01—Abstract
Summary
Summary of the 10-K filed February 21, 2019. Cited figures are marked; the original filing is the authoritative source.
LyondellBasell Industries N.V.
(NYSE: LYB) reported 2018 sales and other operating revenues of $39.00 billiona, up from $34.48 billion in 2017, and operating income of $5.23 billion versus $5.46 billion. Net income attributable to the Company shareholders was $4.69 billion, compared with $4.88 billion in 2017, and diluted earnings per share from continuing operations were $12.03. The company cited strong earnings despite a challenging second half of 2018, with planned and unplanned downtime reducing fourth-quarter 2018 results by approximately $225 million.
Results were supported by higher Intermediates and Derivatives (EBITDA of $2.01 billionb, up from $1.49 billion) and Technology segments, partly offset by lower results in Olefins and Polyolefins–Europe, Asia, International (EBITDA of $1.16 billion, down from $1.93 billion). Key corporate events in 2018 included the $1.94 billion acquisition of A. Schulman, Inc. (completed August 21, 2018), which formed the new Advanced Polymer Solutions segment, and the start of construction on a $2.4 billion PO/TBA plant in Channelview, Texas.
Cash provided by operating activities was $5.47 billionc, while the company spent $2.11 billion on capital expenditures, repurchased $1.85 billion of ordinary shares and paid $1.55 billion in dividends. Total debt, including current maturities, was $9.39 billion at year-end. In February 2019, the company entered into a $2.00 billion 364-day term loan and used the proceeds to redeem the remaining $1.00 billion of its 5% Senior Notes due 2019.
The filing also highlights ongoing exposure to commodity cycles, feedstock price volatility, the single-site Houston refinery, European operations and pension underfunding, with the aggregate pension projected benefit obligation exceeding plan assets by $992 milliond at December 31, 2018. The company stated that it expects its 2019 effective income tax rate to be approximately 20% and planned approximately $2.8 billion of capital expenditures and PO joint venture contributions for 2019.
02—Key points
Key Highlights
- Revenue rose to $39.00 billion in 2018 from $34.48 billion in 2017, while operating income declined to $5.23 billion from $5.46 billion.
- Net income attributable to Company shareholders was $4.69 billion in 2018, versus $4.88 billion in 2017; diluted EPS from continuing operations was $12.03.
- The A. Schulman acquisition for approximately $1.94 billion closed August 21, 2018 and created the Advanced Polymer Solutions segment, which contributed $846 million of revenue after closing.
- Intermediates and Derivatives EBITDA increased to $2.01 billion from $1.49 billion, while O&P–EAI EBITDA fell to $1.16 billion from $1.93 billion.
- Operating cash flow was $5.47 billion; capital expenditures were $2.11 billion and shareholder returns included $1.85 billion of share repurchases and $1.55 billion of dividends.
- Total debt was $9.39 billion at December 31, 2018; in February 2019 the company borrowed $2.00 billion under a 364-day term loan and redeemed $1.00 billion of 5% Senior Notes due 2019.
- Quarterly dividend was increased to $1.00 per share from $0.90 in February 2018, and the company has a 2018 share repurchase program covering up to 57,844,016 shares through December 1, 2019.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, LyondellBasell Industries kept $0.12.
- Revenue$39.00B100.0%
- Cost of revenue−$32.53B83.4%
- Gross profit$6.47B16.6%
- Operating costs−$1.24B3.2%
- Operating income$5.23B13.4%
- Interest, other & tax−$541.0M1.4%
- Net income$4.69B12.0%
Where FY2018 revenue went
$39.00B- Cost of revenue: $32.53B, 83% of revenue
- Net income: $4.69B, 12% of revenue
- R&D: $115.0M, 0.3% of revenue
- SG&A: $1.13B, 2.9% of revenue
- Interest, other & tax: $541.0M, 1.4% of revenue
Kept 12% as net incomeNet income $4.69B · 12%R&D $115.0M · 0.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 21, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $39.00B$34.48B | +13.1% |
| Cost of Revenue | $32.53B$28.06B | +15.9% |
| Gross Profit | $6.47B$6.42B | +0.8% |
| R&D Expenses | $115.00M$106.00M | +8.5% |
| SG&A Expenses | $1.13B$859.00M | +31.4% |
| Operating Expenses | $33.77B$29.02B | +16.4% |
| Operating Income | $5.23B$5.46B | −4.2% |
| Interest Expense | $360.00M$491.00M | −26.7% |
| Net Income | $4.69B$4.88B | −3.8% |
| EPS (Basic) | $12.04$12.23 | −1.6% |
| EPS (Diluted) | $12.01$12.23 | −1.8% |
05—Questions
Frequently Asked Questions
What drove the change in LYB's earnings in 2018?
Revenue growth came mainly from higher average sales prices, which the filing links to crude oil prices, plus the A. Schulman acquisition. Operating income declined by $229 million, with lower results in O&P–EAI, O&P–Americas, APS and Refining offset by higher I&D and Technology results. Interest expense fell to $360 million from $491 million, largely due to the 2017 redemption of $1.00 billion of 5% notes, and the effective tax rate was 11.5%, aided by a $358 million benefit from audit settlements.
How much debt does LyondellBasell carry and what changed after year-end?
Total debt, including current maturities, was $9.39 billion at December 31, 2018, including $809 million of outstanding commercial paper. In February 2019 the company borrowed $2.00 billion under a 364-day senior unsecured term loan and used the proceeds to redeem the remaining $1.00 billion of 5% Senior Notes due 2019 at par. The company must maintain a leverage ratio of 3.50 to 1.00 or less under its credit agreements.
What are the main growth projects and capital plans?
The company expects to start up its Hyperzone high-density polyethylene plant at La Porte, Texas in the third quarter of 2019, and is building a PO/TBA plant in Texas with capacity of 1.0 billion pounds of PO and 2.2 billion pounds of TBA, estimated at about $2.4 billion and expected to be completed in the third quarter of 2021. The company expects to spend approximately $2.8 billion on capital expenditures and PO joint venture contributions in 2019.
What risks does the filing highlight for investors?
Key risks include the cyclical supply and demand balance in chemicals and refining, volatility in feedstock and energy costs tied to crude oil and natural gas, and the dependence on the single Houston refinery for refining operations. The filing also cites international exposure, including euro-denominated operations, and a pension deficit of $992 million at December 31, 2018, with projected benefit obligations exceeding plan assets.
How much cash did LyondellBasell return to shareholders in 2018?
In 2018 the company repurchased ordinary shares for $1.85 billion in cash payments and paid $1.55 billion in common stock dividends, totaling $4.00 per share for the year. The quarterly dividend was raised to $1.00 per share in February 2018 from $0.90. As of February 19, 2019, approximately 38 million shares remained under the current repurchase authorization.
06—Continue