LyondellBasell Industries 10-Q 2023-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

For the quarterly period ended March 31, 2023

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) (Zip Code)

(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,” “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 325,274,141 ordinary shares, €0.04 par value, outstanding at April 26, 2023 (excluding 15,148,357 treasury shares).

LYONDELLBASELL INDUSTRIES N.V.

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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

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.”).

Effective January 1, 2023, our Catalloy and polybutene-1 products were moved from our Advanced Polymer Solutions (“APS”) segment and reintegrated into our Olefins and Polyolefins-Americas (“O&P-Americas”) and Olefins and Polyolefins-Europe, Asia, International (“O&P-EAI”) segments. Segment information provided herein has been revised for all periods presented to reflect these changes.

OVERVIEW

During the first quarter of 2023, margins in our O&P-Americas and O&P-EAI segments increased driven by lower ethane cost in the U.S., lower energy costs and moderately improving global demand. We increased global operating rates to align with market conditions. Steady demand for fuels continued to support margins in our Intermediates and Derivatives and Refining segments.

During the first quarter of 2023, we generated $482 million in cash from operating activities. We remain committed to a disciplined approach to capital allocation. During the first quarter of 2023, we reinvested $352 million in the businesses through capital expenditures and we paid dividends of $389 million to shareholders and repurchased $70 million worth of our shares. In the first quarter of 2023 we successfully started up the world's largest PO/TBA plant.

In March 2023, we announced the decision to explore strategic options for our U.S. Gulf Coast-based ethylene oxide & derivatives (“EO&D”) business as it is not a business where we seek a leading long-term position.

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

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RESULTS OF OPERATIONS

Revenues—Revenues remained relatively unchanged in the first quarter of 2023 compared to the fourth quarter of 2022. Lower volumes driven by lower demand resulted in a 2% decrease in revenues. Favorable foreign exchange impacts resulted in a 2% increase in revenues.

Revenues decreased by $2,910 million, or 22%, in the first quarter of 2023 compared to the first quarter of 2022. Average sales prices were lower for many of our products as sales prices generally correlate with crude oil prices, which decreased relative to the first quarter of 2022. These lower prices led to a 13% decrease in revenue. Lower volumes driven by lower demand resulted in a 7% decrease in revenues. Unfavorable foreign exchange impacts resulted in a 2% decrease in revenues.

Cost of Sales—Cost of sales decreased by $492 million, or 5%, in the first quarter of 2023 compared to the fourth quarter of 2022 and by $2,272 million, or 20%, in the first quarter of 2023 compared to the first quarter of 2022. These decreases were primarily driven by lower feedstock and energy costs.

Impairment—During the first quarter of 2023 we recognized a non-cash goodwill impairment charge of $252 million in our APS segment after the effect of moving our Catalloy and polybutene-1 products from our APS segment and reintegrating into our O&P-Americas and O&P-EAI segments. See Note 12 to our Consolidated Financial Statements for additional information.

Operating Income—Operating income increased by $226 million, or 46%, in the first quarter of 2023 compared to the fourth quarter of 2022. Operating income in our O&P-EAI, O&P-Americas, I&D, and Technology segments increased by $177 million, $154 million, $109 million, and $11 million, respectively. These increases were partially offset by decreases in our APS and Refining segments of $197 million and $35 million, respectively.

Operating income decreased by $948 million, or 57%, in the first quarter of 2023 compared to the first quarter of 2022. Operating income in our O&P-Americas, APS, I&D, O&P-EAI and Technology segments decreased by $383 million, $285 million, $148 million, $142 million and $32 million, respectively. These decreases were partially offset by an increase in our Refining segment of $38 million.

Results for each of our business segments are discussed further

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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, 2022. Our exposure to such risks has not changed materially in the three months ended March 31, 2023.

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As of March 31, 2023, 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 March 31, 2023.

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.

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PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Information regarding our litigation and legal proceedings can be found in Note 9 to the Consolidated Financial Statements, which is incorporated into this Item 1 by reference.

In February 2020, the State of Texas filed suit against Houston Refining, LP, a subsidiary of LyondellBasell, in Travis County District Court seeking civil penalties and injunctive relief for violations of the Texas Clean Air Act related to several emission events. In July 2020, Harris County, Texas petitioned to intervene in the lawsuit and the State added additional claims to its petition relating to self-reported deviations of Houston Refining’s air operating permit. We are currently engaged in settlement discussions with the State to resolve this matter, and reasonably believe resolution of this matter will result in a payment of a penalty in excess of $300,000.

On July 27, 2021, approximately 160,000 pounds of liquid process material containing primarily acetic acid was released from a reactor at the La Porte acetic acid unit. In October 2021, the Texas Commission on Environmental Quality (“TCEQ”) issued a Notice of Enforcement for the incident. In November 2021, the State of Texas filed a petition on behalf of the TCEQ seeking injunctive relief and civil penalties for unauthorized air pollution and regulatory nuisance related to the incident. As of April 17, 2023, we have agreed in principle with the State of Texas to resolve this matter with a civil penalty of $1.1 million; an agreed final judgment is being prepared to be lodged for public comment and entered by the court.

Additional information about our environmental proceedings can be found in Part I, Item 3 of our 2022 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, 2022.

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.

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• Filed herewith

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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.