LyondellBasell Industries NV (LYB:US), the biggest maker of polypropylene plastic, plans to pay special dividends more often as a boom in U.S. natural gas production reduces costs and helps generate excess cash.
A special dividend of $2.75 a share will be paid on Nov. 15 along with the quarterly 40-cent dividend, Rotterdam-based LyondellBasell said in a statement today. The company plans to pay more frequent, possibly smaller, special dividends and it may also buy back shares, Chairman and Chief Executive Officer Jim Gallogly said on a conference call.
“Assuming that the results remain strong and we’re fully funding our growth plans, we intend to return cash to shareholders in a periodic fashion, perhaps in varied amounts and more frequent intervals,” Gallogly said on the call. “We like a strong balance sheet, but we have shown very clearly that we will return value to our shareholders.”
U.S. gas production is expected to increase 29 percent from 2010 to 2035 because of shale output, according to the Energy Information Administration. LyondellBasell is benefiting from shale-gas extraction that has boosted supplies of natural gas liquids used to make polypropylene resins for bottle caps, car parts and textiles.
The company’s cash balance surged 80 percent to $3.55 billion during the third quarter, according to a presentation posted on its website today. The company is expected to boost its regular dividend 25 percent next year, according to a Bloomberg forecast (LYB:US).
Share repurchases may occur after Jan. 1 because of a change in the company’s tax treatment under Dutch law, Gallogly said on the call from Houston, where the company’s operational headquarters is located.
Operating profit in the U.S. olefins unit, which makes polyethylene and polypropylene, rose 23 percent in the quarter, the company said in a separate statement today. About 15 percent of U.S. plastics output was exported, mostly to Latin America, Gallogly said on the call.
Net income in the third quarter fell 5.7 percent to $844 million, or $1.46 a share, from $895 million, or $1.51, a year earlier, the company said. A narrower profit margin from the European olefins unit, where oil-derived naphtha is the main raw material, contributed to the decline.
LyondellBasell is taking “a much harder look” at structuring some of its U.S. ethylene assets as a master-limited partnership after a recent Internal Revenue Service ruling, Gallogly said. The tax treatment, common in the pipeline industry, generally eliminates income taxes at the corporate level.
“We’ll take some time to develop a firmer opinion as to whether this opportunity can be executed by us to the benefit of shareholders,” Gallogly said on the call.
Gallogly also announced plans to boost annual U.S. production of ethylene by about 250 million pounds in Channelview, Texas. A larger expansion at Corpus Christi, Texas, will be detailed later, Gallogly said on the call. The expansions are in addition to a 50 percent increase at an ethylene plant in LaPorte, Texas, and other projects announced last year.
Capital spending will increase to about $1.5 billion next year and in 2014, from $1.2 billion this year, he said.
LyondellBasell rose 0.7 percent to $53.75 at the close in New York. The shares have gained 66 percent this year.
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