UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q | | | | | | |
☒ | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2023March 31, 2024
or | | | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-34726
LYONDELLBASELL INDUSTRIES N.V.
(Exact name of registrant as specified in its charter) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Netherlands | | | | | 98-0646235 | |
| (State or other jurisdiction of incorporation or organization) | | | | (I.R.S. Employer Identification No.) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1221 McKinney St., | | 4th Floor, One Vine Street | | | | |
| Suite 300 | | London | | Delftseplein 27E | |
| Houston, | | Texas | | W1J0AH | | 3013AA | Rotterdam | |
| USA | | 77010 | | United Kingdom | | Netherlands | |
(AddressesAddress of registrant’s principal executive offices) (Zip code) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (713) | | 309-7200 | | | +44 (0) | | 207 | 220 2600 | | | +31 (0) | | 10 | 2755 500 | |
(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:
| | | | | | | | | | | | | | |
Title of Each Class | | Trading Symbol | | Name of Each Exchange On Which Registered |
Ordinary Shares, €0.04 Par Value | | LYB | | New York Stock Exchange |
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 (§232.405 of this chapter) 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, a 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. | | | | | | | | | | | |
Large accelerated filer | x | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
Emerging growth company | ☐ | | |
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 324,197,207325,622,260 ordinary shares, €0.04 par value, outstanding at August 2, 2023April 24, 2024 (excluding 16,225,29114,800,238 treasury shares).
LYONDELLBASELL INDUSTRIES N.V.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED STATEMENTS OF INCOME
| | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, | | | Three Months Ended March 31, |
Millions of dollars, except earnings per share | Millions of dollars, except earnings per share | 2023 | | 2022 | | 2023 | | 2022 | Millions of dollars, except earnings per share | | | | | 2024 | | 2023 |
Sales and other operating revenues: | Sales and other operating revenues: | | | | | | | |
Trade | Trade | $ | 10,149 | | | $ | 14,559 | | | $ | 20,225 | | | $ | 27,399 | |
Trade | |
Trade | |
Related parties | Related parties | 157 | | | 279 | | | 328 | | | 596 | |
| 10,306 | | | 14,838 | | | 20,553 | | | 27,995 | |
| | | | | 9,925 | |
Operating costs and expenses: | Operating costs and expenses: | |
Cost of sales | |
Cost of sales | |
Cost of sales | Cost of sales | 8,868 | | | 12,267 | | | 17,732 | | | 23,403 | |
Impairments | Impairments | — | | | 69 | | | 252 | | | 69 | |
Selling, general and administrative expenses | Selling, general and administrative expenses | 395 | | | 329 | | | 780 | | | 657 | |
Research and development expenses | Research and development expenses | 32 | | | 32 | | | 65 | | | 64 | |
| 9,295 | | | 12,697 | | | 18,829 | | | 24,193 | |
| | | | | 9,221 | |
Operating income | Operating income | 1,011 | | | 2,141 | | | 1,724 | | | 3,802 | |
Interest expense | Interest expense | (115) | | | (58) | | | (231) | | | (132) | |
Interest income | Interest income | 28 | | | 4 | | | 51 | | | 6 | |
Other expense, net | (7) | | | (86) | | | (2) | | | (67) | |
Other income, net | |
Income from continuing operations before equity investments and income taxes | Income from continuing operations before equity investments and income taxes | 917 | | | 2,001 | | | 1,542 | | | 3,609 | |
(Loss) income from equity investments | (Loss) income from equity investments | (12) | | | 22 | | | 5 | | | 51 | |
Income from continuing operations before income taxes | Income from continuing operations before income taxes | 905 | | | 2,023 | | | 1,547 | | | 3,660 | |
Provision for income taxes | Provision for income taxes | 188 | | | 378 | | | 355 | | | 694 | |
Income from continuing operations | Income from continuing operations | 717 | | | 1,645 | | | 1,192 | | | 2,966 | |
Loss from discontinued operations, net of tax | Loss from discontinued operations, net of tax | (2) | | | (1) | | | (3) | | | (2) | |
Net income | Net income | 715 | | | 1,644 | | | 1,189 | | | 2,964 | |
| Dividends on redeemable non-controlling interests | Dividends on redeemable non-controlling interests | (1) | | | (1) | | | (3) | | | (3) | |
| Dividends on redeemable non-controlling interests | |
| Dividends on redeemable non-controlling interests | |
Net income attributable to the Company shareholders | Net income attributable to the Company shareholders | $ | 714 | | | $ | 1,643 | | | $ | 1,186 | | | $ | 2,961 | |
| Earnings per share: | Earnings per share: | |
Net income (loss) attributable to the Company shareholders — | |
Earnings per share: | |
Earnings per share: | |
Net income attributable to the Company shareholders — | |
Net income attributable to the Company shareholders — | |
Net income attributable to the Company shareholders — | |
Basic | |
Basic | |
Basic | Basic | |
Continuing operations | Continuing operations | $ | 2.19 | | | $ | 5.00 | | | $ | 3.64 | | | $ | 9.01 | |
Continuing operations | |
Continuing operations | |
Discontinued operations | Discontinued operations | (0.01) | | | — | | | (0.01) | | | (0.01) | |
| $ | 2.18 | | | $ | 5.00 | | | $ | 3.63 | | | $ | 9.00 | |
| | | | | $ | |
Diluted | Diluted | | | | | | | |
Continuing operations | Continuing operations | $ | 2.19 | | | $ | 4.98 | | | $ | 3.63 | | | $ | 8.99 | |
Continuing operations | |
Continuing operations | |
Discontinued operations | Discontinued operations | (0.01) | | | — | | | (0.01) | | | (0.01) | |
| $ | 2.18 | | | $ | 4.98 | | | $ | 3.62 | | | $ | 8.98 | |
| | | | | $ | |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | Three Months Ended March 31, | |
| | | Three Months Ended March 31, | |
| | | Three Months Ended March 31, | |
Millions of dollars | Millions of dollars | 2023 | | 2022 | | 2023 | | 2022 | Millions of dollars | | | | | 2024 | | 2023 |
Net income | Net income | $ | 715 | | | $ | 1,644 | | | $ | 1,189 | | | $ | 2,964 | |
Other comprehensive income (loss), net of tax – | Other comprehensive income (loss), net of tax – | |
Financial derivatives | Financial derivatives | 3 | | | 102 | | | 7 | | | 190 | |
Financial derivatives | |
Financial derivatives | |
| Defined benefit pension and other postretirement benefit plans | |
Defined benefit pension and other postretirement benefit plans | |
Defined benefit pension and other postretirement benefit plans | Defined benefit pension and other postretirement benefit plans | 2 | | | 78 | | | 4 | | | 83 | |
Foreign currency translations | Foreign currency translations | (31) | | | (161) | | | 28 | | | (186) | |
Total other comprehensive (loss) income, net of tax | Total other comprehensive (loss) income, net of tax | (26) | | | 19 | | | 39 | | | 87 | |
Comprehensive income | Comprehensive income | 689 | | | 1,663 | | | 1,228 | | | 3,051 | |
Dividends on redeemable non-controlling interests | Dividends on redeemable non-controlling interests | (1) | | | (1) | | | (3) | | | (3) | |
| Comprehensive income attributable to the Company shareholders | Comprehensive income attributable to the Company shareholders | $ | 688 | | | $ | 1,662 | | | $ | 1,225 | | | $ | 3,048 | |
Comprehensive income attributable to the Company shareholders | |
Comprehensive income attributable to the Company shareholders | |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED BALANCE SHEETS
| Millions of dollars | Millions of dollars | June 30, 2023 | | December 31, 2022 | Millions of dollars | March 31, 2024 | | December 31, 2023 |
ASSETS | ASSETS | | | |
Current assets: | Current assets: | |
Current assets: | |
Current assets: | |
Cash and cash equivalents | |
Cash and cash equivalents | |
Cash and cash equivalents | Cash and cash equivalents | $ | 2,468 | | | $ | 2,151 | |
Restricted cash | Restricted cash | 26 | | | 5 | |
| Accounts receivable: | Accounts receivable: | |
Accounts receivable: | |
Accounts receivable: | |
Trade, net | |
Trade, net | |
Trade, net | Trade, net | 3,638 | | | 3,392 | |
Related parties | Related parties | 173 | | | 201 | |
Inventories | Inventories | 5,195 | | | 4,804 | |
Prepaid expenses and other current assets | Prepaid expenses and other current assets | 1,193 | | | 1,292 | |
| Total current assets | |
Total current assets | |
Total current assets | Total current assets | 12,693 | | | 11,845 | |
Operating lease assets | Operating lease assets | 1,564 | | | 1,725 | |
Property, plant and equipment | Property, plant and equipment | 24,483 | | | 23,724 | |
Less: Accumulated depreciation | Less: Accumulated depreciation | (9,075) | | | (8,337) | |
Property, plant and equipment, net | Property, plant and equipment, net | 15,408 | | | 15,387 | |
Equity investments | Equity investments | 4,152 | | | 4,295 | |
Goodwill | Goodwill | 1,610 | | | 1,827 | |
Intangible assets, net | Intangible assets, net | 633 | | | 662 | |
Other assets | Other assets | 623 | | | 624 | |
Total assets | Total assets | $ | 36,683 | | | $ | 36,365 | |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED BALANCE SHEETS
| Millions of dollars, except shares and par value data | Millions of dollars, except shares and par value data | June 30, 2023 | | December 31, 2022 | Millions of dollars, except shares and par value data | March 31, 2024 | | December 31, 2023 |
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY | LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY | | | |
Current liabilities: | Current liabilities: | |
Current liabilities: | |
Current liabilities: | |
Current maturities of long-term debt | |
Current maturities of long-term debt | |
Current maturities of long-term debt | Current maturities of long-term debt | $ | 1,206 | | | $ | 432 | |
Short-term debt | Short-term debt | 130 | | | 349 | |
Accounts payable: | Accounts payable: | |
Trade | Trade | 3,024 | | | 3,106 | |
Trade | |
Trade | |
Related parties | Related parties | 493 | | | 477 | |
Accrued liabilities | 2,164 | | | 2,396 | |
Accrued and other current liabilities | |
| Total current liabilities | |
Total current liabilities | |
Total current liabilities | Total current liabilities | 7,017 | | | 6,760 | |
Long-term debt | Long-term debt | 10,276 | | | 10,540 | |
Operating lease liabilities | Operating lease liabilities | 1,437 | | | 1,510 | |
Other liabilities | Other liabilities | 1,989 | | | 1,954 | |
Deferred income taxes | Deferred income taxes | 2,905 | | | 2,858 | |
Commitments and contingencies | Commitments and contingencies | | Commitments and contingencies | | | |
Redeemable non-controlling interests | Redeemable non-controlling interests | 114 | | | 114 | |
Shareholders’ equity: | Shareholders’ equity: | |
Ordinary shares, €0.04 par value, 1,275 million shares authorized, 324,516,083 and 325,723,567 shares outstanding, respectively | 19 | | | 19 | |
Ordinary shares, €0.04 par value, 1,275 million shares authorized, 325,365,833 and 324,483,402 shares outstanding, respectively | |
Ordinary shares, €0.04 par value, 1,275 million shares authorized, 325,365,833 and 324,483,402 shares outstanding, respectively | |
Ordinary shares, €0.04 par value, 1,275 million shares authorized, 325,365,833 and 324,483,402 shares outstanding, respectively | |
Additional paid-in capital | Additional paid-in capital | 6,111 | | | 6,119 | |
Retained earnings | Retained earnings | 9,580 | | | 9,195 | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (1,333) | | | (1,372) | |
Treasury stock, at cost, 15,906,415 and 14,698,931 ordinary shares, respectively | (1,446) | | | (1,346) | |
Treasury stock, at cost, 15,056,665 and 15,939,096 ordinary shares, respectively | |
Total Company share of shareholders’ equity | Total Company share of shareholders’ equity | 12,931 | | | 12,615 | |
Non-controlling interests | Non-controlling interests | 14 | | | 14 | |
Total equity | Total equity | 12,945 | | | 12,629 | |
Total liabilities, redeemable non-controlling interests and equity | Total liabilities, redeemable non-controlling interests and equity | $ | 36,683 | | | $ | 36,365 | |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | Six Months Ended June 30, |
| Three Months Ended March 31, | | | Three Months Ended March 31, |
Millions of dollars | Millions of dollars | 2023 | | 2022 | Millions of dollars | 2024 | | 2023 |
Cash flows from operating activities: | Cash flows from operating activities: | | | |
Net income | Net income | $ | 1,189 | | | $ | 2,964 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
Net income | |
Net income | |
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | |
Depreciation and amortization | |
Depreciation and amortization | |
Depreciation and amortization | Depreciation and amortization | 787 | | | 615 | |
Impairments | Impairments | 252 | | | 69 | |
Amortization of debt-related costs | Amortization of debt-related costs | 4 | | | 8 | |
| Share-based compensation | Share-based compensation | 48 | | | 37 | |
Share-based compensation | |
Share-based compensation | |
| Equity investments— | Equity investments— | |
Equity income | (5) | | | (51) | |
Equity investments— | |
Equity investments— | |
Equity loss (income) | |
Equity loss (income) | |
Equity loss (income) | |
Distributions of earnings, net of tax | Distributions of earnings, net of tax | 50 | | | 184 | |
| Deferred income tax provision | 19 | | | 68 | |
Deferred income tax (benefit) provision | |
Deferred income tax (benefit) provision | |
Deferred income tax (benefit) provision | |
| Changes in assets and liabilities that provided (used) cash: | Changes in assets and liabilities that provided (used) cash: | |
Changes in assets and liabilities that provided (used) cash: | |
Changes in assets and liabilities that provided (used) cash: | |
Accounts receivable | |
Accounts receivable | |
Accounts receivable | Accounts receivable | (192) | | | (829) | |
Inventories | Inventories | (349) | | | (415) | |
Accounts payable | Accounts payable | (64) | | | 750 | |
Other, net | Other, net | 33 | | | (299) | |
Net cash provided by operating activities | 1,772 | | | 3,101 | |
Net cash (used in) provided by operating activities | |
Cash flows from investing activities: | Cash flows from investing activities: | | | |
Expenditures for property, plant and equipment | |
Expenditures for property, plant and equipment | |
Expenditures for property, plant and equipment | Expenditures for property, plant and equipment | (653) | | | (978) | |
| Proceeds from equity securities | — | | | 8 | |
Other, net | |
| Other, net | |
| | Other, net | Other, net | (89) | | | (64) | |
Net cash used in investing activities | Net cash used in investing activities | (742) | | | (1,034) | |
Cash flows from financing activities: | Cash flows from financing activities: | | | |
Repurchases of Company ordinary shares | Repurchases of Company ordinary shares | (170) | | | (262) | |
Repurchases of Company ordinary shares | |
Repurchases of Company ordinary shares | |
Dividends paid - common stock | Dividends paid - common stock | (797) | | | (2,464) | |
| Issuance of long-term debt | Issuance of long-term debt | 500 | | | — | |
Issuance of long-term debt | |
Issuance of long-term debt | |
Payments of debt issuance costs | Payments of debt issuance costs | (5) | | | — | |
Repayment of long-term debt | |
| Net (repayments of) proceeds from commercial paper | (200) | | | 105 | |
Collateral received from interest rate derivatives | — | | | 217 | |
| Other, net | |
| Other, net | |
| | Other, net | Other, net | (29) | | | 12 | |
Net cash used in financing activities | Net cash used in financing activities | (701) | | | (2,392) | |
Effect of exchange rate changes on cash | Effect of exchange rate changes on cash | 9 | | | (86) | |
Increase (decrease) in cash and cash equivalents and restricted cash | 338 | | | (411) | |
Decrease in cash and cash equivalents and restricted cash | |
Cash and cash equivalents and restricted cash at beginning of period | Cash and cash equivalents and restricted cash at beginning of period | 2,156 | | | 1,477 | |
Cash and cash equivalents and restricted cash at end of period | Cash and cash equivalents and restricted cash at end of period | $ | 2,494 | | | $ | 1,066 | |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ordinary Shares | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Company Share of Shareholders’ Equity | | Non- Controlling Interests |
Millions of dollars | Issued | | Treasury | |
Balance, March 31, 2023 | $ | 19 | | | $ | (1,360) | | | $ | 6,092 | | | $ | 9,277 | | | $ | (1,307) | | | $ | 12,721 | | | $ | 14 | |
Net income | — | | | — | | | — | | | 715 | | | — | | | 715 | | | — | |
Other comprehensive loss | — | | | — | | | — | | | — | | | (26) | | | (26) | | | — | |
Share-based compensation | — | | | 13 | | | 19 | | | (3) | | | — | | | 29 | | | — | |
Dividends - common stock ($1.25 per share) | — | | | — | | | — | | | (408) | | | — | | | (408) | | | — | |
| | | | | | | | | | | | | |
Dividends - redeemable non-controlling interests ($15.00 per share) | — | | | — | | | — | | | (1) | | | — | | | (1) | | | — | |
Repurchases of Company ordinary shares | — | | | (99) | | | — | | | — | | | — | | | (99) | | | — | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Balance, June 30, 2023 | $ | 19 | | | $ | (1,446) | | | $ | 6,111 | | | $ | 9,580 | | | $ | (1,333) | | | $ | 12,931 | | | $ | 14 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ordinary Shares | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Company Share of Shareholders’ Equity | | Non- Controlling Interests |
Millions of dollars | Issued | | Treasury | |
Balance, December 31, 2023 | $ | 19 | | | $ | (1,450) | | | $ | 6,145 | | | $ | 9,692 | | | $ | (1,476) | | | $ | 12,930 | | | $ | 14 | |
Net income | — | | | — | | | — | | | 473 | | | — | | | 473 | | | — | |
Other comprehensive loss | — | | | — | | | — | | | — | | | (56) | | | (56) | | | — | |
Share-based compensation | — | | | 78 | | | (33) | | | (3) | | | — | | | 42 | | | — | |
Dividends - common stock ($1.25 per share) | — | | | — | | | — | | | (408) | | | — | | | (408) | | | — | |
| | | | | | | | | | | | | |
Dividends - redeemable non-controlling interests ($15.00 per share) | — | | | — | | | — | | | (2) | | | — | | | (2) | | | — | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Balance, March 31, 2024 | $ | 19 | | | $ | (1,372) | | | $ | 6,112 | | | $ | 9,752 | | | $ | (1,532) | | | $ | 12,979 | | | $ | 14 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ordinary Shares | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Company Share of Shareholders’ Equity | | Non- Controlling Interests |
Millions of dollars | Issued | | Treasury | |
Balance, March 31, 2022 | $ | 19 | | | $ | (1,156) | | | $ | 6,056 | | | $ | 9,514 | | | $ | (1,735) | | | $ | 12,698 | | | $ | 14 | |
Net income | — | | | — | | | — | | | 1,644 | | | — | | | 1,644 | | | — | |
Other comprehensive income | — | | | — | | | — | | | — | | | 19 | | | 19 | | | — | |
Share-based compensation | — | | | 10 | | | 21 | | | (14) | | | — | | | 17 | | | — | |
Dividends - common stock ($1.19 per share) | — | | | — | | | — | | | (389) | | | — | | | (389) | | | — | |
Special dividends - common stock ($5.20 per share) | — | | | — | | | — | | | (1,704) | | | — | | | (1,704) | | | — | |
Dividends - redeemable non-controlling interests ($15.00 per share) | — | | | — | | | — | | | (1) | | | — | | | (1) | | | — | |
Repurchases of Company ordinary shares | — | | | (54) | | | — | | | — | | | — | | | (54) | | | — | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Balance, June 30, 2022 | $ | 19 | | | $ | (1,200) | | | $ | 6,077 | | | $ | 9,050 | | | $ | (1,716) | | | $ | 12,230 | | | $ | 14 | |
| | | | | | | | | | | | | |
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ordinary Shares | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Company Share of Shareholders’ Equity | | Non- Controlling Interests |
Millions of dollars | Issued | | Treasury | |
Balance, December 31, 2022 | $ | 19 | | | $ | (1,346) | | | $ | 6,119 | | | $ | 9,195 | | | $ | (1,372) | | | $ | 12,615 | | | $ | 14 | |
Net income | — | | | — | | | — | | | 1,189 | | | — | | | 1,189 | | | — | |
Other comprehensive income | — | | | — | | | — | | | — | | | 39 | | | 39 | | | — | |
Share-based compensation | — | | | 73 | | | (8) | | | (4) | | | — | | | 61 | | | — | |
Dividends - common stock ($2.44 per share) | — | | | — | | | — | | | (797) | | | — | | | (797) | | | — | |
| | | | | | | | | | | | | |
Dividends - redeemable non-controlling interests ($30.00 per share) | — | | | — | | | — | | | (3) | | | — | | | (3) | | | — | |
Repurchases of Company ordinary shares | — | | | (173) | | | — | | | — | | | — | | | (173) | | | — | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Balance, June 30, 2023 | $ | 19 | | | $ | (1,446) | | | $ | 6,111 | | | $ | 9,580 | | | $ | (1,333) | | | $ | 12,931 | | | $ | 14 | |
| | Ordinary Shares | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Company Share of Shareholders’ Equity | | Non- Controlling Interests |
| Ordinary Shares | | | Ordinary Shares | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Company Share of Shareholders’ Equity | | Non- Controlling Interests |
Millions of dollars | Millions of dollars | Issued | | Treasury | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Company Share of Shareholders’ Equity | | Non- Controlling Interests |
Balance, December 31, 2021 | $ | 19 | | | $ | (965) | | |
Balance, December 31, 2022 | |
Balance, December 31, 2022 | |
Balance, December 31, 2022 | |
Net income | Net income | — | | | — | | | — | | | 2,964 | | | — | | | 2,964 | | | — | |
Other comprehensive income | Other comprehensive income | — | | | — | | | — | | | — | | | 87 | | | 87 | | | — | |
Share-based compensation | Share-based compensation | — | | | 21 | | | 33 | | | (10) | | | — | | | 44 | | | — | |
Dividends - common stock ($2.32 per share) | — | | | — | | | — | | | (760) | | | — | | | (760) | | | — | |
Special dividends - common stock ($5.20 per share) | — | | | — | | | — | | | (1,704) | | | — | | | (1,704) | | | — | |
Dividends - redeemable non-controlling interests ($30.00 per share) | — | | | — | | | — | | | (3) | | | — | | | (3) | | | — | |
Dividends - common stock ($1.19 per share) | |
| Dividends - redeemable non-controlling interests ($15.00 per share) | |
Dividends - redeemable non-controlling interests ($15.00 per share) | |
Dividends - redeemable non-controlling interests ($15.00 per share) | |
Repurchases of Company ordinary shares | Repurchases of Company ordinary shares | — | | | (256) | | | — | | | — | | | — | | | (256) | | | — | |
| Balance, June 30, 2022 | $ | 19 | | | $ | (1,200) | | | $ | 6,077 | | | $ | 9,050 | | | $ | (1,716) | | | $ | 12,230 | | | $ | 14 | |
Balance, March 31, 2023 | |
| Balance, March 31, 2023 | |
| Balance, March 31, 2023 | |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
LyondellBasell Industries N.V. is a limited liability company (Naamloze Vennootschap) incorporated under Dutch law by deed of incorporation dated October 15, 2009. 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.”). LyondellBasell N.V. is a worldwide manufacturer of chemicals and polymers, a refiner of crude oil, a producer of gasoline blending components and a developer and licensor of technologies for the production of polymers.
The accompanying unaudited Consolidated Financial Statements have been prepared from the books and records of LyondellBasell N.V. in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X for interim financial information. Certain notes and other information have been condensed or omitted from the interim financial statements included in this report. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete financial statements. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.2023. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement have been included. These statements contain some amounts that are based upon management estimates and judgments. Future actual results could differ from such current estimates. The results for interim periods are not necessarily indicative of results for the entire year.
Effective January 1, 2023, our Catalloy and polybutene-1 businesses were moved from our Advanced Polymer Solutions segment and reintegrated into our Olefins and Polyolefins-Americas and Olefins and Polyolefins-Europe, Asia, International segments. This move allows the Advanced Polymer Solutions team to focus on our compounding and solutions business, and to develop a more agile operating model with meaningful regional and segment growth strategies. Segment information provided throughout the report has been revised for all periods presented to reflect these changes.
2. Accounting and Reporting Changes
Recently Adopted Guidance
There were no new Accounting Standard Updates (“ASU”) adopted in the quarter ended March 31, 2024 that had a material impact on the Consolidated Financial Statements.
Accounting Guidance Issued But Not Adopted as of March 31, 2024
Supplier Finance ProgramSegment Disclosures—In September 2022,November 2023, the FASB issued ASU 2022-04,2023-07, Liabilities—Supplier Finance Programs (Subtopic 405-50)Segment Reporting (Topic 280): Disclosure of Supplier Finance Program ObligationsImprovements to Reportable Segment Disclosures. The guidance requires an entity that uses supplier finance programs in connection withimproves the purchase of goodsdisclosures about a public entity’s reportable segments and services to disclose certain qualitative and quantitativeaddresses requests from investors for additional detailed information about its programs including the key terms and conditions, activity during the period, and potential magnitude.a reportable segment’s expenses. The guidance is effective retrospectively for the year ending December 31, 2023, including interim periods, with disclosures required for each period for which a balance sheet is presented, except for the disclosure of roll forward information, which is effective for fiscal years beginning after December 15, 2023. The2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently assessing the impact of thisadopting the new guidance did not have a material impact on ourthe Consolidated Financial Statements.
Accounting Guidance Issued But Not Adopted as of June 30, 2023
Fair Value MeasurementIncome Tax Disclosures—In June 2022,December 2023, the FASB issued ASU 2022-03, 2023-09,Fair Value Measurement Income Taxes (Topic 820)74): Fair Value Measurement of Equity Securities SubjectImprovements to Contractual Sale RestrictionsIncome Tax Disclosures. . The guidance clarifiesrequires companies to disclose certain specific categories in the rate reconciliation and provide additional information for reconciling items that a contractual restriction onmeet the salequantitative threshold of an equity security is not considered part5% of the unit of accountexpected tax using the applicable statutory income tax rate. There is also a required disclosure to provide the net income taxes paid or received disaggregated by federal, state, and foreign taxes with jurisdictions to be separately disclosed if the jurisdiction is 5% or more of the equity security because it is a characteristic of the entity holding the equity security rather than a characteristic of the security and is not considered in measuring its fair value.total net income taxes paid or received. The guidance is effective prospectively for the year endingannual periods beginning after December 31, 2024, including the interim periods, with15, 2024. Earlier adoption is permitted. We are currently assessing the impact of adoption reflected in earnings. Early adoption is permitted. The adoption of thisadopting the new guidance will not have a material impact on ourthe Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
3. Assets Held for Sale
During the fourth quarter of 2023, we entered into an agreement to sell our U.S. Gulf Coast-based ethylene oxide and derivatives (“EO&D”) business along with the production facility located in Bayport, TX for cash consideration of $700 million, subject to working capital and other adjustments. The EO&D business had been identified as a non-core business within our Intermediates and Derivatives segment. The transaction is expected to close in the second quarter of 2024 following planned maintenance at the facility, which was completed in the first quarter of 2024, and is subject to satisfaction of customary closing conditions.
The following table summarizes the assets and liabilities held for sale which are reported in Prepaid expenses and other current assets and Accrued and other current liabilities, respectively, in the Consolidated Financial Statements:
| | | | | | | | | | | |
Millions of dollars | March 31, 2024 | | December 31, 2023 |
ASSETS | | | |
Accounts receivable - Trade, net | $ | 41 | | | $ | 42 | |
Inventories | 73 | | | 100 | |
Prepaid expenses and other current assets | 43 | | | 43 | |
Operating lease assets | 20 | | | 20 | |
Property, plant and equipment, net | 288 | | | 225 | |
Goodwill | 13 | | | 14 | |
Total assets held for sale | $ | 478 | | | $ | 444 | |
| | | |
LIABILITIES | | | |
Short-term debt | $ | 43 | | | $ | 43 | |
Accounts payable - Trade | 23 | | | 51 | |
Accrued and other current liabilities | 9 | | | 7 | |
Operating lease liabilities | 17 | | | 19 | |
Total liabilities held for sale | $ | 92 | | | $ | 120 | |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
3.4. Revenues
Contract Balances—Contract liabilities were $185$139 million and $167$175 million at June 30, 2023March 31, 2024 and December 31, 2022,2023, respectively. Revenue recognized in each reporting period that was included in the contract liability balance at the beginning of the period was immaterial.
Disaggregation of Revenues—Effective January 1, 2023, our Catalloy and polybutene-1 businesses were moved from our Advanced Polymer Solutions segment and reintegrated into our Olefins and Polyolefins-Americas and Olefins and Polyolefins-Europe, Asia, International segments. See Note 12 for additional detail regarding the change in segments. Consistent with this change, we have updated the disclosure of revenue disaggregated by key products for all periods presented.
The following table presents our revenues disaggregated by key products:
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | Three Months Ended March 31, | |
| | | Three Months Ended March 31, | |
| | | Three Months Ended March 31, | |
Millions of dollars | Millions of dollars | 2023 | | 2022 | | 2023 | | 2022 | Millions of dollars | | | | | 2024 | | 2023 |
Sales and other operating revenues: | Sales and other operating revenues: | | | | | | | |
Olefins and co-products | |
Olefins and co-products | |
Olefins and co-products | Olefins and co-products | $ | 907 | | | $ | 1,397 | | | $ | 1,790 | | | $ | 2,554 | |
Polyethylene | Polyethylene | 1,920 | | | 2,749 | | | 3,936 | | | 5,456 | |
Polypropylene | Polypropylene | 1,453 | | | 2,188 | | | 2,979 | | | 4,451 | |
Propylene oxide and derivatives | Propylene oxide and derivatives | 538 | | | 931 | | | 1,179 | | | 1,816 | |
Oxyfuels and related products | Oxyfuels and related products | 1,302 | | | 1,553 | | | 2,535 | | | 2,807 | |
Intermediate chemicals | Intermediate chemicals | 766 | | | 1,201 | | | 1,512 | | | 2,311 | |
Compounding and solutions | Compounding and solutions | 956 | | | 1,113 | | | 1,951 | | | 2,248 | |
Refined products | Refined products | 2,293 | | | 3,503 | | | 4,350 | | | 5,961 | |
Other | Other | 171 | | | 203 | | | 321 | | | 391 | |
Total | Total | $ | 10,306 | | | $ | 14,838 | | | $ | 20,553 | | | $ | 27,995 | |
The following table presents our revenues disaggregated by geography, based upon the location of the customer:
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | Three Months Ended March 31, | |
| | | Three Months Ended March 31, | |
| | | Three Months Ended March 31, | |
Millions of dollars | Millions of dollars | 2023 | | 2022 | | 2023 | | 2022 | Millions of dollars | | | | | 2024 | | 2023 |
Sales and other operating revenues: | Sales and other operating revenues: | | | | | | | |
United States | |
United States | |
United States | United States | $ | 5,032 | | | $ | 7,425 | | | $ | 9,884 | | | $ | 13,499 | |
Germany | Germany | 619 | | | 1,075 | | | 1,405 | | | 2,070 | |
China | China | 533 | | | 686 | | | 1,047 | | | 1,342 | |
Mexico | Mexico | 389 | | | 598 | | | 819 | | | 1,040 | |
Japan | 426 | | | 461 | | | 791 | | | 884 | |
Italy | Italy | 346 | | | 521 | | | 722 | | | 1,039 | |
France | France | 272 | | | 446 | | | 566 | | | 833 | |
Poland | |
Japan | |
The Netherlands | The Netherlands | 240 | | | 344 | | | 473 | | | 734 | |
Poland | 223 | | | 374 | | | 462 | | | 769 | |
Other | Other | 2,226 | | | 2,908 | | | 4,384 | | | 5,785 | |
Total | Total | $ | 10,306 | | | $ | 14,838 | | | $ | 20,553 | | | $ | 27,995 | |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
4.5. Accounts Receivable
Our accountsAccounts receivable are reflected in the Consolidated Balance Sheets, net of allowance for credit losses of $6 million as of June 30, 2023March 31, 2024 and December 31, 2022.2023.
5.6. Inventories
Inventories consisted of the following components:
| Millions of dollars | Millions of dollars | June 30, 2023 | | December 31, 2022 | Millions of dollars | March 31, 2024 | | December 31, 2023 |
Finished goods | Finished goods | $ | 3,444 | | | $ | 3,027 | |
Work-in-process | Work-in-process | 217 | | | 227 | |
Raw materials and supplies | Raw materials and supplies | 1,534 | | | 1,550 | |
Total inventories | Total inventories | $ | 5,195 | | | $ | 4,804 | |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
6.7. Debt
Long-term loans, notes and other debt, net of unamortized discount and debt issuance cost, consisted of the following:
| Millions of dollars | Millions of dollars | June 30, 2023 | | December 31, 2022 | Millions of dollars | March 31, 2024 | | December 31, 2023 |
Senior Notes due 2024, $1,000 million, 5.75% ($1 million of debt issuance cost) | $ | 774 | | | $ | 774 | |
Senior Notes due 2055, $1,000 million, 4.625% ($15 million of discount; $11 million of debt issuance cost) | 974 | | | 974 | |
Senior Notes due 2024, $1,000 million, 5.75% | |
Senior Notes due 2055, $1,000 million, 4.625% ($15 million of discount; $10 million of debt issuance cost) | |
Guaranteed Notes due 2027, $300 million, 8.1% | Guaranteed Notes due 2027, $300 million, 8.1% | 300 | | | 300 | |
Issued by LYB International Finance B.V.: | Issued by LYB International Finance B.V.: | Issued by LYB International Finance B.V.: |
Guaranteed Notes due 2023, $750 million, 4.0% | 425 | | | 424 | |
Guaranteed Notes due 2043, $750 million, 5.25% ($19 million of discount; $6 million of debt issuance cost) | 725 | | | 725 | |
Guaranteed Notes due 2043, $750 million, 5.25% ($18 million of discount; $6 million of debt issuance cost) | |
Guaranteed Notes due 2044, $1,000 million, 4.875% ($10 million of discount; $8 million of debt issuance cost) | Guaranteed Notes due 2044, $1,000 million, 4.875% ($10 million of discount; $8 million of debt issuance cost) | 982 | | | 982 | |
Issued by LYB International Finance II B.V.: | Issued by LYB International Finance II B.V.: | Issued by LYB International Finance II B.V.: |
Guaranteed Notes due 2026, €500 million, 0.875% ($1 million of discount; $2 million of debt issuance cost) | 528 | | | 518 | |
Guaranteed Notes due 2026, €500 million, 0.875% ($1 million of discount; $1 million of debt issuance cost) | |
Guaranteed Notes due 2027, $1,000 million, 3.5% ($2 million of discount; $2 million of debt issuance cost) | Guaranteed Notes due 2027, $1,000 million, 3.5% ($2 million of discount; $2 million of debt issuance cost) | 584 | | | 587 | |
Guaranteed Notes due 2031, €500 million, 1.625% ($4 million of discount; $3 million of debt issuance cost) | 526 | | | 516 | |
Guaranteed Notes due 2031, €500 million, 1.625% ($4 million of discount; $2 million of debt issuance cost) | |
Issued by LYB International Finance III LLC: | Issued by LYB International Finance III LLC: | Issued by LYB International Finance III LLC: |
Guaranteed Notes due 2025, $500 million, 1.25% ($1 million of discount; $2 million of debt issuance cost) | 476 | | | 475 | |
Guaranteed Notes due 2025, $500 million, 1.25% ($1 million of discount; $1 million of debt issuance cost) | |
Guaranteed Notes due 2030, $500 million, 3.375% ($1 million of debt issuance cost) | Guaranteed Notes due 2030, $500 million, 3.375% ($1 million of debt issuance cost) | 120 | | | 120 | |
Guaranteed Notes due 2030, $500 million, 2.25% ($3 million of discount; $3 million of debt issuance cost) | 471 | | | 469 | |
Guaranteed Notes due 2030, $500 million, 2.25% ($2 million of discount; $3 million of debt issuance cost) | |
Guaranteed Notes due 2033, $500 million, 5.625% ($5 million of debt issuance cost) | Guaranteed Notes due 2033, $500 million, 5.625% ($5 million of debt issuance cost) | 495 | | | — | |
Guaranteed Notes due 2040, $750 million, 3.375% ($2 million of discount; $7 million of debt issuance cost) | 741 | | | 741 | |
Guaranteed Notes due 2034, $750 million, 5.5% ($6 million of discount, $7 million of debt issuance cost) | |
Guaranteed Notes due 2040, $750 million, 3.375% ($1 million of discount; $7 million of debt issuance cost) | |
Guaranteed Notes due 2049, $1,000 million, 4.2% ($14 million of discount; $10 million of debt issuance cost) | Guaranteed Notes due 2049, $1,000 million, 4.2% ($14 million of discount; $10 million of debt issuance cost) | 976 | | | 976 | |
Guaranteed Notes due 2050, $1,000 million, 4.2% ($6 million of discount; $10 million of debt issuance cost) | Guaranteed Notes due 2050, $1,000 million, 4.2% ($6 million of discount; $10 million of debt issuance cost) | 972 | | | 971 | |
Guaranteed Notes due 2051, $1,000 million, 3.625% ($2 million of discount; $11 million of debt issuance cost) | 895 | | | 897 | |
Guaranteed Notes due 2051, $1,000 million, 3.625% ($2 million of discount; $10 million of debt issuance cost) | |
Guaranteed Notes due 2060, $500 million, 3.8% ($4 million of discount; $6 million of debt issuance cost) | Guaranteed Notes due 2060, $500 million, 3.8% ($4 million of discount; $6 million of debt issuance cost) | 480 | | | 481 | |
Other | Other | 38 | | | 42 | |
Total | Total | 11,482 | | | 10,972 | |
Less current maturities | Less current maturities | (1,206) | | | (432) | |
Long-term debt | Long-term debt | $ | 10,276 | | | $ | 10,540 | |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Fair value hedging adjustments associated with the fair value hedge accounting of our fixed-for-floating interest rate swaps for the applicable periods are as follows:
| | Gains (Losses) | | Cumulative Fair Value Hedging Adjustments Included in Carrying Amount of Debt |
| Three Months Ended June 30, | | Six Months Ended June 30, | | June 30, | | December 31, |
| | | | | Gains (Losses) | |
| | | | | Gains (Losses) | |
| | | | | Gains (Losses) | | | Cumulative Fair Value Hedging Adjustments Included in Carrying Amount of Debt |
| | | | Three Months Ended March 31, | | | | | | Three Months Ended March 31, | | March 31, | | December 31, |
Millions of dollars | Millions of dollars | | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | Millions of dollars | | | | | | 2024 | | 2023 | | 2024 | | 2023 |
Guaranteed Notes due 2025, 1.25% | Guaranteed Notes due 2025, 1.25% | | $ | 1 | | | $ | 1 | | | $ | (1) | | | $ | 8 | | | $ | 13 | | | $ | 14 | |
Guaranteed Notes due 2026, 0.875% | Guaranteed Notes due 2026, 0.875% | | — | | | 3 | | | (1) | | | 7 | | | 12 | | | 13 | |
Guaranteed Notes due 2027, 3.5% | Guaranteed Notes due 2027, 3.5% | | 6 | | | 10 | | | 3 | | | 29 | | | 3 | | | — | |
Guaranteed Notes due 2030, 3.375% | Guaranteed Notes due 2030, 3.375% | | 4 | | | 6 | | | — | | | 16 | | | 21 | | | 21 | |
Guaranteed Notes due 2030, 2.25% | Guaranteed Notes due 2030, 2.25% | | 2 | | | 6 | | | (1) | | | 16 | | | 23 | | | 24 | |
Guaranteed Notes due 2031, 1.625% | Guaranteed Notes due 2031, 1.625% | | 1 | | | 3 | | | (1) | | | 3 | | | 10 | | | 11 | |
Guaranteed Notes due 2050, 4.2% | Guaranteed Notes due 2050, 4.2% | | 1 | | | 2 | | | (1) | | | 7 | | | 12 | | | 13 | |
Guaranteed Notes due 2051, 3.625% | Guaranteed Notes due 2051, 3.625% | | 19 | | | 24 | | | 2 | | | 53 | | | 92 | | | 90 | |
Guaranteed Notes due 2060, 3.8% | Guaranteed Notes due 2060, 3.8% | | 4 | | | 2 | | | 1 | | | 2 | | | 10 | | | 9 | |
Total | Total | | $ | 38 | | | $ | 57 | | | $ | 1 | | | $ | 141 | | | $ | 196 | | | $ | 195 | |
Fair value adjustments are recognized in Interest expense in the Consolidated Statements of Income.
Short-term loans, notes and other debt consisted of the following:
| | | | | | | | | | | |
Millions of dollars | June 30, 2023 | | December 31, 2022 |
U.S. Receivables Facility | $ | — | | | $ | — | |
Commercial paper | — | | | 200 | |
Precious metal financings | 130 | | | 131 | |
Other | — | | | 18 | |
Total Short-term debt | $ | 130 | | | $ | 349 | |
Long-Term Debt
Senior Revolving Credit Facility—Our $3,250 million senior unsecured revolving credit facility (the “Senior Revolving Credit Facility”), which expires in November 2026, may be used for dollar and euro denominated borrowings. The facility also supports our commercial paper program, has a $200 million sub-limit for dollar and euro denominated letters of credit and a $1,000 million uncommitted accordion feature and supports our commercial paper program. In May 2023, we amended our Senior Revolving Credit Facility to update the interest rate benchmark to reference the secured overnight financing rate (“SOFR”) rather than the London Interbank Offered Rate (“LIBOR”).feature. Borrowings under the facility bear interest at either a base rate, SOFRsecured overnight financing rate (“SOFR”) or EURIBOR rate, plus an applicable margin. Additional fees are incurred for the average daily unused commitments. At June 30, 2023,March 31, 2024, we had no borrowings or letters of credit outstanding and $3,250 million of unused availability under this facility.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Guaranteed Notes due 20332034—In May 2023,February 2024, LYB International Finance III, LLC (“LYB Finance III”), a wholly owned finance subsidiary of LyondellBasell Industries N.V., as defined in Rule 13-01 of Regulation S-X, issued $500$750 million of 5.625%5.5% guaranteed notes due 20332034 (the “2033“2034 Notes”) at a discounted price of 99.895%99.2%. Net proceeds after deducting original issuance discounts, underwriting fees and offering expenses totaled $737 million. We used the net proceeds from the sale of the 2034 Notes to repay our 5.75% senior notes totaled $495 million, after deducting underwriting discounts and offering expenses.due 2024 as discussed further below.
The 2033 Notes are the first green financing instruments we have issued related to our green financing framework. Net proceeds from the sale of the 2033 Notes will be used to finance or refinance, in whole or in part, new or existing eligible green projects in the areas of circular economy, renewable energy, pollution prevention and control, and energy efficiency. Pending the full allocation of the net proceeds, any portion that has not been allocated to eligible green projects will be managed in accordance with our normal liquidity management practices.
These unsecured notes, which are fully and unconditionally guaranteed by LyondellBasell Industries N.V., rank equally in right of payment to all of LYB Finance III’s and LyondellBasell Industries N.V.’s existing and future senior unsecured indebtedness and will rank senior in right of payment to any future subordinated indebtedness that LYB Finance III or LyondellBasell Industries N.V. incurs. There are no significant restrictions that would impede LyondellBasell Industries N.V., as guarantor, from obtaining funds by dividend or loan from its subsidiaries.
The indenture governing these notes contains limited covenants, including those restricting our ability, and the ability of our subsidiaries, to incur indebtedness secured by significant property or by capital stock of subsidiaries that own significant property, enter into certain sale and lease-back transactions with respect to any significant property or enter into consolidations, mergers or sales of all or substantially all of our assets.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The 20332034 Notes may be redeemed at any time in whole, or from time to time in part, prior to the scheduled maturity date, at a redemption price equal to the greater of (i) the sum of the present values of the remaining scheduled payments of principal and interest (discounted at the treasury rate plus the applicable basis points) less interest accrued on the notes to be redeemed, and (ii) 100% of the principal amount of the notes redeemed; plus, in either case, accrued and unpaid interest thereon to, but excluding, the redemption date. The 20332034 Notes may also be redeemed at any time, on or after the date that is three months prior to the scheduled maturity date of the notes at a redemption price equal to 100% of the principal amount of the notes to be redeemed plus accrued and unpaid interest thereon to, but excluding, the redemption date. The notes are also redeemable upon certain tax events.
GuaranteedSenior Notes due 20232024—In July 2023,March 2024, we repaid the $425$775 million remaining of outstanding principal onof our 4.0% guaranteed5.75% senior notes due 2023.2024.
Short-Term Debt
U.S. Receivables Facility—Our U.S. Receivables Facility, which expires in June 2024, has a purchase limit of $900 million in addition to a $300 million uncommitted accordion feature. This facility provides liquidity through the sale or contribution of trade receivables by certain of our U.S. subsidiaries to a wholly owned, bankruptcy-remote subsidiary on an ongoing basis and without recourse. We pay variable interest rates on our secured borrowings. Additional fees are incurred for the average daily unused commitments. In May 2023, we amended our U.S. Receivables Facility to update the interest rate benchmark to reference SOFR rather than LIBOR. This facility also provides for the issuance of letters of credit up to $200 million. At June 30, 2023,March 31, 2024, we had no borrowings or letters of credit outstanding and $900 million unused availability under this facility.
Commercial Paper Program—We have a commercial paper program under which we may issue up to $2,500 million of privately placed, unsecured, short-term promissory notes (“commercial paper”). At June 30, 2023,March 31, 2024, we had no borrowings of outstanding commercial paper.
Precious Metal Financings—At March 31, 2024 and December 31, 2023, we had $164 million and $117 million, respectively, of short-term debt related to our precious metal financings.
Weighted Average Interest Rate—At June 30, 2023March 31, 2024 and December 31, 2022,2023, our weighted average interest rates on outstanding Short-term debt were 2.5%1.5% and 3.7%1.9%, respectively.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Additional Information
Debt Compliance—As of June 30, 2023,March 31, 2024, we are in compliance with our debt covenants.
Supply Chain Finance Arrangements
We facilitate a voluntary supply chain finance program that provides suppliers, at their sole discretion, the opportunity to sell their receivables due from us to a participating financial intermediary in order to be paid earlier than our contracted payment terms. We are not a party to any agreement between our suppliers and the financial intermediary. When a supplier utilizes the program and receives an early payment from the financial intermediary, the supplier takes a discount on the invoice. We pay the financial intermediary the full amount of the invoice on the contractually agreed upon due date. The majority of the suppliers using the program are on 90-day payment terms. There is no economic impact to the Company from a supplier’s decision to take an early payment. No guarantees are provided by us or any of our subsidiaries under the program.
As of June 30, 2023 and December 31, 2022, Accounts payable-Trade included $57 million and $53 million, respectively, payable to suppliers who have elected to participate in the supply chain financing program.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
7.8. Financial Instruments and Fair Value Measurements
We are exposed to market risks, such as changes in commodity pricing, interest rates and currency exchange rates. To manage the volatility related to these exposures, we selectively enter into derivative contracts pursuant to our risk management policies.
Financial Instruments Measured at Fair Value on a Recurring Basis—The following table summarizes financial instruments outstanding for the periods presented that are measured at fair value on a recurring basis:
| | | June 30, 2023 | | | December 31, 2022 | | Balance Sheet Classification |
| | | Fair Value | |
| | | Fair Value | |
| | | Fair Value | |
Millions of dollars | Millions of dollars | | Fair Value | | | Fair Value | | Balance Sheet Classification |
| Millions of dollars | |
Millions of dollars | | | | March 31, 2024 | | | | December 31, 2023 | | Balance Sheet Classification |
Assets– | Assets– | | | | |
Derivatives designated as hedges: | Derivatives designated as hedges: | | | | |
Derivatives designated as hedges: | |
Derivatives designated as hedges: | |
Commodities | |
Commodities | |
Commodities | Commodities | | $ | 2 | | | | $ | — | | | Prepaid expenses and other current assets | | | $ | 2 | | | | | $ | | | | $ | 1 | | | Prepaid expenses and other current assets | | Prepaid expenses and other current assets |
| Foreign currency | Foreign currency | | 107 | | | | 109 | | | Prepaid expenses and other current assets |
Foreign currency | Foreign currency | | 103 | | | | 133 | | | Other assets |
Foreign currency | | | | 82 | | | | | 44 | | | Prepaid expenses and other current assets |
Foreign currency | | Foreign currency | | | 82 | | | | | 45 | | | Other assets |
Interest rates | Interest rates | | 41 | | | | 16 | | | Prepaid expenses and other current assets | Interest rates | | | 28 | | | | | 38 | | | | 38 | | | Prepaid expenses and other current assets | | Prepaid expenses and other current assets |
Interest rates | | — | | | | 25 | | | Other assets |
| Derivatives not designated as hedges: | |
Derivatives not designated as hedges: | |
Derivatives not designated as hedges: | Derivatives not designated as hedges: | | | | |
Commodities | Commodities | | 44 | | | | 27 | | | Prepaid expenses and other current assets |
Commodities | Commodities | | 1 | | | | — | | | Other assets |
Commodities | | | | 62 | | | | | 98 | | | Prepaid expenses and other current assets |
| Foreign currency | |
Foreign currency | |
Foreign currency | Foreign currency | | 2 | | | | — | | | Prepaid expenses and other current assets | | | 3 | | | | | 3 | | | | 3 | | | Prepaid expenses and other current assets | | Prepaid expenses and other current assets |
| Total | Total | | $ | 300 | | | | $ | 310 | | |
| | Total | |
| Total | |
| Liabilities– | |
| Liabilities– | |
| Liabilities– | Liabilities– | | | | |
Derivatives designated as hedges: | Derivatives designated as hedges: | | | | |
Derivatives designated as hedges: | |
Derivatives designated as hedges: | |
| Commodities | |
| Commodities | |
| Commodities | Commodities | | $ | 1 | | | | $ | 14 | | | Accrued liabilities | | | $ | 117 | | | | | $ | | | | $ | 109 | | | Accrued and other current liabilities | | Accrued and other current liabilities |
Commodities | Commodities | | 5 | | | | — | | | Other liabilities | Commodities | | | 36 | | | | | 33 | | | | 33 | | | Other liabilities | | Other liabilities |
Foreign currency | Foreign currency | | 25 | | | | 15 | | | Accrued liabilities | Foreign currency | | | 28 | | | | | 40 | | | | 40 | | | Accrued and other current liabilities | | Accrued and other current liabilities |
Foreign currency | Foreign currency | | 19 | | | | 8 | | | Other liabilities | Foreign currency | | | 13 | | | | | 32 | | | | 32 | | | Other liabilities | | Other liabilities |
Interest rates | Interest rates | | 29 | | | | 23 | | | Accrued liabilities | Interest rates | | | 30 | | | | | 31 | | | | 31 | | | Accrued and other current liabilities | | Accrued and other current liabilities |
Interest rates | Interest rates | | 226 | | | | 229 | | | Other liabilities | Interest rates | | | 195 | | | | | 172 | | | | 172 | | | Other liabilities | | Other liabilities |
Derivatives not designated as hedges: | Derivatives not designated as hedges: | | | | |
Commodities | Commodities | | 5 | | | | 11 | | | Accrued liabilities |
Commodities | Commodities | | 2 | | | | 3 | | | Other liabilities |
Commodities | | | | 35 | | | | | 52 | | | Accrued and other current liabilities |
| Foreign currency | |
Foreign currency | |
Foreign currency | Foreign currency | | 13 | | | | 6 | | | Accrued liabilities | | | 4 | | | | | 10 | | | | 10 | | | Accrued and other current liabilities | | Accrued and other current liabilities |
| Total | Total | | $ | 325 | | | | $ | 309 | | |
| Total | |
| Total | |
The financial instruments in the table above are classified as Level 2. We present the gross assets and liabilities of our derivative financial instruments on the Consolidated Balance Sheets.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Financial Instruments Not Measured at Fair Value on a Recurring Basis—The following table presents the carrying value and estimated fair value of our Short-term precious metal financings and Long-term debt:
| | June 30, 2023 | | December 31, 2022 |
| March 31, 2024 | | | March 31, 2024 | | December 31, 2023 |
Millions of dollars | Millions of dollars | Carrying Value | | Fair Value | | Carrying Value | | Fair Value | Millions of dollars | Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
| Precious metal financings | Precious metal financings | $ | 130 | | | $ | 99 | | | $ | 131 | | | $ | 113 | |
| Precious metal financings | |
| Precious metal financings | |
Long-term debt | Long-term debt | 10,256 | | | 8,796 | | | 10,517 | | | 8,882 | |
Total | Total | $ | 10,386 | | | $ | 8,895 | | | $ | 10,648 | | | $ | 8,995 | |
The financial instruments in the table above are classified as Level 2. Our other financial instruments classified within Current assets and Current liabilities have a short maturity and their carrying value generally approximates fair value.
Derivative Instruments:
Commodity Prices—The following table presents the notional amounts of our outstanding commodity derivative instruments:
| | June 30, 2023 | | December 31, 2022 | |
| Notional Amount | |
Millions of units | |
Millions of units | |
Millions of units | Millions of units | Notional Amount | | Notional Amount | | Unit of Measure | | Maturity Date | March 31, 2024 | | December 31, 2023 | | Unit of Measure | | Maturity Date |
Derivatives designated as hedges: | Derivatives designated as hedges: | | | | |
Natural gas | Natural gas | 62 | | | 5 | | | MMBtu | | 2023 to 2026 |
Natural gas | |
Natural gas | | 69 | | | 72 | | | MMBtu | | 2024 to 2027 |
Ethane | Ethane | 1 | | | — | | | Bbl | | 2024 | Ethane | 17 | | | 18 | | 18 | | | Bbls | | Bbls | | 2024 to 2026 |
Power | Power | 1 | | | — | | | MWhs | | 2024 | Power | 1 | | | 1 | | 1 | | | MWhs | | MWhs | | 2024 to 2027 |
Refined products | | Refined products | 1 | | | 1 | | | Bbls | | 2024 |
Derivatives not designated as hedges: | Derivatives not designated as hedges: | |
Crude oil | |
Crude oil | |
Crude oil | Crude oil | — | | | 2 | | | Bbl | | — | 9 | | | 12 | | 12 | | | Bbls | | Bbls | | 2024 |
Refined products | Refined products | 6 | | | 2 | | | Bbl | | 2023 to 2024 | Refined products | 12 | | | 16 | | 16 | | | Bbls | | Bbls | | 2024 |
Precious metals | Precious metals | 1 | | | 1 | | | Troy Ounces | | 2023 to 2024 | Precious metals | 1 | | | 1 | | 1 | | | Troy Ounces | | Troy Ounces | | 2024 |
Renewable Identification Numbers | | Renewable Identification Numbers | 44 | | | 59 | | | RINs | | 2024 |
Interest Rates—The following table presents the notional amounts of our outstanding interest rate derivative instruments:
| | June 30, 2023 | | December 31, 2022 | | |
| Notional Amount | |
| Notional Amount | |
| Notional Amount | |
Millions of dollars | |
Millions of dollars | |
Millions of dollars | Millions of dollars | Notional Amount | | Notional Amount | | Maturity Date | |
Cash flow hedges | Cash flow hedges | $ | 400 | | | $ | 400 | | | 2024 | |
Cash flow hedges | |
Cash flow hedges | |
Fair value hedges | Fair value hedges | 2,168 | | | 2,164 | | | 2025 to 2031 | |
Fair value hedges | |
Fair value hedges | |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Foreign Currency Rates—The following table presents the notional amounts of our outstanding foreign currency derivative instruments:
| | June 30, 2023 | | December 31, 2022 | | |
| Notional Amount | |
| Notional Amount | |
| Notional Amount | |
Millions of dollars | |
Millions of dollars | |
Millions of dollars | Millions of dollars | Notional Amount | | Notional Amount | | Maturity Date | |
Net investment hedges | Net investment hedges | $ | 3,352 | | | $ | 3,128 | | | 2023 to 2030 | |
Net investment hedges | |
Net investment hedges | |
Cash flow hedges | |
Cash flow hedges | |
Cash flow hedges | Cash flow hedges | 1,150 | | | 1,150 | | | 2024 to 2027 | |
Not designated | Not designated | 524 | | | 396 | | | 2023 to 2024 | |
Not designated | |
Not designated | |
|
Impact on Earnings and Other Comprehensive Income—The following tables summarize the pre-tax effect of derivative instruments recorded in Accumulated other comprehensive loss (“AOCI”), the gains (losses) reclassified from AOCI to earnings and additional gains (losses) recognized directly in earnings:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Effects of Financial Instruments |
| Three Months Ended June 30, |
| Balance Sheet | | Income Statement | | |
| Gain (Loss) Recognized in AOCI | | Gain (Loss) Reclassified to Income from AOCI | | Additional Gain (Loss) Recognized in Income | | Income Statement |
Millions of dollars | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | | Classification |
Derivatives designated as hedges: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Commodities | $ | (3) | | | $ | 4 | | | $ | — | | | $ | (21) | | | $ | — | | | $ | — | | | Cost of sales |
Foreign currency | (8) | | | 277 | | | (6) | | | (77) | | | 24 | | | 19 | | | Interest expense |
Interest rates | 12 | | | 146 | | | 2 | | | 2 | | | (53) | | | (50) | | | Interest expense |
Derivatives not designated as hedges: | | | | | | | | | | | | |
Commodities | — | | | — | | | — | | | — | | | (1) | | | 46 | | | Sales and other operating revenues |
Commodities | — | | | — | | | — | | | — | | | — | | | 8 | | | Cost of sales |
Foreign currency | — | | | — | | | — | | | — | | | (13) | | | (20) | | | Other expense, net |
| | | | | | | | | | | | |
| | | | | | | | | | | | | |
Total | $ | 1 | | | $ | 427 | | | $ | (4) | | | $ | (96) | | | $ | (43) | | | $ | 3 | | | |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
| | Effects of Financial Instruments |
| Six Months Ended June 30, |
| Balance Sheet | | Income Statement | |
| Gain (Loss) Recognized in AOCI | | Gain (Loss) Reclassified to Income from AOCI | | Additional Gain (Loss) Recognized in Income | | Income Statement |
| Effects of Financial Instruments | | | Effects of Financial Instruments |
| Three Months Ended March 31, | | | Three Months Ended March 31, |
| Balance Sheet | |
| Gain (Loss) Recognized in AOCI | |
| Gain (Loss) Recognized in AOCI | |
| Gain (Loss) Recognized in AOCI | | | Gain (Loss) Reclassified to Income from AOCI | | Additional Gain (Loss) Recognized in Income | | Income Statement |
Millions of dollars | Millions of dollars | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | | Classification | Millions of dollars | 2024 | | 2023 | | 2024 | | 2023 | | 2024 | | 2023 | | Classification |
Derivatives designated as hedges: | Derivatives designated as hedges: | | | | | | | | | | | | | |
| Commodities | |
Commodities | |
Commodities | | $ | (2) | | | $ | — | | | $ | 1 | | | $ | — | | | $ | — | | | $ | — | | | Sales and other operating revenues |
Commodities | Commodities | $ | (8) | | | $ | 30 | | | $ | 19 | | | $ | (32) | | | $ | — | | | $ | — | | | Cost of sales | Commodities | (48) | | | (5) | | (5) | | | 38 | | 38 | | | 19 | | 19 | | | — | | — | | | — | | — | | | Cost of sales | | Cost of sales |
Foreign currency | Foreign currency | (63) | | | 321 | | | 14 | | | (102) | | | 38 | | | 31 | | | Interest expense | Foreign currency | 95 | | | (55) | | (55) | | | (28) | | (28) | | | 20 | | 20 | | | 19 | | 19 | | | 14 | | 14 | | | Interest expense | | Interest expense |
Interest rates | Interest rates | (2) | | | 258 | | | 3 | | | 3 | | | (30) | | | (127) | | | Interest expense | Interest rates | 11 | | | (14) | | (14) | | | 1 | | 1 | | | 1 | | 1 | | | (45) | | (45) | | | 23 | | 23 | | | Interest expense | | Interest expense |
Derivatives not designated as hedges: | Derivatives not designated as hedges: | |
Commodities | Commodities | — | | | — | | | — | | | — | | | (34) | | | 82 | | | Sales and other operating revenues |
Commodities | Commodities | — | | | — | | | — | | | — | | | 27 | | | 11 | | | Cost of sales |
Commodities | | — | | | — | | | — | | | — | | | (84) | | | (33) | | | Sales and other operating revenues |
Commodities | | Commodities | — | | | — | | | — | | | — | | | 77 | | | 27 | | | Cost of sales |
Foreign currency | Foreign currency | — | | | — | | | — | | | — | | | (24) | | | (39) | | | Other expense, net | Foreign currency | — | | | — | | — | | | — | | — | | | — | | — | | | 8 | | 8 | | | (11) | | (11) | | | Other income, net | | Other income, net |
| | Total | Total | $ | (73) | | | $ | 609 | | | $ | 36 | | | $ | (131) | | | $ | (23) | | | $ | (42) | | |
| Total | |
| Total | |
As of June 30, 2023,March 31, 2024, on a pre-tax basis, $5$4 million is scheduled to be reclassified from Accumulated other comprehensive loss as an increase to Interest expense over the next twelve months.
Other Financial Instruments:
Cash and Cash Equivalents—At June 30, 2023March 31, 2024 and December 31, 2022,2023, we had marketable securities classified as Cash and cash equivalents of $1,630$1,475 million and $1,191$2,432 million, respectively.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
9. Income Taxes
For interim tax reporting, we estimate an annual effective tax rate which is applied to the year-to-date ordinary income. Tax effects of significant, unusual, or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur. Our effective income tax rate fluctuates based on, among other factors, changes in pre-tax income in countries with varying statutory tax rates, changes in valuation allowances, changes in foreign exchange gains or losses, the amount of exempt income, changes in unrecognized tax benefits associated with uncertain tax positions and changes in tax laws.
Our exempt income primarily includes interest income, export incentives, and equity earnings of joint ventures. Interest income earned by certain of our subsidiaries through intercompany financings is taxed at rates substantially lower than the U.S. statutory rate. Export incentives relate to tax benefits derived from elections and structures available for U.S. exports. Equity earnings attributable to the earnings of our joint ventures, when paid through dividends to certain European subsidiaries, are exempt from all or portions of normal statutory income tax rates. We currently anticipate the favorable treatment for interest income, dividends, and export incentives to continue in the near term; however, this treatment is based on current law. We continue to monitorThe United Kingdom, as well as certain other jurisdictions in which we operate, enacted legislation implementing the Organization for Economic Cooperation and Development (“OECD”)’sDevelopment’s Pillar One and Two legislation which focus on taxing rights and minimum taxes in countries where we operate, including the United Kingdom; however, weModel Rules effective as of January 1, 2024. We do not expect the impact to be material based on the principles agreed tolegislation enacted at this stage.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Our effective income tax rate for the second quarter of 2023 was 20.8% compared to 18.7% for the second quarter of 2022. The higher effective tax rate for the second quarter of 2023 is primarily attributable to an audit settlement during the second quarter of 2023 of 4.8%, coupled with fluctuations in uncertain tax positions of 1.7%. The increase was partially offset by a 4.2% decrease in our effective income tax rate due to the increased relative impact of exempt income due to decreased pretax income.
Our effective income tax rate for the first six monthsquarter of 20232024 was 22.9%20.4% compared to 19.0%26.0% for the first six monthsquarter of 2022.2023. The higherlower effective tax rate for the first six monthsquarter of 20232024 was primarily due to the first quarter 2023 goodwill impairment, for which there iswas no tax benefit, of 2.8%, an audit settlement during the second quarter 2023 of 2.4%, and fluctuations6.6% coupled with a 2.1% decrease in uncertainour effective income tax positions of 1.2%.rate related to changes in pre-tax income in countries with varying statutory tax rates. These increasesdecreases were partially offset by a 2.7% decrease3.0% increase in our effective income tax rate due to the increased relative impact ofa decrease in exempt income due to decreased pretax income.
9.10. Commitments and Contingencies
Commitments—We have various purchase commitments for materials, supplies and services incidental to the ordinary conduct of business, generally for quantities required for our businesses and at prevailing market prices. These commitments are designed to assureensure sources of supply and are not expected to be in excess of normal requirements. Additionally, we have capital expenditure commitments, which we incur in our normal course of business.
Financial Assurance Instruments—We have obtained letters of credit, performance and surety bonds and have issued financial and performance guarantees to support trade payables, potential liabilities and other obligations. Considering the frequency of claims made against the financial instruments we use to support our obligations, and the magnitude of those financial instruments in light of our current financial position, management does not expect that any claims against or draws on these instruments would have a material adverse effect on ourthe Consolidated Financial Statements. We have not experienced any unmanageable difficulties in obtaining the required financial assurance instruments for our current operations.
Environmental Remediation—Our accrued liabilityAccrued liabilities for future environmental remediation costs at current and former plant sites and other remediation sites totaled $123$141 million and $127$124 million as of June 30, 2023March 31, 2024 and December 31, 2022,2023, respectively. At June 30, 2023,March 31, 2024, the accrued liabilities for individual sites range from less than $1 million to $24$43 million. The remediation expenditures are expected to occur over a number of years and are not concentrated in any single year. In our opinion, it is reasonably possible that losses in excess of the liabilities recorded may have been incurred. However, we cannot estimate any amount or range of such possible additional losses. New information about sites, new technology or future developments, such as involvement in investigations by regulatory agencies, could require us to reassess our potential exposure related to environmental matters.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Indemnification—We are parties to various indemnification arrangements, including arrangements entered into in connection with acquisitions, divestitures and the formation and dissolution of joint ventures. Pursuant to these arrangements, we provide indemnification to and/or receive indemnification from other parties in connection with liabilities that may arise in connection with the transactions and in connection with activities prior to completion of the transactions. These indemnification arrangements typically include provisions pertaining to third-party claims relating to environmental and tax matters and various types of litigation. As of June 30, 2023,March 31, 2024, we had not accrued any significant amounts for our indemnification obligations, and we are not aware of other circumstances that would likely lead to significant future indemnification obligations. We cannot determine with certainty the potential amount of future payments under the indemnification arrangements until events arise that would trigger a liability under the arrangements.
As part of our technology licensing contracts, we give indemnifications to our licensees for liabilities arising from possible patent infringement claims with respect to certain proprietary licensed technologies. Such indemnifications have a stated maximum amount and generally cover a period of 5 to 10 years.
Legal Proceedings—We are subject to various lawsuits and claims, including but not limited to, matters involving contract disputes, environmental damages, personal injury and property damage. We vigorously defend ourselves and prosecute these matters as appropriate.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Our legal organization applies its knowledge, experience and professional judgment to the specific characteristics of our cases, employing a litigation management process to manage and monitor legal proceedings in which we are a party. Our process facilitates the early evaluation and quantification of potential exposures in individual cases. This process also enables us to track those cases that have been scheduled for trial, mediation or other resolution. We regularly assess the adequacy of legal accruals based on our professional judgment, experience and the information available regarding our cases.
Based on consideration of all relevant facts and circumstances, we do not believe the ultimate outcome of any currently pending lawsuit against us will have a material adverse effect upon our operations, financial condition or Consolidated Financial Statements.
10.11. Shareholders’ Equity and Redeemable Non-controlling Interests
Shareholders’ Equity
Dividend Distributions—The following table summarizes the quarterly dividends paid in the periodsperiod presented:
| | | | | | | | | | | | | | | | | |
Millions of dollars, except per share amounts | Dividend Per Ordinary Share | | Aggregate Dividends Paid | | Date of Record |
March 2023 - Quarterly dividend | $ | 1.19 | | | $ | 389 | | | March 6, 2023 |
June 2023 - Quarterly dividend | 1.25 | | | 408 | | | May 30, 2023 |
| | | | | |
| | | | | |
| $ | 2.44 | | | $ | 797 | | | |
| | | | | | | | | | | | | | | | | |
Millions of dollars, except per share amounts | Dividend Per Ordinary Share | | Aggregate Dividends Paid | | Date of Record |
March 2024 | $ | 1.25 | | | $ | 408 | | | March 4, 2024 |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Share Repurchase Authorization—In May 2023, our shareholders approved a proposal to authorize us to repurchase up to 34.0 million ordinary shares, through November 19, 2024 (“2023 Share Repurchase Authorization”), which superseded any prior repurchase authorizations. The timing and amount of these repurchases, which are determined based on our evaluation of market conditions and other factors, may be executed from time to time through open market or privately negotiated transactions. The repurchased shares, which are recorded at cost, are classified as Treasury stock and may be retired or used for general corporate purposes, including for various employee benefit and compensation plans.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The following table summarizes our share repurchase activity for the periodsperiod presented:
| | | | | | | | | | | | | | | | | | | | |
Millions of dollars, except shares and per share amounts | | Shares Repurchased | | Average Purchase Price | | Total Purchase Price, Including Commissions and Fees |
For six months ended June 30, 2023: | | | | | | |
2022 Share Repurchase Authorization | | 1,365,898 | | | $ | 88.98 | | | $ | 122 | |
2023 Share Repurchase Authorization | | 576,044 | | | 89.34 | | | 51 | |
| | 1,941,942 | | | $ | 89.09 | | | $ | 173 | |
| | | | | | |
For six months ended June 30, 2022: | | | | | | |
2021 Share Repurchase Authorization | | 2,111,538 | | | $ | 97.72 | | | $ | 206 | |
2022 Share Repurchase Authorization | | 560,396 | | | 89.24 | | | 50 | |
| | 2,671,934 | | | $ | 95.94 | | | $ | 256 | |
| | | | | | | | | | | | | | | | | | | | |
Millions of dollars, except shares and per share amounts | | Shares Repurchased | | Average Purchase Price | | Total Purchase Price, Including Commissions and Fees |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
For three months ended March 31, 2023: | | | | | | |
2022 Share Repurchase Authorization | | 846,500 | | | $ | 87.28 | | | $ | 74 | |
| | | | | | |
| | | | | | |
We had no share repurchases for the three months ended March 31, 2024. Total cash paid for share repurchases for the six months ended June 30,first quarter 2023 and 2022 was $170 million and $262 million, respectively.$70 million. Cash payments made during the reporting period may differ from the total purchase price, including commissions and fees, due to the timing of payments.
Ordinary Shares—The changes in the outstanding amounts of ordinary shares are as follows:
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2024 | | 2023 |
Ordinary shares outstanding: | | | |
Beginning balance | 324,483,402 | | | 325,723,567 | |
Share-based compensation | 803,335 | | | 516,142 | |
| | | |
Employee stock purchase plan | 79,096 | | | 75,392 | |
Purchase of ordinary shares | — | | | (846,500) | |
Ending balance | 325,365,833 | | | 325,468,601 | |
Treasury Shares—The changes in the amounts of treasury shares held by the Company are as follows:
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2024 | | 2023 |
Ordinary shares held as treasury shares: | | | |
Beginning balance | 15,939,096 | | | 14,698,931 | |
Share-based compensation | (803,335) | | | (516,142) | |
| | | |
Employee stock purchase plan | (79,096) | | | (75,392) | |
Purchase of ordinary shares | — | | | 846,500 | |
| | | |
Ending balance | 15,056,665 | | | 14,953,897 | |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Accumulated Other Comprehensive Loss—The components of, and after-tax changes in, Accumulated other comprehensive loss as of and for the three months ended March 31, 2024 and 2023 are presented in the following tables:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Millions of dollars | Financial Derivatives | | | | | | Defined Benefit Pension and Other Postretirement Benefit Plans | | Foreign Currency Translation Adjustments | | Total |
Balance – December 31, 2023 | $ | (226) | | | | | | | $ | (279) | | | $ | (971) | | | $ | (1,476) | |
Other comprehensive loss before reclassifications | (12) | | | | | | | — | | | (43) | | | (55) | |
Tax benefit (expense) before reclassifications | 2 | | | | | | | — | | | (17) | | | (15) | |
Amounts reclassified from accumulated other comprehensive loss | 12 | | | | | | | 4 | | | — | | | 16 | |
Tax expense | (1) | | | | | | | (1) | | | — | | | (2) | |
Net other comprehensive income (loss) | 1 | | | | | | | 3 | | | (60) | | | (56) | |
Balance – March 31, 2024 | $ | (225) | | | | | | | $ | (276) | | | $ | (1,031) | | | $ | (1,532) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Millions of dollars | Financial Derivatives | | | | | | Defined Benefit Pension and Other Postretirement Benefit Plans | | Foreign Currency Translation Adjustments | | Total |
Balance – December 31, 2022 | $ | (146) | | | | | | | $ | (182) | | | $ | (1,044) | | | $ | (1,372) | |
Other comprehensive (loss) income before reclassifications | (35) | | | | | | | — | | | 49 | | | 14 | |
Tax benefit before reclassifications | 9 | | | | | | | — | | | 10 | | | 19 | |
Amounts reclassified from accumulated other comprehensive loss | 40 | | | | | | | 3 | | | — | | | 43 | |
Tax expense | (10) | | | | | | | (1) | | | — | | | (11) | |
Net other comprehensive income | 4 | | | | | | | 2 | | | 59 | | | 65 | |
Balance – March 31, 2023 | $ | (142) | | | | | | | $ | (180) | | | $ | (985) | | | $ | (1,307) | |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Ordinary Shares—The changes in the outstanding amounts of ordinary shares are as follows:
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2023 | | 2022 |
Ordinary shares outstanding: | | | |
Beginning balance | 325,723,567 | | | 329,536,389 | |
Share-based compensation | 571,224 | | | 255,185 | |
| | | |
Employee stock purchase plan | 163,234 | | | 125,010 | |
Purchase of ordinary shares | (1,941,942) | | | (2,671,934) | |
Ending balance | 324,516,083 | | | 327,244,650 | |
Treasury Shares—The changes in the amounts of treasury shares held by the Company are as follows:
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2023 | | 2022 |
Ordinary shares held as treasury shares: | | | |
Beginning balance | 14,698,931 | | | 10,675,605 | |
Share-based compensation | (571,224) | | | (255,185) | |
| | | |
Employee stock purchase plan | (163,234) | | | — | |
Purchase of ordinary shares | 1,941,942 | | | 2,671,934 | |
| | | |
Ending balance | 15,906,415 | | | 13,092,354 | |
Accumulated Other Comprehensive Loss—The components of, and after-tax changes in, Accumulated other comprehensive loss as of and for the six months ended June 30, 2023 and 2022 are presented in the following tables:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Millions of dollars | Financial Derivatives | | | | | | Defined Benefit Pension and Other Postretirement Benefit Plans | | Foreign Currency Translation Adjustments | | Total |
Balance – December 31, 2022 | $ | (146) | | | | | | | $ | (182) | | | $ | (1,044) | | | $ | (1,372) | |
Other comprehensive income (loss) before reclassifications | (28) | | | | | | | — | | | 17 | | | (11) | |
Tax benefit before reclassifications | 8 | | | | | | | — | | | 11 | | | 19 | |
Amounts reclassified from accumulated other comprehensive loss | 36 | | | | | | | 5 | | | — | | | 41 | |
Tax expense | (9) | | | | | | | (1) | | | — | | | (10) | |
Net other comprehensive income | 7 | | | | | | | 4 | | | 28 | | | 39 | |
Balance – June 30, 2023 | $ | (139) | | | | | | | $ | (178) | | | $ | (1,016) | | | $ | (1,333) | |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Millions of dollars | Financial Derivatives | | | | | | Defined Benefit Pension and Other Postretirement Benefit Plans | | Foreign Currency Translation Adjustments | | Total |
Balance – December 31, 2021 | $ | (354) | | | | | | | $ | (528) | | | $ | (921) | | | $ | (1,803) | |
Other comprehensive income (loss) before reclassifications | 372 | | | | | | | — | | | (123) | | | 249 | |
Tax expense before reclassifications | (84) | | | | | | | — | | | (63) | | | (147) | |
Amounts reclassified from accumulated other comprehensive loss | (131) | | | | | | | 109 | | | — | | | (22) | |
Tax (expense) benefit | 33 | | | | | | | (26) | | | — | | | 7 | |
Net other comprehensive income (loss) | 190 | | | | | | | 83 | | | (186) | | | 87 | |
Balance – June 30, 2022 | $ | (164) | | | | | | | $ | (445) | | | $ | (1,107) | | | $ | (1,716) | |
The amounts reclassified out of each component of Accumulated other comprehensive loss are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | | Affected Line Item on the Consolidated Statements of Income |
Millions of dollars | 2023 | | 2022 | | 2023 | | 2022 | |
Reclassification adjustments for: | | | | | | | | | |
Financial derivatives: | | | | | | | | | |
| | | | | | | | | |
Commodities | $ | — | | | $ | (21) | | | $ | 19 | | | $ | (32) | | | Cost of sales |
Foreign currency | (6) | | | (77) | | | 14 | | | (102) | | | Interest expense |
Interest rates | 2 | | | 2 | | | 3 | | | 3 | | | Interest expense |
Income tax (expense) benefit | 1 | | | 25 | | | (9) | | | 33 | | | Provision for income taxes |
Financial derivatives, net of tax | (3) | | | (71) | | | 27 | | | (98) | | | |
| | | | | | | | | |
Amortization of defined pension items: | | | | | | | | | |
Settlement loss | — | | | 94 | | | — | | | 94 | | | Other expense, net |
Actuarial loss | 1 | | | 6 | | | 3 | | | 13 | | | Other expense, net |
Prior service cost | 1 | | | 1 | | | 2 | | | 2 | | | Other expense, net |
Income tax expense | — | | | (23) | | | (1) | | | (26) | | | Provision for income taxes |
Defined pension items, net of tax | 2 | | | 78 | | | 4 | | | 83 | | | |
| | | | | | | | | |
Total reclassifications, before tax | (2) | | | 5 | | | 41 | | | (22) | | | |
Income tax (expense) benefit | 1 | | | 2 | | | (10) | | | 7 | | | Provision for income taxes |
Total reclassifications, after tax | $ | (1) | | | $ | 7 | | | $ | 31 | | | $ | (15) | | | Amount included in net income |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
| | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | Affected Line Item on the Consolidated Statements of Income |
Millions of dollars | 2024 | | 2023 | | | | | |
Reclassification adjustments for: | | | | | | | | | |
Financial derivatives: | | | | | | | | | |
Commodities | $ | 1 | | | $ | — | | | | | | | Sales and other operating revenue |
Commodities | 38 | | | 19 | | | | | | | Cost of sales |
Foreign currency | (28) | | | 20 | | | | | | | Interest expense |
Interest rates | 1 | | | 1 | | | | | | | Interest expense |
Income tax expense | (1) | | | (10) | | | | | | | Provision for income taxes |
Financial derivatives, net of tax | 11 | | | 30 | | | | | | | |
| | | | | | | | | |
Amortization of defined pension items: | | | | | | | | | |
| | | | | | | | | |
Actuarial loss | 3 | | | 2 | | | | | | | Other income, net |
Prior service cost | 1 | | | 1 | | | | | | | Other income, net |
Income tax expense | (1) | | | (1) | | | | | | | Provision for income taxes |
Defined pension items, net of tax | 3 | | | 2 | | | | | | | |
| | | | | | | | | |
Total reclassifications, before tax | 16 | | | 43 | | | | | | | |
Income tax expense | (2) | | | (11) | | | | | | | Provision for income taxes |
Total reclassifications, after tax | $ | 14 | | | $ | 32 | | | | | | | Amount included in net income |
Redeemable Non-controlling Interests
Our redeemable non-controlling interests relate to shares of cumulative perpetual special stock (“redeemable non-controlling interest stock”) issued by a consolidated subsidiary. As of June 30, 2023March 31, 2024 and December 31, 2022,2023, we had 113,290113,064 and 113,471113,075 shares of redeemable non-controlling interest stock outstanding, respectively. These shares may be redeemed at any time at the discretion of the holders.
In February and May 2023,2024, we paid cash dividends of $15.00 per share to our redeemable non-controlling interest shareholders of record as of January 15, 2023 and April 15, 2023. Dividends2024. These dividends totaled $3$2 million for each of the sixthree months ended June 30, 2023March 31, 2024 and 2022.2023.
11.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
12. Per Share Data
Basic earnings per share is based upon the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share includes the effect of certain stock option and other equity-based compensation awards. Our unvested restricted stock units contain non-forfeitable rights to dividend equivalents and are considered participating securities. We calculatecompute basic and diluted earnings per share under the two-class method.
Earnings per share data is as follows:
| | | Three Months Ended June 30, | | Three Months Ended March 31, |
| 2023 | | 2022 |
| 2024 | | | 2024 | | 2023 |
Millions of dollars | Millions of dollars | Continuing Operations | | Discontinued Operations | | Continuing Operations | | Discontinued Operations | Millions of dollars | Continuing Operations | | Discontinued Operations | | Continuing Operations | | Discontinued Operations |
Net income (loss) | Net income (loss) | $ | 717 | | | $ | (2) | | | $ | 1,645 | | | $ | (1) | |
| | Dividends on redeemable non-controlling interests | |
| Dividends on redeemable non-controlling interests | |
| Dividends on redeemable non-controlling interests | Dividends on redeemable non-controlling interests | (1) | | | — | | | (1) | | | — | |
Net income attributable to participating securities | Net income attributable to participating securities | (4) | | | — | | | (7) | | | — | |
Net income (loss) attributable to ordinary shareholders – basic and diluted | Net income (loss) attributable to ordinary shareholders – basic and diluted | $ | 712 | | | $ | (2) | | | $ | 1,637 | | | $ | (1) | |
| Millions of shares, except per share amounts | Millions of shares, except per share amounts | |
Millions of shares, except per share amounts | |
Millions of shares, except per share amounts | |
Basic weighted average common stock outstanding | |
Basic weighted average common stock outstanding | |
Basic weighted average common stock outstanding | Basic weighted average common stock outstanding | 325 | | | 325 | | | 328 | | | 328 | |
Effect of dilutive securities | Effect of dilutive securities | 1 | | | 1 | | | 1 | | | 1 | |
Potential dilutive shares | Potential dilutive shares | 326 | | | 326 | | | 329 | | | 329 | |
| Earnings per share: | Earnings per share: | |
Earnings per share: | |
Earnings per share: | |
Basic | |
Basic | |
Basic | Basic | $ | 2.19 | | | $ | (0.01) | | | $ | 5.00 | | | $ | — | |
Diluted | Diluted | $ | 2.19 | | | $ | (0.01) | | | $ | 4.98 | | | $ | — | |
|
24
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2023 | | 2022 |
Millions of dollars | Continuing Operations | | Discontinued Operations | | Continuing Operations | | Discontinued Operations |
Net income (loss) | $ | 1,192 | | | $ | (3) | | | $ | 2,966 | | | $ | (2) | |
| | | | | | | |
| | | | | | | |
Dividends on redeemable non-controlling interests | (3) | | | — | | | (3) | | | — | |
Net income attributable to participating securities | (5) | | | — | | | (9) | | | — | |
Net income (loss) attributable to ordinary shareholders – basic and diluted | $ | 1,184 | | | $ | (3) | | | $ | 2,954 | | | $ | (2) | |
| | | | | | | |
Millions of shares, except per share amounts | | | | | | | |
Basic weighted average common stock outstanding | 326 | | | 326 | | | 328 | | | 328 | |
Effect of dilutive securities | 1 | | | 1 | | | 1 | | | 1 | |
Potential dilutive shares | 327 | | | 327 | | | 329 | | | 329 | |
| | | | | | | |
Earnings per share: | | | | | | | |
Basic | $ | 3.64 | | | $ | (0.01) | | | $ | 9.01 | | | $ | (0.01) | |
Diluted | $ | 3.63 | | | $ | (0.01) | | | $ | 8.99 | | | $ | (0.01) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
12.13. Segment and Related Information
Our operations are managed by senior executives who report to our Chief Executive Officer, the chief operating decision maker. Discrete financial information is available for each of the segments, and our Chief Executive Officer uses the operating results of each of the operating segments for performance evaluation and resource allocation.
The activities of each of our segments from which they earn revenues and incur expenses are described below:
•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.
•Refining. Our Refining segment refines heavy, high-sulfur crude oils 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.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Our chief operating decision maker uses EBITDA as the primary measure for reviewing profitability of our segments, and therefore, we have presented EBITDA for all segments. We define EBITDA as earnings from continuing operations before interest, income taxes, and depreciation and amortization.
“Other” includes intersegment eliminations and items that are not directly related or allocated to business operations, such as foreign exchange gains or losses and components of pension and other postretirement benefit costs other than service costs. Sales between segments are made at prices approximating prevailing market prices.
Summarized financial information concerning reportable segments is shown in the following tables for the periods presented: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2023 |
Millions of dollars | O&P– Americas | | O&P– EAI | | I&D | | APS | | Refining | | Technology | | Other | | Total |
Sales and other operating revenues: | | | | | | | | | | | | | | | |
Customers | $ | 1,756 | | | $ | 2,535 | | | $ | 2,629 | | | $ | 956 | | | $ | 2,293 | | | $ | 137 | | | $ | — | | | $ | 10,306 | |
Intersegment | 971 | | | 194 | | | 33 | | | 4 | | | 166 | | | 17 | | | (1,385) | | | — | |
| 2,727 | | | 2,729 | | | 2,662 | | | 960 | | | 2,459 | | | 154 | | | (1,385) | | | 10,306 | |
Income (loss) from equity investments | 12 | | | (19) | | | (5) | | | — | | | — | | | — | | | — | | | (12) | |
EBITDA | 679 | | | 84 | | | 472 | | | 34 | | | 47 | | | 79 | | | (12) | | | 1,383 | |
Capital expenditures | 102 | | | 65 | | | 104 | | | 14 | | | — | | | 15 | | | 1 | | | 301 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2022 |
Millions of dollars | O&P– Americas | | O&P– EAI | | I&D | | APS | | Refining | | Technology | | Other | | Total |
Sales and other operating revenues: | | | | | | | | | | | | | | | |
Customers | $ | 2,710 | | | $ | 3,635 | | | $ | 3,714 | | | $ | 1,113 | | | $ | 3,503 | | | $ | 163 | | | $ | — | | | $ | 14,838 | |
Intersegment | 1,528 | | | 262 | | | 52 | | | 3 | | | 285 | | | 31 | | | (2,161) | | | — | |
| 4,238 | | | 3,897 | | | 3,766 | | | 1,116 | | | 3,788 | | | 194 | | | (2,161) | | | 14,838 | |
Income (loss) from equity investments | 29 | | | (1) | | | (6) | | | — | | | — | | | — | | | — | | | 22 | |
EBITDA | 954 | | | 186 | | | 675 | | | 42 | | | 418 | | | 112 | | | (6) | | | 2,381 | |
Capital expenditures | 107 | | | 109 | | | 265 | | | 9 | | | 12 | | | 27 | | | 3 | | | 532 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2023 |
Millions of dollars | O&P- Americas | | O&P- EAI | | I&D | | APS | | Refining | | Technology | | Other | | Total |
Sales and other operating revenues: | | | | | | | | | | | | | | | |
Customers | $ | 3,483 | | | $ | 5,245 | | | $ | 5,270 | | | $ | 1,951 | | | $ | 4,350 | | | $ | 254 | | | $ | — | | | $ | 20,553 | |
Intersegment | 2,052 | | | 376 | | | 74 | | | 6 | | | 299 | | | 39 | | | (2,846) | | | — | |
| 5,535 | | | 5,621 | | | 5,344 | | | 1,957 | | | 4,649 | | | 293 | | | (2,846) | | | 20,553 | |
Income (loss) from equity investments | 35 | | | (18) | | | (11) | | | (1) | | | — | | | — | | | — | | | 5 | |
EBITDA | 1,220 | | | 161 | | | 898 | | | (192) | | | 293 | | | 152 | | | (18) | | | 2,514 | |
Capital expenditures | 184 | | | 119 | | | 283 | | | 31 | | | 2 | | | 32 | | | 2 | | | 653 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2024 |
Millions of dollars | O&P- Americas | | O&P- EAI | | I&D | | APS | | Refining | | Technology | | Other | | Total |
Sales and other operating revenues: | | | | | | | | | | | | | | | |
Customers | $ | 1,750 | | | $ | 2,562 | | | $ | 2,527 | | | $ | 960 | | | $ | 1,958 | | | $ | 168 | | | $ | — | | | $ | 9,925 | |
Intersegment | 1,121 | | | 183 | | | 59 | | | 5 | | | 132 | | | 24 | | | (1,524) | | | — | |
| 2,871 | | | 2,745 | | | 2,586 | | | 965 | | | 2,090 | | | 192 | | | (1,524) | | | 9,925 | |
Income (loss) from equity investments | 9 | | | (32) | | | (4) | | | — | | | — | | | — | | | — | | | (27) | |
| | | | | | | | | | | | | | | |
EBITDA | 521 | | | 14 | | | 312 | | | 35 | | | 55 | | | 118 | | | (8) | | | 1,047 | |
Capital expenditures | 177 | | | 87 | | | 140 | | | 23 | | | 25 | | | 24 | | | 7 | | | 483 | |
| | | | | | | | | | | | | | | |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
| | Six Months Ended June 30, 2022 |
| Three Months Ended March 31, 2023 | | | Three Months Ended March 31, 2023 |
Millions of dollars | Millions of dollars | O&P– Americas | | O&P– EAI | | I&D | | APS | | Refining | | Technology | | Other | | Total | Millions of dollars | O&P– Americas | | O&P– EAI | | I&D | | APS | | Refining | | Technology | | Other | | Total |
Sales and other operating revenues: | Sales and other operating revenues: | | | | | | | | | | | | | | | |
Customers | Customers | $ | 5,163 | | | $ | 7,322 | | | $ | 6,990 | | | $ | 2,248 | | | $ | 5,961 | | | $ | 311 | | | $ | — | | | $ | 27,995 | |
Customers | |
Customers | |
Intersegment | Intersegment | 2,809 | | | 501 | | | 115 | | | 4 | | | 547 | | | 64 | | | (4,040) | | | — | |
| 7,972 | | | 7,823 | | | 7,105 | | | 2,252 | | | 6,508 | | | 375 | | | (4,040) | | | 27,995 | |
| 2,808 | |
Income (loss) from equity investments | Income (loss) from equity investments | 62 | | | — | | | (11) | | | — | | | — | | | — | | | — | | | 51 | |
| EBITDA | EBITDA | 1,893 | | | 400 | | | 1,221 | | | 113 | | | 566 | | | 215 | | | (7) | | | 4,401 | |
EBITDA | |
EBITDA | |
Impairments | |
Capital expenditures | Capital expenditures | 242 | | | 198 | | | 428 | | | 24 | | | 26 | | | 56 | | | 4 | | | 978 | |
Acquisition of Joint Venture—In January 2024, we entered into an agreement to acquire a 35% interest in Saudi Arabia-based National Petrochemical Industrial Company (“NATPET”) from Alujain Corporation for approximately $500 million. The following assets are summarized and reconciledtransaction is expected to consolidated totalsclose in the following table:coming months and is subject to regulatory and other customary closing conditions. The joint venture will be included prospectively within our O&P-EAI segment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Millions of dollars | O&P- Americas | | O&P- EAI | | I&D | | APS | | Refining | | Technology | | | | Total |
June 30, 2023 | | | | | | | | | | | | | | | |
Property, plant and equipment, net | $ | 6,364 | | | $ | 1,997 | | | $ | 5,771 | | | $ | 630 | | | $ | 144 | | | $ | 502 | | | | | $ | 15,408 | |
| | | | | | | | | | | | | | | |
Equity investments | 2,033 | | | 1,574 | | | 543 | | | 2 | | | — | | | — | | | | | 4,152 | |
| | | | | | | | | | | | | | | |
December 31, 2022 | | | | | | | | | | | | | | | |
Property, plant and equipment, net | $ | 6,378 | | | $ | 1,880 | | | $ | 5,728 | | | $ | 636 | | | $ | 255 | | | $ | 510 | | | | | $ | 15,387 | |
| | | | | | | | | | | | | | | |
Equity investments | 2,053 | | | 1,655 | | | 585 | | | 2 | | | — | | | — | | | | | 4,295 | |
| | | | | | | | | | | | | | | |
Houston Refinery Operations—Costs incurred for the planned exit from the refinery business are as follows: | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, | | Inception to Date March 31, |
Millions of dollars | | | | | 2024 | | 2023 | | 2024 |
Accelerated lease amortization costs | | | | | $ | 8 | | | $ | 51 | | | $ | 209 | |
Personnel costs | | | | | 6 | | | 16 | | | 146 | |
Asset retirement obligation accretion | | | | | 2 | | | 2 | | | 13 | |
Asset retirement cost depreciation | | | | | 20 | | | 55 | | | 189 | |
Refinery exit costs | | | | | $ | 36 | | | $ | 124 | | | $ | 557 | |
Total costs incurred since our decision to exit the refining business through March 31, 2024, were $557 million. Our estimate of total exit costs, inclusive of costs incurred to date, ranges from $560 million to $1,050 million.
In subsequent periods, we expect to incur additional costs primarily consisting of accelerated amortization of operating lease assets of $10 million to $50 million, personnel costs of $15 million to $90 million and other charges of $40 million to $90 million.
In connection with the planned exit from the refinery business, we recorded liabilities for asset retirement obligations of $262 million as of March 31, 2024. We estimate that the Houston refinery’s asset retirement obligations are in the range of $150 million to $450 million.
Segment Structure Changes and Related Goodwill Impairment—Effective January 1, 2023, our Catalloy and polybutene-1 businesses were moved from our APS segment and reintegrated into our O&P-Americas and O&P-EAI segments. Accordingly, on January 1, 2023, we allocated goodwill from our APS segment to our O&P-Americas and O&P-EAI segments of $315 million and $269 million, respectively, based on the relative fair values of the businesses that were reintegrated compared to the fair value of the APS segment.
As of December 31, 2022, goodwill included in our APS reporting unit was $1,370 million, the majority of which related to the 2018 acquisition of A. Schulman. As of December 31, 2022, a large portion of the APS reporting unit’s fair value was derived from our Catalloy and polybutene-1 businesses, which had disproportionately low carrying values in comparison to the remaining assets of the reporting unit, which had relatively higher carrying values due to the 2018 purchase price allocation associated with the acquisition of A. Schulman. As a result of the reallocation of goodwill and the change in both fair value and carrying value among reporting units, we recognized a non-cash goodwill impairment charge of $252 million in the first quarter of 2023 in our APS segment. Fair values were determined utilizing a discounted cash flow method under the income approach and assumptions including management’s view on long-term growth rates in our industry, discount rates and other assumptions based on a market participant perspective, which are inherently subjective. The fair value of the reporting unit is Level 3 within the fair value hierarchy. The charge is reflected as Impairments in our Consolidated Statements of Income.
Exit of Houston Refinery Operations—In April 2022 we announced our decision to cease operation of our Houston refinery no later than the end of 2023 after determining that exiting the refining business is our best strategic and financial path forward. In May 2023 we announced our decision to extend the operations of our Houston refinery to no later than the end of the first quarter of 2025. Favorable inspections and consistent performance have given us confidence to continue safe and reliable operations. The extension will minimize workforce impacts as we continue to develop future options for the site and will enable a smoother transition between the shutdown and the implementation of the retrofitting and circular projects.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Costs incurred for the planned exit from the refinery business are as follows:
| | | | | | | | | | | |
Millions of dollars | Three Months Ended June 30, 2023 | | Six Months Ended June 30, 2023 |
Accelerated lease amortization costs | $ | 38 | | | $ | 89 | |
Personnel costs | 27 | | | 43 | |
Asset retirement obligation accretion | 2 | | | 4 | |
Asset retirement cost depreciation | 44 | | | 99 | |
Refinery exit costs | $ | 111 | | | $ | 235 | |
In subsequent periods, we expect to incur additional costs primarily consisting of accelerated amortization of operating lease assets of $20 million to $80 million, personnel costs of $50 million to $125 million and other charges of $50 million to $100 million. Additionally, we estimate that the Houston refinery’s asset retirement obligations are in the range of $150 million to $450 million. As of June 30, 2023, we recorded asset retirement obligations of $255 million representing our best estimate. We do not anticipate any material cash payments related to the exit of the refinery business to be made in 2023.
Disposal of Australia Facility—In the second quarter of 2022 we sold our ownership interest in our polypropylene manufacturing facility located in Geelong, Australia, LyondellBasell Australia (Holdings) Pty Ltd, for consideration of $38 million. In connection with this sale, we assessed the net assets of the disposal group for impairment and determined that the carrying value exceeded the fair value less costs to sell. As a result, we recognized a non-cash impairment charge in the second quarter of 2022 of $69 million in the operating results of our O&P-EAI segment. The fair value measurement for the disposal group is based on expected consideration and classified as Level 3 within the fair value hierarchy. The charge is reflected as Impairments in our Consolidated Statements of Income.
A reconciliation of EBITDA to Income from continuing operations before income taxes is shown in the following table for each of the periods presented:
| | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, | | | Three Months Ended March 31, |
Millions of dollars | Millions of dollars | 2023 | | 2022 | | 2023 | | 2022 | Millions of dollars | | | | | 2024 | | 2023 |
EBITDA: | EBITDA: | | | | | | | |
Total segment EBITDA | Total segment EBITDA | $ | 1,395 | | | $ | 2,387 | | | $ | 2,532 | | | $ | 4,408 | |
Total segment EBITDA | |
Total segment EBITDA | |
Other EBITDA | Other EBITDA | (12) | | | (6) | | | (18) | | | (7) | |
Less: | Less: | |
Depreciation and amortization expense | |
Depreciation and amortization expense | |
Depreciation and amortization expense | Depreciation and amortization expense | (391) | | | (304) | | | (787) | | | (615) | |
Interest expense | Interest expense | (115) | | | (58) | | | (231) | | | (132) | |
Add: | Add: | |
Interest income | Interest income | 28 | | | 4 | | | 51 | | | 6 | |
Interest income | |
Interest income | |
Income from continuing operations before income taxes | Income from continuing operations before income taxes | $ | 905 | | | $ | 2,023 | | | $ | 1,547 | | | $ | 3,660 | |
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
This discussion should be read in conjunction with the information contained in ourthe 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,OVERVIEW
In North America, lower costs for natural gas-based feedstocks and energy benefited olefins and polyolefins margins while regional demand for polyethylene improved. Our North American volumes were constrained by downtime in olefins, polyolefins, propylene oxide, oxyfuels and acetyls. In Europe, logistics disruptions in the Red Sea restricted competitive imports and led to increased volumes from our Catalloy and polybutene-1 businesses were moved from the Advanced Polymer Solutions (“APS”) segment and reintegrated into thelocal assets for both our Olefins and Polyolefins-Americas (“O&P-Americas”) and Olefins and Polyolefins-Europe,& Polyolefins Europe, Asia, International (“O&P-EAI”)and Intermediates & Derivatives segments. This move will allow the APS teamGlobally, tepid demand for durable goods continued to focus onchallenge volumes and margins for polypropylene and propylene oxide.
We remain committed to our compoundingbalanced and solutions business, and to develop a more agile operating model with meaningful regional and segment growth strategies. The segment information provided herein has been revised for all periods presented to reflect these changes.
OVERVIEW
Excluding the impacts of the first quarter 2023 APS goodwill impairment, results for the second quarter of 2023 compared todisciplined capital allocation strategy. During the first quarter of 2023 were relatively unchanged. Our O&P-Americas2024 we used $114 million of cash for operating activities, invested $483 million in capital expenditures and O&P-EAI segment results improved duereturned $408 million to modest margin improvements driven by lower feedstock costs. Our I&D segment results improved primarily due to incremental volume driven by improved demand and production from our new PO/TBA plant which was largely offset by planned maintenance at our existing assets. These improvements were offset by a decline in refining marginsshareholders through dividend payments. The use of cash for operating activities during the quarter.
During the first six months of 2023 our results decreased compared to the first six months of 2022. Global olefins and polyolefins margins decreased primarilyquarter was due to a declinebuild in average salesworking capital primarily driven by higher volumes and prices resulting in lower O&P-Americas and O&P-EAI segment results. Our I&D segment results decreased due to unfavorable margins across most businesses partially offset by volume increases for oxyfuels. Refining results declined as a result of decreased margins and unplanned downtimeour segments. Additionally, in the first quarter of 2023.
During the first six months2024, we successfully issued $750 million of 2023 we generated $1,772 million in cash from operating activities. We remain committedguaranteed notes to refinance our 2024 maturity at a disciplined approach to capital allocation, spending $653 million for capital expenditures and returning $967 million to shareholders through dividends and share repurchases. We continue to explore strategic options for our U.S. Gulf Coast-based ethylene oxide & derivatives (“EO&D”) business.lower rate.
Results of operations for the periods discussed are presented in the table below:
| | Three Months Ended | | | Six Months Ended |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| | June 30, | | March 31, | | | June 30, | | June 30, | | March 31, | | December 31, | | | | | | March 31, |
Millions of dollars | Millions of dollars | 2023 | | 2023 | | | 2023 | | 2022 | Millions of dollars | 2024 | | 2023 | | | | | | 2023 |
Sales and other operating revenues | Sales and other operating revenues | $ | 10,306 | | | $ | 10,247 | | | | $ | 20,553 | | | $ | 27,995 | |
Cost of sales | Cost of sales | 8,868 | | | 8,864 | | | | 17,732 | | | 23,403 | |
Impairments | Impairments | — | | | 252 | | | | 252 | | | 69 | |
Selling, general and administrative expenses | Selling, general and administrative expenses | 395 | | | 385 | | | | 780 | | | 657 | |
Research and development expenses | Research and development expenses | 32 | | | 33 | | | | 65 | | | 64 | |
Operating income | Operating income | 1,011 | | | 713 | | | | 1,724 | | | 3,802 | |
Interest expense | Interest expense | (115) | | | (116) | | | | (231) | | | (132) | |
Interest income | Interest income | 28 | | | 23 | | | | 51 | | | 6 | |
Other (expense) income, net | (7) | | | 5 | | | | (2) | | | (67) | |
Other income (expense), net | |
(Loss) income from equity investments | (Loss) income from equity investments | (12) | | | 17 | | | | 5 | | | 51 | |
Income from continuing operations before income taxes | Income from continuing operations before income taxes | 905 | | | 642 | | | | 1,547 | | | 3,660 | |
Provision for income taxes | 188 | | | 167 | | | | 355 | | | 694 | |
Provision for (benefit from) income taxes | |
Income from continuing operations | Income from continuing operations | 717 | | | 475 | | | | 1,192 | | | 2,966 | |
Loss from discontinued operations, net of tax | Loss from discontinued operations, net of tax | (2) | | | (1) | | | | (3) | | | (2) | |
Net income | Net income | 715 | | | 474 | | | | 1,189 | | | 2,964 | |
Other comprehensive income (loss), net of tax – | Other comprehensive income (loss), net of tax – | | | |
Financial derivatives | Financial derivatives | 3 | | | 4 | | | | 7 | | | 190 | |
| Financial derivatives | |
Financial derivatives | |
Defined benefit pension and other postretirement benefit plans | Defined benefit pension and other postretirement benefit plans | 2 | | | 2 | | | | 4 | | | 83 | |
Foreign currency translations | Foreign currency translations | (31) | | | 59 | | | | 28 | | | (186) | |
Total other comprehensive (loss) income, net of tax | Total other comprehensive (loss) income, net of tax | (26) | | | 65 | | | | 39 | | | 87 | |
Comprehensive income | Comprehensive income | $ | 689 | | | $ | 539 | | | | $ | 1,228 | | | $ | 3,051 | |
RESULTS OF OPERATIONS
Revenues—Revenues increasedremained relatively unchanged in the first quarter of 2024 compared to the fourth quarter of 2023. Lower volumes driven by $59planned and unplanned outages resulted in a 3% decrease in revenues, which was partially offset by a 3% increase in revenues due to higher average sales prices.
Revenues decreased by $322 million, or 1%3%, in the secondfirst quarter of 20232024 compared to the first quarter of 2023. Lower average sales prices for many of our products resulted in a 7% decrease in revenues. Higher volumes, driven primarily by increases in our I&D and Refining segmentsimproved demand, resulted in an 8%a 3% increase in revenues. Favorable foreign exchange impacts resulted in a 1% increase in revenues. Average sales prices in the second quarter of 2023 were lower for many of our products as sales prices generally correlate with crude oil prices. These lower prices resulted in an 8% decrease in revenues.
Revenues decreased by $7,442 million, or 27%, in the first six months of 2023 compared to the first six months 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 six months of 2022. These lower prices led to a 25% decrease in revenues. Lower volumes driven by a decline in demand resulted in a 2% decrease in revenues.
Cost of Sales—Cost of sales remained relatively unchangeddecreased by $177 million, or 2%, in the secondfirst quarter of 2024 compared to the fourth quarter of 2023 and by $101 million, or 1%, in the first quarter of 2024 compared to the first quarter of 2023. Cost of sales decreased by $5,671 million, or 24%, in the first six months of 2023, compared to the first six months of 2022, primarily driven by lower feedstock and energy costs.costs, including the impact of our commodity hedges.
Impairments—During the fourth quarter of 2023 we recognized non-cash impairment charges of $241 million, primarily consisting of a non-cash impairment charge of $192 million related to our European PO Joint Venture in our I&D segment.
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 businesses from our APS segment and reintegrating into our O&P-Americas and O&P-EAI segments. During the second quarter of 2022 we recognized a non-cash impairment charge of $69 million related to the sale of our Australian polypropylene manufacturing facility. See Note 12 to our Consolidated Financial Statements for additional information.
SG&A Expenses—Selling, general and administrative (“SG&A”) expenses remained relatively unchanged in the second quarter of 2023 compared to the first quarter of 2023. SG&A expenses increased by $123 million, or 19%, in the first six months of 2023 compared to the first six months of 2022. Approximately half of the increase was attributable to higher employee-related expenses. The remaining increase was largely driven by professional fees incurred for strategic projects.
Operating Income—Operating income increased by $298$389 million, or 42%123%, in the secondfirst quarter of 20232024 compared to the fourth quarter of 2023. Operating income in our I&D, O&P-EAI, Technology, Refining and APS segments increased by $242 million, $129 million, $40 million, $37 million and $30 million, respectively. These increases were offset by a decrease in our O&P-Americas segment of $88 million.
Operating income remained relatively unchanged in the first quarter of 2024 compared to the first quarter of 2023. Operating income in our APS O&P-Americas, I&D, O&P-EAI and Technology segments increased by $256 million, $153 million, $41 million, $33$260 million and $9$48 million, respectively. These increases were partially offset by a decreasedecreases in our Refining, segment of $189 million.
Operating income decreased by $2,078 million, or 55%, in the first six months of 2023 compared to the first six months of 2022. Operating income in our O&P-Americas, I&D, Refining, APS, O&P-EAI and TechnologyO&P-Americas segments decreased by $676of $162 million, $422$108 million, $387 million, $302 million, $233$32 million and $68$15 million, respectively.
Interest Expense—Interest expense remained relatively unchanged in the second quarter of 2023 compared to the first quarter of 2023. Interest expense increased by $99 million, or 75%, in the first six months of 2023 compared to the first six months of 2022, primarily due to a decrease in capitalized interest associated with our new PO/TBA plant which started-up in the first quarter of 2023 and the impact of our fixed-for-floating interest rate swaps due to higher interest rates in current year.
Other Expense, net—Other expense, net remained relatively unchanged in the second quarter of 2023 compared to the first quarter of 2023. Other expense, net decreased by $65 million, or 97%, in the first six months of 2023 compared to the first six months of 2022, primarily as a result of pension settlements recognized in the second quarter of 2022.
(Loss) Income from Equity Investments—Income from equity investments declined by $29 million, or 171%, in the second quarter of 2023 compared to the first quarter of 2023, and by $46 million, or 90%, in the first six months of 2023 compared to the first six months of 2022. The declines were related to the lower results across our joint ventures in O&P-Americas and O&P-EAI segments driven primarily by lower margins.
Results for each of our business segments are discussed further in the Segment Analysis“Segment Analysis” section below.
Income Taxes—Our effective income tax rate for the secondfirst quarter of 2024 was 20.4% compared to -3.9% for the fourth quarter of 2023. In the fourth quarter of 2023, the impact of impairments and a patent box ruling decreased our effective income tax rate by 15.1% and 7.0%, respectively. These movements were coupled with an increase in our effective income tax rate of 10.3% related to changes in pre-tax income in countries with varying statutory tax rates partially offset by fluctuations in foreign exchange gains or losses of 5.9%.
Our effective income tax rate for the first quarter of 2024 was 20.8%20.4% compared withto 26.0% for the first quarter of 2023. The lower effective income tax rate for the second quarter of 2023 is primarily attributable to the first quarter goodwill impairment, for which there is no tax benefit, of 6.6% and the increased relative impact of exempt income due to decreased pretax income of 2.7%. These decreases were partially offset by a 4.8% increase in our effective income tax rate due to an audit settlement during the second quarter.
Our effective income tax rate for the first six monthsquarter of 2023 was 22.9% compared to 19.0% for the first six months of 2022. The higher effective tax rate for the first six months of 20232024 was primarily due to the first quarter 2023 goodwill impairment, for which there iswas no tax benefit, of 2.8%6.6%, an audit settlement during the second quarter 2023 of 2.4%, and fluctuationscoupled with a 2.1% decrease in uncertainour effective income tax positions of 1.2%.rate related to changes in pre-tax income in countries with varying statutory tax rates. These increasesdecreases were partially offset by a 2.7% decrease3.0% increase in our effective income tax rate due to the increased relative impacta decrease in exempt income.
Our income tax results are discussed further in Note 8 to the Consolidated Financial Statements.
Comprehensive Income—Comprehensive income increased by $150$308 million in the secondfirst quarter of 20232024 compared to the firstfourth quarter of 2023, primarily due to the increase in Net income. Comprehensive income decreased by $1,823$122 million in the first six monthsquarter of 20232024 compared to the first six monthsquarter of 2022,2023, primarily due to the decreasenet unfavorable impacts of unrealized changes in Net income.foreign currency translation adjustments. The activities from the remaining components of ComprehensiveOther comprehensive income (loss) are discussed below.
Financial derivatives designated as cash flow hedges, primarily our forward-starting interest ratecommodity swaps, led to an increase in Comprehensive income of $105 million in the first quarter of 2024 compared to the fourth quarter of 2023 reflecting commodity pricing volatility. Financial derivatives designated as cash flow hedges remained relatively unchanged in the secondfirst quarter of 20232024 compared to the first quarter of 2023. Financial derivatives designated as cash flow hedges, primarily our forward-starting interest rate swaps,
Defined pension and postretirement benefit plans led to a decrease inan increase of Comprehensive income of $183$106 million in the first six monthsquarter of 20232024 compared to the first six monthsfourth quarter of 2022 due to periodic2023, as the fourth quarter of 2023 reflected annual changes in the benchmark interest rates.
actuarial assumptions. Defined pension and other postretirement benefit plans remained relatively unchanged in the secondfirst quarter of 20232024 compared to the first quarter of 2023. Defined pension and postretirement benefit plans led to a decrease of Comprehensive income of $79 million in the first six months of 2023 compared to the first six months of 2022, primarily due to a pre-tax pension settlement of $94 million that was reclassified from Accumulated other comprehensive loss to Other (expense) income, net, in the second quarter of 2022.
Foreign currency translations decreased Comprehensive income by $90$191 million and $119 million in the second quarter of 2023 compared to the first quarter of 2023, primarily due to the weakening of the U.S. dollar relative to the euro, offset by the effective portion of our net investment hedges. Foreign currency translation increased Comprehensive income by $214 million in the first six months of 20232024 compared to the fourth and first six monthsquarter of 2022,2023, respectively, primarily due to the strengthening of the U.S. dollar relative to the euro, offset by the effective portion of our net investment hedges.
See Notes 7 and 10 to our Consolidated Financial Statements for further discussions.
Segment Analysis
We use earnings from continuing operations before interest, income taxes, and depreciation and amortization (“EBITDA”) as our measure of profitability for segment reporting purposes. This measure of segment operating results is used by our chief operating decision maker to assess the performance of and allocate resources to our operating segments. Intersegment eliminations and items that are not directly related or allocated to business operations, such as foreign exchange gains or losses and components of pension and other postretirement benefits other than service costs are included in “Other”. For additional information related to our operating segments, as well asSee the table below for a reconciliation of EBITDA to its nearest generally accepted accounting principles (“GAAP”) measure,measure.
The following table presents the reconciliation of Net Income from continuing operations before income taxes, see Note 12 to our Consolidated Financial Statements.EBITDA for each of the periods presented:
| | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| March 31, | | December 31, | | | | | | March 31, |
Millions of dollars | 2024 | | 2023 | | | | | | 2023 |
Net income | $ | 473 | | | $ | 185 | | | | | | | $ | 474 | |
Loss from discontinued operations, net of tax | 1 | | | 1 | | | | | | | 1 | |
Income from continuing operations | 474 | | | 186 | | | | | | | 475 | |
Provision for (benefit from) income taxes | 122 | | | (7) | | | | | | | 167 | |
Depreciation and amortization | 365 | | | 380 | | | | | | | 396 | |
Interest expense, net | 86 | | | 80 | | | | | | | 93 | |
EBITDA | $ | 1,047 | | | $ | 639 | | | | | | | $ | 1,131 | |
| | | | | | | | | |
| | | | | | | | | |
Our continuing operations are managed through six reportable segments: O&P-Americas, O&P-EAI, I&D, APS, Refining and Technology.
Revenues and the components of EBITDAother information by segment for the periods presented are reflected in the tabletables below:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | March 31, | | | | June 30, | | June 30, |
Millions of dollars | 2023 | | 2023 | | | | 2023 | | 2022 |
Sales and other operating revenues: | | | | | | | | | |
O&P-Americas segment | $ | 2,727 | | | $ | 2,808 | | | | | $ | 5,535 | | | $ | 7,972 | |
O&P-EAI segment | 2,729 | | | 2,892 | | | | | 5,621 | | | 7,823 | |
I&D segment | 2,662 | | | 2,682 | | | | | 5,344 | | | 7,105 | |
APS segment | 960 | | | 997 | | | | | 1,957 | | | 2,252 | |
Refining segment | 2,459 | | | 2,190 | | | | | 4,649 | | | 6,508 | |
Technology segment | 154 | | | 139 | | | | | 293 | | | 375 | |
Other, including intersegment eliminations | (1,385) | | | (1,461) | | | | | (2,846) | | | (4,040) | |
Total | $ | 10,306 | | | $ | 10,247 | | | | | $ | 20,553 | | | $ | 27,995 | |
Operating income (loss): | | | | | | | | | |
O&P-Americas segment | $ | 524 | | | $ | 371 | | | | | $ | 895 | | | $ | 1,571 | |
O&P-EAI segment | 54 | | | 21 | | | | | 75 | | | 308 | |
I&D segment | 361 | | | 320 | | | | | 681 | | | 1,103 | |
APS segment | 9 | | | (247) | | | | | (238) | | | 64 | |
Refining segment | (3) | | | 186 | | | | | 183 | | | 570 | |
Technology segment | 70 | | | 61 | | | | | 131 | | | 199 | |
Other, including intersegment eliminations | (4) | | | 1 | | | | | (3) | | | (13) | |
Total | $ | 1,011 | | | $ | 713 | | | | | $ | 1,724 | | | $ | 3,802 | |
Depreciation and amortization: | | | | | | | | | |
O&P-Americas segment | $ | 144 | | | $ | 144 | | | | | $ | 288 | | | $ | 291 | |
O&P-EAI segment | 47 | | | 48 | | | | | 95 | | | 92 | |
I&D segment | 117 | | | 110 | | | | | 227 | | | 162 | |
APS segment | 24 | | | 22 | | | | | 46 | | | 48 | |
Refining segment | 49 | | | 61 | | | | | 110 | | | 2 | |
Technology segment | 10 | | | 11 | | | | | 21 | | | 20 | |
Total | $ | 391 | | | $ | 396 | | | | | $ | 787 | | | $ | 615 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| March 31, | | December 31, | | | | | | March 31, |
Millions of dollars | 2024 | | 2023 | | | | | | 2023 |
Sales and other operating revenues: | | | | | | | | | |
O&P-Americas segment | $ | 2,871 | | | 2,864 | | | | | | | $ | 2,808 | |
O&P-EAI segment | 2,745 | | | 2,412 | | | | | | | 2,892 | |
I&D segment | 2,586 | | | 2,661 | | | | | | | 2,682 | |
APS segment | 965 | | | 842 | | | | | | | 997 | |
Refining segment | 2,090 | | | 2,400 | | | | | | | 2,190 | |
Technology segment | 192 | | | 152 | | | | | | | 139 | |
Other, including intersegment eliminations | (1,524) | | | (1,402) | | | | | | | (1,461) | |
Total | $ | 9,925 | | | $ | 9,929 | | | | | | | $ | 10,247 | |
Operating income (loss): | | | | | | | | | |
O&P-Americas segment | $ | 356 | | | $ | 444 | | | | | | | $ | 371 | |
O&P-EAI segment | (11) | | | (140) | | | | | | | 21 | |
I&D segment | 212 | | | (30) | | | | | | | 320 | |
APS segment | 13 | | | (17) | | | | | | | (247) | |
Refining segment | 24 | | | (13) | | | | | | | 186 | |
Technology segment | 109 | | | 69 | | | | | | | 61 | |
Other, including intersegment eliminations | 1 | | | 2 | | | | | | | 1 | |
Total | $ | 704 | | | $ | 315 | | | | | | | $ | 713 | |
| | | | | | | | | |
| | Three Months Ended | | | Six Months Ended |
| June 30, | | March 31, | | | June 30, | | June 30, |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| March 31, | | | March 31, | | December 31, | | | | | | March 31, |
Millions of dollars | Millions of dollars | 2023 | | 2023 | | | 2023 | | 2022 | Millions of dollars | 2024 | | 2023 | | | | | | 2023 |
Income (loss) from equity investments: | | | | | | | | |
Depreciation and amortization: | |
O&P-Americas segment | O&P-Americas segment | $ | 12 | | | $ | 23 | | | | $ | 35 | | | $ | 62 | |
O&P-EAI segment | (19) | | | 1 | | | | (18) | | | — | |
I&D segment | (5) | | | (6) | | | | (11) | | | (11) | |
APS segment | — | | | (1) | | | | (1) | | | — | |
Total | $ | (12) | | | $ | 17 | | | | $ | 5 | | | $ | 51 | |
Other (expense) income, net: | | | | | | | | |
O&P-Americas segment | |
O&P-Americas segment | O&P-Americas segment | $ | (1) | | | $ | 3 | | | | $ | 2 | | | $ | (31) | |
O&P-EAI segment | O&P-EAI segment | 2 | | | 7 | | | | 9 | | | — | |
I&D segment | I&D segment | (1) | | | 2 | | | | 1 | | | (33) | |
APS segment | APS segment | 1 | | | — | | | | 1 | | | 1 | |
Refining segment | Refining segment | 1 | | | (1) | | | | — | | | (6) | |
Technology segment | Technology segment | (1) | | | 1 | | | | — | | | (4) | |
Other, including intersegment eliminations | (8) | | | (7) | | | | (15) | | | 6 | |
Total | Total | $ | (7) | | | $ | 5 | | | | $ | (2) | | | $ | (67) | |
EBITDA: | | | | | | | | |
O&P-Americas segment | $ | 679 | | | $ | 541 | | | | $ | 1,220 | | | $ | 1,893 | |
O&P-EAI segment | 84 | | | 77 | | | | 161 | | | 400 | |
I&D segment | 472 | | | 426 | | | | 898 | | | 1,221 | |
APS segment | 34 | | | (226) | | | | (192) | | | 113 | |
Refining segment | 47 | | | 246 | | | | 293 | | | 566 | |
Technology segment | 79 | | | 73 | | | | 152 | | | 215 | |
Other, including intersegment eliminations | (12) | | | (6) | | | | (18) | | | (7) | |
Total | $ | 1,383 | | | $ | 1,131 | | | | $ | 2,514 | | | $ | 4,401 | |
|
| | | | | | | | | | | | | | | | | | | | | |
| |
| | | | | | | | | |
| | | | | | | | | |
Income (loss) from equity investments: | | | | | | | | | |
O&P-Americas segment | $ | 9 | | | $ | 8 | | | | | | | $ | 23 | |
O&P-EAI segment | (32) | | | (34) | | | | | | | 1 | |
I&D segment | (4) | | | (5) | | | | | | | (6) | |
APS segment | — | | | — | | | | | | | (1) | |
Total | $ | (27) | | | $ | (31) | | | | | | | $ | 17 | |
Other income (expense), net: | | | | | | | | | |
O&P-Americas segment | $ | 5 | | | $ | — | | | | | | | $ | 3 | |
O&P-EAI segment | 5 | | | (10) | | | | | | | 7 | |
I&D segment | 4 | | | (2) | | | | | | | 2 | |
APS segment | 2 | | | 1 | | | | | | | — | |
Refining segment | — | | | — | | | | | | | (1) | |
Technology segment | (2) | | | — | | | | | | | 1 | |
Other, including intersegment eliminations | (9) | | | (14) | | | | | | | (7) | |
Total | $ | 5 | | | $ | (25) | | | | | | | $ | 5 | |
EBITDA: | | | | | | | | | |
O&P-Americas segment | $ | 521 | | | $ | 604 | | | | | | | $ | 541 | |
O&P-EAI segment | 14 | | | (125) | | | | | | | 77 | |
I&D segment | 312 | | | 73 | | | | | | | 426 | |
APS segment | 35 | | | 12 | | | | | | | (226) | |
Refining segment | 55 | | | 10 | | | | | | | 246 | |
Technology segment | 118 | | | 77 | | | | | | | 73 | |
Other, including intersegment eliminations | (8) | | | (12) | | | | | | | (6) | |
Total | $ | 1,047 | | | $ | 639 | | | | | | | $ | 1,131 | |
Olefins and Polyolefin-AmericasPolyolefins-Americas Segment
Overview—EBITDA decreased in the secondfirst quarter of 2024 compared to the fourth quarter of 2023, increased comparedprimarily due to the absence of a LIFO inventory valuation benefit recognized in the fourth quarter of 2023. EBITDA decreased in the first quarter of 2024 relative to the first quarter of 2023 driven by improvements in polyolefin margins. EBITDAlower income from equity investments and decreased in the first six months of 2023 relative to the first six months of 2022 primarily driven by lowerpolymer margins.
Ethylene Raw Materials—Ethylene and its co-products are produced from two major raw material groups:
•natural gas liquids (“NGLs”), principally ethane and propane, the prices of which are generally affected by natural gas prices; and
•crude oil-based liquids (“liquids” or “heavy liquids”), including naphtha, condensates and gas oils, the prices of which are generally related to crude oil prices.
We have flexibility to vary the raw material mix and process conditions in our U.S. olefins plants in order to maximize profitability as market prices fluctuate for both feedstocks and products. Although prices of crude-based liquids and natural gas liquids are generally related to crude oil and natural gas prices, during specific periods the relationships among these materials and benchmarks may vary significantly. In the second and first quarter of 2023, and the first six months of 2023 and 2022,Ethane represented approximately 70% to 80%75% of the raw materials used in our North American crackers was ethane.
2024 and the fourth quarter of 2023 and, approximately 65% in the first quarter of 2023. The following table sets forth selected financial information for the O&P-Americas segment including Income from equity investments, which is a component of EBITDA:
| | Three Months Ended | | | Six Months Ended |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| | June 30, | | March 31, | | | June 30, | | June 30, | | March 31, | | December 31, | | | | | | March 31, |
Millions of dollars | Millions of dollars | 2023 | | 2023 | | | 2023 | | 2022 | Millions of dollars | 2024 | | 2023 | | | | | | 2023 |
Sales and other operating revenues | Sales and other operating revenues | $ | 2,727 | | | $ | 2,808 | | | | $ | 5,535 | | | $ | 7,972 | |
Income from equity investments | Income from equity investments | 12 | | | 23 | | | | 35 | | | 62 | |
EBITDA | EBITDA | 679 | | | 541 | | | | 1,220 | | | 1,893 | |
Revenue—Revenues for our O&P-Americas segment decreasedremained relatively unchanged in the first quarter of 2024 compared to the fourth quarter of 2023 and increased by $81$63 million, or 3%2%, in the secondfirst quarter of 20232024 compared to the first quarter of 2023.
First quarter of 2024 versus fourth quarter of 2023 and—Revenue increased by $2,437 million, or 31%,8% as a result of higher polymer average sales prices driven by supply disruptions caused by unusually cold temperatures in the first six months of 2023 comparedGulf Coast. Lower sales volume driven by planned and unplanned outages led to the first six months of 2022.an 8% decrease in revenue.
SecondFirst quarter of 20232024 versus first quarter of 2023—Revenue decreased by 6% as a result of lower average sales prices driven by lower demand. Higher co-product and polyethylene volumes resulted in a revenue3% increase of 3% primarily driven by higher propylene and polypropylene sales and improved ethylene operating rates.
First six months of 2023 versus first six months of 2022—Lower average sales prices across all products resulted in a 30% decrease in revenue primarily driven by increased market supply.demand. Lower volumesaverage polymer sales prices resulted in a 1% decrease in revenue.
EBITDA—EBITDA increaseddecreased by $138$83 million, or 26%14%, in the secondfirst quarter of 2024 compared to the fourth quarter of 2023 and by $20 million, or 4%, in the first quarter of 2024 compared to the first quarter of 2023 and decreased by $673 million, or 36%, in the first six months of 2023 compared to the first six months of 2022.2023.
SecondFirst quarter of 20232024 versus firstfourth quarter of 2023—Higher polyethylene results led toDuring the fourth quarter of 2023 we recognized a $73 million LIFO inventory benefit. The absence of a similar benefit in the first quarter of 2024 resulted in a 12% increase in EBITDA due to higher margins driven by lower monomer and freight costs. Higher polypropylene results led to a 5% increase in EBITDA driven by higher margins resulting from lower propylene cost.
First six months of 2023 versus first six months of 2022—Lower polyethylene results led to a 16% decrease in EBITDA primarily driven by lower margins as a result of lower average sales prices.EBITDA. Lower polypropylene results led to a 14% decrease in EBITDA driven by a decrease in margin as a result of lower prices due to increased industry capacity and lower demand. Lower olefinsolefin results led to an 8% decrease in EBITDA due to lower marginsvolumes from planned and unplanned outages. Higher polymer results led to a 5% increase in EBITDA primarily driven by a declinean increase in thepolyethylene margins due to higher average sales priceprices and lower ethylene costs.
First quarter of 2024 versus first quarter of 2023—Lower income from equity investments led to a 2% decrease in EBITDA mainly attributable to lower polypropylene margins at our joint venture in Mexico. Lower polymer results led to a 2% decrease in EBITDA primarily driven by lower feedstock costs.margins.
Olefins and Polyolefin-Europe,Polyolefins-Europe, Asia, International Segment
Overview—EBITDA increased in the secondfirst quarter of 2024 compared to the fourth quarter of 2023, compareddue to higher volumes and margins across most businesses. EBITDA decreased in the first quarter of 2024 relative to the first quarter of 2023 primarily due to improved olefins margins, partially offset by lower polymers margins and lowera decrease in income from equity investments. EBITDA decreased in the first six months of 2023 relative to the first six months of 2022 primarily as a result ofinvestments and lower polymerspolymer margins.
Quality Circular Polymers—In April 2023, we acquired the remaining 50% interest in Quality Circular Polymers (“QCP”). As a result of the acquisition, QCP became a wholly owned subsidiary and is included in our O&P-EAI consolidated results prospectively after the acquisition date.
Ethylene Raw Materials—In Europe, naphtha is the primary raw material for our ethylene production and represented approximately 65% to 70% of the raw materials used in the second and first quarter of 2023,2024, and the fourth and first six monthsquarters of 2023 and 2022.2023.
The following table sets forth selected financial information for the O&P-EAI segment including Income (loss)(Loss) income from equity investments, which is a component of EBITDA:
| | Three Months Ended | | | Six Months Ended |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| | June 30, | | March 31, | | | June 30, | | June 30, | | March 31, | | December 31, | | | | | | March 31, |
Millions of dollars | Millions of dollars | 2023 | | 2023 | | | 2023 | | 2022 | Millions of dollars | 2024 | | 2023 | | | | | | 2023 |
Sales and other operating revenues | Sales and other operating revenues | $ | 2,729 | | | $ | 2,892 | | | | $ | 5,621 | | | $ | 7,823 | |
(Loss) income from equity investments | (Loss) income from equity investments | (19) | | | 1 | | | | (18) | | | — | |
EBITDA | EBITDA | 84 | | | 77 | | | | 161 | | | 400 | |
Revenue—Revenues decreasedincreased by $163$333 million, or 6%14%, in the secondfirst quarter of 2024 compared to the fourth quarter of 2023 and decreased by $147 million, or 5%, in the first quarter of 2024 compared to the first quarter of 2023 and by $2,202 million, or 28%, in the first six months of 2023 compared to the first six months of 2022.2023.
SecondFirst quarter of 2024 versus fourth quarter of 2023—Higher volumes resulted in a revenue increase of 11% primarily due to an increase in demand. Higher average sales prices resulted in a 2% increase in revenue reflecting increased demand from the impacts of the Red Sea logistics disruption which restricted competitive imports and increased restocking activities. Favorable foreign exchange impacts resulted in a revenue increase of 1%.
First quarter of 2024 versus first quarter of 2023—Lower average sales prices resulted in a 6% decrease in revenue as sales prices generally correlate with crude oil prices, which on average, decreased compared to the first quarter of 2023. Lowerand volumes resulted in a revenue decrease of 2% primarily6% and 1%, respectively, due to a decline inlower demand. Favorable foreign exchange impacts resulted in a revenue increase of 2%.
First six months of 2023 versus first six months of 2022—Lower average sales prices resulted in a 24% decrease in revenue as sales prices generally correlate with crude oil prices, which on average, decreased compared to the first six months of 2022. Lower volumes resulted in a revenue decrease of 3% primarily due to a decline in demand. Unfavorable foreign exchange impacts resulted in a revenue decrease of 1%.
EBITDA—EBITDA increased by $7$139 million, or 9%111%, in the secondfirst quarter of 2024 compared to the fourth quarter of 2023 and decreased by $63 million, or 82%, in the first quarter of 2024 compared to the first quarter of 2023.
First quarter of 2024 versus fourth quarter of 2023—During the fourth quarter of 2023 and decreased by $239 million, or 60%,we recognized a non-cash impairment charge of $38 million. The absence of a similar charge in the first six monthsquarter of 2023 compared to2024 resulted in a 30% increase in EBITDA. First quarter 2024 logistic disruptions in the first six months of 2022.Red Sea resulted in higher demand for our products. This drove a 54% increase in EBITDA in our polymer results and a 38% increase in olefins results primarily driven by higher volumes.
SecondFirst quarter of 20232024 versus first quarter of 2023—Higher olefins results led to an 88% increase in EBITDA primarily driven by higher cracker margins as a result of lower feedstock and energy costs. Lower polyolefins results led to a 56% decrease in EBITDA primarily driven by lower margins due to decreased demand as European markets remain challenging, especially for durable goods. A decrease in income from our equity investments led to a decline in EBITDA of 25% mainly attributable42% due to the absence of a gain on sale of asset recognized by one of our joint ventures in Europe in the first quarter of 2023.
First six months of 2023 versus first six months of 2022—Lower polymer results led to a 91%27% decrease in EBITDA primarily driven by decreased margins resulting from lower average salesproduct prices reflectingdue to weak demand. Higher olefins results led to a 17% increase in EBITDA, which was primarily driven by higher volumes resulting from the absence of planned and unplanned downtime. In the second quarter of 2022, we recognized a $69 million non-cash impairment charge in conjunction with the sale of our polypropylene manufacturing facility located in Australia. The absence of a similar charge in the first six months of 2023 resulted in a 17% increase in EBITDA.
Intermediates and Derivatives Segment
Overview—EBITDA increasedDuring the fourth quarter of 2023 we recognized a non-cash impairment related to our European PO joint venture and LIFO inventory valuation charges. Similar charges were not recognized in the secondfirst quarter of 20232024. EBITDA decreased in the first quarter of 2024 compared to the first quarter of 2023, primarily driven by volume improvements for oxyfuels and related products. EBITDA decreased in the first six months of 2023 compareddue to the first six months of 2022, primarily driven by a decrease in margins for propylene oxide and derivatives and intermediate chemicals, partially offset by volume improvements for oxyfuels and related products.lower results across most businesses.
The following table sets forth selected financial information for the I&D segment including Income (loss)Loss from equity investments, which is a component of EBITDA:
| | Three Months Ended | | | Six Months Ended |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| | June 30, | | March 31, | | | June 30, | | June 30, | | March 31, | | December 31, | | | | | | March 31, |
Millions of dollars | Millions of dollars | 2023 | | 2023 | | | 2023 | | 2022 | Millions of dollars | 2024 | | 2023 | | | | | | 2023 |
Sales and other operating revenues | Sales and other operating revenues | $ | 2,662 | | | $ | 2,682 | | | | $ | 5,344 | | | $ | 7,105 | |
Loss from equity investments | Loss from equity investments | (5) | | | (6) | | | | (11) | | | (11) | |
EBITDA | EBITDA | 472 | | | 426 | | | | 898 | | | 1,221 | |
Revenue—Revenues decreased by $20$75 million, or 1%3%, in the secondfirst quarter of 2024 compared to the fourth quarter of 2023 and by $96 million, or 4%, in the first quarter of 2024 compared to the first quarter of 2023 and decreased by $1,761 million, or 25%, in the first six months of 2023 compared to the first six months of 2022.2023.
SecondFirst quarter of 2024 versus fourth quarter of 2023—Sales volumes decreased due to unplanned downtime resulting in a 7% decrease in revenue. Higher average sales prices resulted in a 4% increase in revenue driven primarily by intermediate chemicals products resulting from tight market supply.
First quarter of 2024 versus first quarter of 2023—Lower average sales prices resulted in a 12%9% decrease in revenue driven by propylene oxideoxyfuels and derivativesrelated products as a result of lower demand.gasoline premiums. Sales volumes improvedincreased resulting in a 10%4% increase in revenue driven by driven by improved demand.due to additional PO/TBA capacity. Favorable foreign exchange impacts resulted in a 1%revenue increase in revenue.
First six months of 2023 versus first six months of 2022—Lower average sales prices resulted in a 24% decrease in revenue driven by lower pricing as a result of lower demand. Sales volumes decreased resulting in a 1% reduction in revenue due to lower demand and planned maintenance..
EBITDA—EBITDA increased by $46$239 million, or 11%327%, in the secondfirst quarter of 2024 compared to the fourth quarter of 2023 and decreased by $114 million, or 27%, in the first quarter of 2024 compared to the first quarter of 2023.
First quarter of 2024 versus fourth quarter of 2023—During the fourth quarter of 2023, we recognized a non-cash impairment charge related to our equity investment in the European PO joint venture and decreased by $323LIFO inventory valuation charges of $192 million or 26%,and $97 million, respectively. The absence of similar charges in the first six monthsquarter of 2023 compared to the first six months of 2022.2024 resulted in an increase in EBITDA.
SecondFirst quarter of 20232024 versus first quarter of 2023—Intermediate chemicals results declined, resulting in a 10% decrease in EBITDA improved 23% as a result of higher oxyfuels and related products volumesprimarily driven by strong demand.lower volumes from unplanned acetyls downtime. Propylene oxide and derivatives results drove a 13% decrease in EBITDA driven equally by lower volumes and margins as a result of weak demand.
First six months of 2023 versus first six months of 2022—Propylene oxide and derivatives results drove a 25%9% decrease in EBITDA as margins declined due to lower demand. Intermediate chemicals results declined, resulting in an 18% decrease in EBITDA, primarily driven by lower margins as higher market supply drove average sales prices down. Improveddemand pressured margins. Lower oxyfuels and related products results led to an EBITDA increasedecrease of 10% as volumes increased as a result of strong demand.3% driven primarily by lower margins due to lower blend premiums.
Advanced Polymer Solutions Segment
Overview—EBITDA increased in the secondfirst quarter of 2024 relative to the fourth quarter of 2023 relativeprimarily due to higher sales volumes. During the first quarter of 2023 and decreased in the first six months of 2023 compared to the first six months of 2022 primarily due to the recognition ofwe recognized a non-cash goodwill impairment charge inof $252 million, no similar charges were recognized during the first quarter of 2023.2024.
The following table sets forth selected financial information for the APS segment including Income (loss)Loss from equity investments, which is a component of EBITDA:
| | Three Months Ended | | | Six Months Ended |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| | June 30, | | March 31, | | | June 30, | | June 30, | | March 31, | | December 31, | | | | | | March 31, |
Millions of dollars | Millions of dollars | 2023 | | 2023 | | | 2023 | | 2022 | Millions of dollars | 2024 | | 2023 | | | | | | 2023 |
Sales and other operating revenues | Sales and other operating revenues | $ | 960 | | | $ | 997 | | | | $ | 1,957 | | | $ | 2,252 | |
Loss from equity investments | Loss from equity investments | — | | | (1) | | | | (1) | | | — | |
EBITDA | EBITDA | 34 | | | (226) | | | | (192) | | | 113 | |
Revenue—Revenues decreasedincreased by $37$123 million, or 4%15%, in the secondfirst quarter of 2024 compared to the fourth quarter of 2023 and decreased by $32 million, or 3%, in the first quarter of 2024 compared to the first quarter of 2023 and by $295 million, or 13%, in the first six months of 2023 compared to the first six months of 2022.2023.
SecondFirst quarter of 20232024 versus firstfourth quarter of 2023—Sales volumes decreasedincreased resulting in a 3% decrease12% increase in revenue stemming from lowerhigher demand. Average sales prices decreasedprice increased resulting in a 2% decreaseincrease in revenue. Favorable foreign exchange impacts resulted in a revenue increase of 1%.
First six monthsquarter of 20232024 versus first six monthsquarter of 20222023—Average sales price decreased resulting in an 8% decrease in revenue. Sales volumes decreasedincreased resulting in a 4% decreaseincrease in revenue stemming from lowerdue to higher demand. UnfavorableFavorable foreign exchange impacts resulted in a revenue decreaseincrease of 1%.
EBITDA—EBITDA increased by $260$23 million or 192% in the first quarter of 2024 compared to the fourth quarter of 2023 and by $261 million or 115% in the secondfirst quarter of 20232024 compared to the first quarter of 2023 and decreased by $305 million or 270% in the first six months of 2023 compared to the first six months of 2022.2023.
SecondFirst quarter of 2024 versus fourth quarter of 2023—EBITDA increased primarily due to higher volumes as a result of seasonal demand.
First quarter of 2024 versus first quarter of 2023—During the first quarter of 2023 we recognized a non-cash goodwill impairment charge of $252 million after the effect of moving our Catalloy and polybutene-1 businesses from our APS segment and reintegrating them into our O&P-Americas and O&P-EAI segments. The absence of a similar charge in the second quarter of 2023 resulted in a 112% increase in EBITDA when compared to the first quarter of 2023. See Note 12 to our Consolidated Financial Statements for additional information.
First six months of 2023 versus first six months of 2022—Margins in the first six months of 2023 decreased compared to the first six months of 2022, primarily due to sales prices decreasing more than production and raw material costs, resulting in a 27% decrease in EBITDA. Lower volumes resulted in a 26% decrease in EBITDA as a result of a decrease in demand. The remaining decrease was primarily due to the recognition of the non-cash goodwillthis impairment charge in the first quarter of 2023, discussed above.
2024 was the primary driver for the improved EBITDA results.
Refining Segment
Overview—EBITDA increased in the first quarter of 2024 compared to the fourth quarter of 2023 due to the absence of a LIFO inventory valuation charge recognized in the fourth quarter of 2023, partially offset by a decrease in margins as the impact of commodity hedges more than offset improvement in Maya 2-1-1 margins. EBITDA decreased in the secondfirst quarter of 20232024 compared to the first quarter of 2023 primarily due to lower margins. EBITDA decreased in the first six months of 2023 compared to the first six months of 2022 due to lower margins, unplanned downtime and costs incurred related to the planned exit from the refining business.
The following table sets forth selected financial information and heavy crude oil processing rates for the Refining segment and the U.S. refining market margins for the applicable periods. “Brent” is a light sweet crude oil and is one of the main benchmark prices for purchases of oil worldwide. “Maya” is a heavy sour crude oil grade produced in Mexico that is a relevant benchmark for heavy sour crude oils in the U.S. Gulf Coast market. References to industry benchmarks for refining market margins are to industry prices reported by Platts, a division of S&P Global.
| | Three Months Ended | | | Six Months Ended |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| | June 30, | | March 31, | | | June 30, | | June 30, | | March 31, | | December 31, | | | | | | March 31, |
Millions of dollars | Millions of dollars | 2023 | | 2023 | | | 2023 | | 2022 | Millions of dollars | 2024 | | 2023 | | | | | | 2023 |
Sales and other operating revenues | Sales and other operating revenues | $ | 2,459 | | | $ | 2,190 | | | | $ | 4,649 | | | $ | 6,508 | |
EBITDA | EBITDA | 47 | | | 246 | | | | 293 | | | 566 | |
| Thousands of barrels per day | Thousands of barrels per day | | | |
Thousands of barrels per day | |
Thousands of barrels per day | |
Heavy crude oil processing rates | |
Heavy crude oil processing rates | |
Heavy crude oil processing rates | Heavy crude oil processing rates | 245 | | | 226 | | | | 236 | | | 254 | |
| Market margins, dollars per barrel | Market margins, dollars per barrel | | | |
Market margins, dollars per barrel | |
Market margins, dollars per barrel | |
Brent - 2-1-1 | |
Brent - 2-1-1 | |
Brent - 2-1-1 | Brent - 2-1-1 | $ | 25.11 | | | $ | 29.44 | | | | $ | 27.27 | | | $ | 35.08 | |
Brent - Maya differential | Brent - Maya differential | 14.34 | | | 19.39 | | | | 16.87 | | | 8.25 | |
Total Maya 2-1-1 | Total Maya 2-1-1 | $ | 39.45 | | | $ | 48.83 | | | | $ | 44.14 | | | $ | 43.33 | |
Revenue—Revenues increaseddecreased by $269$310 million, or 12%13%, in the secondfirst quarter of 2024 compared to the fourth quarter of 2023 and by $100 million, or 5%, in the first quarter of 2024 compared to the first quarter of 2023 and decreased by $1,859 million, or 29%, in the first six months of 2023 compared to the first six months of 2022.2023.
SecondFirst quarter of 20232024 versus firstfourth quarter of 2023—Sales volumes increased resulting in an 18% increase in revenue due to the absence of unplanned downtime in the second quarter of 2023. Lower product prices led to a revenue decrease of 6%9% due to an average Brent crude oil price decrease of approximately $4.20$0.84 per barrel.
Lower sales volumes due to planned and unplanned outages led to a 4% decline in revenue.
First six monthsquarter of 20232024 versus first six monthsquarter of 20222023—Lower product prices led to a revenue decrease of 27%8% due to anlower average Brent crude oil price decrease of approximately $24.47 per barrel.sales prices reflecting lower margins on refined products. Sales volumes decreased resultingwere higher in the first quarter of 2024 as the first quarter of 2023 includes the effects of rebuilding inventory levels following the fourth quarter of 2022 unplanned downtime. This volume variance resulted in a 2% decrease3% increase in revenue due to slightly lower operating rates.
revenue.
EBITDA—EBITDA decreasedincreased by $199$45 million, or 81%450%, in the secondfirst quarter of 2024 compared to the fourth quarter of 2023 and decreased by $191 million, or 78%, in the first quarter of 2024 compared to the first quarter of 2023.
First quarter of 2024 versus fourth quarter of 2023—During the fourth quarter of 2023 and by $273we recognized LIFO inventory charges of $42 million, or 48%,no similar charges were recognized in the first six monthsquarter of 2023 compared2024. Margin changes resulted in an EBITDA decrease of 60% in the first quarter of 2024. Despite an increase in the Maya 2-1-1 industry crack spread of approximately $7 per barrel to $34 per barrel in the first quarter, the mark-to-market impact of our commodity hedges offset this benefit. For additional information related to our financial instruments, see Note 8 to the first six months of 2022.Consolidated Financial Statements.
First quarter of 20232024 versus first quarter of 2023—Lower margins resulted indrove a 99%90% decrease in EBITDA asprimarily due to a decrease in the Maya 2-1-1 industry crack spread declinedof approximately $9$15 per barrel to $39 per barreldriven by lower Maya crude differential resulting from a decrease in the second quarter with heavy crude supply tightening leadingsupply. Lower volumes due to lower Mayaplanned and Western Canadian Select (“WCS”) crude discounts. Higher volumes, as a result of the absence of unplanned downtime in the second quarter of 2023, resulted in an 18% increasea 9% decrease in EBITDA.
First six months of 2023 versus first six months of 2022—Costs A decrease in costs incurred related to our planned exit from the refining business in the first six monthsquarter of 2024 compared to the first quarter of 2023 resulted in a 24% decrease22% increase in EBITDA. Lower margin drove a 14% decrease in EBITDA primarily due to unfavorable pricing on non-Maya crude purchases and lower operating yields of refined products. EBITDA decreased 11% as a result of a decrease in volumes driven by unplanned downtime in the first quarter of 2023. See Note 12 to the Consolidated Financial Statements for additional information regarding our planned exit of the refining business.
Technology Segment
Overview—EBITDA increased in the secondfirst quarter of 2024 compared to the fourth quarter of 2023 comparedand in the first quarter of 2024 relative to the first quarter of 2023 primarily due to higher licensing revenues from more contracts reaching significant milestones. EBITDA decreased in the first six months of 2023 relative to the first six months of 2022 primarily driven by lower catalyst volumes and lower licensing revenues from less contracts reaching significant milestones.results.
The following table sets forth selected financial information for the Technology segment:
| | Three Months Ended | | | Six Months Ended |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| | June 30, | | March 31, | | | June 30, | | June 30, | | March 31, | | December 31, | | | | | | March 31, |
Millions of dollars | Millions of dollars | 2023 | | 2023 | | | 2023 | | 2022 | Millions of dollars | 2024 | | 2023 | | | | | | 2023 |
Sales and other operating revenues | Sales and other operating revenues | $ | 154 | | | $ | 139 | | | | $ | 293 | | | $ | 375 | |
EBITDA | EBITDA | 79 | | | 73 | | | | 152 | | | 215 | |
Revenue—Revenues increased by $15$40 million, or 11%26%, in the secondfirst quarter of 2024 compared to the fourth quarter of 2023 and by $53 million, or 38%, in the first quarter of 2024 compared to the first quarter of 2023 and decreased by $82 million, or 22%, in the first six months of 2023 compared to the first six months of 2022.2023.
SecondFirst quarter of 20232024 versus firstfourth quarter of 2023—LicensingHigher licensing revenues increased by 10% asresulting from more contracts reachedreaching significant milestones during the quarter. Increased averagedrove a 28% increase in revenue. Favorable foreign exchange impacts increased revenue by 1%. Lower catalyst sales pricevolume resulted in a revenue increase of 2%. Favorable foreign exchange impact increased revenue by 2%. Lower catalyst volumes resulted in a 3% decrease in revenues.
First six months of 2023 versus first six months of 2022—Lower catalyst volumes resulted in a 16% decrease in revenue primarily driven by weaker demand. Lower licensing revenues resulting from fewer contracts reaching significant milestones drove a 6% decrease in revenue.
EBITDA—EBITDA increased by $6 million, or 8%, in the secondFirst quarter of 2023 compared to the first quarter of 2022 and decreased by $63 million, or 29%, in the first six months of 2023 compared to the first six months of 2022.
Second quarter of 20232024 versus first quarter of 2023—Higher licensing revenues resulting from more contracts reaching significant milestones drove a 30% increase in revenue. Higher catalyst volumes resulted in a 5% increase in revenue primarily driven by higher demand. Favorable foreign exchange impacts increased revenue by 2%. Higher average catalyst sales price resulted in a 1% increase in revenues.
EBITDA—EBITDA increased by $41 million, or 53%, in the first quarter of 2024 compared to the fourth quarter of 2023 and by $45 million, or 62%, in the first quarter of 2024 compared to the first quarter of 2023. Licensing results led to a 15%56% increase in EBITDA. Catalyst results drove an 8% decreaseEBITDA in EBITDA equally driven by pricethe first quarter of 2024 compared to both the fourth and volume declinesfirst quarters of 2023, as a result of lower demand.
First six months of 2023 versus first six months of 2022—Lower catalyst volumes driven by lower demand resulted in a 22% decrease in EBITDA. Lower licensing revenues from lessmore contracts with higher average values reaching significant milestones resulted in a 10% decrease in EBITDA.milestones.
FINANCIAL CONDITION
Operating, investing and financing activities of continuing operations, which are discussed below, are presented in the following table: | | | Six Months Ended June 30, | | Three Months Ended March 31, |
Millions of dollars | Millions of dollars | 2023 | | 2022 | Millions of dollars | 2024 | | 2023 |
Cash provided by (used in): | Cash provided by (used in): | | | |
Operating activities | Operating activities | $ | 1,772 | | | $ | 3,101 | |
Operating activities | |
Operating activities | |
Investing activities | Investing activities | (742) | | | (1,034) | |
Financing activities | Financing activities | (701) | | | (2,392) | |
Operating Activities—Cash providedused in by operating activities of $1,772114 million in the first six monthsquarter of 20232024 primarily reflected earnings adjusted for non-cash items and cash used by the main components of working capital—Accounts receivable, Inventories, and Accounts payable.
In the first six monthsquarter of 2023,2024, the main components of working capital used $605$629 million of cash primarily driven primarily by increases in Inventories and Accounts receivable. The increase in Inventories was primarilyreceivable due to inventory build associated with our PO/TBA plant as well as planned and unplanned outages. The increase in Accounts receivable was primarily driven by higher volumes and average sales prices inacross most of our O&P-EAI and I&D segments.
Cash provided by operating activities of $3,101$482 million in the first six monthsquarter of 20222023 primarily reflected earnings adjusted for non-cash items and cash used by the main components of working capital.
In the first six monthsquarter of 2022,2023, the main components of working capital used $494$558 million of cash driven primarily by an increaseincreases in Accounts receivable and Inventories partially offset by an increase in Accounts payable.Inventories. The increase in Accounts receivable was driven by higher revenues across most businesses primarily driven by higher volumes and average sales prices in our O&P-EAI, I&D and increased demand.APS segments. The increase in Inventories was primarily due to replenishmentinventory build associated with the timing of crude and refined products inventory levels to support anticipated business demandsthe start-up of our PO/TBA plant in Houston, TX as well as increased prices of certain inventory. The increase in Accounts payable was primarily driven by increased raw material costs.planned and unplanned outages.
Investing Activities—Capital expenditures in the first six monthsquarter of 20232024 totaled $653$483 million compared to $978$352 million in the first six monthsquarter of 2022. Approximately 40% and 45% of our capital expenditures in2023. During the first six monthsquarter of 2024 and 2023, approximately 80% and 2022,55% of the expenditures support sustaining maintenance, respectively, was for profit-generating growth projects, primarily our PO/TBA plant, with the remaining expenditures supporting sustaining maintenance. See Note 12 to the Consolidated Financial Statementsprofit-generating growth projects. Capital expenditures in first quarter of 2023 included spending for additional information regarding capital expenditures by segment.our PO/TBA plant.
Financing Activities—We made dividend payments totaling $797$408 million and $2,464$389 million in the first six monthsquarter of 2024 and 2023, and 2022, respectively. Additionally,We had no share repurchases in the first six monthsquarter of 20232024 and 2022, we made payments of $170 million and $262$70 million to repurchase outstanding ordinary shares respectively.in the first quarter of 2023.
In May 2023,February 2024, we issued $500$750 million of 5.625%5.5% guaranteed notes due 2033.2034. In March 2024, we repaid the $775 million remaining of outstanding principal on our 5.75% senior notes due 2024. For additional detail see Note 67 to the Consolidated Financial Statements.
Through the repurchase and issuance of commercial paper instruments under our commercial paper program, we made net repayments of $200 million in the first six months of 2023 and received net proceeds of $105 million in the first six months of 2022.
In the first six months of 2022, we received a return of collateral of $217 million, related to the positions held with our counterparties for certain forward-starting interest rate swaps.
Liquidity and Capital Resources
Overview
We plan to fund our working capital, capital expenditures, debt service, dividends and other cash requirements with our current available liquidity and cash from operations, which could be affected by general economic, financial, competitive, legislative, regulatory, business and other factors, many of which are beyond our control. Debt repayment, and the purchase of shares under our share repurchase authorization, may be funded from cash and cash equivalents, cash from our short-term investments, cash from operating activities, proceeds from the issuance of debt, or a combination thereof.
As part of our overall capital allocation strategy, we plan to provide returns to shareholders in the form of dividends and share repurchases. Barring any significant or unforeseen business challenges, mergers or acquisitions, over the long-term, we are targeting shareholder returns of 70% of free cash flow, defined as net cash provided by operating activities less capital expenditures. We intend to continue to declare and pay quarterly dividends, with the goal of increasing the dividend over time, after giving consideration to our cash balances and expected results from operations. Our focus on funding our dividends while remaining committed to a strong investment grade balance sheet continues to be the foundation of our capital allocation strategy.
Cash and Liquid Investments
As of June 30, 2023,March 31, 2024, we had Cash and cash equivalents totaling $2,468$2,314 million, which includes $965$1,524 million in jurisdictions outside of the U.S., the majority of which is held within the European Union and the United Kingdom. There are currently no legal or economic restrictions that would materially impede our transfers of cash.
Credit Arrangements
At June 30, 2023,March 31, 2024, we had total debt, including current maturities, of $11,612$11,194 million. Additionally, we had $186$143 million of outstanding letters of credit, bank guarantees and surety bonds issued under uncommitted credit facilities to support trade payables and other obligations.facilities.
We had total unused availability under our credit facilities of $4,150 million at June 30, 2023,March 31, 2024, which included the following:
•$3,250 million under our $3,250 million Senior Revolving Credit Facility, which backs our $2,500 million commercial paper program. Availability under this facility is net of outstanding borrowings, outstanding letters of credit provided under the facility and notes issued under our commercial paper program. At June 30, 2023,March 31, 2024, we had no outstanding commercial paper and no borrowings or letters of credit outstanding under this facility; and
•$900 million under our $900 million U.S. Receivables Facility. Availability under this facility is subject to a borrowing base of eligible receivables, which is reduced by outstanding borrowings and letters of credit, if any. At June 30, 2023,March 31, 2024, we had no borrowings or letters of credit outstanding under this facility.
At any time and from time to time, we may repay or redeem our outstanding debt, including purchases of our outstanding bonds in the open market, through privately negotiated transactions or a combination thereof, in each case using cash and cash equivalents, cash from our short-term investments, cash from operating activities, proceeds from the issuance of debt or proceeds from asset divestitures. Any repayment or redemption of our debt will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. In connection with such repurchases or redemptions, we may incur cash and non-cash charges, which could be material in the period in which they are incurred.
Share Repurchases
In May 2023, our shareholders approved a proposal to authorize us to repurchase up to 34.0 million ordinary shares, through November 19, 2024, which superseded any prior repurchase authorizations. Our share repurchase authorization does not have a stated dollar amount, and purchases may be made through open market purchases, private market transactions or other structured transactions. Repurchased shares could be retired or used for general corporate purposes, including for various employee benefit and compensation plans. 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. InThere were no share repurchases during the first six monthsquarter of 2023, we purchased approximately 1.9 million shares under our share repurchase authorizations for $173 million.2024.
As of August 2, 2023,April 24, 2024, we had approximately 33.1 million shares remaining under the current authorization. The timing and amounts of additional shares repurchased, if any, will be determined based on our evaluation of market conditions and other factors, including any additional authorizations approved by our shareholders. For additional information related to our share repurchase authorizations, see Note 1011 to the Consolidated Financial Statements.
Capital Budget
In 2023, we are planning to invest approximately $1.7 billion in capital expenditures. Approximately 70% of the 2023 budget is planned for sustaining maintenance, with the remaining budget supporting profit-generating growth projects.
CURRENT BUSINESS OUTLOOK
In the third quarter of 2023, we expect typical benefits from summer seasonality to be more than offset by soft demand due to ongoing economic uncertainty. Stagnant demand, volatile feedstock costs and new capacity in North America and China are challenging petrochemical margins. Summer demand for transportation fuels continues to support attractive oxyfuels and refining margins.
During the third quarter, we expect average operating rates of 85% for our North American olefins and polyolefins assets and 75% for our European olefins and polyolefins and I&D assets in line with global market demand. We believe current market conditions will persist amidst challenging economic conditions and a slower than expected recovery in China. As a result of the challenging economic environment, we expect our third quarter 2023 earnings will range from mid-teen to mid-twenty percentage points lower than the second quarter of 2023.
Value Enhancement Program
During 2022, we introduced our value enhancement program that is anticipated to generate approximately $575 million in recurring annual Net income improvement by the end of 2025, which, after adding back income taxes and depreciation and amortization of $140 million and $35 million, respectively, results in $750 million of EBITDA.
Our Value Enhancement Program is progressing ahead of schedule. As a result, the program's near-term target was increased by approximately 30% and is now expected to deliver $150 million of Net income and $200 million of recurring annual EBITDA by year end 2023. EBITDA excludes income taxes and depreciation and amortization of approximately $35 million and $15 million, respectively.
We estimate incurring costs of $150 million in 2023 to achieve this milestone. Net income and recurring annual EBITDA for the value enhancement program is estimated based on 2017 through 2019 mid-cycle margins and modest inflation relative to a 2021 baseline year.
CRITICAL ACCOUNTING POLICIESCURRENT BUSINESS OUTLOOK
Goodwill Impairment—We evaluateIn the recoverabilitysecond quarter of 2024, we expect seasonal demand improvements across most of our segments. Low costs for natural gas and NGLs should continue to benefit margins for our North American and Middle East production relative to higher oil-based costs in most other regions. With the start of the carrying valuesummer driving season, oxyfuels and refining margins are expected to increase with higher gasoline crack spreads and lower butane costs. During the second quarter of goodwill annually or more frequently if events or changes2024, we expect to operate our assets in circumstances indicate that the carrying amountline with market demand with average operating rates of the goodwill of a reporting unit may not be fully recoverable.
Effective January 1, 2023, our Catalloy and polybutene-1 businesses were moved from our APS segment and reintegrated into85% for our O&P-Americas and O&P-EAI segments. When moved, a portion of the APS reporting unit’s goodwill was allocatedsegments and 80% for our Intermediates & Derivatives segment. We continue to the O&P-Americasmonitor targeted stimulus efforts and O&P-EAI segments based on the businesses’ relative fair values compared to the reportable segment.
In the first quarter of 2023, we evaluated goodwillremain watchful for impairment immediately before and after the transfer of these businesses. Our evaluation resulteddemand improvements in the recognition of a non-cash goodwill impairment of $252 million recognized in our APS segment. Refer to Note 12 to our Consolidated Financial Statements.
Fair values were determined utilizing a discounted cash flow method under the income approach and assumptions including management’s view on long-term growth rates in our industry, discount rates and other assumptions based on a market participant perspective, which are inherently subjective. Discount rates utilized in our cash flow model were based on a variety of factors, including market and economic conditions, the risk and nature of the cash flows and the rate of return required by market participants. We believe our fair value estimates of projected financial information are reasonable and consistent with those used in our planning, capital investment and business performance reviews. However, actual results may differ from these projections.
An estimate of the sensitivity to net income resulting from impairment calculations is not practicable, given the numerous assumptions, including pricing, volumes and discount rates, which could materially affect our estimates. That is, unfavorable adjustments to some of the above listed assumptions may be offset by favorable adjustments in other assumptions.China.
ACCOUNTING AND REPORTING CHANGES
For a discussion of the potential impact of new accounting pronouncements on ourthe Consolidated Financial Statements, see Note 2 to the Consolidated Financial Statements.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). You can identify our forward-looking statements by the words “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions.
We based forward-looking statements on our current expectations, estimates and projections of our business and the industries in which we operate. We caution you that these statements are not guarantees of future performance. They involve assumptions about future events that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict. Our actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements. Any differences could result from a variety of factors, including the following:
•the cost of raw materials represents a substantial portion of our operating expenses, and energy costs generally follow price trends of crude oil, natural gas liquids and/or natural gas; price volatility can significantly affect our results of operations and we may be unable to pass raw material and energy cost increases on to our customers due to the significant competition that we face, the commodity nature of our products and the time required to implement pricing changes;
•our operations in the United States (“U.S.”) have benefited from low-cost natural gas and natural gas liquids; decreased availability of these materials (for example, from their export or regulations impacting hydraulic fracturing in the U.S.) could reduce the current benefits we receive;
•if crude oil prices are low relative to U.S. natural gas prices, we could see less benefit from low-cost natural gas and natural gas liquids and it could have a negative effect on our results of operations;
•industry production capacities and operating rates may lead to periods of oversupply and low profitability;
•we may face unplanned operating interruptions (including leaks, explosions, fires, weather-related incidents, mechanical failures, unscheduled downtime, supplier disruptions, labor shortages, strikes, work stoppages or other labor difficulties, transportation interruptions, spills and releases and other environmental incidents) at any of our facilities, which would negatively impact our operating results;
•changes in general economic, business, political and regulatory conditions in the countries or regions in which we operate could increase our costs, restrict our operations and reduce our operating results;
•our ability to execute our organic growth plans may be negatively affected by our ability to complete projects on time and on budget;
•our ability to acquire or dispose of product lines or businesses could disrupt our business and harm our financial condition;
•our ability to successfully implement initiatives identified pursuant to our value enhancement program and generate anticipated earnings;
•uncertainties associated with worldwide economies could create reductions in demand and pricing, as well as increased counterparty risks, which could reduce liquidity or cause financial losses resulting from counterparty default;
•the negative outcome of any legal, tax and environmental proceedings or changes in laws or regulations regarding legal, tax and environmental matters may increase our costs, reduce demand for our products, or otherwise limit our ability to achieve savings under current regulations;
•any loss or non-renewal of favorable tax treatment under tax agreements or tax treaties, or changes in tax laws, regulations or treaties, may substantially increase our tax liabilities;
•we may be required to reduce production or idle certain facilities because of the cyclical and volatile nature of the supply-demand balance in the chemical and refining industries, which would negatively affect our operating results;
•we rely on continuing technological innovation, and an inability to protect our technology, or others’ technological developments could negatively impact our competitive position;
•we may be unable to continue operations until the shut downshutdown of the Houston refinery within the expected timeframe or without incurring additional charges or expenses;
•we have significant international operations, and fluctuations in exchange rates, valuations of currencies and our possible inability to access cash from operations in certain jurisdictions on a tax-efficient basis, if at all, could negatively affect our liquidity and our results of operations;
•we are subject to the risks of doing business at a global level, including wars, terrorist activities, political and economic instability and disruptions and changes in governmental policies, which could cause increased expenses, decreased demand or prices for our products and/or disruptions in operations, all of which could reduce our operating results;
•if we are unable to achieve our emission reduction, circularity, or other sustainability targets, it could result in reputational harm, changing investor sentiment regarding investment in our stock or a negative impact on our access to and cost of capital;
•our ability to execute and achieve expected results of our value enhancement program;
•if we are unable to comply with the terms of our credit facilities, indebtedness and other financing arrangements, those obligations could be accelerated, which we may not be able to repay; and
•we may be unable to incur additional indebtedness or obtain financing on terms that we deem acceptable, including for refinancing of our current obligations; higher interest rates and costs of financing would increase our expenses.
Any of these factors, or a combination of these factors, could materially affect our future results of operations and the ultimate accuracy of the forward-looking statements. Our management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or prior earnings levels.
All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section and any other cautionary statements that may accompany such forward-looking statements. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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, 2022.2023. Our exposure to such risks has not changed materially in the sixthree months ended June 30, 2023.March 31, 2024.
Item 4. CONTROLS AND PROCEDURES
As of June 30, 2023,March 31, 2024, 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, 2023.March 31, 2024.
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 910 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. In May 2023, we agreed with the State to settle the matter for $2.6 million, inclusive of attorney’s fees, which remains subject to comment and final approval by the court. In accordance with the settlement, Harris County has dismissed its claims.
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. We have agreed to a settlement of $1.1 million, inclusive of attorney’s fees, and final judgment has been entered by the court.
Additional information about our environmental proceedings can be found in Part I, Item 3 of our 20222023 Annual Report on Form 10-K, which is incorporated into this Item 1 by reference.
Item 1A. RISK FACTORS
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, 2022.2023.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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Issuer Purchases of Equity Securities |
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Period | | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Authorizations | | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Authorizations |
April 1 - April 30 | | 243,575 | | | $ | 93.37 | | | 243,575 | | | 30,650,656 | |
May 1 - May 18 | | 275,823 | | | $ | 90.31 | | | 275,823 | | | 30,374,833 | |
May 19 - May 31 | | 163,750 | | | $ | 88.56 | | | 163,750 | | | 33,878,500 | |
June 1 - June 30 | | 412,294 | | | $ | 89.64 | | | 412,294 | | | 33,466,206 | |
Total | | 1,095,442 | | | $ | 90.48 | | | 1,095,442 | | | 33,466,206 | |
On May 19, 2023, our shareholders approved a share repurchase authorization of up to 34,042,250 shares of our ordinary shares, through November 19, 2024, 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.
Item 5. OTHER INFORMATION
During the three months ended June 30, 2023,March 31, 2024, none of our Section 16 officers or directors adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
Item 6. EXHIBITS
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Exhibit Number | | Description |
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4.1 | | Indenture, among LYB International Finance III, LLC, as Issuer, LyondellBasell Industries N.V., as Guarantor, and Wells Fargo Bank, National Association, as Trustee, dated as of October 10, 2019 (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on October 10, 2019). |
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4.2 | | Supplemental Indenture, among LYB International Finance III, LLC, as Issuer, LyondellBasell Industries N.V., as Guarantor, Computershare Trust Company, N.A., as Base Trustee (as successor to Wells Fargo Bank, National Association) and The Bank of New York Mellon Trust Company, N.A., as Trustee, dated as of May 17, 2023 (incorporated by reference to Exhibit 4.44 to Post-Effective Amendment No. 1 to the Registration Statement on Form S-3 (File No. 333-261639) filed with the SEC on May 17, 2023). |
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4.3 | | |
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4.4 | | |
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10.1* | | Fifth Amendment to Receivables Purchase Agreement, dated as of May 31, 2023, among LYB Receivables LLC, as seller, Lyondell Chemical Company, as servicer, the conduit purchasers, related committed purchasers, LC participants and purchaser agents party thereto, the other parties thereto and Mizuho Bank, Ltd., as Administrator and LC Bank |
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10.2* | | |
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31.1* | | |
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31.2* | | |
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32* | | |
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101.INS* | | XBRL Instance Document–The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH* | | XBRL Schema Document |
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Exhibit Number | | Description |
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101.CAL* | | XBRL Calculation Linkbase Document |
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101.DEF* | | XBRL Definition Linkbase Document |
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101.LAB* | | XBRL Labels Linkbase Document |
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101.PRE* | | XBRL Presentation Linkbase Document |
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104* | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
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* 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.
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| | LYONDELLBASELL INDUSTRIES N.V. |
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Date: | August 4, 2023April 26, 2024 | |
| | /s/ Chukwuemeka A. Oyolu |
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| | Chukwuemeka A. Oyolu |
| | Senior Vice President, |
| | Chief Accounting Officer and Investor Relations |
| | (Principal Accounting Officer) |