LyondellBasell Reports Record Third-Quarter 2011 Results

ROTTERDAM, Netherlands, Oct. 28, 2011 /PRNewswire/ -- LyondellBasell Industries (NYSE: LYB) 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.

In addition, results reflect the following:

"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.

CONFERENCE CALL

LyondellBasell will host a conference call today, Oct. 28, 2011, at 11:00 a.m. ET.  Participating on the call will be: Jim Gallogly, Chief Executive Officer; Karyn Ovelmen, Executive Vice President and Chief Financial Officer; Kent Potter, Principal Financial Officer; Sergey Vasnetsov, Senior Vice President - Strategic Planning and Transactions; and Doug Pike, Vice President of Investor Relations.  The toll-free dial-in number in the U.S. is 888-982-4611.  For international numbers, please go to our website, www.lyondellbasell.com/teleconference, for a complete listing of toll-free numbers by country.  The pass code for all numbers is 7379598.

A replay of the call will be available from 1:00 p.m. ET Oct. 28 to 11:00 p.m. ET on Nov. 28.  The replay dial-in numbers are 800-789-9018 (U.S.) and +1 203-369-3337 (international). The pass code for each is 6798.

A copy of the slides that accompany the call will be available on our website at http://www.lyondellbasell.com/earnings.

ABOUT LYONDELLBASELL

LyondellBasell (NYSE: LYB) is one of the world's largest plastics, chemical and refining companies. The company 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 components, home furnishings, construction materials and biofuels. More information about LyondellBasell can be found at www.lyondellbasell.com.

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 and natural gas; 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 December 31, 2010, 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.

NON-GAAP 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.  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, as we believe that EBITDA is a measure commonly used by investors.  However, 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 for predecessor periods means earnings before interest, taxes, depreciation, amortization and restructuring costs, as adjusted for other items management does not believe are indicative of the Company's underlying results of operations such as impairment charges, reorganization items, the effect of mark-to-market accounting on our warrants and current cost inventory adjustments.  EBITDA for successor periods means earnings before interest, taxes, depreciation and amortization, as adjusted for the same items, to the extent applicable in the successor periods.  EBITDA also includes dividends from joint ventures.  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.  

Reconciliations of non-GAAP financial measures to their nearest comparable GAAP financial measures are provided in the financial tables at the end of this release.

OTHER FINANCIAL MEASURE PRESENTATION NOTES

As a result of the Company's reorganization proceedings and its emergence from Chapter 11, financial results are prepared and disclosed for a predecessor company for the time period before May 1, 2010, and the successor company for time periods after April 30, 2010, the date of emergence.  For financial accounting purposes, the predecessor and successor companies are considered to be two separate entities.  Further, the reorganization under Chapter 11 and the application of fresh-start accounting make comparisons of the predecessor and successor periods difficult.  The primary impacts affecting the comparisons include (i) significant changes to our inventory valuations; (ii) lower depreciation and amortization expense; and (iii) lower interest expense.  In connection with the application of fresh-start accounting, we were required to write our inventory up to fair market value, which was significant given the high crude oil prices at April 30, 2010.  However, in the fourth quarter 2010, prices rose to levels close to those at April 30, 2010, and it became necessary to reverse significant portions of the LCM charges taken in the second and third quarters.  The lower depreciation and amortization expenses in the successor period are the result of the revaluation of assets in connection with fresh-start accounting.  Lower interest expense is the result of the substantial changes to the balance sheet as a result of the reorganization.

Prior to emergence from Chapter 11, we utilized a combination of First-In, First-Out and Last-In, First-Out inventory methods for financial reporting. For purposes of evaluating segment results, management reviewed operating results using current cost, which approximates LIFO. As supplementary information, and for our segment reporting, we provide EBITDA information on a current cost basis for periods prior to our emergence from Chapter 11. Since emergence from Chapter 11, we have utilized the LIFO inventory methodology and EBITDA information for periods after our emergence is on a LIFO basis.  The combined financial results and measures that are disclosed in this press release, including EBITDA, therefore use both current cost and LIFO methodologies.

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.