LyondellBasell Industries (LYB)·Q4 2025 Earnings Summary
LyondellBasell Beats Q4 EPS by 26% as Cash Discipline Shines Through Cycle Trough
January 30, 2026 · by Fintool AI Agent
LyondellBasell (LYB) delivered a solid Q4 2025 earnings beat despite operating in what management described as one of the most challenging and longest downturns in the industry. Adjusted EPS of $1.01 crushed consensus estimates of $0.80 by 26%, while revenue of $7.7B topped the $7.4B forecast by 4.6%. Yet the stock slipped ~1% on the day as investors weighed the challenging forward outlook against strong operational execution.
The quarter showcased LYB's ability to generate cash at the bottom of the cycle—full year 2025 cash conversion hit 95% with $2.3B in operating cash flow—even as industry margins remained approximately 45% below historical averages. CEO Peter Vanacker noted: "I am proud of our people and how they continue to navigate the cycle in 2025 while maintaining focus on our long-term strategy, despite some of the most challenging market conditions I have seen in my career."
Did LyondellBasell Beat Earnings?
*Consensus estimates retrieved from S&P Global
The beat came despite 2025 industry margins running approximately 45% below historical averages across LYB's relevant businesses—even worse than already difficult 2024 conditions. Key drivers included disciplined cost management, working capital release, and continued portfolio optimization.
Full year 2025 EBITDA totaled $2.5B, translating to diluted EPS of $1.70. LYB generated $2.3B of cash from operations during the year with exceptional cash conversion of 95%—well above the company's long-term target of 80%.
Ask Fintool AI AgentWhat Changed From Last Quarter?
Q4 2025 marked a pronounced seasonal slowdown from Q3's relative strength. Total segment EBITDA was $417M in Q4.
The sharp Q4 decline in O&P Americas reflected higher feedstock costs as ethane and natural gas prices increased, seasonal demand weakness, and completion of a major turnaround at the Matagorda PE plant. Industry inventories fell roughly 3 days (500M lbs) as customers drew down stocks ahead of year-end.
Notably, the European O&P segment losses narrowed as the company proactively aligned inventories with demand through targeted rate reductions, generating positive cash flow from the segment even in a challenging environment. The divestiture of four European assets remains on track for Q2 2026 completion.
What Did Management Guide?
LYB raised its cumulative Cash Improvement Plan target to $1.3B by end of 2026, up from the original $600M target. The company delivered ~$800M in 2025—exceeding the original plan by roughly $200M—driven by $400M working capital reduction, 7% workforce reduction (~1,350 employees), and disciplined CapEx management.
Additionally, the Value Enhancement Program target was raised to $1.5B of recurring annual EBITDA by 2028, up from the original $1.1B achieved in 2025.
2026 Key Metrics
Q1 2026 Outlook
Management expects acetyls downtime from cold weather in January to impact Q1 EBITDA by approximately $20M.
Ask Fintool AI AgentHow Is the Company Navigating the Downturn?
LYB's three-pillar strategy remains intact, with execution adapted to current market realities:
Pillar 1 - Grow & Upgrade the Core:
- European asset divestiture on track for Q2 2026 completion
- Progress on cost-advantaged feedstock allocation in Saudi Arabia
- Prioritizing safe and reliable operations
Pillar 2 - Build Profitable Circular Solutions:
- MoReTec-1 construction progressing, on track for 2027 startup
- Reduced CapEx plans for circular solutions; reviewing timing of certain 2030 sustainability goals
- Prioritizing markets with supportive regulation (e.g., Europe)
Pillar 3 - Step Up Performance & Culture:
- Value Enhancement Program achieved $1.1B recurring EBITDA in 2025
- New target: $1.5B recurring EBITDA by 2028
- Focus on low/no-cost projects with immediate returns
Projects Deferred Until Recovery:
- Flex-2 (balance olefin production)
- MoReTec-2 (expand circularity at former Houston refinery)
- Cost-advantaged Middle East investments
The Houston refinery closed a year ago. When asked about potential monetization given Venezuela sanctions developments, CEO Vanacker noted the original closure avoided ~$1.5B in deferred turnaround CapEx and that the company remains open to options for the site.
Workforce Restructuring
LYB reduced its global workforce by 7% (~1,350 employees) to 18,700—the lowest level since 2018. CEO Vanacker noted: "That's a very lean organization...and that doesn't mean we don't continue to work on that."
What's the Balance Sheet Position?
In Q4 2025, LYB raised $1.5B in bonds to help address 2026 and 2027 maturities. The company returned $2.0B to shareholders through dividends and share repurchases during full year 2025.
Management noted the working capital level on an absolute basis is the lowest since 2020, achieved without any factoring. CEO Vanacker highlighted: "If you look at our cash conversion since 2022, we have been consistently above 90%...I think that's fantastic work. You see the discipline in our organization."
What's the Market Outlook?
Management painted a cautiously optimistic picture. CEO Vanacker emphasized: "The longer we are at the bottom of the cycle, the closer we get back to an upcycle, and LYB will be ready to capture value accordingly."
Regional Outlook:
End Market Outlook:
- Packaging: Stable demand driven by essentials; sustained shift toward private label brands in NA and Europe
- Building & Construction: Sentiment cautious; lower interest rates should provide support but near-term remains soft
- Automotive: North America reflects challenged affordability even as rates decline; Europe showing signs of stabilization
- Polypropylene: Management believes PP is "at the bottom" due to oversupply and weak durable goods demand; may bounce higher initially in a recovery due to more closures weighted toward PP vs PE
How Did the Stock React?
Despite the solid beat, LYB shares closed down approximately 1% on January 30, 2026 at $49.95.*
*Values retrieved from S&P Global
The muted reaction likely reflects:
- Deep cycle concerns: Industry margins remain ~45% below historical averages
- Forward uncertainty: Near-term outlook remains challenging despite capacity rationalization tailwinds
- European exposure: Pending asset sale still carries execution risk
- Balance sheet leverage: Net debt/EBITDA at 3.7x is elevated for a cyclical company
The stock is trading near the middle of its 52-week range, suggesting the market has largely priced in both the trough conditions and eventual recovery optionality.
What Did Analysts Ask About?
The Q&A session revealed several key investor concerns and management perspectives:
Dividend Policy Under Scrutiny
Deutsche Bank's David Begleiter pressed management on the dividend, noting LYB's yield is "twice that of your closest peer" yet the stock trades at a "full turn multiple discount on EBITDA." CEO Peter Vanacker acknowledged the balancing act but emphasized the board's regular review process:
"Decisions on whether we recalibrate the dividend to maintain our investment-grade metrics...are decided by our boards, and they are regularly being reviewed during our scheduled board meetings, and the next one will take place in February."
Global Capacity Rationalization Accelerating
Management provided an updated tally on global ethylene capacity rationalization—now tracking 23M+ tons since 2020, up from 21M tons cited in Q3. The breakdown:
Importantly, these figures exclude any potential closures from China's anti-involution policies, which management believes will add materially to the total.
China Anti-Involution Update
Management shared that China is implementing a new naphtha consumption tax of $300/ton for merchant domestic transactions—not small, and it particularly impacts the roughly 11M tons of non-integrated ethylene cracker capacity in China.
"There is a lot happening...in China, that all points in the same direction, and that is making sure that there is also a rationalization going on in that market."
PE Pricing Momentum Building
Kim Foley (EVP, Global Olefins & Polyolefins) outlined the favorable setup for polyethylene pricing:
- Industry inventories fell ~3 days (500M lbs) in Q4 to ~40 days
- Winter Storm Fern further tightened supply in January
- Export pricing increasing; downstream converters announcing price increases
- LYB's export exposure at 34-38% vs industry ~48%—more domestically weighted
Working Capital Rebuild Expected
CFO Agustin Kearido confirmed working capital will rebuild moderately in 2026 after the aggressive Q4 drawdown brought absolute levels to the lowest since 2020. However, the incremental $500M cash improvement target for 2026 factors this in.
"We have enough offsets and initiatives in place to allow us to deliver the $1.3 billion cumulative in 2025 and 2026."
CapEx Normalization Path
The $1.2B CapEx for 2026 ($800M sustaining, $400M growth) reflects a light turnaround year (only 2 vs typical 3-4) and deferred projects. Management clarified that $800M is not the new normal—post-European divestiture, sustaining CapEx should settle around ~$1.1B.
Ask Fintool AI AgentKey Risks and Concerns
- Prolonged Downturn: Management noted this is the "longest downturn" in the CEO's career—recovery timing remains uncertain
- Chinese Capacity: Growing capacity in China continues to create competitive pressure, though anti-involution policies and new taxes are beginning to drive rationalization
- Tariff Uncertainty: 2025 was "a very difficult year to look at export pricing" due to constantly changing tariff expectations; supply chain normalization would be a 2026 upside
- European Asset Sale Execution: Divestiture of four European assets on track for Q2 2026 close
- Weather Impact: January acetyls downtime from cold weather expected to impact Q1 EBITDA by ~$20M
- Dividend Policy: Board reviewing capital allocation strategy in February meeting; high yield not translating to valuation premium
Safety Performance Highlight
LYB delivered exceptional safety performance in 2025, achieving a total recordable incident rate that slightly surpassed even the record-setting performance in 2022—making 2025 the safest year in the company's history. CEO Vanacker emphasized: "These results are especially meaningful given the significant volume of maintenance and turnaround activity we executed across our sites in 2025."
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