Why LYB’s Intermediates and Derivatives Margin Expanded in 1Q18



Intermediates and Derivatives segment’s 1Q18 revenue

LyondellBasell’s (LYB) Intermediates and Derivatives (or I&D) segment accounted for 24.0% of its total revenue in 1Q18 compared to 25.5% in 1Q17, indicating a fall of 1.5% on a YoY (year-over-year) basis.

The segment reported revenue of nearly $2.3 billion in 1Q18, a rise of 9% on a YoY basis. In 1Q17, this segment reported revenue of $2.2 billion.

The segment witnessed a higher average sales price during the quarter compared to the previous year, helping its revenue to rise 7%. Favorable foreign currency translations further enhanced the segment’s revenue by 4%. However, falls in sales volumes due to planned and unplanned plant outages at La Porte, Channel View, and Tuscola adversely impacted its revenue by 2%.

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Segment’s EBITDA and margins

The I&D Americas segment reported EBITDA (earnings before interest, tax, depreciation, and amortization) of $486 million in 1Q18, a rise of 43.4% YoY. In 1Q17, the segment’s EBITDA was $339 million. Its EBITDA rose primarily due to a higher price increase, which resulted from higher demand and tight supply constraints.

As a result, the segment’s margin expanded. It reported an EBITDA margin of 20.7% in 1Q18 compared to 15.8% in 1Q17, representing an expansion of 490 basis points over the previous year.

Investors can indirectly hold LyondellBasell stock by investing in the Vanguard Materials ETF (VAW), which has 4.0% of its total portfolio in LyondellBasell. The fund’s other holdings include PPG Industries (PPG), Celanese (CE), and Eastman Chemical (EMN) with weights of 3.0%, 1.7%, and 1.7%, respectively, as of April 27, 2018.


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