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LyondellBasell Poised on Expansion Actions, Headwinds Remain
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On Aug 18, we issued an updated research report on Netherlands-based chemical maker, LyondellBasell Industries (LYB - Free Report) .
LyondellBasell’s adjusted earnings for second-quarter 2016 missed the Zacks Consensus Estimate. Revenues fell by double digits year over year on declines across most businesses and also trailed expectations.
The company said that 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 continues to benefit from the favorable North American natural gas environment. It should also gain from its ethylene and polyethylene expansion moves.
The company is executing its expansion projects to leverage the U.S. natural gas liquids (NGLs) advantage. It remains on track with its multi-plant ethylene expansion programs across Channelview, La Porte and Corpus Christi facilities in Texas which benefit from shale gas production.
LyondellBasell has already completed an 800-million pound per year expansion at its La Porte site and a 250-million pounds per year expansion at the Channelview facility. The addition of 800 million pounds of capacity at its Corpus Christi plant is expected to complete by the end of third-quarter 2016.
LyondellBasell is also advancing plans to build a world-scale plant on the U.S. Gulf Coast for producing propylene oxide (“PO”) and tertiary butyl alcohol (“TBA”), leveraging the shale gas boom in the region. The new PO/TBA facility, considered to be the largest of its kind, will be built in the Houston area. The company has also decided to build a high density polyethylene (HDPE) plant on the U.S. Gulf Coast. The facility, which will have an annual capacity of 1.1 billion pounds (500,000 metric tons), will be the first commercial plant to employ the company’s new proprietary Hyperzone PE technology.
LyondellBasell also remains committed to deliver greater value to its shareholders leveraging healthy cash flows. The company returned roughly $1.1 billion to its shareholders in the form of dividends and share repurchases in the second quarter.
However, LyondellBasell is exposed to headwind from weak product prices. The low oil price environment remains a concern for the company. Depressed oil prices may continue to hurt its U.S. ethylene margins, thereby affecting its profitability. LyondellBasell is also exposed to macroeconomic uncertainties and volatility across end-use markets it serves.
Moreover, LyondellBasell’s operations are subject to maintenance outages, affecting its production. Maintenance turnarounds and a repair at the refinery impacted its second-quarter results. The company has a number of plant maintenances scheduled in second-half 2016. LyondellBasell expects net value of lost production in the third quarter to be around $135 million. The value of lost production for the first three quarters of 2016 has been estimated at around $300 million.
LyondellBasell currently has a Zacks Rank #3 (Hold).
Better-ranked companies in the diversified chemical space include Innospec Inc. (IOSP - Free Report) , Innophos Holdings Inc and The Chemours Company (CC - Free Report) , all sporting a Zacks Rank #1 (Strong Buy).
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LyondellBasell Poised on Expansion Actions, Headwinds Remain
On Aug 18, we issued an updated research report on Netherlands-based chemical maker, LyondellBasell Industries (LYB - Free Report) .
LyondellBasell’s adjusted earnings for second-quarter 2016 missed the Zacks Consensus Estimate. Revenues fell by double digits year over year on declines across most businesses and also trailed expectations.
The company said that 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 continues to benefit from the favorable North American natural gas environment. It should also gain from its ethylene and polyethylene expansion moves.
The company is executing its expansion projects to leverage the U.S. natural gas liquids (NGLs) advantage. It remains on track with its multi-plant ethylene expansion programs across Channelview, La Porte and Corpus Christi facilities in Texas which benefit from shale gas production.
LyondellBasell has already completed an 800-million pound per year expansion at its La Porte site and a 250-million pounds per year expansion at the Channelview facility. The addition of 800 million pounds of capacity at its Corpus Christi plant is expected to complete by the end of third-quarter 2016.
LyondellBasell is also advancing plans to build a world-scale plant on the U.S. Gulf Coast for producing propylene oxide (“PO”) and tertiary butyl alcohol (“TBA”), leveraging the shale gas boom in the region. The new PO/TBA facility, considered to be the largest of its kind, will be built in the Houston area. The company has also decided to build a high density polyethylene (HDPE) plant on the U.S. Gulf Coast. The facility, which will have an annual capacity of 1.1 billion pounds (500,000 metric tons), will be the first commercial plant to employ the company’s new proprietary Hyperzone PE technology.
LyondellBasell also remains committed to deliver greater value to its shareholders leveraging healthy cash flows. The company returned roughly $1.1 billion to its shareholders in the form of dividends and share repurchases in the second quarter.
However, LyondellBasell is exposed to headwind from weak product prices. The low oil price environment remains a concern for the company. Depressed oil prices may continue to hurt its U.S. ethylene margins, thereby affecting its profitability. LyondellBasell is also exposed to macroeconomic uncertainties and volatility across end-use markets it serves.
Moreover, LyondellBasell’s operations are subject to maintenance outages, affecting its production. Maintenance turnarounds and a repair at the refinery impacted its second-quarter results. The company has a number of plant maintenances scheduled in second-half 2016. LyondellBasell expects net value of lost production in the third quarter to be around $135 million. The value of lost production for the first three quarters of 2016 has been estimated at around $300 million.
LyondellBasell currently has a Zacks Rank #3 (Hold).
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Stocks to Consider
Better-ranked companies in the diversified chemical space include Innospec Inc. (IOSP - Free Report) , Innophos Holdings Inc and The Chemours Company (CC - Free Report) , all sporting a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>