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LyondellBasell (LYB) Successfully Closes JV Deal With Sasol

·3 min read

LyondellBasell Industries N.V. LYB announced that it has successfully closed the Louisiana-based Integrated Polyethylene Joint Venture (JV) transaction with global integrated chemicals and energy company, Sasol. The transaction was closed following the necessary regulatory and shareholder approvals.

LyondellBasell’s 50/50 JV includes a 0.9 MM ton low-density, 1.5 MM ton ethane cracker and linear-low density polyethylene plants along with related infrastructure near Lake Charles, LA. The company stated that the JV will toll manufacture the products on behalf of the two shareholders.

Per the agreement, LyondellBasell will operate the three assets and market the polyethylene products on behalf of the two shareholders. Further, the formation of this JV is part of LyondellBasell’s initiative expand core businesses, while positioning the company to gain from improving economic conditions. This JV also aligns with LyondellBasell's strategy of investing in high-quality assets in growing markets.

Shares of LyondellBasell have lost 6% in the past year against the industry’s 11.6% rise.

In third-quarter 2020 earnings call, the company stated that the petrochemical industry is expected to benefit from recovery in global economies. For 2020, it expects global polyethylene demand to grow, notwithstanding the pandemic and a recession. For the fourth quarter, LyondellBasell expects continued strength in North American integrated polyethylene margins.

The company also believes that slow recovery in global mobility will exert pressure on demand for gasoline and jet fuel that will extend headwinds for its Refining and Oxyfuels & Related Products businesses. The company’s order books reflect higher demand from automotive manufacturing and other durable goods markets. This is expected to boost performance in the Advanced Polymer Solutions segment.

Zacks Rank & Key Picks

LyondellBasell currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space are Pretium Resources, Inc. PVG, BHP Group BHP and Silvercorp Metals Inc. SVM, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Pretium Resources has an expected earnings growth rate of 25.5% for 2020. Its shares have returned 9.5% in the past year.

BHP Group has an expected earnings growth rate of 31.3% for fiscal 2021. The company’s shares have gained 17.5% in the past year.

Silvercorp Metals has an expected earnings growth rate of 40% for fiscal 2021. The company’s shares have increased 17.2% in the past year.

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