LyondellBasell Industries N : 2021 Statutory Dutch Annual Report

LyondellBasell Industries N.V.

Financial Report

For the Year Ended 31 December 2021

CONTENTS

12

About LyondellBasell4

Report of the Board of Directors4

2.1 Operational and Financial Overview4

2.1.1 Segment Analysis 6

2.1.2 Financial Condition 11

2.1.3 Outlook 14

2.2 Risk Factors 14

2.3 Our Strategy 24

2.4 Sustainability 24

2.5 Human Capital 25

2.6 Research and Development 27

2.7 Governance Report of the Board of Directors 27

2.7.1 Evaluation of the Board of Directors and its Individual Members 34

2.7.2 Compensation of the Board of Directors 35

2.8 Corporate Governance and Risk Management 39

2.8.1 Corporate Governance Statement 39

2.8.2 Code of Conduct 39

2.8.3 Conflicts of Interest 39

2.8.4 Related Party Transactions 40

2.8.5 Dutch Corporate Governance Code 41

2.8.6 Shareholders and General Meeting of Shareholders 43

2.8.7 Takeover Directive; Anti-Takeover Provisions and Control 44

2.8.8 Risk Management 44

2.8.9 Audit of Financial Reporting 47

2.8.10 Statements of the Board of Directors 48

Consolidated Financial Statements 51

Consolidated Statement of Income 52

Consolidated Statement of Comprehensive Income 53

Consolidated Statement of Financial Position 54

Consolidated Statement of Changes in Equity 56

Consolidated Statement of Cash Flows 58

1

General 60

2

Summary of Significant Accounting Policies 60

3

Critical Accounting Estimates and Judgments 69

4

Financial Risk Management 71

5

Revenue 77

6

Expenses by Nature 78

7

Employee Benefit Expenses 78

8

Share-Based Compensation Granted to Directors and Employees 78

9

Directors' Remuneration 81

10 Other (Income) Expense, Net 85

11 Finance Costs 85

12 Income Tax Expense 85

13 Earnings per Share 86

14 Intangible Assets 88

15 Property, Plant and Equipment 90

16 Leases 92

17 Investments in Associates and Joint Ventures and Acquisition of Joint Operations 94

18	Financial Assets and Liabilities by Category	97
19	Credit Quality of Financial Assets	97
20	Derivative Financial Instruments	98
21	Inventories	98
22	Trade and Other Receivables	99
23	Cash and Cash Equivalents	100
24	Equity Attributable to the Owners of the Company	100
25	Non-Controlling Interests	101
26	Borrowings	102
27	Deferred Income Tax	106
28	Retirement Benefit Obligations	109
29	Trade and Other Payables	116
30	Provisions	117
31	Contingencies and Commitments	118
32	Related Parties	119
33	Segment and Related Information	120
34	Subsequent Events	122
A	Appendix A	123
127
130
130
131
131
132
133
134
134
135
135
137

Corporate Financial Statements

1

General

2

3

Goodwill and Investments Cash and Cash Equivalents

4

5

Equity Attributable to Equity Holders Long-term Debt

6

7

Group Company Loans Deferred Income

8

9

Commitments and Contingencies not included in the Balance Sheet Independent Auditor's Fees

• 10 Directors' Remuneration

Other Information

1. About LyondellBasell

LyondellBasell Industries N.V. is a global, independent chemical company and was incorporated, as a Naamloze Vennootschap, under Dutch law on 15 October 2009. Unless otherwise indicated, the "Company," "we," "our," "us" and "LyondellBasell" are used in this report to refer to the businesses of LyondellBasell Industries N.V. and its consolidated subsidiaries. We are one of the world's top independent chemical companies based on revenues.

We participate globally across the petrochemical value chain and are an industry leader in many of our product lines. Our chemicals businesses consist primarily of large processing plants that convert large volumes of liquid and gaseous hydrocarbon feedstocks into plastic resins and other chemicals. Our chemical products tend to be basic building blocks for other chemicals and plastics. Our plastic products are used in large volumes as well as smaller specialty applications. Our customers use our plastics and chemicals to manufacture a wide range of products that people use in their everyday lives including food packaging, home furnishings, automotive components, paints and coatings. Our refining business consists of our Houston refinery, which processes crude oil into refined products such as gasoline and distillates. We also develop and license chemical and polyolefin process technologies and manufacture and sell polyolefin catalysts.

Our financial performance is influenced by the supply and demand for our products, the cost and availability of feedstocks and commodity products, global and regional production capacity, our operational efficiency and our ability to control costs. We have a strong operational focus and, as a producer of large volume commodities, continuously strive to differentiate ourselves through safe, reliable and low-cost operations in all our businesses. We purchase large quantities of natural gas, electricity and steam which we use as energy to fuel our facilities and purchase large quantities of natural gas liquids and crude oil derivatives which we use as feedstocks. The relatively low cost of natural gas-derived raw materials in the U.S. versus the global cost of crude oil-derived raw materials has had a significant positive influence on the profitability of our North American operations.

We manage our operations through six operating segments. Our reportable segments are:

• • Olefins and Polyolefins-Americas ("O&P-Americas"). Our O&P-Americas segment produces and markets olefins and co-products, polyethylene and polypropylene.

• • Olefins and Polyolefins-Europe, Asia, International ("O&P-EAI"). Our O&P-EAI segment produces and markets olefins and co-products, polyethylene and polypropylene.

• • Intermediates and Derivatives ("I&D"). Our I&D segment produces and markets propylene oxide and its derivatives, oxyfuels and related products, and intermediate chemicals; such as, styrene monomer, acetyls, ethylene oxide and ethylene glycol.

• • Advanced Polymer Solutions ("APS"). Our APS segment produces and markets compounding and solutions, such as polypropylene compounds, engineered plastics, masterbatches, engineered composites, colors and powders, and advanced polymers, which includes Catalloy and polybutene-1.

• • Refining. Our Refining segment refines heavy, high-sulfur crude oil and other crude oils of varied types and sources available on the U.S. Gulf Coast into refined products, including gasoline and distillates.

• • Technology. Our Technology segment develops and licenses chemical and polyolefin process technologies and manufactures and sells polyolefin catalysts.

Financial information about our business segments and geographical areas can be found in Note 33 to the Consolidated Financial Statements.

2. Report of the Board of Directors

2.1

Operational and Financial Overview

This discussion should be read in conjunction with the information contained in our Consolidated Financial Statements and the accompanying notes elsewhere in this report.

Our 2021 results reflect robust demand for our products and tight market conditions. During 2021 relative to 2020, EBITDA increased largely due to margin improvements in our O&P-Americas, O&P-EAI and I&D segments.

Our 2021 cash generation allowed us to complete our goal of reducing long-term debt by $4 billion during the year, demonstrating our commitment to a solid investment-grade credit rating. We do not plan to pursue further long-term debt reduction in 2022. During 2021, we repurchased 5.2 million shares and increased our annual dividend for the eleventh consecutive year.

During the second quarter of 2021, we invested $104 million to purchase a 50% interest in a joint venture with the China Petroleum & Chemical Corporation ("Sinopec") which will commission a new propylene oxide and styrene monomer unit in China in 2022.

The following selected financial data of the Company should be read in conjunction with the Consolidated Financial Statements and related notes thereto and the discussion and analysis of our results of operations below. The selected financial data of the Company is derived from its audited Consolidated Financial Statements.

Year Ended 31 DecemberMillions of U.S. Dollars (except for earnings per share amounts)

2021

2020

Results of Operations Data

Revenue

$

47,203 $ 28,165

Cost of Sales Operating profit Finance costs

36,686 24,820

8,774 1,456

831 410

Depreciation and amortization Impairments

1,901 1,792

624 582

Share of profit of investments accounted for using the equity method Income tax (benefit)/expense

397 141

1,533 (151)

Profit for the year

6,819 1,350

Earnings per share: Basic

$

20.37 $ 4.02

Diluted

20.35 4.02

Balance Sheet Data

Total equity

$

12,333 $ 7,241

Borrowings Lease Liabilities

12,502 16,779

2,141 1,579

Cash and cash equivalents

(1,626) (1,933)

Net debt

13,017 16,425

Trade and other receivables Inventories

5,825 4,162

6,161 3,878

Trade and other payables

(6,465) (4,421)

Net working capital

$

5,521 $ 3,619

Revenues-Revenues increased by $19,038 million, or 68%, in 2021 compared to 2020. Average sales prices in 2021 were higher for many of our products as sales prices generally correlate with crude oil prices, which increased relative to 2020. These higher prices led to a 64% increase in revenue. Higher sales volumes, driven by increased demand, resulted in a revenue increase of 3%. Favorable foreign exchange impacts resulted in a revenue increase of 1%.

Cost of Sales-Cost of sales increased by $11,866 million, or 48%, in 2021 compared to 2020. This increase primarily related to higher feedstock and energy costs. Fluctuations in our cost of sales are generally driven by changes in feedstock and energy costs. Feedstock and energy related costs generally represent approximately 70% to 80% of cost of sales, other variable costs account for approximately 10% of cost of sales on an annual basis and fixed operating costs, consisting primarily of expenses associated with employee compensation, depreciation and amortization, and maintenance, range from approximately 15% to 20% in each annual period.

Impairments-Results for our Refining segment include non-cash impairment charges of $624 million and $582 million recognized in 2021 and 2020, respectively. See Note 15 to the Consolidated Financial Statements for additional information regarding impairment charges.

Operating Profit-Operating profit increased by $7,318 million in 2021 compared to 2020. In 2021, Operating profit increased for our O&P-Americas, O&P-EAI, I&D, Refining, Technology and APS segments by $3,382 million, $816 million, $466 million, $328 million, $184 million and $60 million, respectively. Results for each of our business segments are discussed further in the Segment Analysis section below.

Finance Costs-Finance costs increased $421 million in 2021 compared to 2020 primarily due to $387 million change on unrealized foreign exchange losses from the remeasurement of intercompany borrowings. These unrealized foreign exchange losses are partially offset by gains from changes in the fair value on financial derivatives recorded in Other (Income) Expense, Net. Refer to Notes 10 and 11 of the Consolidated Financial Statement.