LyondellBasell Industries N.V. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Amounts are in U.S. dollars; financial statement amounts are in millions unless noted. LyondellBasell is a global chemicals and polymers manufacturer, refiner, and technology licensor. Results are unaudited.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $9,925 | $10,247 | Down 3% |
| Operating income | $704 | $713 | Down 1% |
| Net income attributable to company shareholders | $471 | $472 | Down $1 |
| Diluted EPS | $1.44 | $1.44 | Unchanged |
| EBITDA | $1,047 | $1,131 | Down 7% |
| Operating cash flow | $(114) | $482 | Decrease of $596 |
| Capital expenditures | $483 | $352 | Up $131 |
Operating margin was approximately 7.1% versus 7.0% a year earlier; EBITDA margin was approximately 10.5% versus 11.0%. These margins are calculated from reported revenue and operating income or EBITDA. The effective tax rate was 20.4%, down from 26.0%, principally because the prior-year goodwill impairment received no tax benefit, partly offset by lower exempt income.
Balance sheet and liquidity
- Cash and cash equivalents were $2.314 billion at quarter-end, down from $3.390 billion at December 31, 2023. Cash and restricted cash together declined by $1.074 billion during the quarter.
- Total debt, including current maturities, was $11.194 billion. The company reported $4.150 billion of unused availability under its revolving credit and receivables facilities; neither facility had borrowings outstanding. It also reported no commercial paper outstanding.
- Current assets were $12.875 billion and current liabilities were $6.087 billion. Cash and cash equivalents included $1.475 billion of marketable securities.
- Common dividends paid were $408 million, or $1.25 per share. No shares were repurchased in the quarter.
Operating cash use primarily reflected a $629 million cash outflow from the principal working-capital components, especially higher accounts receivable associated with increased volumes and prices. Approximately 80% of Q1 capital expenditures supported sustaining maintenance.
Material changes and segment results
- Revenue fell 3% year over year, primarily from lower average selling prices, partly offset by higher volumes and favorable foreign exchange. Operating income was broadly stable, but total EBITDA declined.
- Olefins and Polyolefins-Americas EBITDA was $521 million, down 4% year over year, reflecting lower polymer margins and equity-investment income.
- Olefins and Polyolefins-Europe, Asia, International EBITDA was $14 million, down from $77 million, amid weaker polymer margins and lower equity-investment income. Red Sea logistics disruption supported local volumes and demand compared with Q4 2023.
- Intermediates and Derivatives EBITDA was $312 million, down from $426 million, due to weaker results across most businesses, including lower margins and unplanned downtime.
- Advanced Polymer Solutions EBITDA was $35 million versus a loss of $226 million. The comparison mainly reflects the absence of a $252 million non-cash goodwill impairment recorded in Q1 2023.
- Refining EBITDA was $55 million versus $246 million, primarily due to lower refining margins. The company is exiting its Houston refinery business.
- Technology EBITDA rose to $118 million from $73 million, primarily due to more licensing contracts reaching significant milestones.
Q1 2024 included no impairment charge, compared with the $252 million APS goodwill impairment in Q1 2023. Q4 2023 included $241 million of impairments, including a $192 million charge related to the European propylene oxide joint venture; those charges did not recur in Q1 2024.
Capital, transactions, outlook and risks
- In February, the company issued $750 million of 5.5% guaranteed notes due 2034 and used the net proceeds toward refinancing its 5.75% notes due 2024. It repaid $775 million of principal in March. The company stated it was in compliance with debt covenants.
- The planned sale of the U.S. Gulf Coast ethylene oxide and derivatives business and Bayport facility is for $700 million in cash, subject to working-capital and other adjustments. Closing was expected in Q2 2024 after planned maintenance; customary closing conditions remain.
- The company agreed to acquire a 35% interest in Saudi Arabia-based NATPET for approximately $500 million. Closing was expected in the coming months, subject to regulatory and other customary conditions.
- Houston refinery exit costs totaled $557 million through March 31, 2024. Estimated total costs, including incurred costs, range from $560 million to $1.050 billion. The company reported $262 million of asset-retirement-obligation liabilities; its estimated refinery retirement obligations range from $150 million to $450 million.
- For Q2 2024, management expects seasonal demand improvement across most segments, continued margin benefits from low-cost North American and Middle Eastern natural gas and NGLs, and stronger oxyfuels and refining margins with the summer driving season. Expected average operating rates are 85% for O&P-Americas and O&P-EAI and 80% for I&D. Management is monitoring stimulus efforts and demand in China. No full-year earnings or revenue guidance is provided in the filing.
- Management’s long-term target is shareholder returns of 70% of free cash flow, defined as operating cash flow less capital expenditures, barring significant or unforeseen challenges, mergers or acquisitions. The company intends to continue quarterly dividends, with the goal of increasing them over time.
- Key disclosed risks include commodity-price and feedstock volatility, competitive pressure and potential difficulty passing through cost increases, weak demand or oversupply, operating outages, international and currency risks, and execution and cost uncertainty in the Houston refinery exit. Environmental remediation liabilities were $141 million; possible losses above recorded amounts could not be estimated. The company does not expect pending lawsuits to have a material adverse effect, and reported no material change to previously disclosed risk factors.
Important facts for investors to verify
- Whether the EO&D sale closed on the expected timetable and what net proceeds resulted after adjustments.
- Progress, final cost and timing of the Houston refinery exit, including the range of retirement obligations and additional charges.
- Whether operating cash flow recovers as working capital normalizes, given Q1 cash use and higher capital spending.
- Actual Q2 demand, operating rates and margins versus management’s outlook, particularly in China, refining and oxyfuels.
- Completion, final purchase price and integration implications of the proposed NATPET investment.
- Changes in debt, liquidity and shareholder distributions, including use of the remaining share repurchase authorization through November 19, 2024.