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LyondellBasell (LYB) Poised on Expansion Amid Challenges
Mar 10, 2017 (Zacks.com via COMTEX) -- Copyright (C) 2017, Zacks Investment Research.

On Mar 9, we issued an updated research report on Netherlands-based chemical maker, LyondellBasell Industries LYB.LyondellBasell posted better-than-expected results for fourth-quarter 2016. Its adjusted earnings came in at $2.18 per share for the quarter, topping the Zacks Consensus Estimate of $2.11. Revenues rose roughly 10% year over year to $7,747 million in the quarter, surpassing the Zacks Consensus Estimate of $7,177 million.The company, in its fourth-quarter call, said that the industry outlook for 2017 has improved over the past several months. LyondellBasell believes that its significant investments in its 2016 maintenance programs have favorably placed it for 2017.LyondellBasell Industries NV Price and EPS Surprise LyondellBasell Industries NV Price and EPS Surprise | LyondellBasell Industries NV QuoteLyondellBasell continues to benefit from the favorable North American natural gas environment. It should also gain from its ethylene and polyethylene expansion moves. The company is executing its expansion projects to leverage the U.S. natural gas liquids (NGLs) advantage.LyondellBasell, in Jan 2017, completed the 800 million pounds per year ethylene expansion project at its Corpus Christi, TX, facility. The project expands ethylene capacity at the site by 50% to 2.5 billion pounds per year from 1.7 billion pounds per year.The conclusion of the expansion at Corpus Christi marks the completion of LyondellBasell's multi-year plan to boost annual ethylene capacity in the U.S. by 2 billion pounds and is also another key milestone in the company's organic profit-generating growth strategy. The company, in 2014, completed an 800-million pound per year expansion at its La Porte, TX site. It also completed a 250-million pound per year expansion at its Channelview facility in 2015.LyondellBasell is also advancing plans to build a world-scale plant on the U.S. Gulf Coast for producing propylene oxide ("PO") and tertiary butyl alcohol ("TBA"), leveraging the shale gas boom in the region. The new PO/TBA facility, considered to be the largest of its kind, will be built in the Houston area. Moreover, the company has decided to build a high density polyethylene ("HDPE") plant on the U.S. Gulf Coast. The facility, which will have an annual capacity of 1.1 billion pounds (500,000 metric tons), will be the first commercial plant to employ the company's new proprietary Hyperzone PE technology.LyondellBasell also remains committed to deliver greater value to its shareholders leveraging healthy cash flows. The company generated cash flows from operations of $5.6 billion in 2016. LyondellBasell, in 2016, returned $4.3 billion to its shareholders in the form of dividends and share buybacks. It bought back 37 million shares in 2016.However, LyondellBasell's operations are subject to interruptions including maintenance outages which is affecting its production capacity and results. Lost production related to Corpus Christi turnaround was around $40 million in the fourth quarter. Planned maintenance on a co-product processing unit at the Channelview facility is expected to have a $40 million impact on first-quarter 2017 results. Moreover, planned maintenance on the fluid unit at the refinery is expected to impact first-quarter results by roughly $80 million.LyondellBasell also faces volatility in raw material and energy costs that account for a major portion of its operating costs. The low oil price environment remains a headwind for the company. Low oil and fuel prices hurt the company's refining and oxyfuel margins in 2016.LyondellBasell has also underperformed the Zacks categorized Chemicals-Diversified industry in the last three months. The company's shares gained just 2.3% during the period while the industry saw a gain of 20.2%.LyondellBasell currently carries a Zacks Rank #3 (Hold).Stocks to ConsiderBetter-ranked companies in basic materials space include Univar Inc. UNVR, United States Steel Corporation X and Ternium S.A. TX, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.Univar has an expected long-term growth rate of 9.4%.U.S. Steel has an expected long-term growth rate of 8%.Ternium has an expected long-term growth rate of 18.4%.More Stock News: 8 Companies Verge on Apple-Like RunDid you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs. A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>

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