LyondellBasell Industries 10-Q 2022-06-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

For the quarterly period ended June 30, 2022

or

For the transition period from to

Commission file number: 001-34726

LYONDELLBASELL INDUSTRIES N.V.

(Exact name of registrant as specified in its charter)

(Addresses of registrant’s principal executive offices)

(Registrant’s telephone numbers, including area codes)

______________________________________________________________________________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The registrant had 326,206,003 ordinary shares, €0.04 par value, outstanding at July 27, 2022 (excluding 14,131,001 treasury shares).

LYONDELLBASELL INDUSTRIES N.V.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED STATEMENTS OF INCOME

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED BALANCE SHEETS

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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 to LyondellBasell 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 our Houston 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. While North America demand for our products used in consumer packaging end markets remained strong, volumes in Europe decreased. In China, 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 $1,599 million and $3,101 million in cash from operating activities, respectively. During the first six months of 2022 we returned $2,464 million to shareholders through the combination of a special dividend and an increased quarterly dividend and repurchased $262 million worth of our shares.

Results of operations for the periods discussed are presented in the table below:

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 fir

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Our exposure to market and regulatory risks is described in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2021. Our exposure to such risks has not changed materially in the six months ended June 30, 2022.

As of June 30, 2022, with the participation of our management, our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial and accounting officer) carried out an evaluation, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Act”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Act). Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2022.

There have been no changes in our internal controls over financial reporting, as defined in Rule 13a-15(f) of the Act, in the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Information regarding our litigation and legal proceedings can be found in Note 10 to the Consolidated Financial Statements, which is incorporated into this Item 1 by reference.

In September 2013, U.S. Environmental Protection Agency (“EPA”) Region V issued a Notice and Finding of Violation alleging violations at our Morris, Illinois facility related to flaring activity. The Notice generally alleges failures to monitor steam usage and improper flare operations. In the Fall of 2020, EPA referred the matter to the U.S. Department of Justice and EPA Headquarters for civil judicial enforcement. In July 2022, a court notice was filed regarding a final settlement agreement providing for a civil penalty of $324,000 and the installation of monitoring and control equipment. Following a public comment period, we expect entry of the settlement by the court.

In April 2022, the State of Texas filed suit against Equistar Chemicals, LP, in Travis County District Court seeking civil penalties and injunctive relief for alleged violations of the Texas Clean Air Act related to multiple emissions events at Equistar’s Bayport Plant. We reasonably believe resolution of this matter will result in payment of a penalty in excess of $300,000.

Additional information about our environmental proceedings can be found in Part I, Item 3 of our 2021 Annual Report on Form 10-K, which is incorporated into this Item 1 by reference.

There have been no material changes to the risk factors associated with our business previously disclosed in “Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2021.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On May 27, 2022, our shareholders approved a share repurchase authorization of up to 34,026,947 shares of our ordinary shares, through November 27, 2023, which superseded any prior repurchase authorizations. 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.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

• Filed herewith

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.