LyondellBasell Industries N.V. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Unaudited interim financial statements. LyondellBasell is a global chemicals and polymers manufacturer, refiner, and technology licensor. Unless stated otherwise, amounts are in U.S. dollars.
Key financial results
| Metric | Q3 2021 | Q3 2020 | First 9 months 2021 | First 9 months 2020 |
|---|---|---|---|---|
| Revenue | $12.700 billion | $6.776 billion | $33.343 billion | $19.816 billion |
| Operating income | $2.248 billion | $23 million | $5.862 billion | $666 million |
| Net income attributable to shareholders | $1.760 billion | $112 million | $4.886 billion | $567 million |
| Diluted EPS | $5.25 | $0.33 | $14.57 | $1.69 |
| EBITDA | $2.691 billion | $466 million | $7.294 billion | $1.872 billion |
| Cash from operating activities | Not separately provided for the quarter | $4.616 billion | $2.661 billion |
Operating margin was approximately 17.7% in Q3 2021 versus 0.3% in Q3 2020; nine-month operating margin was 17.6% versus 3.4%. EBITDA margin was approximately 21.2% for Q3 2021 versus 6.9% a year earlier, and 21.9% versus 9.4% for the nine-month periods.
Balance sheet and liquidity
- At September 30, 2021, cash and cash equivalents were $1.893 billion; short-term investments were $36 million. The company reported $1.929 billion of cash and marketable securities, including $1.593 billion held outside the U.S.
- Total debt, including current maturities, was $13.516 billion, down from $15.957 billion at December 31, 2020. The company also reported $3.004 billion of unused availability under credit facilities.
- Current assets were $13.986 billion and current liabilities were $7.408 billion. Working capital was affected by higher receivables and inventories.
- For the first nine months, capital expenditures were $1.285 billion and common dividends paid were $1.110 billion. The company repurchased shares for $78 million in cash; the recorded purchase price, including fees, was $89 million.
Material changes and operating performance
- Revenue rose 87% in Q3 and 68% for the first nine months year over year. Management attributed the increase mainly to higher sales prices, reflecting higher crude-related prices and tight markets, as well as improved demand and volumes.
- EBITDA improved substantially across O&P–Americas, O&P–EAI, Intermediates and Derivatives, and Refining. Q3 total EBITDA was $2.691 billion, compared with $466 million in 2020.
- Comparisons benefited from the absence of a $582 million non-cash Houston refinery impairment recorded in Q3 2020. The 2020 periods also included inventory valuation charges and reversals; these unusual items affect year-over-year comparisons.
- Refining returned to positive Q3 EBITDA of $41 million from a $692 million loss, but remained negative for the first nine months at $150 million. Advanced Polymer Solutions Q3 EBITDA declined to $121 million from $157 million, with semiconductor-related customer production constraints cited.
- Cash from operations increased, but working capital used $1.517 billion in the first nine months, primarily from increases in receivables and inventories, partly offset by higher payables.
Outlook, risks and unusual items
- Management expected strong product demand to continue, supported by economic recovery and tight industry supply, while anticipating margin moderation from higher feedstock and energy costs and winter seasonality.
- The company expected 2021 debt reduction of up to $4 billion and reported an additional $650 million debt repayment in October. It also expected capital spending to rise in Q4 but remain flat for the full year compared with 2020. Management intended to continue quarterly dividends and said cash generation could support opportunistic repurchases.
- The company was evaluating strategic options for its Houston refinery, including a possible sale; any transaction remained subject to board approval and potential regulatory or other conditions.
- Risks highlighted include commodity and energy price volatility, operating outages and weather events, cyclical demand and supply, project execution, pandemic-related uncertainty, regulatory and environmental matters, foreign exchange, and debt and refinancing risks. Texas weather-related outages affected operations earlier in 2021; acetyls downtime and automotive semiconductor shortages also constrained certain results.
- Environmental remediation accruals were $144 million. The company disclosed an EPA/DOJ settlement concerning flare operation at four U.S. facilities: a $3.4 million penalty, fence-line monitoring, and equipment investments. Management said it did not expect pending litigation to have a material adverse effect.
Important facts for investors to verify
- Whether strong chemical margins and demand persist as feedstock, energy, and seasonal costs rise.
- Progress toward the stated debt-reduction target and the effect of debt repayments and redemptions on interest expense and liquidity.
- Working-capital trends, especially receivables and inventory, and the resulting conversion of earnings to cash.
- Any board-approved decision or transaction involving the Houston refinery and its implications for refining results.
- Effects of operational disruptions, semiconductor shortages, environmental obligations, and other contingencies on future performance.