LyondellBasell (LYB) Q2 Earnings & Sales Miss Estimates

LyondellBasell Industries (NYSE:LYB) missed earnings as well as revenue expectations in the second quarter of 2016.

The Netherlands-based chemical giant’s profits from continuing operations decreased around 17.6% to $1,092 million or $2.56 per share in the reported quarter from $1,326 million or $2.81 per share registered a year ago.

Barring inventory adjustment benefits, earnings from continuing operations were $2.45 per share for the quarter that missed the Zacks Consensus Estimate of $2.54.

Revenues fell roughly 19.9% year over year to $7,328 million, lagging the Zacks Consensus Estimate of $7,763 million.

Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) declined around 18.4% year over year to $1,783 million in the quarter.

Segment Review

Revenues from the Olefins & Polyolefins – Americas division went down 17.5% year over year to $2,211 million in the reported quarter. EBITDA fell around 25.6% year over year to $754 million as a result of inventory adjustments. Lower ethylene margins drove olefin results lower. Polypropylene volumes were lower due to the sale of Petroken.

Sales from the Olefins & Polyolefins – Europe, Asia, International segment fell 11.1% year over year to $2,721 million. EBITDA jumped around 17.1% year over year to $576 million, supported by inventory adjustments and improved polyolefin results due to better spreads as well as volumes. Equity income from joint ventures in the segment increased by $17 million.

Intermediates and Derivatives segment sales skid 18.1% to $1,769 million in the reported quarter. EBITDA decreased roughly 14.8% year over year to $397 million.

Revenues from the Refining segment tumbled roughly 38.7% to $1,289 million. EBITDA swung to a loss of $13 million from a profit of $159 million in the prior-year quarter. A refinery fire and subsequent downtime for repairs reduced throughput by 72,000 barrels per day in the quarter.

The Technology segment’s sales rose around 20.6% to $129 million on improved catalyst and licensing results. EBITDA improved around 28.1% to $73 million.

Financials

LyondellBasell ended the quarter with cash and cash equivalents of $1,060 million, down 20% year over year. Long-term debt rose around 10.8% year over year to $8,485 million.

LyondellBasell bought back 8.8 million ordinary shares during the reported quarter and paid dividends worth $362 million. Net cash provided by operating activities fell around 12.8% year over year to $1,261 million. Capital expenditures for the quarter were $563 million.

Outlook

LyondellBasell said that it benefited from fuel margins in the second quarter of 2016, particularly in the Oxyfuels business. The performance of polyolefin continued to be strong in the quarter. The trend of the polyolefin and chemicals market seen in the second quarter is continuing in the third quarter. However, oxyfuel and refining margins have declined since the beginning of the third quarter.

LyondellBasell’s Corpus Christi ethylene plant expansion is expected to be completed by the end of the third quarter. The second half of 2016 has a number of plant maintenances scheduled. The company’s inventory and scheduling efforts are expected to partly mitigate the impact of this production shortage.

A fourth share repurchase program was approved in the second quarter, authorizing the company to buy back up to 10% of its shares over the next 18 months.

Zacks Rank

LyondellBasell is a Zacks Rank #3 (Hold) stock.

Some better-ranked companies in the chemical space include Axiall Corporation (NYSE:AXLL) , Shin-Etsu Chemical Co., Ltd. (OTC:SHECY) and Stepan Company (NYSE:SCL) , all sporting a Zacks Rank #1 (Strong Buy).