The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from PR Newswire

LyondellBasell Reports Second-Quarter 2011 Results

Friday, July 29, 2011

LyondellBasell Reports Second-Quarter 2011 Results07:00 EDT Friday, July 29, 2011Margin Expansion and Consistency Across Quarter Drive Excellent ResultsROTTERDAM, The Netherlands, July 29, 2011 /PRNewswire/ -- Second-Quarter 2011 HighlightsNet income of $804 million; Diluted earnings per share of $1.38Quarterly EBITDA of $1,553 million; 11 percent increase from first quarter 2011Sales of $14.0 billion, a 15 percent increase from first quarter 2011Margin expansion in global olefins, U.S. refining and oxyfuels businessesMajority independent Supervisory Board in place with addition of four new membersInitiated dividendLyondellBasell Industries (NYSE: LYB) today announced net income for the second quarter 2011 of $804 million, or $1.38 per share.  Second-quarter 2011 EBITDA was $1,553 million, an 11 percent increase from the first quarter 2011.  Sales in the second quarter were $14,042 million, an increase of 15 percent from the prior quarter.  Comparisons with the prior quarter are available in the following table.Table 1 - Earnings Summary(a)Millions of U.S. dollars (except share data) Three months endedSix months endedJune 30, 2011March 31, 2011June 30, 2011Sales and other operating revenues $14,042$12,252$26,294Net income(b) 8046631,467Diluted earnings per share (U.S. dollars) 1.381.152.56Diluted share count (millions)  575569569EBITDA(c)1,5531,4022,955(a)  Net income and EBITDA are calculated using the LIFO (Last-In, First-Out) method of inventory accounting.(b)  Represents net income attributable to shareholders of LyondellBasell Industries.  See Table 11.(c)  See the end of this release for an explanation of the Company's use of EBITDA and Table 9 for reconciliations of EBITDA to   net income.During the second quarter 2011, results improved over a very strong first quarter 2011.  Improvements in the performance of global olefins, U.S. refining and oxyfuels were most notable.  Financial performance was generally consistent across the quarter.In addition, results reflect the following:Table 2 - Charges (Benefits) Included in Net IncomeThree months endedSix months endedMillions of U.S. dollars (except share data)June 30, 2011March 31, 2011June 30, 2011Pretax charges (benefits): Reorganization items$28$2$30Sale of precious metals(41)-(41)Corporate restructurings61-61Environmental accruals16-16Warrants - mark to market(6)5953Impairments13518Premiums and charges on early repayment of debt12-12Insurance settlement-(34)(34)Total pretax charges (benefits)8332115Provision for (benefit from) income tax related to these items(21)11(10)After-tax effect of net charges (credits)6243105Effect on diluted earnings per share(0.11)(0.08)(0.18)"During the second quarter, we continued to demonstrate the earnings potential of our company as margins increased over already strong first-quarter levels," said LyondellBasell Chief Executive Officer Jim Gallogly.  "Our EBITDA of more than $1.5 billion brings our first half EBITDA to nearly $3 billion.""In U.S. olefins, we continued to optimize plant operations across our assets, taking advantage of low-cost natural gas liquids while at the same time completing major maintenance activities at one of our Channelview olefins plants.  Improved cracker and butadiene margins led to solid European olefins results," added Gallogly.  "Our Intermediates & Derivatives segment continued its strong, stable performance.  Our Refining & Oxyfuels segment captured margin through improved operations and the purchase of advantaged crude oils for the Houston refinery while oxyfuels volumes increased and spreads widened during the summer driving season," Gallogly said."The Supervisory Board now consists of a majority of independent directors following the election of four new members in May.  During the second quarter, in addition to repaying 10 percent of our 8 percent Notes, we also paid our first dividend to shareholders," added Gallogly.OUTLOOK"Following a very strong first half of the year, we remain positive about the balance of 2011," commented Gallogly.  "The Chinese polyolefins market is giving indications that it is recovering from its soft patch and although U.S. and European polymer markets are still adjusting to this disruption, we are entering a period of significant industry maintenance.  Since our key U.S. maintenance projects have been completed for the year, we should be the beneficiary of tightened supply/demand conditions and any opportunities that this may create," continued Gallogly."Most importantly, the fundamentals that created strong first-half results remain intact," Gallogly said.  "Specifically, we continue to benefit from the favorable ratio of U.S. natural gas prices to crude oil prices.  The flexibility within our assets makes us particularly well suited to benefit from this environment.  Additionally, our Houston refinery's ability to process discounted heavy crude oils further enhances our favorable position.  The benefits we capture in this environment are clearly visible in our first half results.  These fundamentals are expected to continue into the foreseeable future."LYONDELLBASELL BUSINESS RESULTS DISCUSSION BY REPORTING SEGMENT LyondellBasell operates in five business segments: 1) Olefins & Polyolefins ? Americas; 2) Olefins & Polyolefins ? Europe, Asia, International; 3) Intermediates & Derivatives; 4) Refining & Oxyfuels; and 5) Technology.Olefins & Polyolefins - Americas  (O&P-Americas) ? The primary products of this segment include ethylene and its co-products (propylene, butadiene and benzene), polyethylene, polypropylene and Catalloy process resins.  Table 3 - O&P?Americas Financial Overview(a)Millions of U.S. dollars Three months endedSix months endedJune 30, 2011March 31, 2011June 30, 2011Operating income $509$421$930EBITDA 5784841,062(a)  Operating income and EBITDA are calculated using the LIFO method of inventory accounting.  See Table 8.  Three months ended June 30, 2011 versus three months ended March 31, 2011 ? O&P-Americas segment EBITDA increased $94 million versus the first quarter 2011.  Olefins profitability improved approximately $130 million despite the approximately $75 million lost opportunity cost of the scheduled maintenance activity at one of our Channelview olefins plants and an approximately $25 million weather related lost opportunity cost at our Morris, Ill. facility.  An ethylene sales price increase of approximately 9 cents per pound was partially offset by an approximately 2 cents per pound increase in the company's average cost-of-ethylene-production metric.  Higher monomer prices contributed to an approximately $50 million decline in polyethylene (PE) results as sales price increases lagged monomer price increases.  Polypropylene (PP) profits for the second quarter 2011 increased approximately $10 million versus the first quarter 2011.  Total polyolefins sales volumes were relatively unchanged from the prior period.Olefins & Polyolefins ? Europe, Asia, International (O&P-EAI) ? The primary products of this segment include ethylene and its co-products (propylene and butadiene), polyethylene, polypropylene, global polypropylene compounds, Catalloy process resins and Polybutene-1 resins.  Table 4 - O&P?EAI Financial Overview(a)Millions of U.S. dollars Three months endedSix months endedJune 30, 2011March 31, 2011June 30, 2011Operating income  $207$179$386EBITDA  275333608(a)  Operating income and EBITDA are calculated using the LIFO method of inventory accounting.  See Table 8.Three months ended June 30, 2011 versus three months ended March 31, 2011 ? O&P-EAI segment EBITDA increased $95 million versus the first quarter 2011 after excluding a second-quarter 2011 joint venture dividend decline of $91 million and approximately $60 million of accruals related to a proposed European staff reorganization and possible environmental remediation charges.  Olefins results improved approximately $95 million from the first quarter 2011 due to significantly improved cracker and butadiene margins.  Production volumes were relatively unchanged between the periods.  Polyethylene results were approximately equal to the prior period while combined polypropylene and polypropylene compounds results improved approximately $10 million from the first quarter 2011.    Intermediates & Derivatives (I&D) ? The primary products of this segment include propylene oxide (PO) and its co-products (styrene monomer, tertiary butyl alcohol (TBA), isobutylene and tertiary butyl hydroperoxide), and derivatives (propylene glycol, propylene glycol ethers and butanediol); acetyls, and ethylene oxide and its derivatives.  Table 5 - I&D Financial Overview(a)Millions of U.S. dollars Three months endedSix months endedJune 30, 2011March 31, 2011June 30, 2011Operating income $235$234$469EBITDA 314270584(a)  Operating income and EBITDA are calculated using the LIFO method of inventory accounting.  See Table 8.Three months ended June 30, 2011 versus three months ended March 31, 2011 ? I&D segment EBITDA increased $44 million versus the first quarter 2011.  Decreased sales volumes, as a result of the end of the aircraft deicer season, were primarily responsible for lower PO and PO derivatives results.  Intermediates profitability increased versus the first quarter 2011 as increased acetyls and styrene margins and a $41 million gain on the sale of spent silver catalyst boosted results.  Refining & Oxyfuels (R&O) ? The primary products of this segment include gasoline, diesel fuel, heating oil, jet fuel, petrochemical raw materials, methyl tertiary butyl ether (MTBE) and ethyl tertiary butyl ether (ETBE).  Table 6 - R&O Financial Overview(a)Millions of U.S. dollars Three months endedSix months endedJune 30, 2011March 31, 2011June 30, 2011Operating income$296$164$460EBITDA 353210563(a) Operating income and EBITDA are calculated using the LIFO method of inventory accounting.  See Table 8.Three months ended June 30, 2011 versus three months ended March 31, 2011 ? Refining & Oxyfuels segment EBITDA increased $143 million versus the first quarter 2011.  The Houston refinery financial performance improved approximately $135 million versus first quarter 2011.  Crude oil throughput at the Houston refinery increased slightly to 263,000 barrels per day.  Refining margins improved as the average industry benchmark margin increased approximately $2 per barrel during the quarter.  Margins realized at the Houston refinery increased by more than the industry benchmark due to the purchase and processing of advantaged crudes and operating benefits stemming from the first-quarter completion of the fluid catalytic cracker turnaround.  Absent from second quarter results is the $34 million first-quarter Houston refinery insurance settlement.  At the Berre refinery, results declined approximately $10 million from first quarter 2011 due to low naphtha prices relative to gasoline and additional crude costs related to the Libyan political situation.  Throughput was reduced due to poor economics.  Oxyfuels results improved approximately $50 million compared to the first quarter 2011 due to seasonally higher volumes and margins.  Technology Segment ? The principal products of the Technology segment include polyolefin catalysts and production process technology licenses and related services. Table 7 - Technology Financial Overview(a)Millions of U.S. dollars Three months endedSix months endedJune 30, 2011March 31, 2011June 30, 2011Operating income $23$66$89EBITDA 4291133(a)  Operating income and EBITDA are calculated using the LIFO method of inventory accounting.  See Table 8.Three months ended June 30, 2011 versus three months ended March 31, 2011 ? Results declined compared to the prior quarter due to lower licensing income and a $16 million charge related to the closing of a U.S. research facility.LiquidityCompany liquidity, which we define as cash and cash equivalents plus funds available through established lines of credit, was approximately $7.1 billion on June 30, 2011.  The cash balance was approximately $4.9 billion (including restricted cash) on June 30, 2011.Capital SpendingCapital expenditures, including maintenance turnaround, catalyst and IT related expenditures, were $261 million during the second quarter 2011. CONFERENCE CALLLyondellBasell will host a conference call today, July 29, 2011, at 11:00 a.m. ET.  Participating on the call will be: Jim Gallogly, Chief Executive Officer; Kent Potter, Executive Vice President and Chief Financial Officer; Sergey Vasnetsov, Senior Vice President - Strategic Planning and Transactions; and Doug Pike, Vice President of Investor Relations.  The toll-free dial-in number in the U.S. is 888-982-4611.  For international numbers, please go to our website, www.lyondellbasell.com/teleconference, for a complete listing of toll-free numbers by country.  The pass code for all numbers is 9704313. A replay of the call will be available from 1:00 p.m. ET July 29 to 1:00 p.m. ET on Aug. 29.  The replay dial-in numbers are 800-510-9771 (U.S.) and +1 402-344-6800 (international). The pass code for each is 4765. A copy of the slides that accompany the call will be available on our website at http://www.lyondellbasell.com/earnings.ABOUT LYONDELLBASELLLyondellBasell (NYSE: LYB) is one of the world's largest plastics, chemical and refining companies. The company manufactures products at 58 sites in 18 countries. LyondellBasell products and technologies are used to make items that improve the quality of life for people around the world including packaging, electronics, automotive components, home furnishings, construction materials and biofuels. 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 and natural gas; 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; legal and environmental proceedings; tax rulings, consequences or proceedings; technological developments, and our ability to develop new products and process technologies; current and 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 substantial 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, 2010, 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.NON-GAAP MEASURESThis 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.  We report our financial results in accordance with U.S. generally accepted accounting principles, but believe that certain non-GAAP financial measures provide useful supplemental information to investors regarding the underlying business trends and performance of the company's ongoing operations. These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the financial measures prepared in accordance with GAAP.We have included EBITDA in this press release, as we believe that EBITDA is a measure commonly used by investors.  However, 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. For purposes of this release and our other disclosures, EBITDA means earnings before interest, taxes, depreciation, amortization and restructuring costs, as adjusted for other items management does not believe are indicative of the Company's underlying results of operations, including but not limited to, impairment charges, reorganization items and the effect of mark-to-market accounting on our warrants, to the extent applicable as shown in Table 9 at the end of this release.  EBITDA also includes dividends from joint ventures.  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.  Reconciliations of non-GAAP financial measures to their nearest comparable GAAP financial measures are provided in the financial tables at the end of this release.OTHER FINANCIAL MEASURE PRESENTATION NOTES As a result of the Company's reorganization proceedings and its emergence from Chapter 11, financial results are prepared and disclosed for a predecessor company for the time period before May 1, 2010, and the successor company for time periods after April 30, 2010, the date of emergence.  For financial accounting purposes, the predecessor and successor companies are considered to be two separate entities.  As a result of the reorganization and application of fresh-start accounting, the results of operations of the predecessor and successor companies may not be comparable. 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.Media Contact:  David Harpole (713) 309-4125Investor Contact:  Doug Pike (713) 309-4590Table 8 - Reconciliation of Segment Information to Consolidated Financial Information2011 2010 (Millions of U.S. dollars) Q1Q2YTDMay 1 - June 30Q3Q4Sales and other operating revenues:Olefins & Polyolefins - Americas $3,572$4,010$7,582$2,004$3,247$3,155Olefins & Polyolefins - Europe, Asia, International 3,9444,2648,2082,1403,2473,342Intermediates & Derivatives 1,6921,7773,4699401,4531,361Refining & Oxyfuels 4,7205,83310,5532,4033,8674,051Technology 13912626575157133Other/elims (1,815)(1,968)(3,783)(790)(1,669)(1,432)Total $12,252$14,042$26,294$6,772$10,302$10,610Operating income (loss):  Olefins & Polyolefins - Americas $421$509$930$149$448$446Olefins & Polyolefins - Europe, Asia, International 17920738611423166Intermediates & Derivatives 234235469109207196Refining & Oxyfuels 1642964601483144Technology 66238923388Other 1(5)(4)13(19)(16)Total $1,065$1,265$2,330$422$988$844Depreciation and amortization: Olefins & Polyolefins - Americas $58$59$117$51$42$58Olefins & Polyolefins - Europe, Asia, International 5766123336053Intermediates & Derivatives 343771233028Refining & Oxyfuels 42468895543Technology 24164064032Other ---7(5)(7)Total $215$224$439$129$222$207EBITDA: (a)Olefins & Polyolefins - Americas $484$578$1,062$198$492$505Olefins & Polyolefins - Europe, Asia, International 333275608174289125Intermediates & Derivatives 270314584128243228Refining & Oxyfuels 21035356321140212Technology 9142133297844Other 14(9)572(44)(29)Total EBITDA 1,402$1,553$2,9556221,1981,0852010 LCM inventory valuation adjustments---33332(323)Total excluding 2010 LCM inventory valuation  adjustments $1,402$1,553$2,955$955$1,230$762Capital, turnarounds and IT deferred spending:  Olefins & Polyolefins - Americas $66$138$204$50$40$56Olefins & Polyolefins - Europe, Asia, International 423779313243Intermediates & Derivatives 5152053932Refining & Oxyfuels 10158159223452Technology 7310379Other 110115612Total   222261483116158204Deferred charges included above (1)-(1)(3)(5)(4)Capital expenditures $221$261$482$113$153$200(a) See Table 9 for a reconciliation of total EBITDA, excluding LCM inventory valuation adjustments, to net income.  Table 9 - Reconciliation of EBITDA to Net Income2011 2010 (Millions of U.S. dollars) Q1Q2YTDMay 1 - June 30Q3Q4Segment EBITDA: Olefins & Polyolefins - Americas $484$578$1,062$198$492$505Olefins & Polyolefins - Europe, Asia, International 333275608174289125Intermediates & Derivatives 270314584128243228Refining & Oxyfuels 21035356321140212Technology 9142133297844Other 14(9)572(44)(29)Total EBITDA 1,4021,5532,9556221,1981,085LCM inventory valuation adjustments ---33332(323)Total EBITDA excluding LCM inventory valuation adjustments 1,4021,5532,9559551,230762Add: Income from equity investment 5873131272930Unrealized foreign exchange (loss) gain (3)41(14)(7)(1)Gain on sale of Flavors and Fragrances business -----64Deduct: 2010 LCM inventory valuation adjustments ---(333)(32)323Depreciation and amortization (215)(224)(439)(129)(222)(207)Impairment charge (5)(13)(18)--(28)Reorganization items (2)(28)(30)(8)(13)(2)Interest expense, net (155)(164)(319)(120)(186)(222)Joint venture dividends received (96)(11)(107)(28)-(6)Provision for (benefit from) income taxes (263)(388)(651)(28)(254)112Fair value change in warrants (59)6(53)17(76)(55)Other (2)(5)(7)8(2)(4)Net income 6608031,463347467766Less: Net (income) loss attributable to non-controlling interests    314(5)75Net income attributable to LyondellBasell Industries $663$804$1,467$342$474$771Table 10 - Selected Segment Operating Information2011 2010 Q1Q2YTDQ1Q2Q3Q4YTDOlefins and Polyolefins - Americas Volumes (million pounds) Ethylene produced 2,0891,9294,0182,0191,9982,1842,1528,353Propylene produced 7695561,3257557777906953,017Polyethylene sold 1,4051,3772,7821,3301,3201,4721,3475,469Polypropylene sold 5856111,1966156706756112,571Benchmark Market Prices West Texas Intermediate crude oil (USD per barrel) 94.60102.3498.5078.8878.0576.0985.2479.58Light Louisiana Sweet ("LLS") crude oil (USD per barrel)107.83118.34113.1780.0282.1679.6489.3382.80Natural gas (USD per million BTUs) 4.194.434.315.364.044.354.174.48U.S. weighted average cost of ethylene production (cents/pound) 32.633.833.234.326.725.233.830.0U.S. ethylene (cents/pound) 49.357.553.452.345.638.347.345.9U.S. polyethylene [high density] (cents/pound) 87.795.391.583.384.077.783.782.2U.S. propylene (cents/pound) 71.787.379.561.563.356.257.359.6U.S. polypropylene [homopolymer] (cents/pound) 100.8113.8107.387.889.882.783.886.0Olefins and Polyolefins - Europe, Asia, International Volumes (million pounds) Ethylene produced 9979991,9968618429949133,610Propylene produced 6086311,2395095406365602,245Polyethylene sold 1,3051,2792,5841,2391,2301,3161,2755,060Polypropylene sold 1,7041,6313,3351,5381,7621,8911,8327,023Benchmark Market Prices Western Europe weighted average cost of ethylene production (euro 0.01 per pound)34.735.435.028.727.326.535.729.5Western Europe ethylene (euro 0.01 per pound) 52.054.753.441.643.743.144.343.2Western Europe polyethylene [high density] (euro 0.01 per pound) 62.165.964.051.453.852.452.552.5Western Europe propylene (euro 0.01 per pound) 50.855.353.138.945.143.142.642.4Western Europe polypropylene [homopolymer] (euro 0.01 per pound) 66.669.468.051.360.360.358.957.7Intermediates and Derivatives Volumes (million pounds) Propylene oxide and derivatives 8387911,6298697818728603,382Ethylene oxide and derivatives 288277565265250206251972Styrene monomer 8528171,6695897808276852,881Acetyls 4394178553794394054841,707TBA Intermediates 4854599444724704544251,821Refining and Oxyfuels Volumes Houston Refining crude processing rate (thousands of barrels per day) 258263261263189261233236Berre Refinery crude processing rate (thousands of barrels per day) 10185937399998088MTBE/ETBE sales volumes (million gallons) 196206398189236248218891Benchmark Market MarginsLight crude oil - 2-1-1(a)6.0010.288.186.9410.397.669.018.51Light crude oil - Maya differential(a)17.8715.5016.829.089.918.529.609.31Urals 4-1-2-1 (USD per barrel) 7.797.717.755.987.275.946.626.44MTBE - Northwest Europe (cents per gallon) 58.992.775.449.346.244.318.739.5Source: CMAI, Bloomberg, LyondellBasell Industries(a) Prices prior to 2011 use WTI as the light crude oil benchmark.  Beginning in 2011, Light Louisiana Sweet ("LLS") is used as the light crude oil benchmark.Table 11 - Unaudited Income Statement Information2011 2010 (Millions of U.S. dollars, except per share data)Q1Q2YTDMay 1 -     June 30Q3Q4Sales and other operating revenues$12,252$14,042$26,294$6,772$10,302$10,610Cost of sales10,94312,47423,4176,1989,0759,494Selling, general and administrative expenses211247458129204231Research and development expenses335689233541Operating income1,0651,2652,330422988844Income from equity investments5873131272930Interest expense, net(155)(164)(319)(120)(186)(222)Other income (expense), net(43)45254(97)(60)Income before income taxes and reorganization items9251,2192,144383734592Reorganization items(2)(28)(30)(8)(13)(2)Income before taxes9231,1912,114375721590Provision for (benefit from) income taxes26338865128254(112)Income from continuing operations6608031,463347467702Income from discontinued operations, net of tax-----64Net income  6608031,463347467766Less: Net (income) loss attributable to non-controlling interests314(5)75Net income attributable to the Company$663$804$1,467$342$474$771Table 12 - Unaudited Cash Flow Information2011 2010 (Millions of U.S. dollars) Q1Q2YTDMay 1 - June 30Q3Q4Net cash provided by operating activities $ 221 $ 1,026 $ 1,247 $ 1,105 $ 1,125 $ 728 Net cash used in investing activities (216) (435) (651) (110) (157) (46)Net cash provided by (used in) financing activities 28  (327) (299) 133  (88) (1,239)SOURCE LyondellBasell Industries