LyondellBasell Reports First-Quarter 2017 Earnings

HOUSTON and LONDON, April 28, 2017 /PRNewswire/ --

First Quarter 2017 Highlights

• Income from continuing operations: $0.8 billion
• EBITDA: $1.6 billion
• Diluted earnings per share: $2.00 per share
• Issued $1 billion of 10-year bonds with a coupon rate of 3.5% due 2027; redeemed $1 billion of outstanding 5.0% bonds due in 2019; refinancing costs reduced earnings by $0.26 per share
• Share repurchases and dividends totalled $0.5 billion; repurchased 1.5 million shares during the first quarter

Comparisons with the prior quarter and first quarter 2016 are available in the following table:

LyondellBasell Industries (NYSE: LYB) today announced earnings from continuing operations for the first quarter 2017 of $0.8 billion, or $2.00 per share.  First quarter 2017 EBITDA was $1.6 billion.  During the quarter, the company redeemed $1 billion of outstanding 5.0% bonds that were due in 2019 with a new $1 billion ten-year bond issue at an after-tax cost of $106 million that reduced earnings by $0.26 per share.

"We began the year with improved results in our three largest segments.  Olefins and polyolefins demand continued to be solid across all regions and we increased volumes from our Corpus Christi ethylene expansion.  The Intermediates and Derivatives segment benefitted from improved first quarter profitability for styrene and methanol," said Bob Patel, LyondellBasell CEO and chairman of the management board.

"The first quarter marks the completion of several quarters of significant maintenance activity across our system.  Scheduled maintenance on our U.S. butadiene recovery plant reduced our capture of high margins during the first quarter.  Our refinery performed planned maintenance on the fluid unit, completed repairs on one of our two crude distillation units and successfully commissioned our investment for the production of Tier 3 low-sulfur gasoline.  We look forward to the refinery returning to more consistent operations," said Patel.

OUTLOOK
"During April, global olefin and polyolefin industry conditions continue to remain favorable.  While first quarter maintenance was relatively light for the U.S. ethylene industry, industry schedules show higher planned downtime in Europe and Asia during the second quarter.  With a lighter maintenance schedule ahead for LyondellBasell, we look forward to benefitting from the full availability of our global assets," 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. 

The following comments and analysis represent underlying business activity and are exclusive of LCM inventory adjustments.

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

Three months ended March 31, 2017 versus three months ended December 31, 2016 – EBITDA increased $131 million versus the fourth quarter 2016, excluding a favorable $29 million quarter to quarter variance as a result of a 2016 LCM inventory adjustment.  First quarter 2017 included a $31 million gain on the sale of property in Lake Charles, Louisiana.  Fourth quarter 2016 results reflected a pension settlement charge of $23 million and a last-in, first-out (LIFO) inventory charge of $20 million.  Compared to the prior period, olefin results increased approximately $95 million.  Ethylene sales increased 5 percent following the completion of planned maintenance and higher rates following our expansion at Corpus Christi.  Ethylene margins improved by approximately 3 cents per pound with rising prices for ethylene and co-products.  Combined polyolefin results declined by approximately $45 million.  Ethylene and propylene feedstock price increases outpaced higher polyolefin prices, resulting in a decline in polyethylene and polypropylene spreads of approximately 2 cents per pound and 4 cents per pound respectively, which were partially offset by small volume improvements.  Joint venture equity income increased by $9 million. 

Three months ended March 31, 2017 versus three months ended March 31, 2016 – EBITDA decreased $155 million versus the first quarter 2016.  First quarter 2017 included a $31 million gain on the sale of property in Lake Charles, Louisiana.  The first quarter of 2016 included a $57 million gain on the sale of the Petroken polypropylene business.  Olefin results increased by approximately $50 million primarily due to an increase in ethylene margin of 3 cents per pound.  Combined polyolefin results declined approximately $165 million from very strong levels in the prior year period.  Polyethylene and polypropylene spreads declined approximately 3 cents per pound and 14 cents per pound respectively. Joint venture equity income declined by $8 million.    

Olefins & 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 March 31, 2017 versus three months ended December 31, 2016 – EBITDA increased by $131 million versus the fourth quarter 2016.  Fourth quarter 2016 results reflected a LIFO inventory charge of $17 million and a pension settlement charge of $8 million.  Olefin results increased approximately $60 million as ethylene prices increased nearly 3 cents per pound and higher co-products value offset higher naphtha costs. Olefins also benefitted from increased volume due to the absence of fourth quarter maintenance.  Combined polyolefin results increased approximately $50 million primarily due to increased sales volumes.  Joint venture equity income declined by $4 million.  

Three months ended March 31, 2017 versus three months ended March 31, 2016 – EBITDA decreased by $20 million versus the first quarter 2016, excluding a favorable $40 million quarter to quarter variance as a result of a 2016 LCM inventory adjustment.  The first quarter of 2016 benefitted from a $21 million gain on the sale of the Petroken polypropylene compounding business.  Olefin results increased by approximately $20 million as a result of increased sales volumes due to the planned maintenance which occurred in the first quarter of 2016 and improved ethylene prices.  Combined polyolefin results declined by approximately $20 million as polyethylene spreads declined.  Joint venture equity income was relatively unchanged.

Intermediates & 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 March 31, 2017 versus three months ended December 31, 2016 – EBITDA increased $33 million versus the fourth quarter 2016.  Fourth quarter 2016 results reflected a LIFO inventory charge of $16 million and a pension settlement charge of $16 million.  PO and derivatives results improved by approximately $15 million.  In intermediate chemicals, styrene and methanol were the primary drivers behind approximately $65 million of margin improvement over the fourth quarter.  These gains in the PO and derivatives and intermediate chemicals businesses were offset by approximately $40 million of charges in the first quarter and $30 million of gains in the fourth quarter related to recovery of precious metals after catalyst changes.  Oxyfuels and related products results declined approximately $10 million on lower sales volumes.  Joint venture equity income was relatively unchanged.

Three months ended March 31, 2017 versus three months ended March 31, 2016 – EBITDA decreased $15 million versus the first quarter 2016, excluding a favorable $28 million quarter to quarter variance as a result of an LCM inventory adjustment.  PO and derivatives results declined by approximately $15 million.  In intermediate chemicals, strong margins in styrene and methanol drove approximately $35 million of improvement over the first quarter of 2016.  The PO and derivatives and intermediate chemicals businesses incurred approximately $30 million of increased charges related to recovery of precious metals after catalyst changes.  Oxyfuels and related products results were relatively unchanged.  Joint venture equity income was relatively unchanged.

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

Three months ended March 31, 2017 versus three months ended December 31, 2016 – EBITDA decreased $111 million versus the fourth quarter 2016.  Fourth quarter 2016 results reflected a LIFO benefit of $46 million primarily from low-priced crude inventory consumption, and a pension settlement charge of $8 million.  Underlying operational performance accounted for approximately $60 million of the decline.  The Houston refinery operated at 202,000 barrels per day, 26,000 barrels per day less than the prior quarter due to planned maintenance. Planned maintenance on the fluid catalytic cracker reduced product yields and gasoline production. 

Three months ended March 31, 2017 versus three months ended March 31, 2016 – EBITDA decreased $44 million versus the first quarter 2016.  First quarter 2017 throughput increased by 16,000 barrels per day with planned maintenance impacting both periods. Planned maintenance on the fluid catalytic cracker reduced product yields and gasoline production to outweigh the benefits of the higher throughput.

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

Three months ended March 31, 2017 versus three months ended December 31, 2016 – EBITDA decreased by $1 million.

Three months ended March 31, 2017 versus three months ended March 31, 2016 – EBITDA decreased by $23 million due to the timing of licensing revenue.

Capital Spending and Cash Balances
Capital expenditures, including growth projects, maintenance turnarounds, catalyst and information technology-related expenditures, were $421 million during the first quarter 2017.  Our cash and liquid investment balance was $2.2 billion at March 31, 2017.  We repurchased 1.5 million ordinary shares during the first quarter 2017. There were 403 million common shares outstanding as of March 31, 2017.  The company paid dividends of $343 million during the first quarter of 2017.

CONFERENCE CALL
LyondellBasell will host a conference call April 28 at 11 a.m. EDT.  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 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. EDT April 28 until May 28 at 11:59 p.m. EDT.  The replay dial-in numbers are 800-839-9140 (U.S.) and +1 203-369-3624 (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, 2016, 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 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