third quarter. Oxyfuels and related products results were relatively unchanged as seasonal margin declines were offset by volume improvements with the absence of hurricane losses during the third quarter. 

Three months ended December 31, 2017 versus three months ended December 31, 2016 – EBITDA increased $104 million versus the fourth quarter 2016, which included a $16 million pension settlement.  Results for PO and derivatives and intermediate chemicals improved by approximately $120 million.  PO and derivatives volumes and margins improved as well as intermediate chemicals margins.  The gains in the PO and derivatives and intermediate chemicals businesses were offset by a net charge of approximately $35 million related to precious metal catalysts.  Oxyfuels and related products improved by approximately $10 million. 

Full year ended December 31, 2017 versus full year ended December 31, 2016 – EBITDA increased $157 million versus 2016, which included a $16 million pension settlement.  EBITDA of approximately $1.5 billion for 2017 returned to the historical levels typically seen for the business.  PO and derivatives and intermediate chemicals results increased approximately $250 million primarily due to margin improvements.  The gains in the PO and derivatives and intermediate chemicals businesses were offset by approximately $50 million of higher charges related to precious metal catalysts.  Oxyfuels and related products results declined by approximately $60 million. Volumes were lower due to planned maintenance in 2017 and margins were reduced primarily due to higher butane pricing. 

Refining – The primary products of this segment include gasoline and distillates, including diesel fuel, heating oil and jet fuel.

Three months ended December 31, 2017 versus three months ended September 30, 2017 – EBITDA increased $46 million versus the third quarter 2017 primarily due to a fourth quarter LIFO benefit of $38 million.  The Houston refinery operated at 245,000 barrels per day, up 5,000 barrels per day from the prior quarter.  The Maya 2-1-1 industry benchmark spread declined $1.55, averaging $20.26 per barrel. Declines in gasoline refining spreads were partially offset by improved heavy to light crude oil differentials.

Three months ended December 31, 2017 versus three months ended December 31, 2016 – EBITDA increased $23 million versus the fourth quarter 2016.  Fourth quarter 2017 throughput increased by 17,000 barrels per day from the prior year period. The Maya 2-1-1 industry benchmark spread increased by $1.26 to $20.26 per barrel, primarily due to improvements in diesel product price spreads over crude.

Full year ended December 31, 2017 versus full year ended December 31, 2016 – EBITDA increased $85 million versus 2016.  Throughput at the Houston refinery averaged 236,000 barrels per day, up 35,000 barrels per day. The Maya 2-1-1 industry benchmark spread increased by $1.32 per barrel, averaging $20.56 per barrel, primarily due to improved diesel product spreads.

Technology Segment – Our Technology segment develops and licenses chemical and polyolefin process technologies and manufactures and sells polyolefin catalysts.

Three months ended December 31, 2017 versus three months ended September 30, 2017 – EBITDA increased by $21 million due to increased catalyst sales and the timing of licensing revenue.

Three months ended December 31, 2017 versus three months ended December 31, 2016 – EBITDA increased by $7 million.

Full year ended December 31, 2017 versus full year ended December 31, 2016 – EBITDA decreased by $39 million, primarily due to decreased licensing revenue.

Capital Spending and Cash Balances
Capital expenditures, including growth projects, maintenance turnarounds, catalyst and information technology-related expenditures, were $401 million during the fourth quarter 2017 and $1.5 billion for the full year 2017. Our cash and liquid investment balance was $3.4 billion at December 31, 2017. We repurchased 10 million ordinary shares during 2017. There were approximately 395 million common shares outstanding as of December 31, 2017. The company paid dividends of $1.4 billion during 2017.

CONFERENCE CALL
LyondellBasell will host a conference call February 2 at 11 a.m. EST.  Participants on the call will include Chief Executive Officer Bob Patel, Executive Vice President and Chief Financial Officer Thomas Aebischer and Director of Investor Relations David Kinney. 

The toll-free dial-in number in the U.S. is 800-475-8402. A complete listing of toll-free numbers by country is available at www.lyb.com/teleconference for international callers. The pass code for all numbers is 6934553.

The slides and webcast that accompany the call will be available at http://www.lyb.com/earnings.

A replay of the call will be available from 2 p.m. EST February 2 until March 6 at 12:59 a.m. EST.  The replay dial-in numbers are 800-677-5199 (U.S.) and 203-369-3133 (international). The pass code for each is 6549.

ABOUT LYONDELLBASELL
LyondellBasell (NYSE: LYB) is one of the largest plastics, chemicals and refining companies in the world. Driven by its 13,000 employees around the globe, LyondellBasell produces materials and products that are key to advancing solutions to modern challenges like enhancing food safety through lightweight and flexible packaging, protecting the purity of water supplies through stronger and more versatile pipes, and improving the safety, comfort and fuel efficiency of many of the cars and trucks on the road. LyondellBasell sells products into approximately 100 countries and is the world's largest licensor of polyolefin technologies. In 2018, LyondellBasell was named to Fortune magazine's list of the "World's Most Admired Companies."  More information about LyondellBasell can be found at www.lyondellbasell.com.

FORWARD-LOOKING STATEMENTS
The statements in this release and the related teleconference relating to matters that are not historical facts are forward-looking statements. These forward-looking statements are based upon assumptions of management which are believed to be reasonable at the time made and are subject to significant risks and uncertainties. Actual results could differ materially based on factors including, but not limited to, the business cyclicality of the chemical, polymers and refining industries; the availability, cost and price volatility of raw materials and utilities, particularly the cost of oil, natural gas, and associated natural gas liquids; competitive product and pricing pressures; labor conditions; our ability to attract and retain key personnel; operating interruptions (including leaks, explosions, fires, weather-related incidents, mechanical failure, unscheduled downtime, supplier disruptions, labor shortages, strikes, work stoppages or other labor difficulties, transportation interruptions, spills and releases and other environmental risks); the supply/demand balances for our and our joint ventures' products, and the related effects of industry production capacities and operating rates; our ability to achieve expected cost savings and other synergies; our ability to successfully execute projects and growth strategies; legal and environmental proceedings; tax rulings, consequences or proceedings; technological developments, and our ability to develop new products and process technologies; potential governmental regulatory actions; political unrest and terrorist acts; risks and uncertainties posed by international operations, including foreign currency fluctuations; and our ability to comply with debt covenants and service our debt.  Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the "Risk Factors" section of our Form 10-K for the year ended December 31, 2016, which can be found at www.lyondellbasell.com on the Investor Relations page and on the Securities and Exchange Commission's website at www.sec.gov.

INFORMATION RELATED TO FINANCIAL MEASURES
This release makes reference to certain non-GAAP financial measures as defined in Regulation G of the U.S. Securities Exchange Act of 1934, as amended.

EBITDA, as presented herein, may not be comparable to a similarly titled measure reported by other companies due to differences in the way the measure is calculated. We calculate EBITDA as income from continuing operations plus interest expense (net), provision for (benefit from) income taxes, and depreciation & amortization.  EBITDA should not be considered an alternative to profit or operating profit for any period as an indicator of our performance, or as an alternative to operating cash flows as a measure of our liquidity.

Quantitative reconciliations of EBITDA to net income, the most comparable GAAP measure, are provided in Table 8 at the end of this release.

OTHER FINANCIAL MEASURE PRESENTATION NOTES
This release contains time sensitive information that is accurate only as of the time hereof. Information contained in this release is unaudited and subject to change. LyondellBasell undertakes no obligation to update the information presented herein except to the extent required by law.

 

 

 

 

 

 

 

 

SOURCE LyondellBasell Industries