Manufacturer LyondellBassell (LYB) provides an alternative choice in the plastics and petroleum based chemical sector to industry giants like BASF and Dow Chemical (DOW). The cyclical nature of the chemicals industry makes timing an important factor in any of these stocks. (Note: BASF does not trade on U.S. exchanges.)
LyondellBassell is a Netherlands chemical company with production facilities around the globe and is one of the five largest chemical companies in the world by sales. LyondellBassell is the world's largest producer of polypropylene materials, catalysts, and compounds. The company also produces ethylene, propylene, and it is the No. 1 refiner of oxyfuels. The company is the result of the 2007 merger of U.S. based Lyondell Chemical with Dutch company Bassell International Holdings.
Results for the first half of 2011 were very strong, with total revenues of $26.3 billion and net income of $2.56 per share. The company has exhibited large revenue swings over the last several years, with revenues of $51 billion, $31 billion, and $41 billion for the years 2008 through 2010. LyondellBassell went through Chapter 11 bankruptcy in 2009.
Data provided by LyondellBassell management forecasts a shift in the supply-and-demand characteristics of its products in the favor of producers starting in 2012 and 2013. The restructuring through bankruptcy has left the company is a strong financial position to take advantage of demand growth over the next few years. Approximately $5 billion of cash shows on the balance sheet.
For the second quarter of 2011, the board declared a 20-cent quarterly dividend, double the previous rate. Future dividend hikes would be an additional benefit for investors.
Over the last year, the analysts at UBS and Dahlman Rose have maintained and reiterated a buy rating on the stock with target prices in the $45 to $53 range. In August 2011, Barclays Capital initiated coverage on LYB with an overweight rating.
The company next reports on Oct. 28.
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