LyondellBasell (LYB) Q4 2025 earnings review
Red Ink in the Cycle Trough: Core Margins Compress
LyondellBasell swung to a net loss in Q4 2025, underscoring the severity of the prolonged petrochemical downturn. Even excluding significant impairments, the company posted a net loss of $79M as its primary profit engine—O&P Americas—sputtered under the weight of higher ethane feedstock costs and weak seasonal demand. While management raised its 'Cash Improvement Plan' target and maintained a fortress balance sheet ($3.4B cash), the fundamental earnings power is currently impaired, with EBITDA (ex-identified items) nearly halving sequentially.
🐂 Bull Case
Management is controlling what it can. The Cash Improvement Plan outperformed its 2025 goal ($800M achieved vs. $600M target) and the cumulative target through 2026 was raised to $1.3B.
Despite the earnings pressure, LYB ended the year with $3.4B in cash and $8.1B in total liquidity. This buffer protects the dividend and investment-grade rating through the trough.
🐻 Bear Case
The O&P Americas segment, typically the company's bedrock, saw EBITDA collapse from $428M in Q3 to $164M in Q4. Higher ethane costs and lower polymer prices crushed the 'advantaged' feedstock spread.
O&P EAI (Europe/Asia/Intl) posted a loss of $(61)M on an EBITDA basis (ex-items). Despite restructuring efforts, the region continues to bleed cash operationally.
⚖️ Verdict: 🔴
Bearish. The aggressive cost-cutting is admirable, but it cannot offset the macro headwinds of rising feedstock costs and weak demand. With the core Americas segment faltering and the company posting a net loss, the 'recovery' timeline remains elusive.
Key Themes
O&P Americas Profitability Collapse
The most alarming data point in Q4 was the rapid deterioration of the Americas segment. EBITDA ex-items fell 60% sequentialy to just $164M. Management cited higher NGL feedstock costs and natural gas prices, which compressed the integrated polyethylene margins. This erodes the structural cost advantage LYB typically enjoys over global naphtha-based producers.
Cash Flow Coverage Tightness
For FY25, Operating Cash Flow was $2.3B. The company spent $1.9B on CapEx and returned $2.0B to shareholders (dividends + buybacks). This implies a cash burn after capital returns. While the cash balance is high ($3.4B), the current earnings level does not organically cover the dividend and CapEx without drawing down liquidity or cutting spending further.
Cash Improvement Plan Acceleration
A clear bright spot is execution on efficiency. The company exceeded its 2025 target, realizing $800M in improvements. Consequently, they raised the cumulative 2026 target from $1.1B to $1.3B. This 'self-help' is critical to offset the cyclical headwinds.
Europe/International Weakness Persists
The O&P EAI segment remains unprofitable on an EBITDA basis (loss of $61M ex-items in Q4). Volumes were hit by maintenance and seasonal lows. While the sale of four European assets is 'on track' for Q2 2026, the remaining assets continue to weigh on consolidated results.
CapEx Discipline
Management is aggressively cutting capital intensity to preserve cash. FY26 CapEx guidance is set at $1.2B, a significant reduction from the $1.9B spent in FY25. This 37% reduction is necessary to protect free cash flow in a negative earnings environment.
Other KPIs
Reversing. The company swung from a Net Income of $330M (ex-items) in Q3 to a reported loss. Even excluding impairments and restructuring costs, the adjusted Net Loss was $(79)M.
Missed expectations of profitability. Compared to $1.01 in Q3 25 and $0.77 in Q4 24, this result highlights the depth of the margin squeeze at year-end.
Significant non-cash charges were taken throughout 2025, primarily related to asset write-downs and the strategic exit from certain businesses, signaling a 'clearing of the decks' of underperforming assets.
Guidance
Stable. Matches the ~85% rate mentioned in previous quarters, indicating no immediate V-shaped recovery in demand is expected to start the year.
Accelerating. An improvement from the ~65% rates seen in Q4 (impacted by downtime), suggesting some volume recovery in Europe/Asia, though profitability remains the question.
Decelerating. A sharp reduction from $1.9B in FY25. This strict capital diet is designed to manufacture Free Cash Flow while operating cash generation remains depressed.
Accelerating. Up from the prior target of $1.1 billion. Management expects to generate an additional $500M relative to 2025 actuals.
Key Questions
Dividend Sustainability
With FY25 Operating Cash Flow ($2.3B) barely covering Capital Returns ($2.0B) and negative earnings in Q4, how long can the dividend be defended without tapping into the balance sheet cash or debt?
Ethane Spread Outlook
O&P Americas margins collapsed in Q4 due to higher feedstock costs. Do you view the Q4 ethane spike as transitory, or has the US structural advantage permanently narrowed due to increased NGL exports?
European Asset Sale Certainty
The divestment of four European assets is slated for Q2 2026. Given the continued losses in the EAI segment ($61M EBITDA loss in Q4), how confident are you in closing these transactions on the current timeline and terms?
MoReTec Timeline
With CapEx slashed to $1.2B for 2026, does this impact the construction timeline for MoReTec-1 or the development of future circularity projects?