Lower NGL costs drive LyondellBasell’s Q2 profit jump
Tom Brown
25-Jul-2014
(adds division details and updates throughout)
LONDON (ICIS)–Lower natural gas liquids
(NGL) prices and a favourable ethylene-polyethylene (PE)
price spread helped to drive a 25% year-on-year increase in
LyondellBasell’s net income for the second quarter of
the year to $1.18bn, the Netherlands-headquartered chemicals
producer said on Friday.
Group sales increased 9% year on year to $12.12bn, and EBITDA
increased 17% over the same period to $1.94bn, according to
the company.
The jump in profit was driven primarily by the Americn
olefins and polymers (O&P) business, which posted
earnings before interest, taxes, depreciation and
amortisation (EBITDA) of nearly $1bn despite a maintenance turnaround for its
flagship La Porte, Texas cracker.
The unit was down between late March and late June to add
363,000 tonnes/year of ethylene capacity, bringing its total
to 1.152m tonnes/year.
The improved results were achieved in spite of significant
setbacks during the period, according to company CEO Jim
Gallogly.
“As encouraging as these results are, we did not fully
deliver on our reliability expectations, and the quarterly
earnings could have been better. Specifically, we were late
in completing our La Porte ethylene turnaround
in part due to a mechanical issue with a compressor,” he
said.
“Both supplier upsets and mechanical issues impacted our
Intermediates and Derivatives business as well,” he
added.
Olefins and polymers Americas EBITDA for the quarter was
$978m, a $27m year on year increase primarily on the back of
lower polymers feedstock costs.
A $150m increase in earnings from the improving
spread between ethylene and polyethylene offset a $130m
year on year drop in olefins earnings, the company
said.
LyondellBasell is to take advantage of the La Porta cracker
expansion from the third quarter of the year, Gallogly
added.
“During the third quarter we expect to begin production from
the 800 million pound per year La Porte ethylene
expansion. This is the first of three ethylene expansions and
continues to put us well ahead of new greenfield plants
pursued by others in the industry,” he said.
O&P earnings for the company’s Europe, Asia and
international division increased $24m year on year to $319m,
as higher operating rates and butadiene volumes offset a $20m
drop in olefins earnings on the back of lower margins. Equity
income from joint ventures also increased $32m compared to
the second quarter of 2013, the company added.
Second-quarter intermediates and derivatives EBITDA increased
by $92m year on year to $430m on the back of higher propylene
oxide, methanol and styrene volumes, and higher methanol and
vinyl acetate margins, the company said.
Refining division EBITDA jumped from $20m in the second
quarter of 2013 to $137m in the same period this year, due in
part to improved yields and higher margins on secondary
products.
Favourable conditions in the second quarter have continued
into July, but the extent of third-quarter gains will be
tempered by the delayed ramp-up of La Porta cracker capacity,
according to Gallogly.
“During the first weeks of the third quarter, industry
conditions have been similar to the second quarter
environment. US oil, natural gas, and natural gas
liquids production remain strong. Together these
support margins in our Olefins and Polyolefins – Americas,
Intermediates and Derivatives, and Refining segments,”
Gallogly said.
“However, our results in the next quarter will be negatively
impacted by the delayed start-up of our La Porte
ethylene plant,” he added.
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