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LYB – Market expectations are for Uniform ROA to remain stable, but management is confident about reopening trends, propylene oxide, and their cash flows

September 9, 2021

  • LyondellBasell Industries N.V. (LYB:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 10.1x Uniform P/E. At these levels, the market is pricing in expectations for profitability to remain stable, but management is confident about the global reopening, propylene oxide demand, and strong cash flows.
  • Specifically, management is confident consumers are well funded to drive global economic activity, Q2 EBITDA reached a new record, and that they aim to extend their track record of robust returns over the coming quarters. In addition, they are confident they will benefit from increased global mobility and reopening, they have a decent chance at absorbing propylene oxide demand when their plant starts up, and that the molecular recycling results in the Italy plant have been encouraging. Furthermore, they are confident their Saudi JVs tend to do well when oil and polyethylene prices rise globally and that their strong cash flow supported debt repayment. Also, they are confident a faster gasoline market recovery has returned profitability to their Oxyfuels business ahead of their refining business, which is running at a near full production rate as demand improves.