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How LYB’s Olefins & Polyolefins Americas Segment Did in 3Q16

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Nov. 4 2016, Updated 9:04 p.m. ET

LyondellBasell’s Olefins & Polyolefins Americas segment

LyondellBasell’s (LYB) Olefins & Polyolefins Americas segment reported revenue of $2.3 billion in 3Q16, compared to $2.5 billion in 3Q15, implying a fall in the segment’s revenue by ~7.0% year-over-year. LyondellBasell’s Olefins & Polyolefins Americas segment represented 31.8% of LyondellBasell’s total revenue in 3Q16.

During 3Q16, the Olefins & Polyolefins Americas segment reported EBITDA (earnings before interest, tax, depreciation, and amortization) of $682 million, compared to $841 million in 3Q15. This implies a fall of 19% in its EBITDA on a year-over-year basis.

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Why the revenue and EBITDA falls in 3Q16?

LYB’s Olefins & Polyolefins Americas segment includes ethylene, polyethylene, and polypropylene. LyondellBasell produces a major portion of ethylene by using natural gas liquids (or NGLs). The prices of NGLs fell in 3Q16, negatively affecting the average sales prices of Olefins & Polyolefins co-products. The lower prices affected the segment’s revenue by -5%. Its product volumes were lower due to planned maintenance at the Corpus Christi and Morris, Illinois facilities, which impacted revenue by -2%.

The segment’s EBITDA was impacted by -16% in 3Q16, primarily due to the planned facility maintenance mentioned above. Lower prices impacted margins by another 12%. However, the absence of the $79 million in LCM (lower of cost or market) inventory adjustment that was reflected in 3Q15 positively impacted EBITDA by 9% in 3Q16.

The positive news for investors is that the Corpus Christi ethylene facility is expected to operate starting in November after the turnaround.

Investors can indirectly hold LyondellBasell by investing in the iShares U.S. Basic Materials ETF (IYM), which invests 2.0% of its holdings in LyondellBasell as of November 1, 2016. The top holdings of this fund include Dow Chemical (DOW), DuPont (DD), and Monsanto (MON) at weights of 11.4%, 11.3%, and 8.3%, and respectively, as of November 1, 2016. 

In the next article, we’ll analyze the performance of LyondellBasell’s Olefins & Polyolefins Europe, Asia, and International segment in 3Q16.

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