LYONDELLBASELL
Demand crisis forces wide-sweeping cost control measures / Plant closures and job cuts / Liquidity tight through Q1 2009
Like most of the petrochemicals and plastics industry, LyondellBasell (Rotterdam / The Netherlands; www.lyondellbasell.com) is being hit by intensive destocking at customers. To put business on a more solid footing in preparation for “a potentially deeper economic downturn,” the group has launched a wide-sweeping 12-18 month austerity programme to lower production costs, working capital and capital spending.
Moves will include plant closures and capacity reductions as well as workforce reductions of 15%, or around 2,500 of 17,000 jobs. The olefins plant of subsidiary Equistar in Texas – 16% of the the group’s olefins output – already has been idled (see Plasteurope.com of 06.11.2008). Altogether, capital spending for 2009 will be lowered to USD 800m from the planned USD 1.1 bn. All strategic options for improvement are being reviewed, including “monetisation” of some assets.
At present, divestments are a “likelier option” than acquisitions, CEO Volker Trautz told an analyst teleconference. He pointed also to “permanent shutdowns” of polymers plants. However, as LyondellBasell has multiple plants, “we will be able to meet customers’ needs more efficiently by operating fewer plants at higher rates.” he said. For the CEO, short-term visibility is “quite weak.” While a clearer picture is not likely to emerge before Q1 2009, he said signs from Asia, at least, suggest that the downturn may be bottoming out.
In the current financial crisis with its knock-on effects, highly leveraged companies such as LyondellBasell and competitor Ineos are struggling to meet debt covenants resulting from expensive acquisitions. Some 93% of the Dutch company’s equity is debt-financed. While management maintains that liquidity is still “adequate,” it comments in the financial statement for Q3 that if demand and margins remain “significantly below” expectations, unplanned plant outages occur, raw materials prices return to the high levels of the early 2008 or cash flow be lower than expected or negative, liquidity could become inadequate to fund operations, leaving LyondellBasell at the mercy of its creditors.
e-Service:
LyondellBasell report on Q3 2008 according to US GAAP as a PDF document (4,463 KB)
Moves will include plant closures and capacity reductions as well as workforce reductions of 15%, or around 2,500 of 17,000 jobs. The olefins plant of subsidiary Equistar in Texas – 16% of the the group’s olefins output – already has been idled (see Plasteurope.com of 06.11.2008). Altogether, capital spending for 2009 will be lowered to USD 800m from the planned USD 1.1 bn. All strategic options for improvement are being reviewed, including “monetisation” of some assets.
At present, divestments are a “likelier option” than acquisitions, CEO Volker Trautz told an analyst teleconference. He pointed also to “permanent shutdowns” of polymers plants. However, as LyondellBasell has multiple plants, “we will be able to meet customers’ needs more efficiently by operating fewer plants at higher rates.” he said. For the CEO, short-term visibility is “quite weak.” While a clearer picture is not likely to emerge before Q1 2009, he said signs from Asia, at least, suggest that the downturn may be bottoming out.
In the current financial crisis with its knock-on effects, highly leveraged companies such as LyondellBasell and competitor Ineos are struggling to meet debt covenants resulting from expensive acquisitions. Some 93% of the Dutch company’s equity is debt-financed. While management maintains that liquidity is still “adequate,” it comments in the financial statement for Q3 that if demand and margins remain “significantly below” expectations, unplanned plant outages occur, raw materials prices return to the high levels of the early 2008 or cash flow be lower than expected or negative, liquidity could become inadequate to fund operations, leaving LyondellBasell at the mercy of its creditors.
e-Service:
LyondellBasell report on Q3 2008 according to US GAAP as a PDF document (4,463 KB)
24.11.2008 Plasteurope.com 772 [212264]
Published on 24.11.2008
German version of this article...