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Why LYB’s Olefins & Polyolefins EAI Segment Saw Higher Earnings


Nov. 7 2016, Updated 8:06 a.m. ET

LyondellBasell’s Olefins and Polyolefins EAI segment

LyondellBasell’s (LYB) Olefins & Polyolefins Europe, Asia, and International (or EAI) segment reported revenue of $2.6 billion in 3Q16 compared to $2.9 billion in 3Q15, implying a fall of ~10.0% in the segment’s revenue on a year-over-year basis. 

LyondellBasell’s Olefins & Polyolefins EAI segment represented 35.8% of LyondellBasell’s total revenue in 3Q16.

In 3Q16, the Olefins & Polyolefins EAI segment reported EBITDA (earnings before interest, tax, depreciation, and amortization) of $584 million, compared to $549 million in 3Q15. This implies a fall in EBITDA of 6.4% year-over-year.

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Driving factors

The Olefins & Polyolefins EAI segment includes ethylene, polyethylene, polypropylene, global polypropylene compounds, Catalloy process resins, and Polybutene-1 resins. The fall in the segment’s revenue was primarily due to the fall in the average sales price across these products. The fall in the sales price was due to lower crude prices, which fell 4% in the span of three months from July to September 2016. However, sales volumes remain constant on a year-over-year basis due to the absence of maintenance in this segment.

The segment’s EBITDA rose 7% in the absence of turnaround activity. Further, the segment’s EBITDA rose 3%, primarily due to the restructuring of its Asian polypropylene joint ventures and the sale of its Australian polypropylene assets. These gains were partially offset by price falls, which impacted EBITDA by -2%. LyondellBasell’s equity investment in the form of several joint ventures had a lower return and impacted EBITDA by -2% in 3Q16.

Investors can indirectly hold LyondellBasell by investing in the iShares U.S. Basic Materials ETF (IYM), which had invested 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%, respectively, as of November 1, 2016.

In the next article, we’ll analyze the performance of LyondellBasell’s Intermediates & Derivatives segment in 3Q16.


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