LyondellBasell says Q2 earnings likely to miss expectations

03 June 2009 18:42  [Source: ICIS news]

HOUSTON (ICIS news)--LyondellBasell would likely fall short of its projected second-quarter earnings due to refining weakness and poor European demand for polymers, the Netherlands-based producer said on Wednesday.

The company, whose chemicals segment nearly offset the underperforming fuels segment on the year, previously projected its second-quarter earnings before interest, taxes, depreciation, amortisation and reorganisation (EBITDAR) at $637m (€446m).

But overall April EBITDAR was only $188m, LyondellBasell said, leaving it on pace to come up short.

“The principle weakness in our portfolio continues to be refining margins,” chief operating officer Ed Dineen said on the company’s monthly conference call. “Other segments are near forecasts.”

LyondellBasell’s strength this year was in chemicals. On a year-to-date basis through April, chemicals EBITDAR was at $186m, well ahead of the operating forecast of $112m.

That nearly was enough to offset the underperforming fuels segment, where year-to-date EBITDAR of $138m fell below the projected $218m.

The US olefins markets was solid, the company said, with improved product demand in April and production rates at US facilities that are ahead of operating plans.

Excluding the company’s shuttered Chocolate Bayou, Texas, facility, operating rates were more than 90% in the US, the company said. Ethane remained the favoured raw material in the US, LyondellBasell said, so it has reacted by shifting its raw material mix toward ethane and other natural gas liquids.

The strong performance, combined with increased raw material prices and the recent increase in crude oil and naphtha prices, will likely lead to increased prices in the olefins chain, the company said.

The European olefins markets are lagging the US, with operating rates at about 85%.

In polymers, LyondellBasell was slightly ahead of planned year-to-date EBITDAR, finishing April at $114m compared with an operating forecast of $101m.

However, the company was dealing with a major divide between US and Europe results.

The company said that US polymer demand was strengthening and that it anticipated export opportunities throughout the second quarter, while local European demand remained weak.

In particular, polypropylene (PP) and polyethylene (PE) volumes declined outside of the US relative to March levels, the company said.

“We have a lot of work to do because the market isn’t cooperating with us,” chief operating officer Ed Dineen said.

LyondellBasell has 79 affiliates under Chapter 11 bankruptcy protection and recently added 13 non-operating subsidiaries to the filing.

The company has said it seeks to improve overall results by $1.3bn/year by the end of 2010, and planned to get there through lower fixed costs as well as cutting 4,800 employees and contractors and closing 14 plants and facilities.

($1 = €0.70)

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By: Ben DuBose
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