LyondellBasell Reports Fourth-Quarter and Full Year 2010 Results

ROTTERDAM, Netherlands, Feb. 18, 2011 /PRNewswire/ --

Fourth-Quarter 2010 Highlights

• Net income of $874 million; Diluted earnings per share of $1.54
• Quarterly EBITDA of $762 million, excluding reversal of inventory charge
• Repayment of $1.2 billion of debt
• Impacted by seasonal factors and increased European raw material costs

Full-Year 2010 Highlights

• EBITDA( R ) of $4 billion, excluding non-cash inventory charge, an increase of 80 percent from 2009
• Led by particularly strong results in U.S. olefins and polyolefins and global propylene oxide
• Sales of $41 billion, up 33 percent from prior year
• Ended Year with $6.1 billion liquidity; $4.2 billion cash

LyondellBasell Industries (NYSE: LYB) today announced net income for the fourth quarter 2010 of $874 million, or $1.54 per share.  Fourth-quarter 2010 EBITDA was $762 million, excluding a reversal of $323 million of non-cash Lower of Cost or Market (LCM) inventory charges(1).  Sales in the fourth quarter were $10,610 million, an increase of 20 percent from the prior year period.  For the full year 2010, EBITDA( R ) was $4,035 million excluding a $42 million LCM charge.

Comparisons with the prior quarter, fourth quarter 2009 and full year 2009 are available in the following table.

During 2010, business conditions and results improved across the vast majority of our portfolio, most notably in the Olefins & Polyolefins and propylene oxide businesses.  Improved worldwide demand and industry supply disruptions contributed to improved results.

The fourth quarter was impacted by seasonally lower volumes and margins in the oxyfuels and polyolefins businesses, rising olefins feedstock costs in Europe, and one-time events.

In addition, results reflect the following:

"2010 was a great beginning for the 'New LyondellBasell'," said LyondellBasell Chief Executive Officer Jim Gallogly.  "The company enjoyed financial success while advancing the plans and processes that form the foundation for our future.  We demonstrated the strength of our assets and business position and that the uncertainties of the past years are behind us.  Although early in this phase of economic and industry recovery, the earnings and cash generation capabilities of the company are now quite evident," Gallogly said.

"Fourth quarter profits increased significantly year-on-year although they did not match very strong mid-year levels.  Notable during the fourth quarter was the repayment of $1.2 billion of debt," Gallogly said.

OUTLOOK

Commenting on the near-term outlook, Gallogly said, "Looking to the first quarter, industry fundamentals are unchanged, positioning us well for a solid beginning to 2011.  Chemical and polyolefin prices are adjusting to increased naphtha costs while our U.S. olefins operations continue to benefit from advantaged ethane economics.  Our SEPC joint venture has paid an $82 million dividend, its first dividend."  

"Our Intermediates and Derivatives segment continues to perform well as higher propylene prices are passed through.  In our Refining & Oxyfuels segment, a major turnaround is underway at our Houston refinery fluid catalytic cracker.  This is a key step in our plans to improve refinery operations.  The Maya 211 spread has averaged more than $20 per barrel this quarter, and oxyfuels spreads have rebounded from their typical winter lows," added Gallogly.

LYONDELLBASELL BUSINESS RESULTS DISCUSSION BY REPORTING SEGMENT

LyondellBasell operates in five business segments: 1) Olefins & Polyolefins – Americas; 2) Olefins & Polyolefins – Europe, Asia, International; 3) Intermediates & Derivatives; 4) Refining & Oxyfuels; and 5) Technology.

Olefins & Polyolefins - Americas  (O&P-Americas) – The primary products of this segment include ethylene and its co-products (propylene, butadiene and benzene), polyethylene, polypropylene and Catalloy process resins.  

Three months ended Dec. 31, 2010 versus three months ended Sept. 30, 2010 – Excluding a non-cash LCM inventory charge of $26 million in the third quarter 2010 and a $163 million non-cash LCM reversal in the fourth quarter 2010, underlying EBITDA declined by $176 million versus the third quarter 2010.  An average ethylene sales price increase of approximately 10 cents per pound was offset by an approximately 10 cent per pound increase in the company's average cost-of-ethylene-production.  Ethylene sales volume decreased by approximately 130 million pounds compared to the third quarter 2010 due to a seasonal slowdown in derivative demand.  Polyethylene (PE) results declined by approximately $70 million versus third quarter 2010, primarily due to seasonal demand effects and higher ethylene costs which were only partially offset by higher PE prices.  Polypropylene profits for the fourth quarter declined approximately $40 million reflecting seasonal trends and higher raw material costs.  Total polyolefins sales volumes decreased approximately 200 million pounds, or 9 percent, versus the third quarter with polyethylene sales accounting for the majority of the decrease.

Three months ended Dec. 31, 2010 versus three months ended Dec. 31, 2009 – Excluding a non-cash LCM inventory reversal in the fourth-quarter 2010 of $163 million, O&P – Americas results improved significantly versus the fourth quarter 2009 as the average ethylene sales price increased approximately 9 cents per pound while the company's cost-of-ethylene production increased approximately 1 cent per pound.  Segment polyethylene and polypropylene results were approximately equal to fourth-quarter 2009 results.

Year ended Dec. 31, 2010 versus year ended Dec. 31, 2009 – Excluding a non-cash 2010 LCM inventory charge of $34 million, O&P – Americas results improved $976 million versus 2009.  The Company's average ethylene sales price increased approximately 14 cents per pound while the company's cost of ethylene production increased approximately 2 cents per pound as improved market conditions and a lighter feedstock slate drove improved results.  Segment polyolefin results were approximately equal in 2010 and 2009.  Total polyolefins sales increased approximately 150 million pounds, or 2 percent, in 2010 versus 2009.

Olefins & Polyolefins – Europe, Asia, International (O&P-EAI) – The primary products of this segment include ethylene and its co-products (propylene and butadiene), polyethylene, polypropylene, global polypropylene compounds, Catalloy process resins and Polybutene-1 resins.  

Three months ended Dec. 31, 2010 versus three months ended Sept. 30, 2010 – Excluding a non-cash LCM inventory charge of $5 million in the third quarter 2010 and a $10 million non-cash LCM reversal in the fourth quarter 2010, EBITDA decreased by $179 million versus the third quarter 2010.  Lower olefins margins, due to increased feedstock prices, drove results lower.  A polyolefins sales decrease of approximately 100 million pounds, which resulted from seasonal declines and labor actions in France, also contributed to the lower fourth-quarter results.  Dividends of $6 million were received from joint ventures during the fourth quarter 2010.  

Three months ended Dec. 31, 2010 versus three months ended Dec. 31, 2009 – Excluding a non-cash LCM inventory reversal of $10 million in the fourth quarter 2010, EBITDA increased $64 million versus the fourth quarter 2009.  Improved polyolefins margins accounted for the majority of the improved performance.  Volume growth in olefins, polypropylene and polypropylene compounding also contributed to the improvement.  

Year ended Dec. 31, 2010 versus year ended Dec. 31, 2009 – EBITDA increased $477 million versus 2009.  Improved olefins and polyolefins volumes and margins contributed to the improved performance.  Ethylene production increased approximately 100 million pounds, or 3 percent, while polyethylene and polypropylene volumes increased a combined 1.1 billion pounds, or 10 percent.

Intermediates & Derivatives (I&D) – The primary products of this segment include propylene oxide (PO) and its co-products (styrene monomer, tertiary butyl alcohol, isobutylene and tertiary butyl hydroperoxide), and derivatives (propylene glycol, propylene glycol ethers and butanediol); acetyls, ethylene oxide and its derivatives, and flavors and fragrances chemicals (divested in December 2010).  

Three months ended Dec. 31, 2010 versus three months ended Sept. 30, 2010 – Excluding a non-cash LCM inventory reversal of $17 million in the fourth quarter 2010, EBITDA declined by $32 million versus the third quarter 2010.  The majority of the decline occurred in PO and PO derivatives and was due to a seasonal decrease in demand and the effects of a planned maintenance turnaround.  Intermediates results declined versus the third quarter 2010 primarily due to higher raw material costs.  

Three months ended Dec. 31, 2010 versus three months ended Dec. 31, 2009 – I&D results improved significantly in the fourth quarter 2010 compared to the fourth quarter 2009.  PO and PO derivatives EBITDA improved due to higher PO sales volumes and improved margins for most products.  Intermediates results were relatively unchanged versus the prior year period.

Year ended Dec. 31, 2010 versus year ended Dec. 31, 2009 – Excluding a non-cash LCM inventory charge of $8 million in 2010, EBITDA increased $324 million versus 2009.  Improved PO and PO derivative volumes and margins, resulting from improved durable goods demand and competitor operating problems, accounted for approximately 80 percent of the improved segment profitability.  Increased Intermediates volumes also had significant positive impacts on the results.

Refining & Oxyfuels (R&O) – The primary products of this segment include gasoline, diesel fuel, heating oil, jet fuel, petrochemical raw materials, methyl tertiary butyl ether (MTBE) and ethyl tertiary butyl ether (ETBE).  

Three months ended Dec. 31, 2010 versus three months ended Sept. 30, 2010 – Excluding a non-cash LCM inventory charge of $1 million in the third quarter 2010 and a non-cash LCM reversal of $133 million in the fourth quarter 2010, EBITDA declined $62 million versus the third quarter 2010.  Houston refinery financial performance was nearly unchanged versus third quarter 2010.  Crude oil volume at the Houston refinery decreased by approximately 28,000 barrels per day (10 percent of nameplate capacity) compared to the third quarter primarily due to unplanned coker unit outages and a supply disruption from a third-party utility provider.  Refining margins improved as the average industry benchmark margin increased approximately $2 per barrel during the quarter.  At the Berre refinery, industry benchmark margins increased approximately $1 per barrel, while volumes declined as a result of national labor actions in France.  Oxyfuels results, as expected, declined compared to the third quarter.  Seasonally lower margins accounted for the majority of the approximately $75 million decline.  

Three months ended Dec. 31, 2010 versus three months ended Dec. 31, 2009 – Excluding a $133 million non-cash LCM inventory reversal in the fourth quarter 2010, segment EBITDA increased  $86 million versus the fourth quarter 2009.  At the Houston refinery, an increase in the industry benchmark margin of approximately $7 per barrel was the primary contributor to the improved results.  Berre refinery results were relatively unchanged.  Oxyfuels results declined from an atypically strong fourth quarter 2009 due to lower margins.  

Year ended Dec. 31, 2010 versus year ended Dec. 31, 2009 – Segment EBITDA increased $197 million versus 2009.  An increase in the industry benchmark margin of approximately $7 per barrel was the primary contributor to an approximately $430 million improvement in performance at the Houston refinery.  Berre refinery results were relatively unchanged versus 2009.  Oxyfuels results declined approximately $200 million in 2010 from the record year 2009, principally as a result of lower margins.

Technology Segment – The principal products of the Technology segment include polyolefin catalysts and production process technology licenses and related services.

Three months ended Dec. 31, 2010 versus three months ended Sept. 30, 2010 – Results declined due to seasonally lower polyolefin catalyst sales and lower licensing income.  Fourth-quarter 2010 results were negatively impacted by a $17 million LIFO inventory adjustment.

Three months ended Dec. 31, 2010 versus three months ended Dec. 31, 2009 – Results declined due to lower licensing income.  Fourth-quarter 2010 results were negatively impacted by a $17 million LIFO inventory adjustment.

Year ended Dec. 31, 2010 versus year ended Dec. 31, 2009 – Results declined primarily due to lower licensing income which was partially offset by higher catalyst sales.

Liquidity

Company liquidity, which we define as cash and cash equivalents plus funds available through established lines of credit, less appropriate reserves and letters of credit, was approximately $6.1 billion at Dec. 31, 2010.  The $6.1 billion of liquidity consisted of approximately $4.2 billion cash and approximately $1.4 billion of undrawn funds available through the $1.75 billion asset-based loan facility, and approximately $0.5 billion available through the euro 450 million European securitization facility.

Capital Spending

Capital expenditures, including maintenance turnaround, catalyst and information technology related expenditures, were $204 million during fourth quarter 2010, and $779 million for the full year 2010.  Reduced spending versus original projections was due, in part, to improved capital project execution.

CONFERENCE CALL

LyondellBasell will host a conference call today, February 18, 2011, at 11:00 a.m. ET.  Participating on the call will be: Jim Gallogly, Chief Executive Officer; Kent Potter, Executive Vice President and Chief Financial Officer; Sergey Vasnetsov, Senior Vice President  - Strategic Planning and Transactions; and Doug Pike, Vice President of Investor Relations.  The toll-free dial-in number in the U.S. is 800-369-1176.  For international numbers, please go to our website, www.lyondellbasell.com/teleconference, for a complete listing of toll-free numbers by country.  The pass code for all numbers is 8764192.

A replay of the call will be available from 2:00 p.m. ET Feb. 18 to 8:00 a.m. ET on March 18.  The dial-in numbers are 888-568-0028 (U.S.) and +1 203-369-3451 (international). The pass code for each is 6323.

A copy of the slides that accompany the call will be available on our website at http://www.lyondellbasell.com/earnings.

ABOUT LYONDELLBASELL

LyondellBasell (NYSE: LYB) is one of the world's largest plastics, chemical and refining companies. The company manufactures products at 58 sites in 18 countries. LyondellBasell products and technologies are used to make items that improve the quality of life for people around the world including packaging, electronics, automotive components, home furnishings, construction materials and biofuels. More information about LyondellBasell can be found at www.lyondellbasell.com.

FORWARD-LOOKING STATEMENTS

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 which are believed to be reasonable at the time made and are subject to significant risks and uncertainties. Actual results could differ materially based on factors including, but not limited to, 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 and natural gas; 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 products 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; legal and environmental proceedings; tax rulings, consequences or proceedings; technological developments, and our ability to develop new products and process technologies; current and 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 service our substantial debt.  Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in our registration statements filed with the Securities and Exchange Commission, which are available at www.lyondellbasell.com/InvestorRelations.

(1) NON-GAAP MEASURES

This release makes reference to certain "non-GAAP" financial measures as defined in Regulation G of the U.S. Securities Exchange Act of 1934, as amended.  We report our financial results in accordance with U.S. generally accepted accounting principles, but believe that certain non-GAAP financial measures provide useful supplemental information to investors regarding the underlying business trends and performance of the company's ongoing operations and are useful for period-over-period comparisons of such operations. These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the financial measures prepared in accordance with GAAP.

As a result of the company's emergence from Chapter 11 bankruptcy and the application of fresh-start accounting, the company reports its financial information for a predecessor period ending on April 30, 2010, the date of emergence from bankruptcy, and a successor period after such date in accordance with GAAP.  For purposes of this press release, we have presented "combined" results of operations for the  twelve months ended Dec. 31, 2010.  For the twelve months ended Dec. 31, 2010, the combined results are the sum of (i) the first four months of 2010, representing the predecessor and (ii) the eight months ended December 31, 2010, representing the successor period.  The results of operations on the combined basis are non-GAAP because they combine two separate reporting entities.  We have included the combined financial information because we believe it gives investors a better understanding of the year-over-year comparisons.  

We also include certain other non-GAAP measures, such as EBITDAR and EBITDA.  While we believe that EBITDAR and EBITDA are measures commonly used by investors, EBITDAR and 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. For purposes of this release, EBITDAR means earnings before interest, taxes, depreciation, amortization and restructuring costs, as adjusted for certain unusual and non-recurring items such as impairment charges, reorganization items, the effect of mark-to-market accounting on our warrants and current cost inventory adjustments.  EBITDA means earnings before interest, taxes, depreciation and amortization, as adjusted for the same items, to the extent applicable in the successor periods.  EBITDAR and EBITDA both also include dividends from joint ventures.  EBITDAR and EBITDA should not be considered as alternatives to profit or operating profit for any period as an indicator of our performance, or as alternatives to operating cash flows as a measure of our liquidity.  Additionally, this release contains EBITDA(R), which represents a combined predecessor and successor period when the predecessor period is adjusted for restructuring costs, therefore representing EBITDAR, and the successor period is not adjusted, because there were no restructuring costs, or any such costs are included in net income.  

Reconciliations of non-GAAP financial measures to their nearest comparable GAAP financial measures are provided in the financial tables at the end of this release.

The primary impacts on the Company's financial results after the reorganization under Chapter 11 and the application of fresh-start accounting, which make comparisons of the predecessor and successor periods difficult, include (i) significant changes to our inventory valuations; (ii) lower depreciation and amortization expense; and (iii) lower interest expense.  In connection with the application of fresh-start accounting, we were required to write our inventory up to fair market value, which was significant given the high crude oil prices at April 30, 2010.  However, in the fourth quarter 2010, prices rose to levels close to those at April 30, 2010, and it became necessary to reverse significant portions of the LCM charges taken in the second and third quarters.  The lower depreciation and amortization expenses in the successor period are the result of the revaluation of assets in connection with fresh-start accounting.  Lower interest expense is the result of the substantial changes to the balance sheet as a result of the reorganization.

Prior to emergence from Chapter 11, we utilized a combination of First-In, First-Out and Last-In, First-Out inventory methods for financial reporting. For purposes of evaluating segment results, management reviewed operating results using current cost, which approximates LIFO. As supplementary information, and for our segment reporting, we provide EBITDAR information on a current cost basis for periods prior to our emergence from Chapter 11. Since emergence from Chapter 11, we have utilized the LIFO inventory methodology and EBITDA information for periods after our emergence is on a LIFO basis.  The combined financial results and measures that are disclosed in this press release, including EBITDAR and EBITDA, therefore use both current cost and LIFO methodologies.

This release contains time sensitive information that is accurate only as of the time hereof. Information contained in this release is unaudited and subject to change. LyondellBasell undertakes no obligation to update the information presented herein except to the extent required by law.

SOURCE LyondellBasell