LyondellBasell's Net Rises, but Earnings Miss - Analyst Blog

Chemicals and polymers maker LyondellBasell Industries LYB raked in earnings from continuing operations of $1.72 per share for the first quarter of 2014, up roughly 10% from $1.56 per share recorded a year ago.

Consolidated profit (attributable to the company's shareholders) rose around 5% year over year to $945 million in the quarter. The improvement came despite headwinds from weather-related raw material cost volatility and shipping delays. The Netherlands-based company continued to leverage favorable North American natural gas environment.

Barring a $52 million (or 9 cents per share) benefit associated with environmental indemnity settlement, earnings for the quarter were $1.63 per share. That missed the Zacks Consensus Estimate of $1.70.

LyondellBasell recorded revenues of $11,135 million in the quarter, up around 4% year over year as gains were witnessed across most of the business segments. Sales, however, missed the Zacks Consensus Estimate of $11,209 million.

Consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) went up 5% year over year to $1,668 million.

Segment Highlights

Revenues from the Olefins & Polyolefins – Americas division rose 3% year over year to $3,357 million in the reported quarter. EBITDA, however, fell 18% year over year to $736 million, affected by maintenance activity and preparation for turnaround at the company's La Porte facility.  

Sales from the Olefins & Polyolefins - Europe, Asia, International segment fell around 0.6% year over year to $3,778 million. EBITDA jumped 58% year over year to $356 million, benefiting from environmental settlement.

Intermediates and Derivatives segment sales went up 6% to $2,429 million in the reported quarter. EBITDA edged up 0.5% year over year to $375 million, supported by higher sales volumes.

Revenues from the Refining segment rose around 12% to $2,756 million. EBITDA surged more than six-fold year over year to $129 million, partly benefiting from higher throughput. Renewable Identification Numbers (RINs) costs to meet U.S. renewable fuel standards fell $5 million from the year-ago quarter.

Technology segment sales inch up 1% year over year to $136 million. EBITDA rose 15% year over year to $76 million as a result of lower R&D expenses.  

Financials

LyondellBasell ended the quarter with cash and cash equivalents of $2.7 billion, down 6% year over year. Long-term debt jumped 57% year over year to roughly $6.8 billion.

LyondellBasell bought back 15 million shares in the reported quarter. The company's Supervisory Board, on Apr 16, approved a 17% rise in its interim dividend to 70 cents per share. Moreover, its shareholders approved a share repurchase program to authorize the company to buyback an additional 10% of its outstanding shares.

Outlook

Moving ahead, LyondellBasell envisions significant planned downtime at La Porte in the second quarter given normal turnaround maintenance and actions to complete ethylene capacity expansion at the site. The company also expects its refining benchmark crack spread to remain relatively stable compared with the first quarter.

LyondellBasell is executing its expansion projects to leverage the U.S. natural gas liquids advantage. The company restarted its methanol plant at Channelview, TX, in fourth-quarter 2013 to benefit from low-cost natural gas from shale formations. The facility had been out of operation since 2004 as a result of rising natural gas costs.  

The methanol facility along with the company's 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, which has emerged from Chapter 11 bankruptcy in 2010, is among the leading plastics, chemical and refining companies globally with operations across 18 countries. The company's products are used across a bevy of industries including electronics, automotive parts, packaging, construction materials and biofuels.  

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

Other chemical stocks worth considering include Celanese Corp. CE, Eastman Chemical Co. EMN and Huntsman Corp. HUN with all retaining a Zacks Rank #2 (Buy).