LyondellBasell Industries N.V. (LYB) Earnings & Analysis

Latest quarter

LyondellBasell reported third-quarter revenue of $8.5 billion, up from $7.7 billion a year earlier and above the consensus. Adjusted earnings of $2.54 per share fell short of the consensus.

The company reported diluted earnings of $2.32 per share, compared with a loss per share a year earlier. Its gross margin rose to 17.6% from 11.7%, while its operating margin rose to 12.6% from −9.46%.

In its filing, LyondellBasell said industry supply constraints associated with the Middle East conflict lifted margins in its olefins and polyolefins businesses over the first nine months of the year. For the third quarter, the company said lower polymer prices reduced profitability in the Americas compared with the preceding quarter, while prices and volumes fell in its Europe, Asia and International business after European asset sales.

The filing said intermediates and derivatives results improved sequentially as the Bayport PO/TBA site returned to full rates and global supply disruptions lifted gasoline crack spreads and octane values. LyondellBasell generated $1.4 billion in free cash flow during the quarter, compared with $577.0 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Asked about demand, Kimberly Foley said customers across the value chain had kept inventories lean amid price volatility. She said demand was firm in North America but softening in Europe, while logistics costs and feedstock availability continued to affect trade flows. Foley said China had resumed importing polyethylene after exporting it earlier in the year.

Foley told analysts that polyethylene pricing would remain responsive to feedstock costs, demand, supply-chain constraints and inventory levels. Asked about feedstocks, she said rising North American natural gas liquids costs could compress ethylene margins in the short term, although additional fractionation capacity should support ethane supply.

Aaron Ledet said oxyfuels margins had declined through October as gasoline cracks and premiums fell and butane prices rose. He added that seasonal demand was affecting fourth-quarter volumes, while Rhine logistics constraints had moderated the margin decline in Europe relative to the United States.

On capital allocation, Chief Financial Officer Agustin Izquierdo said the company continued to prioritize its investment-grade balance sheet, sustaining investment and selective growth spending. He said inventory sales had helped cash conversion in the quarter, although the full-year change in working capital would depend on year-end prices. Izquierdo added that the workforce had become smaller through portfolio changes and restructuring.

Asked about circularity investment, Chief Executive Officer Peter Vanacker said the strategy depended on regulation, customer demand and infrastructure. He said the company was assuming MoReTec-2 would be in Europe, following a successful startup and learning from MoReTec-1, while any U.S. deployment would depend on demand visibility and regulatory progress.

Vanacker described the former Houston refinery-site transaction as a real estate and capital allocation decision rather than a change in corporate strategy. He said the company preferred to invest in its core olefins and polyolefins and intermediates and derivatives assets.

Guidance

Chief Financial Officer Agustin Izquierdo said LyondellBasell now expects its full-year effective tax rate to be at the upper end of its prior guidance, citing profitability in the United States.