LYONDELLBASELL INDUSTRIES N.V. GENERAL
This discussion should be read in conjunction with the information contained in our Consolidated Financial Statements, and the accompanying notes elsewhere in this report. Unless otherwise indicated, the "Company", "we", "us," "our" or similar words are used to refer toLyondellBasell Industries N.V. together with its consolidated subsidiaries ("LyondellBasell N.V. ").
OVERVIEW
During the second quarter 2022 our global portfolio of businesses delivered higher sequential earnings. Our Intermediates & Derivatives segment delivered strong results. We ran ourHouston refinery at a rate of nearly 95 percent to support increased demand for gasoline, diesel and jet fuel. Olefins and polyolefins markets reflected distinct regional dynamics. WhileNorth America demand for our products used in consumer packaging end markets remained strong, volumes inEurope decreased. InChina , markets remained weak due to zero-COVID measures and logistical challenges. During the first six months of 2022 our results declined compared to the first six months of 2021, primarily due to lower results in our O&P-Americas segment driven by lower olefin margins, and in our O&P-EAI segment from lower polyolefins volumes, compressed margins and a decline in equity earnings. These declines were partially offset by higher margins in our Refining and Intermediates & Derivatives segments.
During the second quarter and first six months of 2022 we generated
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Results of operations for the periods discussed are presented in the table
below:
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30,
Millions of dollars 2022 2022 2022 2021
Sales and other operating revenues $ 14,838 $ 13,157 $ 27,995 $ 20,643
Cost of sales 12,267 11,136 23,403 16,354
Impairments 69 - 69 -
Selling, general and administrative expenses 329 328 657 614
Research and development expenses 32 32 64 61
Operating income 2,141 1,661 3,802 3,614
Interest expense (58) (74) (132) (240)
Interest income 4 2 6 7
Other (expense) income, net (86) 19 (67) 39
Income from equity investments 22 29 51 285
Income from continuing operations before income taxes 2,023
1,637 3,660 3,705
Provision for income taxes 378 316 694 576
Income from continuing operations 1,645 1,321 2,966 3,129
Loss from discontinued operations, net of tax (1) (1) (2) -
Net income $ 1,644 $ 1,320 $ 2,964 $ 3,129
Other comprehensive income (loss), net of tax -
Financial derivatives 102 88 190 97
Unrealized losses on available-for-sale debt
securities - - - (1)
Defined benefit pension and other postretirement
benefit plans 78 5 83 28
Foreign currency translations (161) (25) (186) (30)
Total other comprehensive income, net of tax 19 68 87 94
Comprehensive income $ 1,663 $ 1,388 $ 3,051 $ 3,223
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RESULTS OF OPERATIONS
Revenues-Revenues increased by $1,681 million , or 13%, in the second quarter of
2022 compared to the first quarter of 2022 and by $7,352 million or 36% in the
first six months of 2022 compared to the first six months of 2021. Average sales
prices in the second quarter and first six months of 2022 were higher for many
of our products as sales prices generally correlate with crude oil prices, which
increased relative to the first quarter of 2022 and the first six months of
2021. These higher prices led to a 15% and 31% increase in revenue for the
second quarter and first six months of 2022, respectively. Higher volumes driven
by increased demand resulted in an 8% increase in Revenues in the first six
months of 2022 compared to the first six months of 2021. Unfavorable foreign
exchange impacts resulted in a 2% and 3% decrease in revenues for the second
quarter and first six months of 2022, respectively.
Cost of Sales-Cost of sales increased by $1,131 million , or 10%, in the second
quarter of 2022 compared to the first quarter of 2022 and by $7,049 million , or
43%, in the first six months of 2022 compared to the first six months of 2021.
These increases were primarily related to higher feedstock and energy costs.
Operating Income-Operating income increased by $480 million , or 29%, in the
second quarter of 2022 compared to the first quarter of 2022. Operating income
in our Refining, I&D, O&P-Americas , Technology and APS segments increased
$274 million , $167 million , $40 million , $13 million and $12 million ,
respectively. These increases were partially offset by a decrease in Operating
income in our O&P- EAI segment of $17 million .
Operating income increased by $188 million , or 5%, in the first six months of
2022 compared to the first six months of 2021. Operating income in our Refining,
I&D and Technology segments increased by $795 million , $522 million , and
$35 million , respectively. These increases were partially offset by decreases in
Operating income in our O&P-Americas , O&P-EAI and APS segments of $586 million ,
$551 million and $17 million , respectively.
Results for each of our business segments are discussed further in the Segment Analysis section below.
Income from Equity Investments-Income from our equity investments decreased by$7 million , or 24%, in the second quarter of 2022 compared to the first quarter of 2022 and by$234 million , or 82%, in the first six months of 2022 compared to the first six months of 2021. The decrease in the first six months of 2022 compared to the first six months of 2021 was mainly attributable to margin compression as our integrated cracker joint venture inChina remained challenged by weak markets due to zero-COVID measures and logistical challenges. Income Taxes-Our effective income tax rate for the second quarter of 2022 was 18.7% compared with 19.3% for the first quarter of 2022. The lower effective income tax rate for the second quarter of 2022 is primarily attributable to changes in unrecognized tax benefits associated with uncertain tax positions which resulted in a 0.6% decrease in our effective tax rate. Our effective income tax rates for the first six months of 2022 was 19.0% compared to 15.5% for the first six months of 2021. In the first six months of 2021, we benefited from return to accrual adjustments primarily associated with a step-up of certain Italian assets to fair market value and benefits resulting from the CARES Act of 3.2% and 2.0%, respectively; such benefits did not impact our effective tax rate in the first six months of 2022. These increases were partially offset by a 1.1% decrease in our effective income tax rate due to changes in pre-tax income in countries with varying statutory tax rates.
Our income tax results are discussed further in Note 9 to the Consolidated Financial Statements.
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Comprehensive Income-Comprehensive income increased by$275 million in the second quarter of 2022 compared to the first quarter of 2022 and decreased by$172 million in the first six months of 2022 compared to the first six months of 2021, primarily due to changes in net income. The activity from the remaining components in Comprehensive income is discussed below. Financial derivatives-In the second quarter and first six months of 2022, the cumulative after-tax effects of our derivatives designated as cash flow hedges were net gains of$102 million and$190 million , respectively. Pre-tax gains of$146 million and$258 million , respectively, related to forward-starting interest rate swaps were driven by periodic changes in benchmark interest rates in the second quarter and first six months of 2022. The strengthening of theU.S. dollar against the euro and the periodic changes in benchmark interest rates, in the second quarter and first six months of 2022, resulted in pre-tax gains of$75 million and$84 million , respectively, related to our cross-currency swaps. Pre-tax losses of$77 million and$102 million , related to our cross-currency swaps were reclassified from Accumulated other comprehensive loss to Interest expense in the second quarter and first six months of 2022, respectively. The remaining change pertains to our commodity cash flow hedges. In the first quarter of 2022 and the first six months of 2021, the cumulative after-tax effects of our derivatives designated as cash flow hedges were net gains of$88 million and$97 million , respectively. Pre-tax gains of$112 million and$100 million , related to forward-starting interest rate swaps were driven by periodic changes in benchmark interest rates in the first quarter of 2022 and the first six months of 2021, respectively. The fluctuations of theU.S. dollar against the euro and the periodic changes in benchmark interest rates, in the first quarter of 2022 and the first six months of 2021, resulted in pre-tax gains of$9 million and$64 million , respectively, related to our cross-currency swaps. Pre-tax losses of$25 million and$68 million , related to our cross-currency swaps were reclassified from Accumulated other comprehensive loss to Interest expense in the first quarter of 2022 and the first six months of 2021, respectively. The remaining change pertains to our commodity cash flow hedges. Defined benefit pension and other postretirement benefit plans-In the second quarter and first six months of 2022, we recognized defined benefit pension and other postretirement benefit plans pre-tax gains in the amount of$101 million and$109 million , respectively, primarily due to a pre-tax pension settlement of$94 million that was reclassified from Accumulated other comprehensive loss to Other (expense) income, net, in the second quarter of 2022. For additional information, see Note 8 to our Consolidated Financial Statements. Foreign currency translations-The predominant functional currency for our operations outside of theU.S. is the euro. Relative to theU.S. dollar, the value of the euro weakened in the second quarter and first six months of 2022, resulting in net losses reflected in the Consolidated Statements of Comprehensive Income. The net losses related to unrealized changes in foreign currency translation include pre-tax gains of$202 million and$237 million , in the second quarter and first six months of 2022, respectively, which represent the effective portion of our net investment hedges. Relative to theU.S. dollar, the value of the euro weakened in the first quarter of 2022 and the first six months of 2021, resulting in net losses reflected in the Consolidated Statements of Comprehensive Income. The net losses related to unrealized changes in foreign currency translation include pre-tax gains of$35 million and$75 million , in the first quarter of 2022 and first six month of 2021, respectively, with represent the effective portion of our net investment hedges. 32
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Segment Analysis
We use earnings from continuing operations before interest, income taxes, and
depreciation and amortization ("EBITDA") as our measure of profitability for
segment reporting purposes. This measure of segment operating results is used by
our chief operating decision maker to assess the performance of and allocate
resources to our operating segments. Intersegment eliminations and items that
are not directly related or allocated to business operations, such as foreign
exchange gains or losses and components of pension and other postretirement
benefits other than service costs are included in "Other". For additional
information related to our operating segments, as well as a reconciliation of
EBITDA to its nearest GAAP measure, Income from continuing operations before
income taxes, see Note 13 to our Consolidated Financial Statements.
Revenues and the components of EBITDA for the periods presented are reflected in
the table below:
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30,
Millions of dollars 2022 2022 2022 2021
Sales and other operating revenues:
O&P-Americas segment $ 4,069 $ 3,595 $ 7,664 $ 6,582
O&P-EAI segment 3,714 3,762 7,476 6,502
I&D segment 3,766 3,339 7,105 4,352
APS segment 1,425 1,408 2,833 2,606
Refining segment 3,788 2,720 6,508 3,071
Technology segment 194 181 375 348
Other, including intersegment eliminations (2,118) (1,848) (3,966) (2,818)
Total $ 14,838 $ 13,157 $ 27,995 $ 20,643
Operating income (loss):
O&P-Americas segment $ 768 $ 728 $ 1,496 $ 2,082
O&P-EAI segment 121 138 259 810
I&D segment 635 468 1,103 581
APS segment 100 88 188 205
Refining segment 422 148 570 (225)
Technology segment 106 93 199 164
Other, including intersegment eliminations (11) (2) (13) (3)
Total $ 2,141 $ 1,661 $ 3,802 $ 3,614
Depreciation and amortization:
O&P-Americas segment $ 144 $ 144 $ 288 $ 285
O&P-EAI segment 42 47 89 103
I&D segment 81 81 162 161
APS segment 25 29 54 55
Refining segment 2 - 2 38
Technology segment 10 10 20 23
Total $ 304 $ 311 $ 615 $ 665
Income (loss) from equity investments:
O&P-Americas segment $ 29 $ 33 $ 62 $ 65
O&P-EAI segment (1) 1 - 197
I&D segment (6) (5) (11) 23
Total $ 22 $ 29 $ 51 $ 285
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Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30,
Millions of dollars 2022 2022 2022 2021
Other (expense) income, net:
O&P-Americas segment $ (36) $ 6 $ (30) $ 11
O&P-EAI segment (3) 2 (1) 10
I&D segment (35) 2 (33) 13
APS segment (7) 8 1 4
Refining segment (6) - (6) (4)
Technology segment (4) - (4) (1)
Other, including intersegment eliminations 5 1 6 6
Total $ (86) $ 19 $ (67) $ 39
EBITDA:
O&P-Americas segment $ 905 $ 911 $ 1,816 $ 2,443
O&P-EAI segment 159 188 347 1,120
I&D segment 675 546 1,221 778
APS segment 118 125 243 264
Refining segment 418 148 566 (191)
Technology segment 112 103 215 186
Other, including intersegment eliminations (6) (1) (7) 3
Total $ 2,381 $ 2,020 $ 4,401 $ 4,603 Olefins and Polyolefin-Americas Segment
Overview-EBITDA in the second quarter of 2022 remained relatively unchanged compared to first quarter of 2022 as decreases in olefins margins were offset by increases in polyethylene margins. EBITDA decreased in the first six months of 2022 relative to the first six months of 2021 primarily driven by lower olefins margins. Ethylene Raw Materials-We have flexibility to vary the raw material mix and process conditions in ourU.S. olefins plants in order to maximize profitability as market prices fluctuate for both feedstocks and products. Although prices of crude-based liquids and natural gas liquids are generally related to crude oil and natural gas prices, during specific periods the relationships among these materials and benchmarks may vary significantly. In the second and first quarter of 2022, and the first six months of 2022 and 2021, approximately 65% to 75% of the raw materials used in our North American crackers was ethane.
The following table sets forth selected financial information for the
O&
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30,
Millions of dollars 2022 2022 2022 2021
Sales and other operating revenues $ 4,069 $ 3,595 $ 7,664 $ 6,582
Income from equity investments 29 33 62 65
EBITDA 905 911 1,816 2,443
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Revenue-Revenues for our O&P-Americas segment increased by$474 million , or 13%, in the second quarter of 2022 compared to the first quarter of 2022 and increased by$1,082 million , or 16%, in the first six months of 2022 compared to the first six months of 2021. Second quarter of 2022 versus first quarter of 2022-Higher sales volume resulted in a 8% increase in revenue due to the absence of planned and unplanned outages compared to the first quarter of 2022. Higher average sales prices resulted in a 5% increase in revenue primarily driven by an increase in polymer prices from supply constraints across the industry. First six months of 2022 versus first six months of 2021-Higher average sales prices resulted in a 13% increase in revenue primarily driven by tight market conditions and lower supply. Higher sales volume resulted in a revenue increase of 3% as the first six months of 2021 was impacted by the effects of unusually cold temperatures and associated electrical power outages that led to shutdowns of manufacturing facilities inTexas .
EBITDA-EBITDA decreased by
Second quarter of 2022 versus first quarter of 2022- Lower olefin results led to a 10% decrease in EBITDA primarily due to lower margins driven by higher ethane and energy costs coupled with a decline in the average sales price of ethylene. Higher polyethylene results led to a 10% increase in EBITDA primarily due to higher margins driven by higher average sale price. First six months of 2022 versus first six months of 2021-Lower olefin results led to a 27% decrease in EBITDA due to lower margins driven by higher feedstock and energy costs coupled with a decline in the average sales price of ethylene.
Olefins and Polyolefin-Europe,
Overview-EBITDA decreased in the second quarter of 2022 compared to the first quarter of 2022 due to recognition of non-cash impairment charges and lower polypropylene results partially offset by higher olefins margins. EBITDA decreased in the first six months of 2022 relative to the first six months of 2021 mainly as a result of lower volumes and margins across all businesses, lower income from equity investments and the unfavorable impacts of foreign exchange. During the first and second quarter of 2022, we had planned and unplanned maintenance resulting in ethylene cracker operating rates of approximately 70% to 75% of capacity compared to 97% of capacity during the six months endedJune 30, 2021 . Ethylene Raw Materials-In Europe, naphtha is the primary raw material for our ethylene production and represented approximately 65% to 70% of the raw materials used in the second and first quarter of 2022 and the first six months of 2022 and 2021. The following table sets forth selected financial information for the O&P-EAI segment including Income from equity investments, which is a component of EBITDA: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, Millions of dollars 2022 2022 2022 2021 Sales and other operating revenues$ 3,714 $ 3,762 $ 7,476 $ 6,502 (Loss) income from equity investments (1) 1 - 197 EBITDA 159 188 347 1,120 35
-------------------------------------------------------------------------------- Table of Contents Revenue-Revenues decreased by$48 million , or 1%, in the second quarter of 2022 compared to the first quarter of 2022 and increased by$974 million , or 15%, in the first six months of 2022 compared to the first six months of 2021. Second quarter of 2022 versus first quarter of 2022-Lower volume resulted in a revenue decrease of 8% primarily due to lower demand. Unfavorable foreign exchange impacts resulted in a revenue decrease of 4%. Higher average sales prices resulted in a 11% increase in revenue as sales prices generally correlate with crude oil prices, which on average, increased compared to the first quarter of 2022. First six months of 2022 versus first six months of 2021-Higher average sales prices resulted in a 25% increase in revenue as sales prices generally correlate with crude oil prices, which on average, increased compared to the first six months of 2021. Lower volumes resulted in a revenue decrease of 4% primarily due to lower demand. Unfavorable foreign exchange impacts resulted in a revenue decrease of 6%. EBITDA-EBITDA decreased by$29 million , or 15%, in the second quarter of 2022 compared to the first quarter of 2022 and by$773 million , or 69%, in the first six months of 2022 compared to the first six months of 2021. In the second quarter of 2022, we recognized a$69 million non-cash impairment charge in conjunction with the sale of our polypropylene manufacturing facility located inAustralia , see Note 13 to the Consolidated Financial Statements for additional information. This charge resulted in a 37% and 6% decrease in EBITDA for the second quarter of 2022 compared to the first quarter of 2022 and the first six months of 2022 compared to the first six months of 2021, respectively. Second quarter of 2022 versus first quarter of 2022- Lower polypropylene results led to a 25% decrease in EBITDA. Approximately 60% of this change was driven by lower volumes due to lower demand with the remainder due to lower margins as a result of lower spreads. Higher olefins results led to a 48% increase in EBITDA primarily driven by higher margins as a result of by higher ethylene and co-product prices. First six months of 2022 versus first six months of 2021-Lower olefins results led to a 18% decrease in EBITDA. Approximately 55% of the change was driven by lower volumes due to planned and unplanned maintenance with the remainder due to lower margins resulting from higher feedstock and energy costs which outpaced increased ethylene prices. Lower income from our equity investments led to a decrease in EBITDA of 18% mainly attributable to margin compression driven by decreased demand and lower sales prices inAsia . Lower polypropylene and polyethylene results led to a 12% and 8% decrease in EBITDA, respectively, which was equally impacted by lower volumes due to lower demand and decreased margins resulting from higher energy costs. Unfavorable foreign exchange impacts resulted in a 7% decrease in EBITDA. 36
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Intermediates and Derivatives Segment
Overview-EBITDA increased in the second quarter of 2022 compared to the first
quarter of 2022 and in the first six months of 2022 compared to the first six
months of 2021, primarily driven by higher oxyfuels & related products margin
improvements due to higher prices.
The following table sets forth selected financial information for the I&D
segment including Income from equity investments, which is a component of
EBITDA:
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30,
Millions of dollars 2022 2022 2022 2021
Sales and other operating revenues $ 3,766 $ 3,339 $ 7,105 $ 4,352
(Loss) income from equity investments (6) (5) (11) 23
EBITDA 675 546 1,221 778
Revenue-Revenues increased by $427 million , or 13%, in the second quarter of
2022 compared to the first quarter of 2022 and by $2,753 million , or 63%, in the
first six months of 2022 compared to the first six months of 2021.
Second quarter of 2022 versus first quarter of 2022-Higher average sales prices
resulted in a 21% increase in revenue as sales prices generally correlate with
crude oil prices, which, on average, increased compared to the first quarter of
2022. Sales volumes declined resulting in a 6% decrease in revenue, largely due
to prolonged outages at our acetyls facilities. Unfavorable foreign exchange
impacts resulted in a revenue decrease of 2%.
First six months of 2022 versus first six months of 2021-Higher average sales
prices resulted in a 46% increase in revenue as sales prices generally correlate
with crude oil prices, which, on average, increased compared to the same period
in 2021. Sales volumes improved resulting in a 20% increase in revenue, mainly
due to absence of the impact of unusually cold temperatures and associated
electrical power outages that led to shutdowns of our manufacturing facilities
in Texas in early 2021. Unfavorable foreign exchange impacts resulted in a
revenue decrease of 3%.
EBITDA-EBITDA increased by $129 million , or 24%, in the second quarter of 2022
compared to the first quarter of 2022 and by $443 million , or 57%, in the first
six months of 2022 compared to the first six months of 2021.
In the second quarter of 2022, we recognized a non-cash pension settlement loss
of $37 million , see Note 8 to the Consolidated Financial Statements for
additional information. This loss resulted in a 7% and 5% decrease in EBITDA for
the second quarter of 2022 compared to the first quarter of 2022 and the first
six months of 2022 compared to the first six months of 2021, respectively.
Second quarter of 2022 versus first quarter of 2022-Oxyfuels and related
products results led to an EBITDA increase of 48% primarily driven by margin
improvement as a result of higher product prices and lower costs. Propylene
oxide and derivatives results led to decreases in EBITDA of 17% due to lower
margins driven by lower demand and prices.
First six months of 2022 versus first six months of 2021-Oxyfuels and related
products results increased EBITDA by 44% primarily driven by margin improvement
as a result of improved demand and prices. Propylene oxide and derivatives
results increased EBITDA by 19% equally driven by both volume and margin
improvements upon tight market supply and strong demand. Intermediate chemicals
results improved resulting in an EBITDA increase of 13% as a result of higher
margins due to tight market supply resulting from industry outages. Unfavorable
foreign exchange impacts resulted in a EBITDA decrease of 4%.
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Advanced Polymer Solutions Segment
Overview-Results in the second quarter of 2022 relative to the first quarter of
2022 and in the first six months of 2022 relative to the first six months of
2021 were slightly lower due to a decline in compounding and solutions results
partially offset by improved advanced polymer results.
The following table sets forth selected financial information for the APS
segment:
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30,
Millions of dollars 2022 2022 2022 2021
Sales and other operating revenues $ 1,425 $ 1,408 $ 2,833 $ 2,606
EBITDA 118 125 243 264
Revenue-Revenues increased by $17 million , or 1%, in the second quarter of 2022
compared to the first quarter of 2022 and by $227 million , or 9%, in the first
six months of 2022 compared to the first six months of 2021.
Second quarter of 2022 versus first quarter of 2022-Average sales price
increased resulting in a 9% increase in revenue as sales prices generally
correlate with crude oil prices, which, on average, increased compared to the
first quarter of 2022. Sales volumes decreased resulting in a 4% decrease in
revenue stemming from constraints in automotive production as a result of
component shortages. Foreign exchange impacts resulted in a revenue decrease of
4%.
First six months of 2022 versus first six months of 2021-Average sales price
increased resulting in a 21% increase in revenue as sales prices generally
correlate with crude oil prices, which, on average, increased compared to the
first six months of 2021. Sales volumes decreased resulting in a 5% decrease in
revenue stemming from constraints in automotive production as described above.
Foreign exchange impacts resulted in a revenue decrease of 7%.
EBITDA-EBITDA decreased by
In the second quarter of 2022, we recognized a non-cash pension settlement loss of$8 million , see Note 8 to the Consolidated Financial Statements for additional information. This loss resulted in a 6% and 3% decrease in EBITDA for the second quarter of 2022 compared to the first quarter of 2022 and the first six months of 2022 compared to the first six months of 2021, respectively. Second quarter of 2022 versus first quarter of 2022-Compounding and solutions results led to an EBITDA decrease of 17% primarily due to lower volumes as described above. Increased advanced polymers results led to an EBITDA increase of 18% due to higher margins driven by higher demand and sales prices. First six months of 2022 versus first six months of 2021-Compounding and solutions results led to an EBITDA decrease of 13% primarily due to lower volumes as described above. Advanced polymers results improved by 11% driven by margin improvements due to increased price spreads. Unfavorable foreign exchange impacts resulted in a EBITDA decrease of 6%. 38
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Refining Segment
Overview-EBITDA increased in the second quarter of 2022 relative to the first quarter of 2022 and in the first six months of 2022 compared to the first six months of 2021 due to higher margins. The following table sets forth selected financial information and heavy crude oil processing rates for the Refining segment and theU.S. refining market margins for the applicable periods. "Brent" is a light sweet crude oil and is one of the main benchmark prices for purchases of oil worldwide. "Maya" is a heavy sour crude oil grade produced inMexico that is a relevant benchmark for heavy sour crude oils in theU.S. Gulf Coast market. References to industry benchmarks for refining market margins are to industry prices reported by Platts, a division of S&P Global. Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, Millions of dollars 2022 2022 2022 2021 Sales and other operating revenues$ 3,788 $ 2,720 $ 6,508 $ 3,071 EBITDA 418 148 566 (191) Thousands of barrels per day Heavy crude oil processing rates 252 255 254 200 Market margins, dollars per barrel Brent - 2-1-1$ 47.83 $ 22.31 $ 35.08 $ 12.95 Brent - Maya differential 8.00 8.51 8.25 5.44 Total Maya 2-1-1$ 55.83 $ 30.82 $ 43.33 $ 18.39 Revenue-Revenues increased by$1,068 million , or 39%, in the second quarter of 2022 compared to the first quarter of 2022 and by$3,437 million , or 112%, in the first six months of 2022 compared to the first six months of 2021. Second quarter of 2022 versus first quarter of 2022-Higher product prices led to a revenue increase of 39% due to an average Brent crude oil price increase of approximately$14 per barrel. First six months of 2022 versus first six months of 2021-Higher product prices led to a revenue increase of 87% due to an average Brent crude oil price increase of approximately$40 per barrel. Sales volumes increased resulting in a 25% increase in revenue due to improved supply and demand as the first six months of 2021 was impacted by planned and unplanned outages, including the effects of unusually cold temperatures and associated electrical power outages that led to shutdowns of our manufacturing facilities inTexas . EBITDA-EBITDA increased by$270 million , or 182%, in the second quarter of 2022 compared to the first quarter of 2022 and by$757 million , or 396%, in the first six months of 2022 compared to the first six months of 2021. Second quarter of 2022 versus first quarter of 2022-EBITDA improvements were primarily driven by margin improvements as a result of an increase in the Maya 2-1-1 market margin. First six months of 2022 versus first six months of 2021-Volumes increased as demand improved for refined products which resulted in a 9% increase in EBITDA. The remaining increase in EBITDA was driven by margin improvements due to an increase in the Maya 2-1-1 market margin.
Other-In
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Technology Segment
Overview-EBITDA increased in the second quarter of 2022 compared to the first
quarter of 2022 from higher licensing revenues, partly offset by lower catalyst
volumes and increased in the first six months of 2022 relative to the first six
months of 2021 driven by higher catalyst volumes and higher licensing revenues.
The following table sets forth selected financial information for the Technology
segment:
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30,
Millions of dollars 2022 2022 2022 2021
Sales and other operating revenues $ 194 $ 181 $ 375 $ 348
EBITDA 112 103 215 186
Revenue-Revenues increased by $13 million , or 7%, in the second quarter of 2022
compared to the first quarter of 2022 and by $27 million , or 8%, in the first
six months of 2022 compared to the first six months of 2021.
Second quarter of 2022 versus first quarter of 2022-Licensing revenues increased
by 14% as more contracts reached significant milestones during the quarter.
Changes in average catalyst sales price resulted in a revenue increase of 3%.
Lower catalyst volumes resulted in a 6% decrease in volumes due to lower demand.
Unfavorable foreign exchange impacts decreased revenue by 4%.
First six months of 2022 versus first six months of 2021-Higher catalyst volumes
resulted in an 8% increase in revenue primarily driven by strong demand. Changes
in average catalyst sales price resulted in a 5% increase in revenue. Higher
licensing revenues resulted in a 3% increase in revenue. Unfavorable foreign
exchange impacts resulted in an 8% decrease in revenue.
EBITDA-EBITDA increased by
Second quarter of 2022 versus first quarter of 2022-EBITDA increases were
primarily driven by higher licensing revenue resulting from more contracts
reaching significant milestones which resulted in a 29% increase in EBITDA. This
increase was partially offset by a decrease in catalyst volume of 8% driven by a
decrease in demand. Unfavorable foreign exchange impacts resulted in a 6%
decrease in EBITDA.
First six months of 2022 versus first six months of 2021-Higher catalyst volumes
driven by stronger demand resulted in an EBITDA increase of 13%. Higher
licensing revenues resulting from more contracts reaching significant milestones
drove a 9% increase in EBITDA. Unfavorable foreign exchange impacts resulted in
an EBITDA decrease of 9%.
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FINANCIAL CONDITIONOperating, investing and financing activities of continuing operations, which are discussed below, are presented in the following table:
Six Months Ended
June 30,
Millions of dollars 2022 2021
Cash provided by (used in):
Operating activities $ 3,101 $ 2,473
Investing activities (1,034) (362)
Financing activities (2,392) (2,470)
Operating Activities-Cash provided by operating activities of $3,101 million in
the first six months of 2022 primarily reflected earnings adjusted for non-cash
items and cash used by the main components of working capital-Accounts
receivable, Inventories and Accounts payable.
In the first six months of 2022, the main components of working capital used
$494 million of cash driven primarily by an increase in Accounts receivable and
Inventories partially offset by an increase in Accounts payable. The increase in
Accounts receivable was driven by higher revenues across most businesses
primarily driven by higher average sales prices and increased demand. The
increase in Inventories was primarily due to replenishment of crude and refined
products inventory levels to support anticipated business demands as well as
increased prices of certain inventory. The increase in Accounts payable was
primarily driven by increased raw material costs.
Cash provided by operating activities of $2,473 million in the first six months
of 2021 reflected earnings adjusted for non-cash items and cash used by the main
components of working capital.
In the first six months of 2021, the main components of working capital used
$1,561 million of cash driven primarily by an increase in Accounts receivable
and Inventories partially offset by an increase in Accounts payable. The
increase in Accounts receivable was driven by higher revenues across most
businesses primarily driven by higher average sales prices. The increase in
Inventories was primarily due to the replenishment of inventory levels to
support anticipated business demands. The increase in Accounts payables was
primarily driven by increased raw material costs.
Investing Activities-Capital expenditures in the first six months of 2022
totaled $978 million compared to $771 million in the first six months of 2021.
Approximately 45% and 60% of our capital expenditures in the first six months of
2022 and 2021, respectively, was for profit-generating growth projects,
primarily our PO/TBA plant, with the remaining expenditures supporting
sustaining maintenance. See Note 13 to the Consolidated Financial Statements for
additional information regarding capital expenditures by segment.
We invest cash in investment-grade and other high-quality instruments that provide adequate flexibility to redeploy funds as needed to meet our cash flow requirements while maximizing yield.
In the first six months of 2022 and 2021, we received proceeds of$8 million and$264 million , respectively, from the liquidation of our investment in equity securities. Additionally, in the first six months of 2021, we received proceeds of$291 million from maturities of certain available-for-sale debt securities. In the first six months of 2021 we made an equity contribution of$104 million to formNingbo ZRCC LyondellBasell New Material Company Limited , a 50/50 joint venture with China Petroleum & Chemical Corporation. The joint venture constructed a new propylene oxide and styrene monomer unit in ZhenhaiNingbo, China which began production inJanuary 2022 . The joint venture is included in our I&D segment. 41
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Financing Activities-We made dividend payments totaling$2,464 million , which included a combination of a special dividend of$5.20 per share and an increased quarterly dividend, and$730 million in the first six months of 2022 and 2021, respectively. Additionally, in the first six months of 2022, we made payments of$262 million to repurchase outstanding ordinary shares.
In the first six months of 2022, we received net proceeds of
In the first six months of 2022 and 2021, we received a return of collateral of$217 million and$51 million , respectively, related to the positions held with our counterparties for certain forward-starting interest rate swaps.
In the first six months of 2021, we repaid
Liquidity and Capital Resources
Overview
We plan to fund our working capital, capital expenditures, debt service, dividends and other cash requirements with our current available liquidity and cash from operations, which could be affected by general economic, financial, competitive, legislative, regulatory, business and other factors, many of which are beyond our control. Cash and cash equivalents, cash from our short-term investments, cash from operating activities, proceeds from the issuance of debt, or a combination thereof, may be used to fund the purchase of shares under our share repurchase authorization. We intend to continue to declare and pay quarterly dividends, with the goal of increasing the dividend over time, after giving consideration to our cash balances and expected results from operations. Our focus on funding our dividends while remaining committed to a strong investment grade balance sheet continues to be the foundation of our capital allocation strategy.
Cash and Liquid Investments
As ofJune 30, 2022 , we had Cash and cash equivalents totaling$1,057 million , which includes$658 million in jurisdictions outside of theU.S. , principally in theUnited Kingdom . There are currently no legal or economic restrictions that would materially impede our transfers of cash.
Credit Arrangements
AtJune 30, 2022 , we had total debt, including current maturities, of$11,475 million . Additionally, we had$210 million of outstanding letters of credit, bank guarantees and surety bonds issued under uncommitted credit facilities to support trade payables and other obligations.
We had total unused availability under our credit facilities of
•$2,941 million under our$3,250 million Senior Revolving Credit Facility, which backs our$2,500 million commercial paper program. Availability under this facility is net of outstanding borrowings, outstanding letters of credit provided under the facility and notes issued under our commercial paper program. AtJune 30, 2022 , we had$309 million of outstanding commercial paper, net of discount, and no borrowings or letters of credit outstanding under this facility; and •$900 million under our$900 million U.S. Receivables Facility. Availability under this facility is subject to a borrowing base of eligible receivables, which is reduced by outstanding borrowings and letters of credit, if any. AtJune 30, 2022 , we had no borrowings or letters of credit outstanding under this facility. 42
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At any time and from time to time, we may repay or redeem our outstanding debt, including purchases of our outstanding bonds in the open market, through privately negotiated transactions or a combination thereof, in each case using cash and cash equivalents, cash from our short-term investments, cash from operating activities, proceeds from the issuance of debt or proceeds from asset divestitures. Any repayment or redemption of our debt will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. In connection with such repurchases or redemptions, we may incur cash and non-cash charges, which could be material in the period in which they are incurred. In accordance with our current interest rate risk management strategy and subject to management's evaluation of market conditions and the availability of favorable interest rates among other factors, we may from time to time enter into interest rate swap agreements to economically convert a portion of our fixed rate debt to variable rate debt or convert a portion of our variable rate debt to fixed rate debt. Share Repurchases InMay 2022 , our shareholders approved a proposal to authorize us to repurchase up to 34.0 million ordinary shares, throughNovember 27, 2023 , which superseded any prior repurchase authorizations. Our share repurchase authorization does not have a stated dollar amount, and purchases may be made through open market purchases, private market transactions or other structured transactions. Repurchased shares could be retired or used for general corporate purposes, including for various employee benefit and compensation plans. The maximum number of shares that may yet be purchased is not necessarily an indication of the number of shares that will ultimately be purchased. In the first six months of 2022, we purchased approximately 2.7 million shares under our share repurchase authorizations for$256 million . As ofJuly 27, 2022 , we had approximately 32.4 million shares remaining under the current authorization. The timing and amounts of additional shares repurchased, if any, will be determined based on our evaluation of market conditions and other factors, including any additional authorizations approved by our shareholders. For additional information related to our share repurchase authorizations, see Note 11 to the Consolidated Financial Statements.
CURRENT BUSINESS OUTLOOK
We expect continued strength in demand from the packaging markets and favorable margins for our oxyfuels products in the third quarter of 2022. We anticipate the Maya 2-1-1 spread to moderate from strong second quarter levels and we plan to perform a limited scope of maintenance at the refinery in the coming months. Moderating demand and elevated costs for feedstocks and energy are likely to compress margins across most of our businesses in the third quarter. Potential benefits associated withChina's reopening could also improve results toward the end of 2022. We are carefully monitoring impacts from inflation, supply chain challenges and slowing economic conditions.
In the third quarter of 2022, we plan to begin commissioning activities
associated with our world-scale
ACCOUNTING AND REPORTING CHANGES
For a discussion of the potential impact of new accounting pronouncements on our Consolidated Financial Statements, see Note 2 to the Consolidated Financial Statements.
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CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify our forward-looking statements by the words "anticipate," "estimate," "believe," "continue," "could," "intend," "may," "plan," "potential," "predict," "should," "will," "expect," "objective," "projection," "forecast," "goal," "guidance," "outlook," "effort," "target" and similar expressions. We based forward-looking statements on our current expectations, estimates and projections of our business and the industries in which we operate. We caution you that these statements are not guarantees of future performance. They involve assumptions about future events that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict. Our actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements. Any differences could result from a variety of factors, including the following: •the cost of raw materials represents a substantial portion of our operating expenses, and energy costs generally follow price trends of crude oil, natural gas liquids and/or natural gas; price volatility can significantly affect our results of operations and we may be unable to pass raw material and energy cost increases on to our customers due to the significant competition that we face, the commodity nature of our products and the time required to implement pricing changes; •our operations inthe United States ("U.S.") have benefited from low-cost natural gas and natural gas liquids; decreased availability of these materials (for example, from their export or regulations impacting hydraulic fracturing in theU.S. ) could reduce the current benefits we receive;
•if crude oil prices fall materially, or remain low relative to
•industry production capacities and operating rates may lead to periods of oversupply and low profitability;
•we may face unplanned operating interruptions (including leaks, explosions, fires, weather-related incidents, mechanical failures, unscheduled downtime, supplier disruptions, labor shortages, strikes, work stoppages or other labor difficulties, transportation interruptions, spills and releases and other environmental incidents) at any of our facilities, which would negatively impact our operating results; for example, because theHouston refinery is our only refining operation, we would not have the ability to increase production elsewhere to mitigate the impact of any outage at that facility; •changes in general economic, business, political and regulatory conditions in the countries or regions in which we operate could increase our costs, restrict our operations and reduce our operating results;
•our ability to execute our organic growth plans may be negatively affected by our ability to complete projects on time and on budget;
•our ability to acquire new businesses and assets and integrate those operations into our existing operations and make cost-saving changes in operations;
•uncertainties associated with worldwide economies could create reductions in demand and pricing, as well as increased counterparty risks, which could reduce liquidity or cause financial losses resulting from counterparty default; •uncertainties related to the extent and duration of the pandemic-related decline in demand, or other impacts due to the pandemic in geographic regions or markets served by us, or where our operations are located, including the risk of prolonged recession;
•the negative outcome of any legal, tax and environmental proceedings or changes in laws or regulations regarding legal, tax and environmental matters may increase our costs, reduce demand for our products, or otherwise limit our ability to achieve savings under current regulations;
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•any loss or non-renewal of favorable tax treatment under agreements or treaties, or changes in laws, regulations or treaties, may substantially increase our tax liabilities;
•we may be required to reduce production or idle certain facilities because of the cyclical and volatile nature of the supply-demand balance in the chemical and refining industries, which would negatively affect our operating results; •we rely on continuing technological innovation, and an inability to protect our technology, or others' technological developments could negatively impact our competitive position; •we may be unable to meet our sustainability goals, including the ability to operate safely, increase production of recycled and renewable-based polymers, and reduce our emissions;
•we may be unable to shut down the
•we have significant international operations, and fluctuations in exchange rates, valuations of currencies and our possible inability to access cash from operations in certain jurisdictions on a tax-efficient basis, if at all, could negatively affect our liquidity and our results of operations; •we are subject to the risks of doing business at a global level, including wars, terrorist activities, political and economic instability and disruptions and changes in governmental policies, which could cause increased expenses, decreased demand or prices for our products and/or disruptions in operations, all of which could reduce our operating results;
•if we are unable to comply with the terms of our credit facilities, indebtedness and other financing arrangements, those obligations could be accelerated, which we may not be able to repay; and
•we may be unable to incur additional indebtedness or obtain financing on terms that we deem acceptable, including for refinancing of our current obligations; higher interest rates and costs of financing would increase our expenses. Any of these factors, or a combination of these factors, could materially affect our future results of operations and the ultimate accuracy of the forward-looking statements. Our management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or prior earnings levels. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section and any other cautionary statements that may accompany such forward-looking statements. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements.
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