2011 annual report
Targeting Excellence! About Us
LyondellBasell is one of the world’s CEO Letter to Stakeholders I largest plastics, chemicals and refining Highlights of Financial Statements II companies. With operations on five Returning Value to Shareholders III continents and sales in more than Aiming Higher Every Day IV
100 countries, we are a major global Excellence Begins With Our Employees V manufacturer of ethylene, polyethylene, Satisfying Our Customers VI propylene, polypropylene, propylene Enhancing Life in Our Communities VII oxide and acetyls. We also are a significant producer of gasoline, diesel Business Segments & Locations VIII and fuel additives. Supervisory Board & Leadership Team Inside Back Cover Shareholder Information Back Cover Our products provide the amazing chemistry for countless goods including computers, portable electronics, personal care items, fresh food packaging, sports equipment, high- strength construction materials, automotive components, biofuels, textiles and medical supplies.
Inaugural BRAVO Awards Honor Employees for Targeting Excellence
Our employees are targeting of millions of dollars in cost savings excellence. In 2011, we introduced the and revenue enhancements. While only Bravo recognition program to applaud a few of our award-winning employees their efforts. LyondellBasell CEO Jim are featured in this publication, a listing Gallogly and the leadership team of all Bravo winners can be found in honored 300 employees for exemplary our online Annual Report available at achievements that resulted in hundreds www.lyondellbasell.com/excellence. To Our Stakeholders
“It concerns us to know the purposes we seek in life, for then, like archers aiming at a definite mark, we shall be more likely to attain what we want.”
-Aristotle
Photo Credit: Jeroen Bouman
At LyondellBasell, our sights are fixed on operating safe, reliable and low-cost facilities; creating sustainable competitive advantages; establishing a strong presence in the right markets and having financial flexibility with strong liquidity. By focusing on these targets, we have moved LyondellBasell closer to the bull’s eye of best in class.
For the third consecutive year, our safety and environmental performance improved around the globe. Employees set an all-time best safety record, placing us among the safest operators in the industry. Process safety incidents decreased approximately 65 percent and environmental incidents decreased 12 percent. Safe, environmentally responsible operations are our top priority.
During 2011, our strong operations and advantaged asset positions helped drive profitability across all major business segments. Our scale and cracking flexibility allowed us to reap the benefits of shale gas discoveries in the United States. Low natural gas and natural gas liquids prices resulted in strong margins for our North American olefins and polyolefins business. Expanding our crude mix and improving reliability at the Houston refinery increased overall throughput and positively impacted financial results in the refining and oxyfuels segment. Our intermediates and derivatives business also performed well. Compared to 2010, total EBITDA increased 31 percent from $4.0 billion to $5.3 billion. Revenues were also 24 percent higher.
We generated substantial cash flow that enabled us to improve our balance sheet and reward shareholders. We reduced debt by $2.1 billion and paid $2.9 billion in dividends. Over the course of 2011, an investment in LyondellBasell yielded a ten percent return, five times higher than the S&P 500 index. We hit the target in other areas as well. From a manufacturing perspective, we completed three key maintenance turnarounds and increased our ethane feedstock flexibility by approximately five percent. We also announced plans to establish a propylene oxide joint venture in China that will strengthen our focus on large-scale, low-cost operations and allow us to supply emerging economies. We will continue to invest in our existing assets and grow our company.
We will, of course, always focus on costs and the prudent use of our capital. This is a hallmark of a great company – regardless of financial strength. Streamlining our European organization is one of the necessary actions we took in 2011 to aggressively improve our cost position and strengthen our competitive posture.
Finally, establishing strong governance was an important goal for us. We expanded our independent Supervisory Board by adding four distinguished business leaders with world-class expertise. We also introduced a new Code of Conduct and trained the global workforce on our expectations for conducting business in an ethical and responsible manner.
In the pages that follow, we hope you will note how targeting excellence has served our stakeholders. We are aiming high with a goal to be the top competitor in our industry. With the substantial improvements we have made over the last couple of years, I believe we are well positioned for profitable growth and continued success.
Sincerely,
James L. Gallogly Chief Executive Officer
I Highlights of Consolidated Financial Statements
U.S. $ IN MILLIONS 2011
Sales and other operating revenues $51,035
Operating income 3,998
Income from equity investments 216
Net income 2,140
Diluted earnings per share (U.S. dollars) 3.74
Diluted share count (millions) 572
EBITDA (a) 5,279
Cash flow from operations 2,869
Capital expenditures 1,050
2011 Selected Financial Data
Revenues Increased Total EBITDA Increased Improvements Across All 24 Percent 31 Percent Major Segments 2011 Revenues 2009-2011 EBITDA 2010 & 2011 Segment EBITDA
90 +15% 2,250 5,000 80 2,000 +25% 70 1,750 4,000 60 1,500 +12% 50 3,000 1,250 +24% +25% 40 1,000 +14% +23% $ billions 30 +20% $ millions 2,000 $ millions 750 +115% 20 500 1,000 10 250 +1%
0 0 2009 2010 (b ) 2011 - EAI Peer 1 Peer 2 Peer 3 Peer 4 - Americas Derivatives Technology
2010 2011 LyondellBasell Intermediates & Intermediates Refining & Oxyfuels Olefins & Polyolefins Olefins & Polyolefins
2010 2011
We have included certain financial information for the full-year 2010. For financial accounting purposes, periods on and before April 30, 2010, represent a different entity than for periods after our emergence from bankruptcy on that date. We have combined the two entities’ results for certain disclosures in this presentation; the combined information is considered non-GAAP because it combines two entities whose results are not accounted for in the same manner. (a) EBITDA means earnings before interest, taxes, depreciation and amortization and includes joint venture dividends as well as adjustments for impairment charges, reorganization items, and market-to-market charges related to our warrants. Our calculation of EBITDA may not be comparable to similarly titled measures used by other companies. You should refer to our reconciliations of EBITDA to net income, which can be found on our website at www.lyondellbasell.com. (b) Periods prior to 5/1/10 calculated on current cost inventory basis using LIFO method of inventory accounting. Excludes LCM adjustments. Excludes lower of cost or market charge of $542 million, of which $34 million and $8 million are related to O&P-Americas and Intermediates & Derivatives, respectively.
II Returning Value to Our Shareholders
LyondellBasell is committed to Operational improvements coupled Underlying fixed costs were managed increasing shareholder value. In 2011, with our financing efforts enabled flat during the past three years. We we completed a number of steps to us to generate strong cash flow. We exited lagging businesses and announced position the company for future earnings strengthened our financial flexibility aggressive restructuring efforts. By growth and an investment-grade and reduced debt by $2.1 billion. We managing costs and focusing on capital structure. We lowered interest established and increased our regular Operational Excellence, we believe we expense and removed certain of our dividend from $0.10 to $0.25 and issued will continue to strengthen our ability to restrictive covenants through our capital a special dividend of $4.50. We also respond to global market uncertainties, restructuring efforts. contributed approximately $526 million pursue disciplined growth and return to our employee pension plan. significant value to shareholders.
Outperforming Increasing
the S&P 500 and 150 Regular $0.30 Industry Peers Dividends 100 $0.20 Value of $100 invested on April 30, 2010, as of 50 Growing regular Dec. 31, 2011, assuming $0.10
$U.S. dollars dividend with a target reinvestment of range of 3 to 4 percent dividends. 0 yield. $0.00 S&P 500 S&P 500 LYB Index Chemicals Index 2Q’11 3Q’11 4Q’11
Net Interest Joint Ventures Expense Has $800 Contribute to Declined $600 Earnings $200
$400
$ millions $100 $ millions $200
$0 0 ‘10 ‘11 ‘12E 2010 2011 2010 net interest represents annualized May to Dec. interest. 2011 net interest excludes $431 million of refinancing charges. 2012 net interest assumes $4 billion total debt at a weighted average cost of debt of 9.2 percent.
EMPLOYEE SPOTLIGHT: Prabhakar Susarla: Principal Engineer; Houston, Texas – U.S. The Houston Natalie Nichols: Manager-Oil Supply; Houston, Texas – U.S. refinery’s crude Prabhakar Susarla and Natalie Nichols were among a team of purchasing employees who learned about the availability of extremely heavy program diversified crude oil that only a few refineries could process. They assessed the our sourcing capabilities of our Houston refinery and evaluated the economics. Working with producers, they confirmed that our refinery’s while yielding an complexity and separate processing trains enabled us to segregate estimated $150 and process this oil to make ultra-low sulfur diesel and gasoline. We million advantage gave it a try and produced a full-range of product that met required Learn more about Houston refinery improvements by versus the industry specifications. In 2011, our Houston refinery processed more than 95 watching a video featuring Kevin Brown (Senior Vice benchmark. President, Refining) and Todd Monette (Houston Refinery million barrels of the heavy crude oil. This purchasing program yielded Manager) in the online version of this report. an estimated $150 million advantage versus the industry benchmark.
III Aiming Higher Every Day
approximately $1 billion. We continue among the most cost competitive in the to target substantial cost reduction and world. Approximately 25 percent of this efficiency improvements such as our capacity is located in the Midwest which restructuring efforts, debt refinancing and was further cost advantaged compared to further upgrades to the Houston refinery. our facilities along the Gulf Coast in 2011.
To be the top competitor in our industry, Portfolio management will continue to be a we must also focus on disciplined strategic premise for us as well. Evaluating growth. We will continue to make several the entire company – business by business of our largest, most competitive plants and plant by plant – helps us identify our even more competitive through low- current strengths and weaknesses. We Channelview, Texas cost projects that quickly return value intend to enhance our U.S. market share as and enhance profitability. We will focus a result of plant debottlenecks. In Europe, We are aiming higher in everything we on assets that leverage advantaged we will continue our efforts to improve our do. Our performance demonstrates we feedstocks. Our olefins and polyolefins basic cost structure. In Asia, we will focus are achieving our goals. LyondellBasell is assets in the United States and the on assets that allow us to easily supply stronger than ever with a balanced capital Middle East are prime examples. emerging economies within the region. We structure, an improved cost position and will also continue to invest in differentiated a proven leadership team. Looking to In the U.S., we benefit from the technologies. We believe our strategy, our the future, continuous improvement and emergence of shale gas resources in technologies and our people, coupled with prudent cost management will remain key North America. The abundance of shale the flexibility and quality of our assets, drivers for our actions. Since 2008, our gas has helped lower our production will increase value for all stakeholders and persistent pursuit of cost improvement costs, making approximately 10 billion enable us to hit the bull’s eye. has allowed us to reduce costs by pounds of our U.S. ethylene capacity
60 U.S. Ethylene Capturing 100%
Producers the Shale Gas 80% are Cost- 40 Advantage Advantaged 60% Increasing ethane mix from 65% to 40% Compared to other (cents/pound) 20 regions, U.S. ethane 75% can generate is advantaged by $100 to $150 million 20%
15 to 25 cents per 2011 Cost of ethylene production per year. pound in ethylene Northeast Asia Gulf Coast Midwest production. Ethane 2008 2011E 2014E Naphtha Ethane Ethane (Source: CMAI, 2/15/12) Other NGL’s
EMPLOYEE SPOTLIGHT: According to the Marie Herzig: Senior Production Engineer; Channelview, Texas – U.S. Energy Information Administration, In recent years, the emergence of new sources of low-cost natural gas produced shale gas may from U.S. shale formations has created a cost advantage for ethylene crackers using feedstocks such as ethane. Two years ago, LyondellBasell began making the shift account for 47 from liquids to a higher ethane feed at our olefins units in Channelview and Corpus percent of total Christi, Texas. Marie Herzig was part of a team of employees who helped modify U.S. gas production our feedstock mix at these facilities. Making changes to enhance the flexibility in 2035, up from of these assets was not a simple task; however, we believe that debottlenecks of Access the online version 16 percent in 2009. existing capacity offer us the greatest advantage because these projects can be of this report to learn why completed faster and at a considerably lower cost than new capacity expansions. shale gas may be a game changer for our industry.
IV Excellence Begins With Our Employees
One of our strongest competitive advantages is the skill and efficiency of our people.
With a strong focus on continuous For the third consecutive year, overall improvement and flawless execution, safety and environmental performance LyondellBasell’s 14,000 employees around improved across global operations. the world have delivered impressive Process safety incidents decreased results. Knowledgeable and creative, approximately 65 percent, environmental our people use their diversity of talents incidents decreased 12 percent and we to keep our costs low, our quality high experienced 19 fewer injuries. These and our customers satisfied. Through achievements place us among the best in improved processes and best practice our industry. In fact, our Bayport Polymers sharing, employees set new production plant in Pasadena, Texas, was the only volume records at more than 30 locations. U.S. facility recognized with the American Fuel and Petrochemical Manufacturers’ (AFPM) highest honor, the Distinguished Safety Award.
Our industry-leading metrics show that our employees aim for excellence in everything they do. Their diversity of talents helps advance our strategy and create value for all stakeholders.
$400 2011 EBITDA $362 Outstanding per Employee Safety 0.5 $300 0.45 Performance 0.42 0.4 0.35
$200 Total Recordable-injury 0.3 $ thousands Rate (TRIR) is based on TRIR $124 the number of injuries 0.2 $100 per 200,000 work hours. It equates roughly to the 0.1 number of injuries per 100 full-time annual workers. LYB Weighted Peer 2009 2010 2011 Average Peer group includes The Dow Chemical Company, BASF, Celanese and DuPont. According to the AFPM Report of Occupational Injuries and Illnesses for the Year 2010, the U.S. Source: Capital IQ petroleum industry average incidence rate was 0.83.
EMPLOYEE SPOTLIGHT: Giuseppe Penzo: Director-Process Design & Support; Ferrara, Italy We estimate more than 200 polyolefin production An avid archery competitor who has earned an Olympic bow in lines currently use our Italy, Giuseppe Penzo was one of two employees recognized in licensed technologies. Since 2011 with a BRAVO Lifetime Achievement Award, the company’s 2000, we have sold licenses most prestigious honor. For the past 20 years, Penzo has helped position LyondellBasell as a technology leader by designing more representing approximately than 100 process platforms for commercial polyolefins production. 40 percent of global In 2011, we entered into licensing agreements representing installed polyolefin capacity. approximately one million tons of polyolefin capacity.
V Satisfying Our Customers
Leading GLOBAL CAPACITY PRODUCTS Capacity POSITION Positions Polyolefins, Polypropylene, Polypropylene #1 Compounds, Oxyfuels
#2 Propylene Oxide
#3 Polyolefins Licensing
#4 Propylene, Polyethylene
#5 Ethylene
Positions based on LyondellBasell wholly owned capacity and pro rata share of JV capacities Photo Credit: Jeroen Bouman as of Dec. 31, 2011.
$60 From our homes to our cars, from the Strong Global $50 grocery store to the office, LyondellBasell Sales Revenues increased $40 makes chemicals the world counts on. 24% compared to 2010 $30 $ millions
North America $20 Consumers appreciate the convenience Europe $10 of plastic bottles, the importance of Asia, South America & Other pharmaceuticals, the need for plastic 2009 2010 2011 wraps and containers to keep food safe and fresh, the value of clothing and the comfort of furniture. It’s not surprising 2011 Sales that global demand for products made 1% from plastics, polyurethanes, polyesters, by Segment 20% coatings and adhesives continues to 37% Olefins & Polyolefins - Americas grow. LyondellBasell is well positioned Olefins & Polyolefins - EAI to meet the demand. Our innovative Intermediates & Derivatives 29% people, proprietary technologies and Refining & Oxyfuels 13% operational excellence have positioned Technology us for a bright future.
Sales segment distribution excludes other and intersegment sales.
EMPLOYEE SPOTLIGHT: Jane Horal: Customer Project Manager; Lansing, Michigan – U.S. Erik Licht: Global Marketing Manager; Frankfurt, Germany
Erik Licht and Jane Horal were part of a team that developed, marketed and introduced a new product that created high value for the customer and improved margins for the company. Selected as one of the most innovative products by the 2011 German Innovation Award Committee, LyondellBasell’s Softell resins enable customers to produce automotive interiors with exceptional surface aesthetics. Manufacturers using Softell include Fiat, General Motors and Volkswagen. View other products supplied to the Softell is a trademark owned or used by the LyondellBasell family of companies and is registered in automotive industry in the online version the U.S. Patent and Trademark Office. of this report.
VI Enhancing Life in Our Communities
We embrace the principles of stewards of products and processes. We and active employee volunteerism. Responsible Care®. By supporting know that sustainability extends beyond We participate in Community Advisory this initiative, we demonstrate our the borders of our facilities and that we Panels in communities around the commitment to sustainable operations must produce products that contribute world, allowing us to address topics and social responsibility. We aim to to energy conservation, environmental of shared interest with local citizens. continually improve the quality of life for protection, health care and consumer Employees around the globe strive current and future generations through safety. to make a personal difference by resource efficiency, technological volunteering their time and talents to Our continued growth depends in part advancements, safety, and community benefit the communities where we on the strength of the communities in outreach. operate. which we operate. We seek to be an We conduct our business with the asset to these communities through highest ethical standards, being good open dialogue, financial contributions
In 2011, more than 3,000 employee volunteers completed 70 outreach projects in 24 countries as part of our 12th annual Global Care Day.
Education Environment Community Prosperity
In 2011, we sponsored events around the From planting trees to cleaning coastlines, Our employees generously support food and toy world to promote excellence in science our employees actively support conservation, drives, home repair programs and other efforts to education as part of the International Year environmental education and sustainable help those in need. Employee contributions to our of Chemistry. development. 2011 United Way campaign were the highest in the company’s history.
EMPLOYEE SPOTLIGHT: Kirsten Jacobsen-Baqdounes: Senior Consultant - Product Clearance & Hazard Communication; Houston, Texas – U.S. Rene de Graaff: European Lead-REACh/Chemical Control; Rotterdam, The Netherlands
Sound product stewardship practices contribute to the safe management of our products. Kirsten Jacobsen-Baqdounes and Rene de Graaff were among a team of employees who worked many long hours to help LyondellBasell meet the requirements of the Registration, Evaluation and Authorization of Chemicals (REACh). This European regulation requires chemical manufacturers to consider uses for each product throughout its life cycle. Over the past two years, we devoted substantial resources Learn more about our commitment to to the project. LyondellBasell completed 92 substance registrations in line with the sustainability and social responsibility in deadline, and work on this project will continue for years to come. the online version of this report.
VII Business Segments
Olefins & Polyolefins Intermediates & Derivatives Refining & Oxyfuels Technology Strengths: Strengths: Strengths: Strengths:
• A leading global producer • Second largest global producer • Our Houston refinery, among • Leading global provider of of ethylene, propylene, of propylene oxide and one of North America’s largest full technology licenses and supplier polyethylene (PE), polypropylene the largest producers of high- conversion refineries, is a major of catalysts for polyolefin (PP) and PP compounds. purity isobutylene, acetic acid refiner of heavy, high-sulfur production. and vinyl acetate monomer. crude oil. • Large-scale operations and the • Technology platform that operational flexibility to use • Proprietary propylene oxide (PO) • Strategically located on the facilitates investments in high- the lowest-cost raw materials. and acetyls production process U.S. Gulf Coast near interstate growth regions broadening our For example, U.S. feedstock technologies provide a cost- pipelines and the Port of global reach. processing flexibility enables advantaged position for these Houston, our Houston refinery processing of advantaged products and their derivatives. benefits from access to cost- • A complete PE and PP natural gas liquids, particularly advantaged crudes and other technology portfolio enabling ethane. • Vertically-integrated facilities feedstocks as well as multiple polyolefin manufacturers the with global reach benefit from product markets. choice of a single provider for • Differentiated product offerings optimization opportunities polyolefin process technologies from key building blocks for across the entire value chain. • Our oxygenated fuel products and catalyst systems. basic plastics to high-value ranked #1 in global capacity. specialty products.
Locations
North America South America Europe Middle East USA Argentina France Saudi Arabia Illinois Brazil Germany Iowa Italy Louisiana Netherlands Asia-Pacific Michigan Rotterdam Australia New Jersey Poland China Administrative Offices/Headquarters Ohio Spain Hong Kong Manufacturing Pennsylvania United Kingdom Japan Technology Centers Tennessee S. Korea Joint Ventures Texas Malaysia Houston Thailand Owned and operated by LyondellBasell subsidiaries Mexico and or joint ventures.
VIII Supervisory Board of Directors
Marvin O. Schlanger 4 Jacques Aigrain 1,2 Jagjeet S. Bindra 2,4 Robin W.T. Buchanan Milton Carroll 2,3 Stephen F. Cooper Chairman of the Board Chairman, Former President, Senior Advisor, Bain & Co. Chairman of the Board, Chief Executive Officer, Principal, Cherry Hill Chemical LCH Clearnet Group, Ltd. Global Manufacturing, CenterPoint Energy, Inc. Warner Music Group Investments Chevron Former President & CEO, ARCO Chemical Company 1. Audit Committee 2. Compensation Committee 3. Nominating & Governance Committee 4. Health, Safety & Environmental Committee Symbols in blue indicate committee chair position.
Robert G. Gwin 1,3 Joshua J. Harris Scott M. Kleinman Bruce A. Smith 1,3 Rudy van der Meer 2,4 Senior Vice President, Senior Managing Director, Senior Partner, Former Chairman, Former CEO, Finance and CFO, Apollo Global Apollo Global President & CEO, Coatings and Chemicals, Anadarko Petroleum Management, LLC Management, LLC Tesoro Petroleum Akzo Nobel N.V. Corporation Leadership Team
Jim Gallogly Karyn Ovelmen Craig Glidden Kevin Brown Massimo Covezzi Chief Executive Officer Executive Vice President Executive Vice President Senior Vice President, Senior Vice President, and Chief Financial Officer and Chief Legal Officer Refining Research and Development
Bob Patel Pat Quarles Tim Roberts Par Singh Karen Swindler Senior Vice President, Olefins Senior Vice President, Senior Vice President, Olefins Senior Vice President, Senior Vice President, & Polyolefins (Europe, Asia and Intermediates and Derivatives and Polyolefins – Americas Manufacturing – Europe, Manufacturing - Americas International) and Technology Asia & International
Sergey Vasnetsov Paul Davies Sam Smolik Senior Vice President, Vice President and Vice President, Health, Photo Credits: Jeroen Bouman, Drew Donovan and Hiebert Photography & Professional Imaging Strategic Planning and Chief Human Resources Safety, Environment and Transactions Officer Operational Excellence Shareholder Information
Stock Exchange Online Annual Report Registrar and Transfer Agent LyondellBasell’s common stock is listed LyondellBasell’s Annual Report Computershare Shareholder Services, Inc. on the New York Stock Exchange under is available online at 250 Royall Street the symbol “LYB.” www.lyondellbasell.com/excellence Canton, MA 02021 +1 877 456 7920 (U.S. Toll-Free) Website Annual Meeting +1 781 575 4337 (U.S. Toll/International) Shareholders and other interested parties The Annual General Meeting of www.computershare.com can learn more about LyondellBasell by Shareholders of LyondellBasell visiting www.lyondellbasell.com Industries N.V. will be held at the company’s principal executive Investor Relations Contact offices at Stationsplein 45, 3013 AK, Douglas J. Pike, +1 713 309 4590 Rotterdam, The Netherlands. Notice Corporate Governance of the meeting, proxy statement and LyondellBasell’s corporate governance proxy card will be sent to shareholders information is available at in advance of the meeting. www.lyondellbasell.com
Rotterdam Stationsplein 45 3013 AK Rotterdam The Netherlands Tel: +31 10 275 5500
Houston LyondellBasell Tower, Ste. 700 1221 McKinney Street Houston, Texas 77010 Tel: +1 713 309 7200
Hong Kong 12/F Caroline Centre Lee Gardens Two 28 Yun Ping Road Causeway Bay Hong Kong, China Tel: +852 2577 3855
lyondellbasell.com
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
Form 10-K (Mark One)