LyondellBasell Industries N.V. LYB issued an operational update and estimated financial results for the first quarter of 2020.
The company projects net income in the range $110-$180 million for the first quarter. EBITDA is expected between $610 million and $680 million ($1,055 million to $1,075 million excluding non-cash inventory valuation charges).
Global markets for LyondellBasell's products are impacted due to the ongoing coronavirus pandemic and the considerable drop in oil prices. At present, the company’s major global manufacturing facilities are operational. Moreover, demand for products used in medical applications and packaging continues to be robust. In most of the regions where LyondellBasell operates, its manufacturing operations have been designated as essential for supporting society's needs during the pandemic.
The company has temporarily idled production at a number of small plants in the Advanced Polymer Solutions unit in response to lower demand for certain products. The segment serves automotive end markets and LyondellBasell has suitably reduced production rates at other plants. The company also stated that volumes and margins in the Refining unit and Oxyfuels & Related Products business are affected by lower oil prices as well as reduced demand for transportation fuels. This is likely to impact the company’s second-quarter results.
To reduce financial and operational risk, LyondellBasell is postponing selected growth projects and planned maintenance. This includes slowing down construction activities on its PO/TBA plant in Houston, TX. These moves are expected to reduce the company’s 2020 capital expenditures by roughly 20% to $1.9 billion from its earlier guidance of $2.4 billion.
As of Mar 31, LyondellBasell had total debt of $13.7 billion with available liquidity of $3.2 billion, which includes cash and short-term investments worth $1.8 billion. The company is scheduled to release first-quarter 2020 earnings on May 1.
Shares of LyondellBasell have lost 42.6% in the past year compared with the industry’s 37.6% decline.
Zacks Rank & Key Picks
LyondellBasell currently carries a Zacks Rank #5 (Strong Sell).
A few better-ranked stocks in the basic materials space are Novagold Resources Inc. NG, Franco-Nevada Corporation FNV and Barrick Gold Corporation GOLD, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Novagold has an expected earnings growth rate of 11.1% for fiscal 2020. The company’s shares have surged 185.3% in the past year.
Franco-Nevada has an expected earnings growth rate of 15.9% for 2020. Its shares have returned 71.8% in the past year.
Barrick has an expected earnings growth rate of 41.2% for 2020. The company’s shares have rallied 85.3% in the past year.
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