LyondellBasell (LYB)

The Industry Margin Disclosure

LyondellBasell publishes the clearest industry series for North American polyethylene (PE) margins, the number every spread model needs. In its Q4 2025 earnings slides, using Chemical Market Analytics (CMA) data, the North American integrated PE margin averaged $580/t in 2025 against $830/t for 2013-22, 30% below. Across all its businesses, LyondellBasell put 2025 industry margins about 45% below their historical averages. Management said margins reflected a cyclical trough and called the downturn one of the longest in the industry.

FY2025 EBITDA excluding identified items was $2,543M, against reported EBITDA of $1,126M after charges. Net debt was $9,489M at 31 December 2025, and the company put net debt at 3.7x EBITDA on the ex-items basis.

The feedstock splits by region. The Americas crackers, the plants that split feedstock into ethylene, run on ethane and other natural-gas liquids; the European units run on naphtha, an oil-derived feed. In an oversupply the naphtha crackers of Europe and Northeast Asia are the high-cost tonnes that idle first. The ethylene and PE spreads guide separates the cracker margin in ¢/lb from the integrated PE margin in $/t, the two units LyondellBasell's slides mix.

How the Numbers Read

The $1,417M gap between the two EBITDA figures is mostly write-downs, so a screen on reported earnings misleads. The ex-items line is the one to compare across years, and it still needs normalising, because it carries 2025's spreads.

LyondellBasell's Value Enhancement Program (VEP), a set of plant reliability, cost and commercial improvements, delivered $1.1B of recurring annual EBITDA by the end of 2025, measured at 2017-19 mid-cycle margins and operating rates (company estimate). The target is now $1.5B by 2028. It covers only one programme, but it is a filed bridge between downturn spreads and management's view of normal earnings.

LyondellBasell also gave segment operating rates for 4Q25: Olefins & Polyolefins (O&P) Americas ran at about 75% (its crackers about 90%) and Intermediates & Derivatives (I&D) at about 75%. Utilisation falls before margins do, so these rates are the early warning.

How You Would Value a Business Like This

The industry margins behind the ex-items EBITDA were well below their long-run averages, so a multiple on it would mislead. The method rebuilds EBITDA at a long-run PE margin first; the Selborne Excel model uses $650/t, between the 2025 figure and history. The same goes for leverage: the company's ratio divides by a downturn year's EBITDA. The mid-cycle EBITDA guide works the arithmetic and the multiples on fictional producers.

What to Watch in the Financials

The industry PE margin. A move back towards the 2013-22 average is the clearest published sign of recovery.

Identified items. FY2025's were mostly asset write-downs; if such items recur, the ex-items line overstates normal earnings.

VEP delivery. Progress towards the 2028 target.

Segment operating rates. The quarterly rates are the first place a turn would show.

Key Risks

European naphtha exposure. The Americas' ethane advantage does not protect the European plants when naphtha units sit at the top of the cost curve.

A long downturn. When spreads recover matters more than anything else in the numbers.