LyondellBasell Reports 2016 Earnings

HOUSTON and LONDON, Feb. 3, 2017 /PRNewswire/ --

2016 Full Year Highlights

• Strong Earnings
  • Income from continuing operations: $3.8 billion ($3.9 billion excluding LCM¹)
  • Diluted earnings per share: $9.15 per share ($9.20 per share excluding LCM)
  • EBITDA: $6.6 billion ($6.6 billion excluding LCM)
• Advanced the Growth Program
  • Completed an 800 million pound ethylene expansion at Corpus Christi, Texas, the final in a series of planned expansions to increase our U.S. ethylene capacity by 20%
  • Began site preparations for a new 1.1 billion pound polyethylene plant in La Porte, Texas
• Strong Cash Flow and Share Repurchases
  • Full year cash generation from operations totaled $5.6 billion
  • Share repurchases and dividends totaled $4.3 billion; $2.2 billion in capital expenditures
  • Repurchased 37 million shares or approximately 8% of the shares outstanding on January 1, 2016

Fourth Quarter 2016 Highlights

• Income from continuing operations: $770 million ($788 million excluding LCM)
• Diluted earnings per share: $1.89 per share ($1.94 per share excluding LCM)
• EBITDA: $1.4 billion ($1.4 billion excluding LCM)
• Share repurchases and dividends totaled $783 million; repurchased 5.2 million shares during the fourth quarter or approximately 1.3% of the shares outstanding on October 1, 2016

Comparisons with the prior quarter, fourth quarter 2015 and full year 2015 are available in the following table:

 

LyondellBasell Industries (NYSE: LYB) today announced earnings from continuing operations for the fourth quarter 2016 of $770 million, or $1.89 per share. Fourth quarter 2016 EBITDA was $1.4 billion.  The quarter included a $29 million non-cash, pre-tax charge for the impact of a lower of cost or market (LCM) inventory adjustment ($18 million after-tax).  Excluding the LCM adjustment, earnings from continuing operations during the fourth quarter totaled $788 million, or $1.94 per share, and EBITDA was $1.4 billion. The fourth quarter also included a $58 million lump sum pension settlement and a $61 million non-cash, out-of-period cumulative correction. The correction, which was not material to any reporting period, relates to taxes on our cross-currency swaps for 2014, 2015 and through the third quarter of 2016. Together, the pension settlement and the non-cash, out-of-period correction adversely impacted fourth quarter earnings by $0.24 per share. Full year 2016 income from continuing operations was $3.8 billion, or $9.15 per share, and EBITDA was $6.6 billion. The full year included a non-cash, pre-tax LCM inventory adjustment of $29 million ($18 million after tax).  Excluding the LCM adjustment, earnings from continuing operations for the full year totaled $3.9 billion, or $9.20 per share, and EBITDA was $6.6 billion.  2016 earnings were negatively impacted due to the $58 million pension settlement, a $74 million non-cash, out-of-period cumulative correction relating to 2014 and 2015 for taxes on our cross currency swaps and  positively impacted by an after tax gain of $78 million on the sale of our Argentine wholly owned subsidiary, Petroken Petroquímica Ensenada S.A. (Petroken).  Combined, the net effect of the pension settlement, non-cash, out-of-period tax correction and Petroken gain adversely impacted full year 2016 earnings by $0.07 per share. 

"LyondellBasell posted good results for 2016 despite the impact of our heavy planned maintenance schedule and several Refining operational upsets.  Our continued strong earnings and cash flow enabled us to return cash to shareholders by increasing our dividend per share by 9 percent and purchasing 8 percent of the outstanding shares.  Our Olefins and Polyolefins - Europe, Asia and International and Technology segments posted their second consecutive year of record results, demonstrating continued global industry strength.  Overall, the global olefins and polyolefins industry benefitted from continued favorable supply and demand balances while low crude oil and fuel prices adversely impacted refining and oxyfuel margins.  During the fourth quarter, we completed the final step in our 2 billion pound North American ethylene expansion program, began site preparation for a 1.1 billion pound polyethylene plant, and advanced our new propylene oxide plant design.  These projects coupled with the 2016 completion of seven major plant maintenance turnarounds, including four cracker turnarounds, position our company favorably for the coming years," said Bob Patel, LyondellBasell chief executive officer. 

OUTLOOK
"During the past several months, the industry outlook for 2017 has steadily improved.  Healthy U.S. and global economic activity and ethylene project delays have led to an improved forecast for industry supply and demand dynamics.  Global supply positions have provided optimism regarding crude oil prices and NGL supply.  While we will continue to watch these developments, the significant investments in our 2016 maintenance programs favorably position the company for 2017," 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. 

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

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, 2016 versus three months ended September 30, 2016 – EBITDA decreased $90 million versus the third quarter 2016, excluding an unfavorable $29 million quarter to quarter variance as a result of the fourth quarter LCM inventory adjustment. The fourth quarter segment results were adversely impacted by $23 million due to the pension settlement.  Compared to the prior period, olefins results decreased approximately $80 million.  This decrease was driven by margins which declined approximately 6 cents per pound due to lower ethylene prices and increased feedstock costs.  Volumes improved as a result of the completion of planned maintenance at the Morris, Illinois complex.  Combined polyolefins results increased by approximately $10 million.  Polyethylene price spreads over ethylene improved approximately 2 cents per pound partially offset by a 2 percent volume decrease.  Polypropylene volumes declined due to seasonal demand while price spreads over propylene improved approximately 4 cents per pound.  Joint venture equity income declined by $7 million.

Three months ended December 31, 2016 versus three months ended December 31, 2015 – EBITDA decreased $242 million versus the fourth quarter 2015, excluding a favorable $30 million quarter to quarter variance as a result of the LCM inventory adjustments.  2016 results were negatively impacted by $23 million due to the pension settlement. Olefins results declined approximately $70 million versus the fourth quarter 2015.  Ethylene margins were lower and production was down 9% primarily due to scheduled maintenance.  Combined polyolefins results decreased approximately $150 million versus the very strong prior year period.  Polyethylene spreads declined by approximately 6 cents per pound and volume decreased by approximately 6 percent.  Polypropylene spreads declined by approximately 3 cents per pound.  Joint venture equity income declined by $10 million.

Full year ended December 31, 2016 versus full year ended December 31, 2015 – EBITDA decreased $915 million versus 2015, excluding a favorable $131 million year to year variance as a result of the LCM inventory adjustments in both years.  2016 results include a $57 million gain on the sale of the Petroken polypropylene business and the $23 million negative impact due to the pension settlement.  Olefins results declined by approximately $850 million from the prior year.  Ethylene margins declined by approximately 6 cents per pound versus 2015.  The impact of 2 cents per pound lower ethylene sales price was compounded by a higher cost of ethylene production.  Production was approximately 13 percent lower primarily as a result of 2016 scheduled plant maintenance.  Combined polyolefins results decreased approximately $120 million versus the prior year.  Polyethylene spreads over ethylene declined approximately 4 cents per pound and volume decreased approximately 4 percent.  Polypropylene spreads improved by approximately 4 cents per pound.  Polypropylene sales volumes were lower due to the sale of our Petroken subsidiary.  Joint venture equity income increased by $17 million versus the prior year.

Olefins and Polyolefins - Europe, Asia, 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, 2016 versus three months ended September 30, 2016 – EBITDA decreased $186 million for the fourth quarter versus the third quarter 2016.  The fourth quarter was negatively impacted by a pension settlement of $8 million and the absence of an $11 million third quarter gain due to the restructuring of Asian polypropylene joint ventures and the sale of idled Australian polypropylene assets.  Compared to the prior period, olefins results decreased approximately $120 million. Ethylene margins declined 7 cents per pound primarily due to feedstock costs.  Ethylene sales and internal consumption were also lower due to planned maintenance at our Wesseling, Germany cracker.  Combined polyolefins results declined by approximately $50 million primarily due to lower spreads for both polyethylene and polypropylene.  Joint venture equity income increased by $3 million.

Three months ended December 31, 2016 versus three months ended December 31, 2015 – EBITDA decreased by $53 million versus the fourth quarter 2015, excluding a favorable $24 million quarter to quarter variance as a result of the 2015 LCM inventory adjustment.  The fourth quarter 2016 was adversely impacted by the $8 million pension settlement.  Compared to the prior period, olefins results were relatively unchanged.  Combined polyolefins results decreased approximately $50 million.  Polyethylene spreads declined while polypropylene margins were relatively unchanged.  Sales volume declined 4 percent and 10 percent for polyethylene and polypropylene, respectively.  Joint venture equity income increased by $2 million.

Full year ended December 31, 2016 versus full year ended December 31, 2015 – The segment achieved record EBITDA for the year.  EBITDA increased $212 million versus 2015, excluding a favorable $30 million year to year variance as a result of the 2015 LCM inventory adjustment.  2016 results include gains totaling $32 million due to the sale of the Petroken polypropylene business, restructuring of Asian polypropylene joint ventures and the sale of idled Australian polypropylene assets.  Olefins results declined by approximately $20 million.  Combined polyolefins results increased approximately $180 million compared to the prior year driven by a polyethylene and polypropylene spread improvement of approximately 2 cents per pound and 3 cents per pound, respectively. Joint venture equity income increased by $19 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, 2016 versus three months ended September 30, 2016 – EBITDA increased $2 million.  The fourth quarter was negatively impacted by a pension settlement of $16 million. PO and derivatives and intermediate chemicals results increased by approximately $50 million primarily due to improved methanol and ethylene glycol margins and reduced maintenance while PO and derivatives were relatively steady.  Oxyfuels results decreased approximately $20 million due to lower seasonal margins and volumes.  Joint venture equity income was relatively unchanged.

Three months ended December 31, 2016 versus three months ended December 31, 2015 – EBITDA increased $20 million versus the fourth quarter 2015, excluding a favorable $74 million quarter to quarter variance as a result of a LCM inventory adjustment in 2015.  2016 results were adversely impacted by the $16 million pension settlement.  Results for PO and derivatives and intermediate chemicals improved by approximately $20 million primarily due to increased styrene and acetyls results.  Oxyfuels improved approximately $10 million.  Joint venture equity income was relatively unchanged.

Full year ended December 31, 2016 versus full year ended December 31, 2015 – EBITDA decreased $323 million versus 2015, excluding a favorable $181 million year to year variance as a result of LCM inventory adjustments.  2016 results were negatively impacted by the $16 million pension settlement.  PO and derivatives and intermediate chemicals results decreased approximately $200 million primarily due to lower margins for methanol, ethylene glycol and PO derivatives, as well as the PO sales mix.  Oxyfuels results declined by approximately $90 million due to lower 2016 margins.  Joint venture equity income declined by $8 million.

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

 

Three months ended December 31, 2016 versus three months ended September 30, 2016 – EBITDA increased $91 million versus the third quarter 2015.  Underlying operational improvements provided approximately half of the increase while the consumption of low priced crude inventory from the prior year provided the balance.  The Houston refinery operated at 228,000 barrels per day, up 19,000 barrels per day from the prior quarter.  The Maya 2-1-1 industry benchmark spread was relatively unchanged, averaging approximately $19 per barrel.

Three months ended December 31, 2016 versus three months ended December 31, 2015 – EBITDA increased $13 million versus the fourth quarter 2015, excluding a favorable $127 million quarter to quarter variance as a result of a 2015 LCM inventory adjustment.  Fourth quarter 2016 throughput increased by 22,000 barrels per day from the prior year period. The Maya 2-1-1 industry benchmark spread increased by $0.45 per barrel, averaging $19 per barrel.  Both operating periods were adversely impacted by operating issues.

Full year ended December 31, 2016 versus full year ended December 31, 2015 – EBITDA decreased $447 million versus 2015, excluding a favorable $177 million year to year variance as a result of 2015 LCM inventory adjustments.  Throughput at the Houston Refinery averaged 201,000 barrels per day, down 37,000 barrels per day. The Maya 2-1-1 industry benchmark spread decreased by approximately $3 per barrel, averaging approximately $19 per barrel. The cost of RINs was approximately $30 million higher in 2016 versus the prior year.

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

 

Three months ended December 31, 2016 versus three months ended September 30, 2016 – EBITDA increased by $16 million driven by the timing of licensing revenue.

Three months ended December 31, 2016 versus three months ended December 31, 2015 – EBITDA decreased by $4 million.

Full year ended December 31, 2016 versus full year ended December 31, 2015 – Record results as EBITDA increased by $19 million, primarily due to improved catalyst results.

Capital Spending and Cash Balances
Capital expenditures, including growth projects, maintenance turnarounds, catalyst and information technology-related expenditures, were $567 million during the fourth quarter 2016 and $2.2 billion for the full year 2016. Our cash and liquid investment balance was $2.4 billion at December 31, 2016. We repurchased 5.2 million ordinary shares during the fourth quarter 2016 and 36.6 million shares during 2016. There were 404 million common shares outstanding as of December 31, 2016.  The company paid dividends of $1.4 billion during 2016.

CONFERENCE CALL
LyondellBasell will host a conference call February 3 at 11 a.m. ET.  Participants on the call will include Chief Executive Officer Bob Patel, Executive Vice President and Chief Financial Officer Thomas Aebischer and Vice President of Investor Relations Doug Pike. 

The toll-free dial-in number in the U.S. is 888-677-1826. 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. ET February 3 until March 4 at 12:59 a.m. ET.  The replay dial-in numbers are 866-467-2412 (U.S.) and +1 203-369-1448 (international). The pass code for each is 2526.

ABOUT LYONDELLBASELL
LyondellBasell (NYSE: LYB) is one of the world's largest plastics, chemical and refining companies and a member of the S&P 500.  LyondellBasell (www.lyb.com) products and technologies are used to make items that improve the quality of life for people around the world including packaging, electronics, automotive parts, home furnishings, construction materials and biofuels. 

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, 2015, which can be found at www.lyb.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.  The non-GAAP measures we have presented include income from continuing operations excluding LCM, diluted earnings per share excluding LCM, EBITDA and EBITDA excluding LCM.  LCM stands for "lower of cost or market," which is an accounting rule consistent with GAAP related to the valuation of inventory.  Our inventories are stated at the lower of cost or market.  Cost is determined using the last-in, first-out ("LIFO") inventory valuation methodology, which means that the most recently incurred costs are charged to cost of sales and inventories are valued at the earliest acquisition costs.  Market is determined based on an assessment of the current estimated replacement cost and selling price of the inventory.  In periods where the market price of our inventory declines substantially, cost values of inventory may be higher than the market value, which results in us writing down the value of inventory to market value in accordance with the LCM rule, consistent with GAAP. This adjustment is related to our use of LIFO accounting and the recent decline in pricing for many of our raw material and finished goods inventories. We report our financial results in accordance with U.S. generally accepted accounting principles, but believe that certain non-GAAP financial measures, such as EBITDA and earnings and EBITDA excluding LCM, provide useful supplemental information to investors regarding the underlying business trends and performance of the company's ongoing operations and are useful for period-over-period comparisons of such operations. 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.

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.  We have also presented financial information herein exclusive of adjustments for LCM. 

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