LyondellBasell’s Q3 Earnings Top Estimates, Profit Jumps

Chemicals and polymers maker LyondellBasell Industries (LYB) recorded earnings from continuing operations of $2.46 per share for the third quarter of 2014, up roughly 63% from $1.51 per share logged a year ago.

Barring charges of $45 million associated with inventory adjustments, earnings were $2.51 per share for the reported quarter. That outstripped the Zacks Consensus Estimate of $2.28.

Consolidated profit surged around 48% year over year to $1,257 million or $2.45 per share in the quarter. The results were driven by healthy gains in the company’s Olefins & Polyolefins – Americas division.

LyondellBasell recorded revenues of $12,066 million in the quarter, up around 8% year over year. Sales were well ahead of the Zacks Consensus Estimate of $11,712 million.

Consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) climbed 33% year over year to a record $2,035 million.

Segment Review

Revenues from the Olefins & Polyolefins – Americas division rose roughly 13% year over year to $3,750 million in the reported quarter. EBITDA shot up roughly 38% year over year to $1,157 million, benefiting from higher average ethylene prices and lower costs of natural gas liquids (NGLs). Results for both polyethylene and polypropylene improved in the quarter.

Sales from the Olefins & Polyolefins – Europe, Asia, International segment went up 11% year over year to $3,995 million. EBITDA soared 68% year over year to $343 million. The division benefited from increased operating rates and higher margins from processing advantaged feedstocks that boosted olefins results.

Intermediates and Derivatives segment sales moved up around 10% to $2,691 million in the reported quarter. EBITDA, however, slipped 10% year over year to $383 million.

Revenues from the Refining segment edged down 1% to $3,146 million. EBITDA surged manifold year over year to $110 million, benefiting from higher yields and improved margins on secondary products. Renewable Identification Numbers (RINs) costs to meet U.S. renewable fuel standards fell $10 million from the year-ago quarter.

Technology segment sales moved down around 14% year over year to $107 million. EBITDA fell 21% year over year to $41 million on reduced licensing results.

Financials

LyondellBasell exited the quarter with cash and cash equivalents of roughly $1,185 million, down 73% year over year. Long-term debt rose 17% year over year to roughly $6,753 million.

LyondellBasell bought back 12 million shares in the reported quarter and around 46 million shares so far this year. The company has repurchased 73 million shares since its first buyback program started in May 2013.

Outlook

Moving ahead, LyondellBasell envisions results in the fourth quarter to be favorably impacted by new ethylene capacity at its La Porte facility in Texas. It also expects that its refinery will start receiving shipments of Canadian crude from the Flanagan South pipeline.

The company is expected to gain from favorable pricing of NGLs and strong ethylene and polyolefins prices in the U.S. However, the recent decline in crude oil prices may hurt domestic margins.

LyondellBasell is executing its expansion projects to leverage the U.S. NGLs advantage. The company, during the third quarter, started production from the 800-million pound a year ethylene expansion.

The company’s methanol plant at Channelview, TX, along with its other major debottleneck projects (including expansion at La Porte) are expected to bring in new capacity at considerably lower cost than building new facilities.

LyondellBasell is a Zacks Rank #2 (Buy) stock.

Better-ranked stocks in the chemicals space include Westlake Chemical Corp. (WLK), Globe Specialty Metals, Inc. (GSM) and Celanese Corp. (CE). While Westlake Chemical sports a Zacks Rank #1 (Strong Buy), both Globe Specialty Metals and Celanese hold a Zacks Rank #2 (Buy).