LyondellBasell posts Q3 net income of US$895M, up about 90%, revenues of US$13.29B, up 29%; results boosted by U.S. olefins market, strong ethane- and naphtha-based ethylene margins

ROTTERDAM, Netherlands , October 28, 2011 (press release) – Strong Operations and Advantaged Asset Positions Drive Record Quarterly Results

Third-Quarter 2011 Highlights

LyondellBasell Industries (NYSE:LYB - News) today announced net income for the third quarter 2011 of $895 million, or $1.51 per share. Third-quarter 2011 EBITDA was $1,788 million, a 15 percent increase from the second quarter 2011. Sales in the third quarter were $13,297 million.

During the third quarter 2011, results improved over a very strong second quarter 2011. Improvements in the performance of U.S. olefins and the Refining & Oxyfuels segment were most notable.

- Net income of $895 million; diluted earnings per share of $1.51; Sales of $13.3 billion
- Quarterly EBITDA of $1,788 million; 15 percent increase from second quarter 2011, 45 percent increase from third quarter 2010
- Excellent results across the portfolio, particularly in U.S. olefins and Refining & Oxyfuels businesses
- Closed third quarter with no net debt
- Initiated bond tender and covenant amendment effort
- Quarterly dividend doubled to 20 cents per share


"We earned $895 million during the third quarter and eclipsed our previous record quarterly net income set last quarter. EBITDA during the quarter was nearly $1.8 billion – also a record," said Jim Gallogly, LyondellBasell Chief Executive Officer.

"In U.S. olefins, we benefited from both very strong ethane- and naphtha-based ethylene margins. Our Midwest ethylene plants were especially advantaged," added Gallogly. "We achieved good results in our Olefins & Polyolefins – Europe, Asia, International segment due to our differentiated positions in polypropylene compounding, butadiene and our joint ventures. Intermediates & Derivatives continued its strong, stable performance with EBITDA margins of 18%. Results for Refining & Oxyfuels were particularly strong as the Houston refinery operated above nameplate capacity, and we took full advantage of our flexibility optimizing the crude oil feed slate," he said.

"Our strong results over the last year and a half have enabled us to close the quarter with no net debt and begin to restructure our balance sheet," Gallogly said. Details on LyondellBasell's plans to improve its capital structure can be found in a news release dated Oct. 20, 2011.

"Additionally, we increased our dividend during the quarter, doubling it to 20 cents per share," added Gallogly.

OUTLOOK

"We are currently operating in a period of global economic uncertainty, which has introduced significant raw material price and profit margin volatility. The volatility limits our near-term visibility, but our strategy of focusing on the basics and running our assets safely and efficiently has proven successful in any environment," commented Gallogly.

"Certain underlying fundamentals that have supported our business remain intact. A low ratio of U.S. natural gas to crude oil prices creates a favorable condition for our U.S. operations although ethane prices have increased in recent weeks. The spread between heavy and light crude oil continues to benefit the Houston refinery. We also have several businesses that have less volatile earnings such as our propylene oxide and polypropylene compounding businesses, and our Saudi joint ventures," added Gallogly.

"During the coming months, in addition to olefins chain margin volatility, we expect to see typical seasonal impacts in the Refining & Oxyfuels and polyolefins areas," said Gallogly.

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.

Three months ended September 30, 2011 versus three months ended June 30, 2011 – O&P-Americas segment EBITDA increased $95 million versus the second quarter 2011. Olefins profitability improved approximately $155 million from the prior period. An ethylene sales price decrease of approximately 2 cents per pound was more than offset by an approximately 6 cents per pound decrease in the company's average cost-of-ethylene-production metric. Ethylene production volume increased during the quarter primarily as a result of the return to service of one of the Channelview olefins plants which had undergone scheduled maintenance activity during the second quarter. Polyethylene (PE) results declined approximately $35 million chiefly as a result of lower sales prices. Polypropylene (PP) profits for the third quarter 2011 declined approximately $15 million primarily due to lower margins. We received $10 million of JV dividends in the third quarter 2011.

Three months ended September 30, 2011 versus three months ended September 30, 2010 – O&P-Americas results increased $155 million versus the third quarter 2010 after excluding a third-quarter 2010 Lower of Cost or Market (LCM) charge of $26 million. Olefins results increased approximately $300 million compared to the prior year period largely as a result of significantly improved margins. This increase was partially offset by PE results which declined approximately $120 million compared to the third quarter 2010 as a result of lower margins caused by higher ethylene prices. PP results declined approximately $30 million compared to the third quarter 2010 due to lower sales volumes and margins.

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.

Three months ended September 30, 2011 versus three months ended June 30, 2011 – O&P-EAI segment EBITDA decreased $14 million versus the second quarter 2011. Olefins results declined approximately $55 million from the second quarter 2011 due to lower cracker margins and lower ethylene and co-product production volumes. Polyethylene results declined approximately $15 million from the prior period chiefly due to lower margins. Polypropylene results declined approximately $65 million due to lower margins. Polypropylene compounds results improved approximately $15 million from the second quarter 2011. We received $45 million of dividends from joint ventures during the third quarter 2011. Second quarter 2011 results included approximately $60 million of accruals related to a proposed European staff reorganization and possible environmental remediation charges.

Three months ended September 30, 2011 versus three months ended September 30, 2010 – Excluding a $5 million third-quarter 2010 LCM adjustment, EBITDA declined $33 million versus the third quarter 2010. Underlying olefins results were relatively unchanged while polyethylene results declined approximately $20 million compared to the prior year period primarily as a result of lower margins. Polypropylene EBITDA fell approximately $90 million compared to the prior year period due to lower sales volumes and compressed margins. Polypropylene compounding results improved slightly compared to the prior year. Third quarter 2010 results included a charge of approximately $43 million related to a dispute over an environmental indemnity.

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. Three months ended September 30, 2011 versus three months ended June 30, 2011 – I&D segment EBITDA decreased $17 million versus the second quarter 2011. PO and PO derivatives results improved versus the prior period due to higher margins which were partially a result of industry outages. Underlying Intermediates profitability declined slightly versus the second quarter which included a $41 million gain on the sale of spent silver catalyst.

Three months ended September 30, 2011 versus three months ended September 30, 2010 –I&D EBITDA increased $54 million compared to the third quarter 2010. PO and PO derivatives EBITDA improved versus the prior year period due to increased PO derivative margins. Increased acetyls and ethylene oxide / ethylene glycol volumes and margins also contributed to improved results compared to the third quarter 2010.

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).

Three months ended September 30, 2011 versus three months ended June 30, 2011 – Refining & Oxyfuels segment EBITDA increased $166 million versus the second quarter 2011. The Houston refinery financial performance improved approximately $135 million. Crude oil throughput at the Houston refinery increased to 269,000 barrels per day, slightly above nameplate capacity. Although the industry average benchmark margin declined approximately $2 per barrel during the quarter, margins at the Houston refinery expanded due to optimization of the crude oil mix. The Berre refinery continued to record a loss. A labor strike at the end of the third quarter 2011 had minimal impact on results. Oxyfuels results improved approximately $20 million due to improved margins.

Three months ended September 30, 2011 versus three months ended September 30, 2010 – Excluding a $1 million LCM charge in the third quarter 2010, segment EBITDA increased $378 million versus the third quarter 2010. At the Houston refinery, EBITDA increased approximately $330 million versus the prior year period. A higher industry average benchmark margin and optimization of the crude oil feed slate drove results. Berre refinery results were relatively unchanged versus the prior year period. Oxyfuels results improved approximately $40 million between the periods mainly as a result of higher margins.

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

Three months ended September 30, 2011 versus three months ended June 30, 2011 – Catalyst results were relatively unchanged compared to the second quarter 2011.

Three months ended September 30, 2011 versus three months ended September 30, 2010 – Catalyst results improved compared to the prior year period while licensing and technology services results declined compared to third quarter 2010.

Liquidity

Company liquidity, which we define as cash and cash equivalents plus funds available through established lines of credit, was approximately $7.9 billion on Sept. 30, 2011. The cash balance was approximately $5.9 billion including restricted cash on Sept. 30, 2011.

Capital Spending

Capital expenditures, including maintenance turnaround, catalyst and information technology related expenditures, were $281 million during the third quarter 2011. This figure includes approximately $75 million for a pipeline acquisition.

 

   

Table 1 - Earnings Summary(a)

           
 

Three Months Ended

Nine Months Ended

 
 

September 30,

June 30,

September 30,

September 30,

 

Millions of U.S. dollars (except share data)

2011

2011

2010

2011

2010 

 

Sales and other operating revenues

$13,297

$14,042

$10,302

$39,591

$30,541

 

Net income(b) (c)

895

804

467

2,358

9,318

 

Diluted earnings per share (U.S. dollars)

1.51

1.38

0.84

4.12

N/A

 

Diluted share count (millions)  

575

575

564

570

N/A

 

EBITDA(d)

1,788

1,553

1,198

4,743

2,908

 

EBITDA excluding LCM inventory valuation adjustments

1,788

1,553

1,230

4,743

3,273

 
               

(a)  For all periods prior to May 1, 2010, EBITDA is calculated using a current cost inventory basis.  For periods on and after May 1, 2010, net income and EBITDA are calculated using the LIFO (Last-In, First-Out) method of inventory accounting.

 

(b)  Includes net income (loss) attributable to non-controlling interests.  See Table 11.

 

(c)  The nine months ended September 30, 2010 includes an $8,640 million after-tax gain on the discharge of liabilities subject to compromise related to emergence from Chapter 11 and fresh-start accounting adjustments.  

 

(d)  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.

 
   
             

 

In addition, results reflect the following:

   

 

   

Table 11 - Unaudited Income Statement Information

 
                                   
           

Successor

 
           

2011 

 
 

(Millions of U.S. dollars)

 

Q1

 

Q2

 

Q3

 

YTD

 
 

Sales and other operating revenues

 

$

12,252

 

$

14,042

 

$

13,297

 

$

39,591

 
 

Cost of sales

   

10,943

   

12,474

   

11,538

   

34,955

 
 

Selling, general and administrative

                         
   

expenses

   

211

   

247

   

239

   

697

 
 

Research and development expenses

   

33

   

56

   

53

   

142

 
   

Operating income

   

1,065

   

1,265

   

1,467

   

3,797

 
 

Income from equity investments

   

58

   

73

   

52

   

183

 
 

Interest expense, net

   

(155)

   

(164)

   

(145)

   

(464)

 
 

Other income (expense), net

   

(43)

   

45

   

10

   

12

 
   

Income before income taxes and

                         
     

reorganization items

   

925

   

1,219

   

1,384

   

3,528

 
 

Reorganization items

   

(2)

   

(28)

   

- -

   

(30)

 
   

Income before taxes

   

923

   

1,191

   

1,384

   

3,498

 
 

Provision for income taxes

   

263

   

388

   

489

   

1,140

 
 

Net income

   

660

   

803

   

895

   

2,358

 
 

Less: Net loss attributable to non-controlling

                         
   

interests

   

3

   

1

   

- -

   

4

 
 

Net income attributable to the Company

 

$

663

 

$

804

 

$

895

 

$

2,362

 
                                   
                                   
                                 

 
 
   

 

   
 

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