FOURTH QUARTER 2020 EARNINGS
January 29, 2021
CAUTIONARY STATEMENT AND
INFORMATION RELATED TO FINANCIAL MEASURES
CAUTIONARY STATEMENT
The statements in this release and the related teleconference relating to matters that are not historical facts are forward-looking statements. These forward-looking statements are based upon assumptions of management of LyondellBasell which are believed to be reasonable at the time made and are subject to significant risks and uncertainties. When used in this release, the words "estimate," "believe," "continue," "could," "intend," "may," "plan," "potential," "predict," "should," "will," "expect," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Actual results could differ materially based on factors including, but not limited to, market conditions, the business cyclicality of the chemical, polymers and refining industries; the availability, cost and price volatility of raw materials and utilities, particularly the cost of oil, natural gas, and associated natural gas liquids; uncertainties related to the extent and duration of the pandemic-related decline in demand, or other impacts due to the COVID-19 pandemic in geographic regions or markets served by us, or where our operations are located, including the risk of prolonged recession; competitive product and pricing pressures; labor conditions; our ability to attract and retain key personnel; operating interruptions (including leaks, explosions, fires, weather-related incidents, mechanical failure, unscheduled downtime, supplier disruptions, labor shortages, strikes, work stoppages or other labor difficulties, transportation interruptions, spills and releases and other environmental risks); the supply/demand balances for our and our joint ventures' products, and the related effects of industry production capacities and operating rates; our ability to achieve expected cost savings and other synergies; our ability to successfully execute projects and growth strategies; future financial and operating results; benefits and synergies of any proposed transactions; legal and environmental proceedings; tax rulings, consequences or proceedings; technological developments, and our ability to develop new products and process technologies; potential governmental regulatory actions; political unrest and terrorist acts; risks and uncertainties posed by international operations, including foreign currency fluctuations; and our ability to comply with debt covenants and to amend, extend, repay, redeem, service, and reduce our debt. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the "Risk Factors" sections of our Form 10-K for the year ended December 31, 2019, and our Forms 10-Q for the quarters ended March 31, 2020, and September 30, 2020. which can be found at www.LyondellBasell.com on the Investor Relations page and on the Securities and Exchange Commission's website at www.sec.gov. There is no assurance that any of the actions, events or results of the forward-looking statements will occur, or if any of them do, what impact they will have on our results of operations or financial condition. Forward-looking statements speak only as of the date they were made and are based on the estimates and opinions of management of LyondellBasell at the time the statements are made. LyondellBasell does not assume any obligation to update forward-looking statements should circumstances or management's estimates or opinions change, except as required by law.
INFORMATION RELATED TO FINANCIAL MEASURES
This presentation makes reference to certain "non-GAAP" financial measures as defined in Regulation G of the U.S. Securities Exchange Act of 1934, as amended.
EBITDA, as presented herein, may not be comparable to a similarly titled measure reported by other companies due to differences in the way the measure is calculated. We calculate EBITDA as income from continuing operations plus interest expense (net), provision for (benefit from) income taxes, and depreciation & amortization. EBITDA should not be considered an alternative to profit or operating profit for any period as an indicator of our performance, or as an alternative to operating cash flows as a measure of our liquidity. We also present EBITDA, net income and diluted EPS exclusive of adjustments for ("LCM") and impairment. LCM is an accounting rule consistent with GAAP related to the valuation of inventory. Our inventories are stated at the lower of cost or market. Cost is determined using the last-in,first-out ("LIFO") inventory valuation methodology, which means that the most recently incurred costs are charged to cost of sales and inventories are valued at the earliest acquisition costs. Fluctuation in the prices of crude oil, natural gas and correlated products from period to period may result in the recognition of charges to adjust the value of inventory to the lower of cost or market in periods of falling prices and the reversal of those charges in subsequent interim periods as market prices recover. Property, plant and equipment are recorded at historical costs. If it is determined that an asset or asset group's undiscounted future cash flows will not be sufficient to recover the carrying amount, an impairment charge is recognized to write the asset down to its estimated fair value. Estimated EBITDA, as presented for future projects is calculated as volume multiplied by average historical margins. Estimated EBITDA cannot be reconciled to net income due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, including adjustments that could be made for interest expense (net), provision for (benefit from) income taxes, depreciation & amortization and other changes reflected in the reconciliation of historical numbers, the amounts of which, based on historical experience, could be significant.
Cash from operating activities yield from EBITDA excluding LCM and impairment is a measure that provides an indicator of a company's operational efficiency and management. Cash from operating activities yield from EBITDA excluding LCM and impairment, as presented herein, may not be comparable to similarly titled measures reported by other companies due to differences in the way the measures are calculated. For purposes of this presentation, cash from operating activities yield from EBITDA excluding LCM and impairment means cash from operating activities divided by EBITDA excluding LCM and impairment.
Change in cash working capital represents changes in Accounts receivable, Inventories and Account payable that (provided) used cash in our consolidated statements of cash flows.
Free cash flow is a measure of profitability commonly used by investors to evaluate performance. Free cash flow, as presented herein, may not be comparable to similarly titled measures reported by other companies due to differences in the way the measures are calculated. For purposes of this presentation, free cash flow means net cash provided by operating activities minus capital expenditures.
Additionally, liquidity is a measure that provides an indicator of value to investors. For purposes of this presentation, liquidity includes cash and cash equivalents, restricted cash and restricted cash equivalents, short term investments, and availability under our Senior Revolving Credit Facility and our Receivables Facility.
Reconciliations for our non-GAAP measures can be found on our website at www.LyondellBasell.com/investorrelations.
2
MAINTAINING OUR COMMITMENTS
BUILDING A STRONGER COMPANY FOR OUR INVESTORS, CUSTOMERS AND EMPLOYEES
PROTECTING EMPLOYEES
Maintained a safe work environment during pandemic
No company-wide workforce reductions
Bolstered diversity, equity and inclusion efforts
Maintained 401(k) and other benefits
SAFEGUARDING INVESTORS
Committed to investment-grade credit rating
Funded dividend and capex with cash from operations
Actively managed capex and working capital
Accelerated cost efficiency initiatives
3
2020 HIGHLIGHTS
MAINTAINED STRATEGIC FOCUS WHILE NAVIGATING THE PANDEMIC AND RECESSION
$1.4 B | $3.3 B | $4.24 | $5.2 B | |||
NET INCOME | EBITDA | DILUTED EPS | LIQUIDITY | |||
$1.9 B | $3.9 B | $5.61 | ||||
NET INCOME | EBITDA | DILUTED EPS | ||||
ex. LCM and Impairment | ex. LCM and Impairment | ex. LCM and Impairment | ||||
4
CONSISTENT SAFETY FOCUS
FACIAL COVERING
IMPROVING SAFETY PERFORMANCE IN A CHALLENGING YEAR
Injuries per 200,000 hours worked 0.5
0.4
0.3
SOCIAL DISTANCING
0.2
0.1
2016 | 2017 | 2018 | 2019 | 2020 | ||
LyondellBasell | ACC Top Quartile | |||||
HEALTH SCREENING
5 | Source: American Chemistry Council (ACC) and LyondellBasell. Note: Number of hours |
worked includes employees and contractors. Data includes safety performance from the |
acquisition of A. Schulman from August 21, 2018 forward.
ADVANCING CIRCULAR PLASTICS
QCP PARTNERSHIP EXPANDS CAPACITY AND FOOTPRINT
EXPANDING LYB'S MECHANICAL RECYCLING NETWORK
2018 - Geleen, The Netherlands
2020 - Blandain, Belgium
ADVANCING PRODUCT OPTIONS
Expands the number of end-use applications
Assists brand owners to achieve sustainability goals
SUPPORTING SUSTAINABILITY INITIATIVES
Expands LYB plastic waste recycling capacity to 55 K ton per year
Goal: Produce and market 2 MM ton of recycled and renewable- based polymers annually by 2030
6
STRONG CASH CONVERSION
DIVIDEND AND CAPITAL INVESTMENTS COVERED BY CASH FROM OPERATING ACTIVITIES
Change in Cash Working Capital | Cash Conversion | |||||||||
USD, millions | ||||||||||
$100 | 100% | |||||||||
0 | 90% | |||||||||
-100 | ||||||||||
80% | ||||||||||
-200 | ||||||||||
-300 | 70% | |||||||||
-400 | 60% | |||||||||
2018 | 2019 | 2020 | ||||||||
Cash Conversion | Change in Cash Working Capital | |||||||||
88%
CASH CONVERSION 2020
$3.4 B
CASH FROM OPERATING ACTIVITIES
2020
$1.4 B
DIVIDENDS PAID
2020
7 | Note: Cash Conversion equals cash from operating activities divided by EBITDA excluding LCM and impairment. |
CASH GENERATION AND DEPLOYMENT
ADVANCING ON OUR GROWTH STRATEGY DESPITE ECONOMIC DOWNTURN
DELIVERING RESULTS
Cash from operating activities $3.4 B
GROWING THROUGH INVESTMENT
Ramped up PO/TBA activity in 4Q20
Established Bora JV in China
Formed Louisiana PE JV
PROVIDING AMPLE LIQUIDITY
$5.2 B total liquidity
Well positioned for debt reduction
USD, billions $6
4
2 | $2.5 |
$1.1
1Q20 | Cash from | Dividends & CAPEX | Change in | Joint Venture Other | 4Q20 |
Beginning | Operating | Share | Debt | Investments | Ending |
Balance | Activities | Repurchases | Balance |
8 | Note: Beginning and ending cash balances include cash and cash equivalents, restricted cash, and liquid investments. CAPEX includes growth and sustaining |
(maintenance and HSE) capital. |
LYONDELLBASELL 2021 MODELING INFORMATION
CAPITAL
EXPENDITURES
MAJOR
PLANNED
MAINTENANCE EBITDA IMPACT ~$170 MM
Sustaining CAPEX | |
Total CAPEX | ~$1.0 B |
~$2.0 B | Profit Generating CAPEX |
~$1.0 B |
1Q 2Q 3Q 4Q
O&P - EAI | ~$10 MM ~$15 MM |
I&D | ~$20 MM ~$60 MM ~$35 MM ~$30 MM |
FINANCIAL
METRICS
Net Interest Expense
~$430 MM
Depreciation & Amortization
~$1.4 B
Pension Contribution
~$100 MM
Pension Expense
~$100 MM
Effective Tax Rate
~17%
9 | Note: Net interest expense includes ~$90 MM capitalized interest. Major planned maintenance EBITDA impact is the estimated lost production multiplied by |
expected future margins. |
RECOVERING MARKETS
DIVERSE GLOBAL PORTFOLIO REFLECTING SIGNIFICANT ECONOMIC RECOVERY
EBITDA ex. LCM and Impairment USD, billions
$1.5
1.0
0.5
4Q19 | 1Q20 | 2Q20 | 3Q20 | 4Q20 | ||
EBITDA | EBITDA ex. LCM and Impairment | |||||
STRONG CONSUMER DRIVEN DEMAND
Packaging and non-durable products
FURTHER INDUSTRIAL SECTOR RECOVERY
Automotive and other durable products
PERSISTENTLY LOW MOBILITY
Transportation fuels
10
GLOBAL POLYETHYLENE
FUTURE OPERATING RATES LIKELY COMPARABLE TO PREVIOUS CYCLES
2016 FORECAST
Effective Operating Rate
- Consultants predicted low operating rates 2017-2018
●. Typical delays in new capacity maintained high operating rates
100%
95%
Actual
2020 ENVIRONMENT
- Global demand growth was 4%
- Persistent increases in demand from lifestyle changes
CURRENT FORECAST
90%
85%
80%
Balanced Market
- Consultants predict a low operating rate in 2022
- Capacity additions forecasted, primarily in China
- Typical delays likely to improve the operating rate forecast
2015 | 2017 | 2019 | 2021 | 2023 | 2025 |
2016 Forecast
Current Forecast (2021: 4% demand growth, 4% after)
Current Forecast (2021: 7% demand growth, 4% after)
11 | Source: IHS Markit and LyondellBasell. Dataset from IHS Markit Fall 2020 forecast and December 2020 quarterly update. 2020 demand growth has been |
adjusted to 4% and the effective operating rate assumes 8% industry downtime. |
OLEFINS & POLYOLEFINS - AMERICAS
TIGHT MARKETS DROVE MARGIN AND VOLUME IMPROVEMENTS
EBITDA ex. LCM
USD, millions
$722 | |
OLEFINS | |
Higher ethylene and propylene prices driven by | |
$523 | tight supply |
$477 |
$404 | Volumes increased due to higher demand |
$210 | POLYOLEFINS |
Polyethylene and polypropylene spreads improved |
LOUISIANA JV
4Q19 | 1Q20 | 2Q20 | 3Q20 | Volume Margin | Other | 4Q20 | ||
Accretive in 4Q20 | ||||||||
EBITDA | EBITDA ex. LCM | |||||||
12
OLEFINS & POLYOLEFINS - EUROPE, ASIA & INTERNATIONAL
IMPROVING DEMAND AND INCREASED BORA JV CONTRIBUTION DROVE IMPROVED PROFITABILTY
EBITDA ex. LCM
USD, millions
$251
$225 $219
$144 | $131 |
4Q19 1Q20 2Q20 3Q20 Volume Margin Equity Other 4Q20 Income
EBITDA EBITDA ex. LCM
OLEFINS
Volume increased with higher operating rates Margins lower due to higher maintenance expense
POLYOLEFINS
Polyethylene and polypropylene volume increased
EQUITY INCOME
Bora JV accretive in 4Q20
13
INTERMEDIATES & DERIVATIVES
EARNINGS GROWTH MUTED BY LOW OXYFUELS MARGINS
EBITDA ex. LCM
USD, millions
$329
$281 | PO & DERIVATIVES |
$245 | |
Margins increased due to strong Asia demand and market
$196tightness
$121 | OXYFUELS & RELATED PRODUCTS | ||||||||
Volumes improved slightly | |||||||||
Margins decreased driven by low gasoline pricing and | |||||||||
higher butane costs | |||||||||
4Q19 | 1Q20 | 2Q20 | 3Q20 | Volume Margin | Other | 4Q20 | |||
EBITDA | EBITDA ex. LCM | ||||||||
14
ADVANCED POLYMER SOLUTIONS
VOLUME IMPROVEMENT FROM REBOUNDING AUTOMOTIVE MANUFACTURING
EBITDA ex. LCM
USD, millions
$126 | COMPOUNDING & SOLUTIONS | |||
$115 | $117 | Volumes increased with improved automotive demand | ||
Margins declined on product prices lagging feedstocks | ||||
$62 | ||||
$23 | SYNERGIES | |||
Beginning to capture >$200 MM annual run rate | ||||
Increasing visibility as volumes continue to recover |
4Q19 | 1Q20 | 2Q20 | 3Q20 | Volume Margin | Other | 4Q20 | ||
EBITDA | EBITDA ex. LCM | |||||||
15
POLYPROPYLENE DURABLE GOODS
MARKETS SHOWING STRENGTH INTO FIRST QUARTER 2021
CHINA | LYB |
NORTH AMERICA & EUROPE | |
PP DEMAND | |
DAYS OF PP INVENTORY HIT | |
+10% | ALL-TIME LOWS |
2020 vs. 2019 | During 4Q20 |
NORTH AMERICA | CHINA |
ROOFING DEMAND | AUTOMOTIVE PRODUCTION |
+5% | +6% |
4Q20 vs. 4Q19 | 4Q20 vs. 4Q19 |
LYB PPC, EP and Catalloy Sales Volume
Indexed to 1Q19
100%
90%
80%
70%
60%
50%
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 Jan '21 Fcst.
16 | Source: LyondellBasell, IHS Markit, ICIS, and ChemOrbis |
Note: Roofing demand is for single-ply thermoplastic polyolefin roofing. January forecast based upon LyondellBasell January order book multiplied by 3. |
REFINING
LOW DEMAND FOR GASOLINE AND JET FUEL CONTINUE TO PRESSURE PROFITABILITY
EBITDA ex. LCM and Impairment
USD, millions
$22
$(80) | $(14) | $(74) | |
$(121) | |||
4Q19 | 1Q20 | 2Q20 | 3Q20 | Volume Margin | Other | 4Q20 | |
EBITDA | EBITDA ex. LCM and Impairment | ||||||
CRUDE THROUGHPUT
80% utilization rate matching reduced demand
MARGIN IMPROVED
Lower fixed cost and commercial agility Maya 2-1-1 increased by $0.22 to $10.11
3Q20 CHARGES
$582 MM impairment
$8 MM restructuring costs
17
TECHNOLOGY
LICENSING PROFITABILTIY REDUCED DUE TO TIMING
EBITDA
USD, millions
$138
$112 $111
$56
$45
4Q19 | 1Q20 | 2Q20 | 3Q20 | 4Q20 |
LICENSING
Decreased number of revenue milestones
CATALYST
Margins increased due to inventory mix
Volumes decreased as customers managed inventories at year-end
18
DISCIPLINED INVESTMENTS DRIVING GROWTH AND VALUE
HIGHER EBITDA AND LOWER CAPEX: A CLEAR STRATEGY FOR INCREASING FREE CASH FLOW
2022 | 2023 | ||||
4Q 2020 | PO/TBA | ||||
Sinopec PO/SM JV | |||||
4Q 2020 | Louisiana | Channelview, Texas | |||
3Q 2020 | Ningbo, China | ||||
Advanced | Integrated PE JV | Bayport, Texas | |||
Estimated EBITDA | |||||
2Q 2020 | Bora Integrated | Polymer | Lake Charles, LA | Estimated EBITDA | |
~$45 MM/yr | |||||
Hyperzone HDPE | Cracker JV | Solutions | Estimated EBITDA | ~$450 MM/yr | |
La Porte, Texas | Panjin, China | Synergies | ~$330 MM/yr | ||
Estimated EBITDA | Estimated EBITDA | ~$200 MM/yr | |||
~$170 MM/yr | ~$150 MM/yr |
Reducing CAPEX to ~$2 B/yr 2020-2023
FREE CASH FLOW
19 | Note: Estimated EBITDA for projects and joint ventures is nameplate capacity multiplied by 2017-2019 average cash margins assuming 40% of the PE, PO and MTBE from |
U.S. production exported to Asia. The results or returns of growth projects are presented for illustrative purposes only and not intended to be a guarantee or representation |
of the Company's expectations for future performance.
FOURTH QUARTER 2020 SUMMARY & OUTLOOK
COMMITTED TO DELIVERING VALUE THROUGH CYCLES
COMMITMENTS | MARKETS | FREE CASH FLOW | PATH |
KEPT | IMPROVING | GROWING | FORWARD |
Supported employees | Robust global PE/PP demand | APS synergies | Further deleveraging |
Advanced sustainability | Hyperzone PE & PO/TBA | Maintaining capital discipline | |
initiatives | Increasing automotive and | ||
Maintained | construction demand | Bora, Louisiana and PO/SM | Optimizing portfolio |
Joint Ventures | |||
investment-grade rating | Upside from increasing | ||
Advancing sustainability | |||
transportation fuel demand | |||
Preserved dividend | Lower CAPEX | & DEI initiatives | |
20
Attachments
- Original document
- Permalink
Disclaimer
LyondellBasell Industries NV published this content on 29 January 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 January 2021 15:55:02 UTC.