28 January 2010 18:48 [Source: ICIS news]
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HOUSTON (ICIS news)--Earnings in LyondellBasell’s polymers segment - its biggest overachiever for much of 2009 - declined drastically in December as US polyethylene (PE) margins were squeezed by rising feedstock costs, the producer said on Thursday.
Speaking on a monthly conference call with analysts, chief executive Jim Gallogly said the declining US PE margins, combined with an expected seasonal slowdown in polypropylene (PP) demand, led the decline.
The company also said it took a $40m hit after it adjusted its internal polymers cost allocations.
Overall, polymers earnings before interest, tax, depreciation and amortisation and restructuring costs (EBITDAR) resulted in a loss of $27m (€19m) after posting a $58m profit in November.
“As seasonally expected, December was a difficult month,” Gallogly said. “There are [PE] price increases in the industry pending, but we have seen ethylene prices rise faster and we do expect a margin squeeze. No doubt there will be some continued pressure.
“That said, the export markets continue to be fairly robust, and that should help us get the price increases,” he added.
In particular, low-density PE (LDPE) faces the most difficult market conditions, he said.
Elsewhere in polymers, global PP volumes declined by about 5% month over month on holiday weakness, but the underlying EBITDAR was unchanged, Gallogly said.
For the full 2009 year, Lyondell’s polymers segment earned $769m – well ahead of its operating forecast of $453m.
Within the chemicals segment, however, EBITDAR bounced back to $126m in December from $41m in November and $108m in October due to improved margins and higher volumes within propylene oxide (?xml:namespace>
For all of 2009, chemicals earnings were $861m – ahead of the $731m projected.
However, Lyondell’s overall 2009 earnings of $2.26bn were only slightly higher than the $2.11bn predicted, due in large part to the struggling fuels segment.
Lyondell said weak refining industry conditions continued in December and were likely to continue in the first part of 2010, capping a year in which the fuels segment earned $255m – well under the forecast of $710m.
Going forward, Lyondell said olefins profitability would be subject to oil price movements, while the polymers outlook would largely depend on whether the US PE export window to
($1 = €0.71)
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