LyondellBasell warned Wednesday it expects up to an 86% decrease in net income for the first quarter and said it has idled production at some small plants in response to the global coronavirus pandemic.
The company said Q1 net income was expected to be in a range of $110 million to $180 million, down from $817 million in the first quarter of 2019.
"Events surrounding the ongoing coronavirus pandemic and the significant drop in the price of oil continue to evolve and impact global markets for LyondellBasell's products," the company said in a statement.
"Currently, all of our major global manufacturing sites are operational and demand for products used in packaging and medical applications remains robust," it added.
The OPEC+ alliance of oil producers last weekend reached a deal to reduce crude oil output by 9.7 million b/d in May and June, ending a Saudi Arabia-Russia price war, but crude markets have not rallied amid concerns that the cuts would be insufficient to prevent a near-term oil glut.
On Tuesday, ICE June Brent settled down $2.14 at $29.60/b and NYMEX May WTI moved $2.30 lower to finish at $20.11/b.
SOME PRODUCTION IDLED, RATES CUT
LyondellBasell said it has temporarily idled production at several small plants that serve automotive markets and "appropriately reduced production rates" at other plants that the company did not identify.
Major US vehicle manufacturers, such as Ford, GM and Fiat Chrysler, last month shut down plants amid coronavirus concerns, crushing demand for resins and chemicals used in that industry, such as polypropylene to make dashboards and door panels.
The fallout has hit other companies that make parts for the auto sector, such as Pace Industries, an industrial component manufacturer. Pace on Sunday announced that it has initiated a voluntary prepackaged Chapter 11 bankruptcy process to deleverage its balance sheet and resume normal operations following the COVID-19 outbreak, which has disrupted its supply chain and forced temporary closures of many of its US plants.
LyondellBasell said it has developed strategies and is implementing responses to various economic scenarios given uncertainty over the full extent of the pandemic and the drop in oil prices.
Those include postponing selected growth projects and planned maintenance, including slowing construction at its $2.4 billion propylene oxide/tertiary butyl alcohol (PO/TBA) plant near Houston that broke ground in August 2018.
LyondellBasell expects those moves to reduce its 2020 capital expenditures by 20% to $1.9 billion from $2.4 billion.
In addition, the company said "aggressive inventory management" and reduced prices for raw materials and products will provide a cash influx from working capital.
LyondellBasell said it would disclose more detail in its quarterly earnings call on May 1.
