LyondellBasell Reports First Quarter 2021 Earnings

Source: www.gulfoilandgas.com 4/30/2021, Location: North America

First Quarter 2021 Highlights
- Strong demand and tight markets drove margin improvements
- Net Income: $1.1 billion
- Diluted earnings per share: $3.18 per share
- EBITDA: $1.6 billion; Highest quarterly EBITDA for O&P-Americas since 2015 and O&P-EAI since 2018
- Repaid $500 million of debt in January
- Newly-formed Louisiana joint venture contributed $130 million in EBITDA
- Finalized agreement to form a propylene oxide joint venture in China with Sinopec
- Launched Circulen suite of polymers enabling customers to improve the sustainability of consumer products

LyondellBasell Industries (LYB) announced net income for the first quarter 2021 of $1.1 billion, or $3.18 per share. First quarter 2021 EBITDA was $1.6 billion.

"First quarter performance built upon the economic momentum we saw toward the end of last year. We experienced persistently strong consumer-driven demand, recovery in durable goods markets and industry supply constraints, which enabled price increases and drove margin improvements for many of our products. During February, unusually cold weather and related power outages impacted operations in our industry across the state of Texas and reduced our production volumes. In March we achieved the first full quarter of results for our newly-formed Louisiana joint venture. We benefited from the increased geographic diversity of our portfolio as the Louisiana ethylene cracker operated continuously when most Texas assets were down due to the cold weather. Tight markets and strong demand drove margin improvements in both of our Olefins and Polyolefins segments as well as most of the businesses in our Intermediates and Derivatives segment. Higher demand from automotive and other non-durable markets increased volumes for our Advanced Polymer Solutions segment while margins compressed due to rapidly rising raw material costs. As the industry enters the second quarter with very low inventory levels, we expect these favorable market conditions will persist as production returns," said Bob Patel, LyondellBasell CEO.

"Amidst a rapidly recovering global economy and improving market conditions, we remained focused on advancing the circular economy and the sustainable solutions we offer customers. Over the past two years, we expanded our mechanical recycling manufacturing capacity in Europe through our Quality Circular Polymers joint venture with SUEZ and also commercialized polyethylene and polypropylene products made with renewable bio-based feedstocks. We are advancing LyondellBasell's proprietary catalyzed pyrolysis technology at our MoReTec molecular recycling pilot facility in Italy with the goal of eventually bringing this potentially game-changing technology to commercial scale. In April we launched a suite of products under the brand name Circulen that enables brand owners to improve the sustainability of their consumer products," said Patel.

OUTLOOK

"LyondellBasell is emerging stronger from the pandemic and the associated global recession. With no significant planned maintenance for our assets during the second quarter, we plan to operate at nearly full capacity worldwide to meet robust demand that is expected to persist due to low inventories and maintenance downtime across our industry. Strong North American integrated polyethylene margins are anticipated to continue as U.S. producers seek to fulfill domestic order backlogs, rebuild inventories and serve export demand. During the second half of 2021, increased mobility should drive higher demand for gasoline and jet fuel, improving margins for our Refining and Oxyfuels & Related Products businesses. We also expect that moderating feedstock costs will increase second quarter margins for our Advanced Polymer Solutions segment."

"We believe that our recent value-driven growth investments should enable LyondellBasell to establish new benchmarks for the profitability of our company over the coming years. With an improving outlook for cash generation, we remain committed to further strengthening our investment grade balance sheet through deleveraging. In both January and April, we repaid $500 million of outstanding debt for a total of $1 billion year to date with more debt reduction planned for the remainder of 2021. By extending our robust track record of cash generation and fortifying our balance sheet, we are emerging stronger, building upon our current momentum and continuing to capture opportunities through business cycles," Patel said.

LYONDELLBASELL BUSINESS RESULTS DISCUSSION BY REPORTING SEGMENT

LyondellBasell manages operations through six operating segments: 1) Olefins and Polyolefins - Americas; 2) Olefins and Polyolefins - Europe, Asia and International; 3) Intermediates and Derivatives; 4) Advanced Polymer Solutions; 5) Refining; and 6) Technology.

Comments and analysis represent underlying business activity and are exclusive of LCM.

Olefins & Polyolefins - Americas (O&P-Americas) - Our O&P-Americas segment produces and markets Olefins & Co-products, polyethylene and polypropylene.

Three months ended March 31, 2021 versus three months ended December 31, 2020 - EBITDA increased $145 million versus the fourth quarter 2020. Compared to the prior period, olefins results increased about $155 million driven by an increase in margins partially offset by lower volumes. Margins improved primarily due to increases in the price of ethylene and propylene outpacing higher feedstock and utility costs. Volumes decreased driven by the downtime in Texas due to the weather events, partially offset by a full quarter of Louisiana joint venture volumes. Polyolefins results decreased approximately $15 million due to lower polyethylene margin partially offset by higher polypropylene margin and increased polyethylene volume. Polyethylene volume increased driven by a full quarter of contribution from our Louisiana joint venture partially offset by volume lost during the weather events. Results from our Louisiana joint venture are embedded in the segment's olefins and polyethylene profitability and are not reflected in equity income.

Three months ended March 31, 2021 versus three months ended March 31, 2020 - EBITDA increased $390 million versus the first quarter 2020, excluding a favorable variance of $111 million due to a first quarter 2020 LCM inventory charge. Compared with the prior period, olefins results increased about $330 million driven by increases in ethylene margins primarily due to higher ethylene and propylene pricing outpacing increases in feedstock costs.

Polyolefin results increased $30 million due to higher polypropylene margin and higher polyethylene volume partially offset by lower polyethylene margin. Polyethylene volume increased due to a full quarter of contribution from the Louisiana joint venture partially offset by a decline in production during the Texas weather events. Joint venture equity income increased approximately $30 million due to higher volumes and margins at our polypropylene joint venture in Mexico, Indelpro.

Olefins & Polyolefins - Europe, Asia, International (O&P-EAI) - Our O&P-EAI segment produces and markets Olefins and Co-products, polyethylene and polypropylene.

Three months ended March 31, 2021 versus three months ended December 31, 2020 - EBITDA increased $161 million versus the fourth quarter 2020, excluding an unfavorable variance of $53 million due to LCM inventory benefits in the fourth quarter. The prior quarter included a last-in, first out (LIFO) inventory valuation benefit of approximately $20 million that did not recur in the first quarter. Compared to the prior period, olefins results increased $30 million due to increased margins and volumes. Margins increased driven by higher ethylene prices and lower fixed costs partially offset by higher feedstock costs. Volumes increased due to robust demand and improved operating rates. Combined polyolefins results increased about $150 million due to strong demand driving higher polyethylene and polypropylene price spreads over monomer.

Three months ended March 31, 2021 versus three months ended March 31, 2020 - EBITDA increased $187 million versus the first quarter 2020, excluding a favorable variance of $36 million due to a first quarter 2020 LCM inventory charge. First quarter 2021 results benefited approximately $20 million due to an increase in the euro versus the U.S. dollar exchange rate relative to the first quarter 2020. Compared to the prior period, olefins results decreased approximately $95 million due to lower margins driven by higher feedstock costs. Combined polyolefins results increased about $170 million due to higher polyethylene and polypropylene price spreads over monomer driven by strong demand. Joint venture equity income increased approximately $100 million due to higher margins associated with increased polyolefin demand.

Intermediates & Derivatives (I&D) - Our I&D segment produces and markets Propylene Oxide & Derivatives, Oxyfuels & Related Products and Intermediate Chemicals, such as styrene monomer, acetyls, ethylene oxide and ethylene glycol.

Three months ended March 31, 2021 versus three months ended December 31, 2020 - EBITDA decreased $14 million versus the fourth quarter 2020, excluding an unfavorable variance of $66 million due to LCM inventory benefits in the fourth quarter. First quarter results increased approximately $50 million due to LIFO inventory valuation charges in the fourth quarter. Compared to the prior period, Propylene Oxide & Derivatives results decreased approximately $35 million due to lower volumes driven by Texas weather events and planned maintenance partially offset by higher margins due to tight market supply. Intermediate Chemicals results decreased about $55 million primarily due to a decrease in volumes driven by the weather events. Oxyfuels & Related Products results increased approximately $25 million with higher margins benefiting from improving gasoline prices partially offset by lower volumes.

Three months ended March 31, 2021 versus three months ended March 31, 2020 - EBITDA decreased $99 million versus the first quarter 2020, excluding a favorable variance of $78 million due to LCM inventory charges in the first quarter 2020. First quarter 2021 results benefited approximately $10 million due to an increase in the euro versus the U.S. dollar exchange rate relative to the first quarter 2020. Compared with the prior period, Propylene Oxide & Derivatives results decreased about $25 million due to lower volumes driven by the weather events and planned maintenance partially offset by higher margins due to tight market supply. Intermediate Chemicals results decreased approximately $20 million due to lower margins driven by higher feedstock costs and lower volumes. Oxyfuels & Related Products results decreased approximately $70 million driven by lower margins and volumes. Volumes were lower driven by weather events and lower gasoline demand. Equity income increased more than $10 million due to improved results at our joint venture in China.

Advanced Polymer Solutions (APS) - Our Advanced Polymer Solutions segment produces and markets in two lines of business: Compounding & Solutions and Advanced Polymers. Compounding & Solutions includes polypropylene compounds, engineered plastics, masterbatches, engineered composites, colors and powders. Advanced Polymers consists of Catalloy and polybutene-1.

Three months ended March 31, 2021 versus three months ended December 31, 2020 - EBITDA increased $9 million versus the fourth quarter 2020, excluding an unfavorable variance of $26 million due to LCM inventory benefits in the in the fourth quarter. Compared with the prior period, Compounding & Solutions results were relatively unchanged with higher volumes driven by improved demand offset by lower margins due to elevated feedstock costs. Advanced Polymers results increased approximately $15 million primarily due to higher margins and volumes.

Three months ended March 31, 2021 versus three months ended March 31, 2020 - EBITDA increased $20 million compared to the first quarter 2020, excluding a favorable variance of $2 million due to LCM inventory charges in the first quarter 2020. The prior quarter results included integration costs of approximately $15 million which did not recur in the first quarter 2020. Compared with the prior period, Compounding & Solutions results increased more than $10 million with higher demand in Asia and Europe driving increases in volumes and margins. Advanced Polymers results were relatively unchanged with volume increases offset by margin declines due to increased propylene feedstock prices in North America.

Refining - Our Refining segment produces and markets gasoline and distillates, including diesel fuel, heating oil and jet fuel.

Three months ended March 31, 2021 versus three months ended December 31, 2020 - EBITDA decreased $36 million versus the fourth quarter 2020, excluding an unfavorable variance of $2 million due to LCM inventory benefits in the in the fourth quarter. Margin declined driven by increased costs for renewable identification number credits (RINs), partially offset by an increase in the Maya 2-1-1 industry benchmark crack spread of $5.21 per barrel to $15.32 per barrel. The Houston Refinery operated at 152,000 barrels per day, 62,000 barrels per day lower than prior period driven by the weather events and muted demand for transportation fuels due to the pandemic.

Three months ended March 31, 2021 versus three months ended March 31, 2020 - EBITDA decreased $30 million versus the first quarter 2020, excluding a favorable variance of $192 million due to LCM inventory charges in the first quarter 2020. Margin declined driven by a decrease in the Maya 2-1-1 industry benchmark crack spread of $1.9 per barrel and higher RINs cost. Crude throughput decreased by 74,000 barrels per day due to rate reductions in response to the weather events and lower demand for transportation fuels.

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

Three months ended March 31, 2021 versus three months ended December 31, 2020 - EBITDA increased $49 million compared to the fourth quarter 2020 driven by catalyst results. Catalyst volumes increased driven by customers rebuilding inventories and higher demand in Asia and the Middle East. Catalyst margins increased due to inventory mix.

Three months ended March 31, 2021 versus three months ended March 31, 2020 - EBITDA increased $38 million, versus the first quarter 2020 driven by higher number of licensing revenue milestones and increased catalyst results.

Capital Spending and Cash Balances
Capital expenditures, including growth projects, maintenance turnarounds, catalyst and information technology-related expenditures, were $340 million during the first quarter 2021. Our cash and liquid investment balance was $1.8 billion and there were 334 million common shares outstanding as of March 31, 2021. The company paid dividends of $352 million during the first quarter 2021.


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