Q4 2024 Earnings Summary
- Price increases and capacity reductions are expected to improve margins in the first quarter. LYB and other producers have announced price increases for polyethylene and polypropylene. Additionally, 5% of industry crackers are coming offline, reducing supply and potentially leading to margin improvements.
- Strategic investments in propylene production enhance LYB's competitive position. LYB has announced a Final Investment Decision (FID) for their Flex 2/metathesis unit, allowing better integration and control over propylene molecules. They are also expanding capacity in their NATPET joint venture, aiming to more than double capacity, providing the lowest delivered cost capacity in polypropylene.
- Signs of demand recovery in key markets support growth prospects. In North America, polyethylene demand improved by 8% year-over-year in 2024, with domestic demand up 4% and exports up 12%. Similarly, LYB's Propylene Oxide & Derivatives business grew by 4% year-over-year. Limited new capacity additions in polyethylene and polypropylene combined with demand recovery could support future margins.
- Significant planned maintenance turnarounds in Q1 2025 are expected to negatively impact LyondellBasell's earnings. The company is undertaking major maintenance at its Channelview facility, including an olefins unit, metathesis unit (Flex unit), and C4 processing units. This turnaround is expected to have a $190 million impact on EBITDA, compared to a $70 million impact from the previous year's turnaround.
- Higher feedstock and energy costs in Q1 2025, such as increased ethane and natural gas prices, may compress margins if LyondellBasell is unable to pass these costs onto customers. There is uncertainty about the company's ability to implement announced price increases for polyethylene and polypropylene, as management lacks a "crystal ball" to predict market acceptance. ,
- Potential oversupply in the propylene and polypropylene markets due to increased capacity additions, particularly in China, and new crude oil-to-chemical projects designed to maximize propylene output, may pressure margins over the next 2 to 3 years, challenging LyondellBasell's profitability in these segments.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Down roughly 4% (USD 9,497M vs. USD 9,929M) | Total revenue declined due to a combination of weaker market demand and pricing pressures relative to Q4 2023, with regional shifts—especially dramatic changes in Italy and Mexico—affecting the overall revenue mix. |
Operating Income (EBIT) | Declined approximately 32% (USD 214M vs. USD 315M) | Operating income suffered a steep drop driven by lower margins and increased operating costs in several segments, including the impact of unfavorable market conditions relative to the previous period, indicating that cost pressures and weaker segment performance were more pronounced in Q4 2024. |
Net Income | Reversed from positive USD 185M to negative USD 61M | Net Income deteriorated sharply as the decline in operating income, combined with higher cost pressures and adverse segment performance, overwhelmed prior gains, resulting in a substantial earnings reversal compared to Q4 2023. |
Basic EPS | Dropped drastically from 0.58 to –1.86 | Basic EPS fell dramatically as a consequence of the net income reversal and the amplified negative impact on profitability, indicating that the adverse operational performance and cost increases fully propagated to per-share earnings compared to the previous period. |
Cost of Goods Sold (COGS) | Surged from approximately USD 8,940M to USD 16,919M | COGS more than doubled, a dramatic increase far exceeding typical year‐over‐year changes, likely due to significant hikes in feedstock and energy costs along with potential changes in commodity hedging strategies, starkly contrasting with the relatively modest changes in the past. |
Revenue in Italy | Increased nearly 10-fold (USD 29M to USD 282M) | Italy’s revenue surged due to major regional shifts, which may involve reclassification, consolidation of previously unreported business, or significant market improvements in Europe relative to Q4 2023. |
Revenue in Mexico | Dropped dramatically (USD 384M to USD 38M) | Mexico’s revenue fell prominently, suggesting either divestiture, restructuring, or an abrupt decline in local demand, marking a stark contrast to the previous period’s figures. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
I&D Operating Rate | Q4 2024 | none | 75% | no prior guidance |
O&P Americas Operating Rate | Q4 2024 | none | 85% | no prior guidance |
I&D Operating Rate | Q1 2025 | none | 80% | no prior guidance |
O&P Americas Operating Rate | Q1 2025 | none | 80% | no prior guidance |
O&P EAI Operating Rate | Q1 2025 | none | 75% | no prior guidance |
EBITDA Impact (Storm) | Q1 2025 | none | $45 million | no prior guidance |
Turnaround Impact | Q1 2025 | none | $190 million | no prior guidance |
CapEx | FY 2025 | none | $1.9 billion | no prior guidance |
Effective Tax Rate | FY 2025 | none | 17% | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Maintenance Turnarounds | Consistently mentioned with details on turnarounds in Bayport, Wesseling, and Channelview, impacting operating rates and EBITDA across Q3, Q2, Q1. | Mentioned significant upcoming Channelview turnaround in Q1 2025 (expected ~$45MM EBITDA impact) and European maintenance downtime (~$20MM). | Continues to be a recurring focus with sizable financial impacts. |
Price Increases for PE and PP | Previously multiple rounds of announced PE price hikes and a few PP increases; mixed success due to seasonal demand and market conditions. | PE price decreases in Q4, contrary to earlier expectations; optimism for possible Q1 rebound, no specific success probability. | Still a focus, with recent disappointment on PE pricing but continued optimism for next quarter. |
Demand Recovery | Ongoing discussion of slow but gradual improvement in the Americas and muted demand in Europe; China still lagging, with uncertainty noted in each quarter. | Signs of recovery after years of decline; moderation of inflation and lower interest rates offer some optimism but timing remains uncertain. | Sentiment improving slightly, but overall caution on timing persists. |
Overcapacity in China | Previously addressed in Q2 as potential PO capacity expansions offset by older technology bans in China; in Q1, concern over subscale Chinese plants and margin pressure. | No direct mention of overcapacity, but slower Chinese growth is noted as part of broader structural headwinds. | Less explicit mention in Q4, though China’s weaker demand still a factor. |
European Cost Challenges | Highlighted throughout Q3, Q2, Q1 as high costs, weaker demand, and possible asset sales or rationalizations. | High energy costs and capacity rationalization continue, with O&P-EAI EBITDA loss of ~$146MM; strategic review ongoing. | Still a major issue, with further details on losses and restructuring progress in Q4. |
North American Feedstock Advantage | Previously emphasized as a major strength supporting polyethylene margins and export competitiveness in Q3, Q2, Q1. | Integrated margins down slightly in Q4 amid rising ethane prices, but strong exports and cost advantage persist. | Continues as a strategic advantage, though some short-term margin pressure observed. |
Strategic Expansions in Propylene/PP | Mentioned in Q2 with new JV in Saudi Arabia (NATPET) and in Q1 as part of global expansions; less specific in Q3. | Flex 2/metathesis unit moving forward; NATPET JV expansion in Saudi Arabia planned for cost-advantaged PP. | Further detailed expansions in Q4, focusing on integration and overseas JV growth. |
Investments in Circular Economy | Consistent updates each quarter (Q3, Q2, Q1) on MoReTec construction, acquisitions like APK, and refinery conversion projects. | CLCS volumes up 65% (~200k tons); progress on MoReTec in Germany (50k tons) and second facility planned for Houston. | Steady expansion of advanced recycling and renewable initiatives, central to long-term strategy. |
Exit from Refining & Euro Restructuring | Discussed closure timeline in Q3, Q2, Q1; Europe asset reviews for possible sales or rationalizations repeated each quarter. | Refinery shutdown underway with completion by Q1 2025; European strategic review ongoing amid capacity rationalization. | Consistent progression toward refining exit and further clarity on Euro restructuring. |
Working Capital Fluctuations | Mentioned in Q3 as part of improving cash flow management in APS; in Q1, a ~$600MM working capital build impacted cash from operations. Q2 data not provided. | Pulled forward some working capital release; strong Q4 cash conversion (~90%), planning inventory rebuild in Q1 2025. | Continues as a management focus, with proactive inventory and cash strategies. |
Advanced Polymer Solutions (APS) | Steady transformation noted in Q3, Q2, Q1 with improved margins, site rationalizations, and automotive demand challenges. | 20% EBITDA improvement in 2024; focus on customer centricity and above-market volume growth. | Ongoing transformation with notable EBITDA gains and improved customer relationships. |
Potential Oversupply for PP/Propylene | Minimal direct mention in Q3; Q2 indicated reliability issues with PDH units; Q1 had no specific commentary. | Discussed global capacity additions and China’s PDH expansions but limited new capacity in near term; most additions beyond 2025. | More explicit Q4 mention of supply/demand watch, but near-term constrained capacity. |
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Dividend Outlook
Q: Will dividend increases continue in 2025?
A: Management is confident they can responsibly grow the dividend in 2025 due to strong cash flow generation and a solid balance sheet. They have reduced capital expenditures by $750 million from previous plans and continue share buybacks, positioning them well to increase dividends. -
Margin Recovery and Demand
Q: Is sluggish demand the new normal?
A: Management anticipates demand improvement toward the second half of 2025, dismissing the current sluggishness as temporary. In North America, polyethylene domestic demand improved by 4%, overall demand by 8%, and exports grew 12% year-on-year, indicating an uptick. Limited new capacity coming online should also aid margin recovery. -
First Quarter EBITDA Outlook
Q: Will EBITDA grow in Q1 despite turnarounds?
A: EBITDA growth in Q1 may be impacted by higher feedstock and energy costs, and significant turnarounds, including a $190 million impact from the Channelview facility. Proactive shutdowns due to a freeze and lower operating rates in some segments contribute to a slow start, though North American PE and PP demand remains strong. -
Polyethylene Margins
Q: How will PE margins evolve in Q1?
A: Despite higher feedstock costs adding $0.05 to $0.06 per pound to ethylene, management is confident in margin improvement. LYB and others have announced price increases of $0.07 and $0.05 per pound. With 5% of industry crackers offline, reduced capacity should support price increases and margin expansion. -
European Capacity Cuts
Q: Is Europe seeing capacity rationalization?
A: Yes, there are ongoing capacity shutdowns in Europe due to high energy costs and market challenges. LyondellBasell is progressing with its European strategic assessment but has no announcements yet. -
Propylene Chain Strategy
Q: What's the outlook for propylene?
A: With a shift to lighter feedstocks reducing propylene supply, LYB is investing in its Flex 2 metathesis unit to enhance propylene production and integration across its propylene and propylene oxide chains. Increased PDH capacity in China sets the global floor for propylene-to-polypropylene dynamics. -
Circular Plastics Investment
Q: What's the CapEx to reach 2 million tons circular plastics?
A: Approximately 20% of total CapEx is allocated to Circular & Low Carbon Solutions. The 50,000-ton MoReTec unit in Cologne is expected to contribute $25 to $30 million in incremental EBITDA starting end of 2026. Plans for a second, 100,000-ton MoReTec unit in Houston are progressing toward a final investment decision.