Company Reports

LyondellBasell is one of the largest petrochemical producers in the world, manufacturing ethylene and propylene and a myriad of chemical derivatives, including propylene oxide, or PO. These products form the building blocks for downstream chemicals and plastics that are used in industrial and consumer markets alike. Roughly 70% of LyondellBasell’s ethylene and polyethylene production capacity sits in North America. Its total ethylene and propylene capacity is fairly evenly split between North American and international markets.

Following its second-quarter results, we see no reason to change our $118 fair value estimate for narrow-moat-rated LyondellBasell. Results materially outpaced our near-term expectations, but we simply see them as a continuation of an accelerated recovery. That recovery benefits from an attractive ratio of high oil prices relative to low gas prices.

LyondellBasell is one of the largest petrochemical producers in the world, manufacturing ethylene and propylene and a myriad of chemical derivatives, including propylene oxide, or PO. These products form the building blocks for downstream chemicals and plastics that are used in industrial and consumer markets alike. Roughly 70% of LyondellBasell’s ethylene and polyethylene production capacity sits in North America. Its total ethylene and propylene capacity is fairly evenly split between North American and international markets.

LyondellBasell is one of the largest petrochemical producers in the world, manufacturing ethylene and propylene and a myriad of chemical derivatives, including propylene oxide, or PO. These products form the building blocks for downstream chemicals and plastics that are used in industrial and consumer markets alike. About 70% of LyondellBasell’s ethylene and polyethylene production capacity sits in North America. Its total ethylene and propylene capacity is fairly evenly split between North American and international markets.

LyondellBasell is one of the largest petrochemical producers in the world, manufacturing ethylene and propylene and a myriad of chemical derivatives, including propylene oxide, or PO. These products form the building blocks for downstream chemicals and plastics that are used in industrial and consumer markets alike. About 70% of LyondellBasell’s ethylene and polyethylene production capacity sits in North America. Its total ethylene and propylene capacity is fairly evenly split between North American and international markets.

LyondellBasell's first-quarter results showed demand was recovering in line with our outlook for the cadence of the year. Adjusted EBITDA rose sequentially from the fourth quarter driven by profit growth in most segments. In 2024, we think Lyondell will generate higher profits from a favorable price-to-cost spread and improved volumes, which will allow the company to run its plants at a higher capacity utilization.

LyondellBasell is one of the largest petrochemical producers in the world, manufacturing ethylene and propylene and myriad chemical derivatives, including propylene oxide, or PO. These products form the building blocks for downstream chemicals and plastics that are used in industrial and consumer markets alike. About 70% of LyondellBasell’s ethylene and polyethylene production capacity sits in North America. Its total ethylene and propylene capacity is fairly evenly split between North American and international markets.

LyondellBasell is one of the largest petrochemical producers in the world, manufacturing ethylene and propylene and myriad chemical derivatives, including propylene oxide, or PO. These products form the building blocks for downstream chemicals and plastics that are used in industrial and consumer markets alike. About 70% of LyondellBasell’s ethylene and polyethylene production capacity sits in North America. Its total ethylene and propylene capacity is fairly evenly split between North American and international markets.

Weak end-market demand continued to weigh on LyondellBasell as revenue dropped for the sixth quarter straight, decreasing 3% year over year and 7% sequentially. The firmwide adjusted EBITDA margin held steady year over year but declined more than 400 basis points sequentially, exiting 2023 at 9%. However, adverse impacts from the refining business (which LyondellBasell is gradually discontinuing) contribute to some of the firm’s weaker results, excluding that segment’s performance yields little improvement. Even the automotive industry, which has long been one of LyondellBasell’s few enduring end markets, demonstrated weak year-end demand. Despite the quarterly downturn, we remain optimistic about LyondellBasell’s longer-term prospects and anticipate rebounding demand will materialize around the second half of 2024. We’ll incorporate the firm’s full financial and operating results shortly but maintain our $118 fair value estimate and narrow moat rating at present.

LyondellBasell's third-quarter results reflected continued challenges arising from a sluggish global macroeconomic environment, with sales down 13% year over year. Favorable tailwinds contributed to year-over-year EBITDA margin expansion exceeding 370 basis points, though most of this is attributable to two one-off events during the quarter rather than a signal of improving market dynamics. We don't expect significant improvements through year-end either, though we remain optimistic that end markets will begin to recover around 2024 and beyond. We lower our fair value estimate to $118 per share from $124 and maintain our narrow moat rating. Shares remain slightly undervalued at the time of writing.

LyondellBasell is one of the largest petrochemical producers in the world, manufacturing ethylene and propylene and myriad chemical derivatives, including propylene oxide, or PO. These products form the building blocks for downstream chemicals and plastics that are used in industrial and consumer markets alike. About 70% of LyondellBasell’s ethylene and polyethylene production capacity sits in North America. Its total ethylene and propylene capacity is fairly evenly split between North American and international markets.

LyondellBasell’s second-quarter performance emulated that of peers, with sales down 31% year over year and roughly flat sequentially. The firmwide adjusted EBITDA margin was also flat compared with last quarter at 14%. Results reflect softer-than-expected demand across end markets owing to widespread economic uncertainty, a dynamic that will likely persist through year-end. We’ll incorporate the firm’s full financial results shortly, but after this first look, we maintain our narrow moat rating and $124 fair value estimate.

LyondellBasell is one of the largest petrochemical producers in the world, manufacturing ethylene and propylene and myriad chemical derivatives, including propylene oxide, or PO. These products form the building blocks for downstream chemicals and plastics that are used in industrial and consumer markets alike. About 70% of LyondellBasell’s ethylene and polyethylene production capacity sits in North America. Its total ethylene and propylene capacity is fairly evenly split between North American and international markets.

Narrow-moat LyondellBasell’s first-quarter results reflected a broadly weaker macroeconomic landscape compared with last year, with total sales decreasing $3 billion year over year and operating margins contracting 100 basis points to 14%. Sequentially, sales were flat and the firmwide adjusted EBITDA margin nearly doubled. The firm’s quarter-over-quarter performance reflects lower energy costs and moderately improving demand across end markets, partially offset by standard seasonal declines. We note, however, that the fourth quarter of 2022 was also very weak for LyondellBasell, as extremely high natural gas prices significantly increased the firm’s input costs and constrained end market demand. We’ll incorporate the firm’s full financial and operating results shortly, but after this first look our $124 per share fair value estimate is unchanged.

LyondellBasell’s fourth-quarter earnings reflected several challenges that culminated in the back half of 2022. Significant constraints in top-line growth materialized from reduced global demand in several end markets, as economic and geopolitical concerns compounded typical adverse seasonal impacts. An unfavorable pricing environment, heightened natural gas costs, and lower fixed cost absorption (due to reduced capacity utilization) all contributed to a sequential EBITDA margin contraction of 120 basis points.

LyondellBasell is one of the largest petrochemical producers in the world, manufacturing ethylene and propylene and myriad chemical derivatives, including propylene oxide, or PO. These products form the building blocks for downstream chemicals and plastics that are used in industrial and consumer markets alike. About 70% of LyondellBasell’s ethylene and polyethylene production capacity sits in North America. Its total ethylene and propylene capacity is fairly evenly split between North American and international markets.

We are launching coverage of LyondellBasell with a fair value estimate of $116 per share. We award the firm a narrow moat driven by its cost advantage. We assign the company a stable moat trend, a Morningstar Uncertainty Rating of Medium, and a Standard capital allocation rating.

LyondellBasell is one of the largest petrochemical producers in the world, manufacturing ethylene and propylene and myriad chemical derivatives, including propylene oxide, or PO. These products form the building blocks for downstream chemicals and plastics that are used in industrial and consumer markets alike. About 70% of LyondellBasell’s ethylene and polyethylene production capacity sits in North America. Its total ethylene and propylene capacity is fairly evenly split between North American and international markets.

In our view, years of record profits are over for U.S. olefin producers, which make ethylene, a chemical building block for plastics. LyondellBasell generates roughly half of its profits from U.S. olefin production and serves as a play on the oil/gas price ratio as well as the fractionation spread, the difference between gas and natural gas liquid prices.

We are no longer providing equity research on LyondellBasell. We provide broad coverage of more than 1,400 companies across more than 140 industries and adjust our coverage as necessary based on client demand and investor interest.