LyondellBasell mulls 15% staff cut after Q3 loss

14 November 2008 21:12  [Source: ICIS news]

TORONTO (ICIS news)--LyondellBasell may cut 15% of its staff following a third-quarter net loss of $136m (€107m), the company said on Friday.


The third loss compared with a profit of $397m a year earlier, as the most recent quarter was marked by operational problems, the impacts of Hurricane Ike and the deepening global economic slowdown.


The company also said that to cope amid worsening market conditions it was taking drastic steps, including the idling of chemical capacities and cutting staff.


As for its third-quarter performance, the Netherlands-based petrochemicals major stressed that results were not comparable on a year-on-year basis as the 2007 third quarter did not include the December 2007 acquisition of Lyondell by Basell.


“Operating results for periods prior to 20 December 2007 do not include the businesses acquired, and some significant changes in operating results are due to the effects of the acquisition of Lyondell, rather than changes in the business performance of Basell,” it said.


Reported sales for the three months ended 30 September were $14bn, up from $4bn in the 2007 quarter while operating profit was $274m, down from $388m.


Operating income was affected by lost production at the company’s Houston refinery due to a major planned maintenance turnaround, a fluid catalytic cracker (FCC) unit upgrade and catalyst changes and lost production due to unplanned maintenance on the Houston refinery's FCC unit.


Also, the company lost production for about two weeks in September 2008 when substantially all of its US Gulf Coast operations were temporarily off line as a result of Hurricane Ike, it said.


LyondellBasell estimated the costs of the outages, maintenance turnarounds and the impact of Ike at $373m.


Furthermore, the quarter’s business performance was affected by slowing world economic growth and the decrease in crude oil prices, it said.


Commenting on the business outlook, LyondellBasell said the global financial crisis and recessionary concerns had created substantial uncertainty for the global economy and the markets it operates in.


During the current fourth quarter, polymer demand in major markets and spot prices for some of the company's products declined significantly, it said.


In addition, demand for gasoline in North America declined substantially compared with the third quarter of 2007, which has reduced margins in the fuels business.


These conditions also had a negative impact on trade credit available to the company and its suppliers and customers, it said.


The tough conditions were expected to continue during the fourth quarter of 2008 and into 2009, placing further demands on the company's liquidity, particularly in the first quarter, it said.


But LyondellBasell also said it was taking steps to address the situation, including the temporary idling of one of its US Gulf Coast ethylene facilities - representing 16% of its US olefins capacity - and reductions of operating rates of certain integrated cracker operations.


It would also adjust operating rates at its polymers facilities globally to optimise working capital requirements, it said.


As part of a “substantial cost reduction programme” in anticipation of a potentially deeper economic downturn, LyondellBasell was evaluating strategic options, including the possible sale or other monetisation of some assets, a restructuring of the organisation and a 15% staff reduction over the next 12-18 months, it said.


Earlier on Friday, credit agency Moody’s cut its ratings for LyondellBasell citing the company’s high debt levels and tough business conditions going forward.


The company will further brief analysts in a conference call on Tuesday.


($1 = €0.79)


For more on LyondellBasell visit ICIS company intelligence

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By: Stefan Baumgarten
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