JVs, stronger polymers drive up LyondellBasell Q4 profits

Author: Tom Brown

2021/01/29

LONDON (ICIS)--Stronger polyolefins margins and contributions from new joint venture stakes drove LyondellBasell’s fourth-quarter earnings to the highest level in years, despite the impact of refining sector losses, the producer said on Friday.

Q4 2020 $m) Q4 2019 ($m) Change (%) FY 2020 ($m) FY 2019 ($m) Change (%)
Sales and other op revenues 7,937 8,179 -3 27,753 34,727 -20
EBITDA 1,413 1,172 21 3,285 5,692 -42
Net income 855 612 40 1,427 3,397 -58

The company reported its strongest fourth-quarter earnings before interest, taxes, depreciation and amortisation (EBITDA) since 2017 on the back of firmer polyethylene (PE) margins, contributions from joint ventures with Sasol and Liaoning Bora Enterprise drove profits.

LyondellBasell invested $2bn for a 50% stake in the commodity chemical production assets at Sasol’s Beleaguered Lake Charles, Louisiana, project, and entered into a 50/50 joint venture with Bora for a polyolefins complex in China.

The two projects add the equivalent of a new world-scale cracker for the company without having to engage in project risk, according to CEO Bob Patel speaking in late 2020. The contribution from the company’s completed 500,000 tonne/year Hyperzone PE plant in texas also contributed to earnings.

“Both joint ventures provided immediate benefits to our fourth quarter profitability without the project completion risks associated with the construction of greenfield projects,” Patel said.

Consumer and durable goods demand and turnaround tightening supply in the sector all helped to defy the traditional fourth-quarter slowdown, he added.

“Strong and persistent consumer-driven demand, industry supply constraints and continued recovery in durable goods markets reduced the impact of typical end-of-year slowdowns for our businesses,” he said.

Americans olefins and polyolefins (O&P EBITDA stoof at $722m compared to $498m in the same period a year earlier, as firmer PE pricing and higher ethylene volumes offset weaker ethylene margins.

Europe, Asia and global O&P earnings more than doubled year on year in the quarter to $304m, with PE margins and volumes offsetting weaker polypropylene (PP) spreads, and the Bora joint venture adding $65m equity income. Advanced polymer earnings also rose substantially.

In October, Patel projected that the industry had reached the bottom of the cycle for PE, with pandemic and oversupply-driven delays and cancellations to projects helping to balance the market.

““I do think that we are at the bottom of the PE cycle and as there have been many public announcements of delays and cancellation of projects… we are seeing good growth even in a pandemic,” he said at the time.

Conditions were weaker during the quarter for intermediates and refined products on the back of continued weak oil demand as a result of the decline in travel during the pandemic.

Weaker gasoline demand saw oxyfuels results fall $175m year on year, more than offsetting higher margins and volumes for most intermediates and derivative products, while refining the refining division swung to a $72m loss. Daily output at the company’s Houston, Texas, refinery was 53,000 barrels less than in the closing quarter of 2019.

Conditions into 2021 were also stronger overall globally, Patel said, despite the spike in European coronavirus cases and return of lockdowns as a means of combating the spread.

“"Improving trends seen in the closing weeks of December are continuing into the first quarter of 2021 and providing a bridge to the seasonal upticks typically seen in our businesses during the second and third quarters,” he said.

“Elevated export demand to China and Latin America combined with tight markets are supporting strong margins for our Olefins and Polyolefins businesses. Increased demand from automotive and construction markets has pushed the January order book for our Advanced Polymer Solutions segment to higher levels than the fourth quarter 2020 average,” he added.

(Thumbnail picture: LyondellBasell's Houston, Texas, complex. Source: LyondellBasell)