LyondellBasell Reports Record 2014 Earnings

HOUSTON and LONDON, Feb. 3, 2015 /PRNewswire/ --

2014 Full Year Highlights

• Record Earnings
  • Income from continuing operations: $4.2 billion ($4.7 billion excluding LCM¹)
  • Diluted earnings per share: $8.00 per share ($8.92 per share excluding LCM)
  • EBITDA: $7.1 billion ($7.8 billion excluding LCM)
• Executed and Expanded the Growth Program
  • Completed an 800 million pound La Porte ethylene expansion, one in a series of planned expansions expected to increase our U.S. ethylene capacity approximately 25% by 2017
  • Completed a 200 million pound PE expansion at our Matagorda site
  • Announced the development of new propylene oxide and ethylene growth projects
• Record Cash Flow
  • Full year cash generation from operations totaling $6.0 billion
  • Share repurchases and dividends totaled $7.2 billion
  • Repurchased 63 million shares or approximately 12% of the shares outstanding

Fourth Quarter 2014 Highlights

• Income from continuing operations: $0.8 billion ($1.3 billion excluding LCM)
• Diluted Earnings per share: $1.57 per share ($2.48 per share excluding LCM)
• EBITDA: $1.4 billion ($2.1 billion excluding LCM)
• Share repurchases and dividends totaled $1.8 billion;  repurchased 17.2 million shares during the fourth quarter, greater than 3% of the outstanding shares

Comparisons with the prior quarter, fourth quarter 2013 and full year 2013 are available in the following table:

LyondellBasell Industries (NYSE: LYB) today announced earnings from continuing operations for the fourth quarter 2014 of $0.8 billion, or $1.57 per share. Fourth quarter 2014 EBITDA was $1.4 billion.  The quarter included a $715 million non-cash, pre-tax charge for the impact of a lower of cost or market (LCM) inventory adjustment ($455 million after-tax).  This charge is driven by LIFO accounting, the implementation of fresh start accounting in April 2010 as we entered the public markets, and the recent declines in pricing for many of our raw material and finished goods inventories.  Excluding the LCM adjustment, earnings from continuing operations during the fourth quarter totaled $1.3 billion, or $2.48 per share.  EBITDA was $2.1 billion.  Full year 2014 income from continuing operations was $4.2 billion, or $8.00 per share, and EBITDA was $7.1 billion. The full year included a non-cash, pre-tax LCM inventory adjustment of $760 million ($483 million after tax).  Excluding the LCM adjustment, earnings from continuing operations for the full year totaled $4.7 billion, or $8.92 per share, and EBITDA was $7.8 billion.

"During 2014, LyondellBasell generated record earnings and cash flow, advanced our growth program, and continued returning cash to shareholders at an industry-leading rate.  Every segment posted strong results for the year, with record performance from both of our Olefins and Polyolefin segments, as well as our Technology segment.  Fourth quarter 2014 EBITDA remained strong, and excluding the effects of the LCM inventory charge, we posted record results," said Bob Patel, LyondellBasell chief executive officer. 

"During 2014 we continued to execute and expand our strategic growth program.  We completed an 800 million pound per year ethylene expansion and a 200 million pound polyethylene expansion.  We also announced that we are developing two new growth projects:  a propylene oxide and tertiary butyl alcohol facility and an additional ethylene expansion at our Channelview site," continued Patel.

"Cash generation reached record levels in 2014 and we continued to return cash to shareholders.  Share repurchases and dividends totaled approximately $7.2 billion.  We purchased approximately 63 million shares, or approximately 12% percent of outstanding shares during 2014.  Since initiating the share repurchase program during mid-2013, we have repurchased approximately 91 million shares, or approximately 16% of the outstanding shares," Patel said.

OUTLOOK

"We remain confident in our favorable industry position and in the fundamentals supporting our business.  While we anticipate that margins will ease from the records of 2014 as crude oil prices decline, our positions remain advantaged, our growth program is generating incremental earnings, and our share count is greatly reduced through our repurchase program.  The principles that Jim Gallogly established during his tenure as CEO are part of our core values.  My mission is to build on this success and take the company to the next level.  During 2015 we plan to advance approximately one billion pounds of ethylene expansion projects, improve operations at our methanol facility, and receive additional volumes of Canadian crude oil at our refinery," 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) – The primary products of this segment include ethylene and its co-products (propylene, butadiene and benzene), polyethylene, polypropylene and Catalloy process resins. 

Three months ended December 31, 2014 versus three months ended September 30, 2014 – The segment achieved record EBITDA results for the quarter, excluding the impact of the LCM inventory adjustment. EBITDA increased $72 million versus the third quarter 2014, excluding a $234 million LCM inventory impact. Compared to the prior period, underlying olefins results increased approximately $40 million.  This increase was driven by higher volume following the re-start of the La Porte plant at its expanded capacity.  Declining ethylene prices during the quarter were largely offset by lower feedstock costs.  Combined polyolefin results increased by approximately $30 million versus the third quarter 2014.  Moderately lower volumes were offset by improved spreads, primarily in polyethylene where the spread over ethylene improved approximately 4 cents per pound. Joint venture equity income was relatively unchanged from the third quarter 2014.

Three months ended December 31, 2014 versus three months ended December 31, 2013 – EBITDA increased $391 million versus the fourth quarter 2013, excluding a $234 million LCM inventory adjustment. Olefin results contributed the majority of the improvement as quarterly EBITDA increased approximately $310 million versus the prior year.  This was due to margins that were approximately 11 cents per pound higher than 2013 and from higher volume from the added La Porte capacity.  Combined polyolefin results increased approximately $90 million versus the prior year period.  Polyethylene volume improved by approximately 6 percent.  Polypropylene spreads improved approximately 2 cents per pound.  Joint venture equity income was relatively unchanged versus the prior year.

Full year ended December 31, 2014 versus full year ended December 31, 2013 – The segment achieved record results for the year.  EBITDA increased $617 million versus 2013, excluding a $279 million LCM inventory adjustment. Olefin results increased approximately $100 million compared to the prior year. Ethylene margins were higher due to higher pricing and from a lower cost of ethylene. Volume was lower as a result of the La Porte turnaround. Combined polyolefin results increased approximately $530 million versus the prior year.  Polyethylene volume increased by approximately 6 percent and the price spread over ethylene increased by approximately 5 cents per pound.  Polypropylene spread improved by approximately 1 cent per pound. Joint venture equity income declined by $4 million versus the prior year.

Olefins and 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.

Three months ended December 31, 2014 versus three months ended September 30, 2014 – EBITDA increased $49 million versus the third quarter 2014, excluding a $44 million LCM inventory adjustment. Olefin results increased approximately $70 million reflecting higher olefin margins as feedstock cost declines more than offset a lower ethylene price.  Combined polyolefin results declined approximately $20 million as a result of seasonally lower volumes. Polypropylene compounds and polybutene-1 results decreased primarily due to seasonally lower sales volumes. Equity income from joint ventures was relatively unchanged from the third quarter 2014.

Three months ended December 31, 2014 versus three months ended December 31, 2013 – EBITDA increased $277 million versus the fourth quarter 2013, excluding a $44 million LCM inventory adjustment.  The fourth quarter 2013 included a positive impact of $25 million related to an insurance settlement.  Olefin results improved approximately $190 million primarily as a result of higher margins from a lower cost of naphtha feedstock and from a higher proportion of ethylene produced from advantaged feedstocks.  Ethylene production volume increased by approximately 14 percent due to stronger polymer demand and improved operating reliability. Combined polyolefin results increased approximately $100 million from both higher volumes and margins. Polypropylene compounds and polybutene-1 results were relatively unchanged. Equity income from joint ventures increased by $15 million from the fourth quarter 2013.

Full year ended December 31, 2014 versus full year ended December 31, 2013 – The segment achieved record EBITDA for the year.  EBITDA increased $571 million versus 2013, excluding a $44 million LCM inventory adjustment.  2014 benefited from a $52 million environmental settlement that was recognized in the first quarter 2014.  The fourth quarter 2013 included a positive impact of $25 million related to an insurance settlement.  Underlying olefin results increased approximately $260 million benefitting from olefin margins that improved by approximately 6 cents per pound.  Cracking a higher proportion of advantaged feedstocks and lower naphtha prices in 2014 were major drivers of the higher olefin margins. Ethylene production increased by approximately 8 percent.  Combined polyolefin results increased approximately $235 million compared to the prior year driven primarily by higher margins. Polypropylene compounds and polybutene-1 results were relatively unchanged. Equity income from joint ventures increased by $55 million in 2014 from 2013.

Intermediates and 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 (including methanol), ethylene oxide and its derivatives, and oxyfuels.   

Three months ended December 31, 2014 versus three months ended September 30, 2014 – EBITDA decreased $19 million versus the third quarter 2014, excluding a $93 million LCM inventory adjustment. Results for PO and PO derivatives decreased approximately $20 million from strong third quarter results. Compared to the prior quarter, intermediate chemicals results increased by approximately $10 million as improved styrene margins from declining benzene were partially offset by lower C4 chemical sales volume due to maintenance at our Bayport site.  Oxyfuels results decreased approximately $10 million due to declining gasoline prices and typical seasonal declines.  Equity income from joint ventures was relatively unchanged.

Three months ended December 31, 2014 versus three months ended December 31, 2013 – EBITDA increased $10 million versus the fourth quarter 2013, excluding a $93 million LCM inventory adjustment. Fourth quarter 2013 results include $26 million of charges related to our exit from the NOC joint venture, including $10 million that impacted our equity income.  Results for PO and PO derivatives increased approximately $10 million as higher margins and PO sales volumes were partially offset by lower derivative volume.  Intermediate chemicals results decreased by approximately $45 million driven by lower styrene margins and lower ethylene glycol results due to unscheduled maintenance, partially offset by improved acetyls results with the additional capacity from Channelview methanol in 2014.  Oxyfuels increased approximately $25 million primarily as a result of higher octane premium in 2014. Equity income from joint ventures increased by $10 million.

Full year ended December 31, 2014 versus full year ended December 31, 2013 – EBITDA increased $60 million versus 2013, excluding a $93 million LCM inventory adjustment. Results in 2013 included charges of $26 million related to our exit from the NOC joint venture, including $10 million that impacted our equity income. PO and PO derivatives results increased by approximately $65 million as both volume and margin increased.  Intermediate chemicals results increased by approximately $10 million as higher methanol volume was mostly offset by lower styrene, C4 chemicals, and ethylene glycol results.  Oxyfuels results declined by approximately $30 million compared to the prior year due to lower volume.  Equity income from joint ventures increased by $3 million from 2013.

Refining – The primary products of this segment include gasoline, diesel fuel, heating oil, jet fuel, and petrochemical raw materials.  

Three months ended December 31, 2014 versus three months ended September 30, 2014 – EBITDA decreased $77 million versus the third quarter 2014, excluding a $344 million LCM inventory adjustment. The Houston refinery operated at 266,000 barrels per day, up 2,000 barrels per day from the prior quarter. The Maya 2-1-1 industry benchmark crack spread decreased by $6.63 per barrel, averaging $17.72 per barrel. The refinery spread decreased less than the benchmark, and secondary product margins improved as those values held versus the decline in crude prices. The cost of Renewable Identification Numbers (RINs) to meet U.S. renewable fuel standards were relatively unchanged versus the third quarter 2014.

Three months ended December 31, 2014 versus three months ended December 31, 2013 – EBITDA decreased $101 million versus the fourth quarter 2013, excluding a $344 million LCM inventory adjustment. The Houston refinery operated at 266,000 barrels per day, up 27,000 barrels per day from the prior year period. The Maya 2-1-1 industry benchmark crack spread decreased by $6.60 per barrel, averaging $17.72 per barrel. Compared to the 2013 period, refinery margins improved as secondary product values held versus the decline in crude prices.  The cost of RINs increased by approximately $15 million versus the fourth quarter 2013.

Full year ended December 31, 2014 versus full year ended December 31, 2013 – EBITDA increased $227 million versus 2013, excluding a $344 million LCM inventory adjustment.  Throughput at the Houston Refinery averaged 259,000 barrels per day, up 27,000 barrels per day. The Maya 2-1-1 industry benchmark crack spread increased by $1.49 per barrel, averaging $24.43 per barrel. The cost of RINs decreased by approximately $20 million in 2014 relative to 2013.

Technology Segment – The principal products of the Technology segment include polyolefin catalysts and production process technology licenses and related services.

Three months ended December 31, 2014 versus three months ended September 30, 2014 – EBITDA increased by $3 million.

Three months ended December 31, 2014 versus three months ended December 31, 2013 – EBITDA decreased by $11 million as lower licensing revenue was partially offset by lower R&D costs.

Full year ended December 31, 2014 versus full year ended December 31, 2013 – EBITDA was unchanged versus 2013.

Capital Spending, Cash Balances and Tax Rate

Capital expenditures, including growth projects, maintenance turnarounds, catalyst and information technology-related expenditures, were $403 million during the fourth quarter 2014 and $1.5 billion for the full year 2014. Our cash and short-term securities balance was $3.0 billion at Dec. 31, 2014. We repurchased 17.2 million ordinary shares during the fourth quarter 2014 and 63.3 million shares during 2014. There were 487 million common shares outstanding as of December 31^st.  The company paid dividends of $1.4 billion during 2014.

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 Karyn Ovelmen, Senior Vice President - Strategic Planning and Transactions Sergey Vasnetsov, 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 4843334.

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 3 at 11 p.m. ET.  The replay dial-in numbers are 866-407-9260 (U.S.) and +1 203-369-0614 (international). The pass code for each is 4558.

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) manufactures products at 55 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 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, 2013, 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 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. 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 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.

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SOURCE LyondellBasell Industries