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LyondellBasell’s Revenue Falls Across Its Segments

LYB  LyondellBasell Industries, NV (NYSE: LYB – $75.18), one of the world’s largest plastics, chemical and refining companies, reported a worse-than-expected slide in revenue and said sales declined across its units as its product prices remain pressured. In all, the company reported earnings of $1.09 billion, or per share earnings of $2.45 taking into account inventory pricing adjustments. Revenue fell 20% to $7.33 billion from the prior year’s $9.15 billion. Analysts had expected adjusted earnings of $2.53 a share on revenue of $7.61 billion. Olefins and polyolefins, the segment that produces products such as ethylene and represents a majority of the company’s top line, reported an 18% fall in revenue in the Americas and an 11% decline in revenue in the rest of the world. Its intermediates and derivatives segment reported an 18% decrease in revenue, and its refining unit reported a 39% revenue fall.

       Separately, the Dutch-based company said it has made the final investment decision to build a High Density Polyethylene Plant on the U.S. Gulf Coast. The plant will have an annual capacity of 1.1 billion pounds and will be the first commercial plant to employ LyondellBasell’s new proprietary Hyperzone PE technology.  The project is expected to create up to 1,000 jobs at the peak of construction and as many as 75 permanent positions. Start-up is planned for 2019.

       Until worldwide demand for Lyondell’s products picks up, I don’t see much, if any, sales and earnings growth this year. However, I see demand for Lyondell’s plastic resins improving over the next few years. In the meantime, the generous and growing dividend of $3.40 per share yielding 4.3% provides an above-average income stream and some downside risk protection as we wait for economic expansion to kick in.


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