01—Abstract
Summary
Summary of the 10-K filed February 20, 2020. Cited figures are marked; the original filing is the authoritative source.
LyondellBasell Industries N.V.
(LYB) reported 2019 net income of $3.40 billiona on sales and other operating revenues of $34.73 billion, down from $39.00 billion in 2018, with operating income of $4.12 billion versus $5.23 billion. The decline was driven primarily by lower average sales prices tied to crude oil, weaker polyethylene and intermediate chemicals margins, and a Refining segment EBITDA loss of $65 million. Results were partly supported by the A.
Schulman acquisition (added $1.30 billionb of revenue in 2019) and record Technology segment licensing revenue. Cash from operating activities was $4.96 billion, and the company returned $5.2 billion to shareholders through dividends ($1.46 billion) and share repurchases ($3.75 billion paid in cash). Balance sheet leverage increased: long-term debt rose to $11.61 billion from $8.50 billion, and total debt including current maturities was $12.06 billion, largely due to borrowings used to fund the July 2019 tender offer and refinance maturities.
Capital expenditures increased to $2.69 billionc, with approximately $2.4 billion planned for 2020, including the Channelview PO/TBA plant expected to be completed in late 2021. Management expects an effective tax rate of approximately 20% for 2020 and cites expected benefits from IMO 2020 regulations for the Houston refinery and the completion of the Hyperzone polyethylene plant.
The filing also discloses a $238 milliond unrecognized tax benefit position, a pension deficit of $1.29 billion, and several environmental enforcement matters, none described as material to the company's financial condition. The company's auditor, PricewaterhouseCoopers LLP, issued an unqualified opinion on the financial statements and on internal control over financial reporting as of December 31, 2019.
02—Key points
Key Highlights
- Net sales and other operating revenues fell to $34.73 billion in 2019 from $39.00 billion in 2018, with lower average sales prices responsible for a 10% revenue decrease.
- Operating income declined to $4.12 billion from $5.23 billion; O&P-Americas, I&D, and Refining were the largest contributors to the decrease.
- Refining segment EBITDA was a loss of $65 million in 2019 versus $167 million of EBITDA in 2018, with Maya 2-1-1 market margins falling to $17.58 per barrel from $19.85.
- Technology segment achieved record licensing revenues, with segment operating income rising to $374 million from $284 million.
- Cash from operating activities was $4.96 billion; the company repurchased $3.75 billion of shares and paid $1.46 billion in dividends, with the quarterly dividend raised to $1.05 per share.
- Long-term debt increased to $11.61 billion from $8.50 billion, reflecting the July 2019 tender offer and refinancing transactions.
- Capital expenditures rose to $2.69 billion in 2019, with approximately $2.4 billion budgeted for 2020, including the Channelview PO/TBA plant due for completion in late 2021.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, LyondellBasell Industries kept $0.10.
- Revenue$34.73B100.0%
- Cost of revenue−$29.30B84.4%
- Gross profit$5.43B15.6%
- Operating costs−$1.31B3.8%
- Operating income$4.12B11.9%
- Interest, other & tax−$719.0M2.1%
- Net income$3.40B9.8%
Where FY2019 revenue went
$34.73B- Cost of revenue: $29.30B, 84% of revenue
- Net income: $3.40B, 9.8% of revenue
- R&D: $111.0M, 0.3% of revenue
- SG&A: $1.20B, 3.5% of revenue
- Interest, other & tax: $719.0M, 2.1% of revenue
Kept 9.8% as net incomeNet income $3.40B · 9.8%R&D $111.0M · 0.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 20, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $34.73B$39.00B | −11.0% |
| Cost of Revenue | $29.30B$32.53B | −9.9% |
| Gross Profit | $5.43B$6.47B | −16.2% |
| R&D Expenses | $111.00M$115.00M | −3.5% |
| SG&A Expenses | $1.20B$1.13B | +6.2% |
| Operating Expenses | $30.61B$33.77B | −9.4% |
| Operating Income | $4.12B$5.23B | −21.3% |
| Interest Expense | $347.00M$360.00M | −3.6% |
| Net Income | $3.40B$4.69B | −27.6% |
| EPS (Basic) | $9.59$12.04 | −20.3% |
| EPS (Diluted) | $9.58$12.01 | −20.2% |
05—Questions
Frequently Asked Questions
Why did LyondellBasell's revenue and operating income decline in 2019?
The filing attributes the revenue decline primarily to lower average sales prices, which generally correlate with crude oil prices, and to lower sales volumes. Operating income fell due to weaker polyethylene margins in O&P-Americas, lower intermediate chemicals margins in I&D, and a decline in refining margins, partly offset by the contribution from the acquired A. Schulman operations and higher Technology licensing revenue.
How much did LyondellBasell return to shareholders in 2019?
The company's MD&A states it returned a total of $5.2 billion in dividends and share repurchases to shareholders in 2019. Cash paid for share repurchases was $3.75 billion and dividend payments totaled $1.46 billion. The company repurchased approximately 42.7 million shares, including 35.1 million shares through a modified Dutch Auction tender offer completed in July 2019 at $88.00 per share.
What is the company's debt position at year end 2019?
Total debt, including current maturities, was $12.06 billion at December 31, 2019, of which long-term debt was $11.61 billion and short-term debt was $445 million. The company had $2.92 billion of total unused credit facility availability, including $2.23 billion under its $2.5 billion senior revolving credit facility and $690 million under its $900 million U.S. Receivables Facility. The filing states the company was in compliance with its debt covenants.
What does management expect for 2020?
Management expects typical seasonal improvements through the second and third quarters of 2020 and anticipates benefits from IMO 2020 regulations for the Houston refinery and the completion of the Hyperzone polyethylene plant. It expects an effective income tax rate of approximately 20% for 2020 and planned maintenance that reduces EBITDA by approximately $25 million and $30 million in the first and second quarters of 2020 in O&P-Americas. Capital expenditures are budgeted at approximately $2.4 billion.
What significant legal or environmental matters are disclosed?
The filing discloses several environmental enforcement matters, including an EPA Region V notice regarding flaring at the Morris, Illinois facility, an ongoing EPA and Department of Justice flare emissions initiative covering four U.S. facilities, a €1.8 million regulatory fine notice in Germany arising from a pipeline leak near Wesseling, a $225,000 civil penalty demand in Illinois, and a proposed Texas Commission on Environmental Quality agreed order assessing a $279,336 penalty at Channelview. The company states it does not believe the outcome of any pending lawsuit will have a material adverse effect on its financial statements.
06—Continue