LyondellBasell Reports Third-Quarter 2012 Results and Announces $2.75 per share Special Dividend
Oct 26, 2012
ROTTERDAM, Netherlands, Oct. 26, 2012 /PRNewswire/ --
Third-Quarter 2012 Highlights
LyondellBasell Industries (NYSE: LYB) today announced earnings for the third quarter 2012 of $851 million, or $1.47 per share. Third-quarter 2012 EBITDA was $1,565 million, inclusive of a $71 million reversal of a non-cash, lower of cost or market inventory valuation adjustment recognized in the second quarter 2012.
Comparisons with the prior quarter and third quarter 2011 are shown below:
Net income in the third quarter 2012 increased from the second quarter 2012 as a result of lower interest and financing charges. Third quarter 2012 EBITDA was lower than the second quarter 2012, primarily due to lower margins in European olefins. Second quarter 2012 results included $100 million from a hurricane insurance settlement. Results also reflect the following charges and benefits:
"LyondellBasell continues to perform strongly in a volatile economic environment. We are pleased with the third quarter and year-to-date results as the company advances its strategy. Although the outlook for the global economy is uncertain, we remain focused on safe and reliable operations, continuously improving our cost structure and disciplined growth. Our robust cash generation has allowed us to further reward shareholders through our regular interim dividend of $0.40 per share plus a special dividend of $2.75 per share. The company's dramatic financial improvement over the last couple of years and our significant position within the chemical industry were acknowledged by our recent inclusion in the S&P 500 index," said Jim Gallogly, LyondellBasell Chief Executive Officer.
"During the third quarter, our segments generally performed well, and results were consistent with their specific business environments and geographic exposures. Our olefins and polyolefins business in North America continues to provide excellent results. In addition to stable NGL price trends throughout the third quarter, our olefins plants utilization exceeded 100 percent of nameplate capacity. The olefins and polyolefins segment results for Europe, Asia and International (EAI) reflected weak European economic conditions; however, polyolefin sales volumes improved versus the second quarter. Our Intermediates and Derivatives business continues to demonstrate steady performance with exceptional third-quarter oxyfuels results. Refining margins improved in line with the change in industry spreads, but operating limitations at the Houston refinery during the quarter impacted crude processing rates," Gallogly said. "Our previously-announced growth projects remain on schedule. We have initiated a review of additional olefins debottleneck projects targeted to capitalize on the advantage of favorable North American NGL prices," Gallogly indicated.
"We have historically experienced a fourth quarter seasonal slowdown in certain of our segments. While we expect this to recur, we do not expect a slowdown of the severity experienced in 2011," Gallogly said.
"In North America olefins, we believe that margins will remain strong as fundamental drivers remain intact. We do not expect to see the rapid increase in ethane prices experienced in 2011. Conversely, we expect European olefins and polyolefin results to remain weak in the fourth quarter. However, the differentiated areas of Olefins and Polyolefins – EAI, including polypropylene compounding and joint ventures, are expected to remain steady. Thus far in the quarter, Intermediates and Derivatives segment margins have held firm except oxyfuel margins, which have seasonally declined. We have one of our German crackers and a U.S. PO/TBA plant finishing turnarounds during the quarter. The Houston refinery is currently operating at normal rates," Gallogly added.
LYONDELLBASELL BUSINESS RESULTS DISCUSSION BY REPORTING SEGMENT
LyondellBasell operates in five business segments: 1) Olefins and Polyolefins – Americas; 2) Olefins and Polyolefins –EAI; 3) Intermediates and Derivatives; 4) Refining; and 5) Technology.
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 September 30, 2012 versus three months ended June 30, 2012 – O&P-Americas segment EBITDA increased $44 million in the third quarter 2012 versus the second quarter 2012. Excluding the second quarter 2012 hurricane insurance settlement of $29 million and the impact of the $71 million non-cash lower of cost or market (LCM) reversal in the third quarter 2012 to offset the second quarter 2012 LCM inventory valuation charge, underlying EBITDA declined by $69 million. Compared to the prior period, underlying olefins results decreased primarily due to a decline in margins resulting from lower ethylene and co-products prices from naphtha cracking. Ethylene production volume increased as our olefins plants utilization exceeded 100 percent of nameplate capacity. Combined polyolefin results decreased by approximately $25 million from the second quarter 2012 primarily due to lower margins. Polyolefin sales volumes increased approximately 7 percent from the prior quarter. During the third quarter, the segment received $10 million in dividends from the Indelpro joint venture.
Three months ended September 30, 2012 versus three months ended September 30, 2011 – O&P-Americas results increased $148 million in the third quarter 2012 versus the third quarter 2011. Excluding the impact of the $71 million non-cash LCM reversal in the third quarter 2012 which offset the prior quarter LCM inventory valuation charge, underlying EBITDA increased by $77 million compared to the same period in 2011. Olefins results increased approximately $30 million compared to the prior year period as a result of higher olefins sales more than offsetting a 2 cents per pound decline in margin. Combined polyolefin results improved by approximately $50 million primarily due to improved polyethylene margins. The segment received $10 million in dividends from its Indelpro joint venture in the third quarters of 2012 and 2011.
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 September 30, 2012 versus three months ended June 30, 2012 – O&P-EAI segment EBITDA decreased $260 million in the third quarter 2012 versus the second quarter 2012. Olefins results decreased approximately $210 million from the second quarter 2012, returning the business to approximately breakeven performance which is more reflective of the prevailing industry and economic environment than the strong second quarter results. Olefins production volumes declined in the third quarter 2012 due to a turnaround at Wesseling, Germany. Combined polyolefin results increased approximately $10 million compared to the second quarter primarily driven by approximately a 20 percent increase in polypropylene sales volumes. Polypropylene compounds and polybutene-1 results increased approximately $20 million from the second quarter 2012 mainly driven by margins improvement. The segment did not receive any joint venture dividends in the third quarter 2012 compared to $59 million in the second quarter.
Three months ended September 30, 2012 versus three months ended September 30, 2011 – O&P-EAI segment EBITDA declined $172 million versus the third quarter 2011. Olefins results declined by approximately $140 million, primarily as a result of lower margins. Production volume was lower in the third quarter 2012 versus the corresponding period in 2011 due to a turnaround at Wesseling, Germany. Polyolefin results increased by approximately $15 million primarily as a result of higher polypropylene margins in the third quarter 2012. Polypropylene compounds and polybutene-1 results were approximately $15 million higher than the prior year due to higher margins. The third quarter in 2011 included $45 million related to dividend payments from joint ventures.
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, ethylene oxide and its derivatives, and oxyfuels.
Three months ended September 30, 2012 versus three months ended June 30, 2012 – I&D segment EBITDA increased $20 million versus the second quarter 2012. Results for PO, PO derivatives, and intermediate chemicals were relatively unchanged. Oxyfuels results increased by approximately $60 million, driven by higher sales volumes and stronger margins in the third quarter 2012 compared to the prior period. Oxyfuels margins gained strength as the crude oil-to-natural gas spread expanded in the third quarter 2012. Second quarter 2012 EBITDA included an $18 million insurance settlement and $14 million of dividends from our Asian PO joint ventures.
Three months ended September 30, 2012 versus three months ended September 30, 2011 – I&D EBITDA increased $58 million compared to the third quarter 2011. Intermediate chemicals results decreased approximately $30 million versus the prior year period mainly due to lower margins in the derivatives businesses. The third quarter 2011 prices benefitted from several competitor outages. Oxyfuels results improved approximately $80 million in the 2012 period primarily as a result of stronger margins.
Refining – The primary products of this segment include gasoline, diesel fuel, heating oil, jet fuel, and petrochemical raw materials.
Three months ended September 30, 2012 versus three months ended June 30, 2012 – Refining segment EBITDA decreased $11 million versus the second quarter 2012. The Houston refinery operated at 240,000 barrels per day, down 27,000 barrels per day from the prior quarter due to a reduction in throughput resulting from certain operating limitations. The Maya 2-1-1 benchmark crack spread increased $3.49 per barrel to $26.65 per barrel in the third quarter 2012. Relative to the benchmark spread, results continue to be negatively impacted from depressed by-product values such as petroleum coke and various natural gas-based products. The refining segment benefitted in the third quarter from $24 million of restitution related to a former employee's fraudulent activities and in the second quarter from $53 million related to a hurricane insurance settlement.
Three months ended September 30, 2012 versus three months ended September 30, 2011 – Refining segment EBITDA decreased $277 million versus the third quarter 2011 due to fewer opportunities to purchase discounted crude oils, reduced by-product values, and a 29,000 barrels-per-day throughput decline. Throughput decline negatively impacted the third quarter 2012 by approximately $25 million while lower by-products values, such as petroleum coke and various natural gas based products, had a negative impact of approximately $90 million. The refining segment also benefitted from $24 million of restitution in the third quarter 2012 related to a former employee's fraudulent activities.
Technology – The principal products of the Technology segment include polyolefin catalysts and production process technology licenses and related services.
Three months ended September 30, 2012 versus three months ended June 30, 2012 – Results were relatively unchanged.
Three months ended September 30, 2012 versus three months ended September 30, 2011 – Results were relatively unchanged.
Company liquidity, defined as cash and cash equivalents plus funds available through established lines of credit, was approximately $6.8 billion on Sept. 30, 2012. The company's cash balance was approximately $3.5 billion on Sept. 30, 2012.
Capital expenditures, including maintenance turnarounds, catalyst and information technology-related expenditures, were $267 million in the third quarter 2012.
LyondellBasell will host a conference call and webcast to discuss these results today at 11 a.m. ET. Participating on the call will be Chief Executive Officer Jim Gallogly, Executive Vice President and Chief Financial Officer Karyn Ovelmen, Senior Vice President of 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 800-369-1609. For international numbers, please go to the company website, www.lyondellbasell.com/teleconference, for a complete listing of toll-free numbers by country. The pass code for all numbers is 4807902.
A replay of the call will be available from 2 p.m. ET Oct. 26 until 11 p.m. ET on Nov. 26. The replay dial-in numbers are 800-839-5569 (U.S.) and +1 402-998-1150 (international). The pass code for each is 9511. The slides that accompany the call will be available at http://www.lyondellbasell.com/earnings.
LyondellBasell (NYSE: LYB) is one of the world's largest plastics, chemical and refining companies and a member of the S&P 500 Index. LyondellBasell (www.lyondellbasell.com) manufactures products at 58 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.
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; 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 Dec. 31, 2011, which can be found at www.lyondellbasell.com on the Investor Relations page and on the Securities and Exchange Commission's website at www.sec.gov.
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. We report our financial results in accordance with U.S. generally accepted accounting principles, but believe that certain non-GAAP financial measures 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. These 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.
We have included EBITDA in this press release. 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. For purposes of this release, EBITDA means net income before net interest expense, income taxes, depreciation and amortization, reorganization items, income from equity investments, net income (loss) attributable to non-controlling interests plus joint venture dividends, as adjusted for other items management does not believe are indicative of the Company's underlying results of operations such as impairment charges, asset retirement obligations and the effect of mark-to-market accounting on our warrants. The specific items for which EBITDA is adjusted in each applicable reporting period may only be relevant in certain periods and are disclosed in the reconciliation of non-GAAP financial measures table. EBITDA should not be considered an alternative to profit or operating profit for any period as an indicator of our performance, or as alternatives to operating cash flows as a measure of our liquidity.
Quantitative reconciliations of non-GAAP financial measures are provided in Table 9 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.