LyondellBasell Industries N.V. (NYSE:LYB)

The analysis of the quarterly financial indicators reveals distinctive trends in profitability and financial structure over the examined periods.

Return on Assets (ROA)

ROA exhibited a gradual decline from the first quarter of 2015 through the middle of 2017, starting at about 18.31% and reaching a lower point near 14.85%. This was followed by a recovery phase throughout 2017 and into 2018, peaking at approximately 21.6% by the third quarter of 2018. However, the final quarters reflected a noticeable downturn, with ROA declining steadily to around 11.61% by mid-2019. This pattern indicates variable efficiency in asset utilization, with a mid-period peak before a subsequent decrease.

Financial Leverage

Financial leverage ratios initially increased from around 3.21 in early 2015 to a peak near 3.88 by the end of 2016, suggesting a rising use of debt relative to equity. After reaching this high point, leverage decreased steadily through 2017 and the first half of 2018, reaching a low of 2.55, indicating a reduction in dependency on debt. Starting in late 2018, leverage began to rise modestly again, stabilizing around 2.91 by the middle of 2019. The leverage trend reflects strategic shifts in capital structure management, alternating between higher and lower debt levels.

Return on Equity (ROE)

ROE showed a similar fluctuating pattern with high values in the initial periods, exceeding 60% during much of 2015 and 2016. This was followed by a downward trend beginning in 2017, declining from over 55% to 33.77% by mid-2019. The decline in ROE during this later period aligns with the reduction in ROA and indicates diminishing returns to shareholders, possibly influenced by the changes in leverage and operational efficiency.

Overall, the data reveals that profitability metrics experienced cyclical changes with a peak around 2018 followed by declines, while leverage demonstrated an inverse pattern of increase and decrease, reflecting active financial management. The combination of these factors suggests challenges in sustaining profitability amid varying financing strategies in the most recent periods analyzed.

The analysis of the quarterly financial metrics over the observed period reveals several notable trends in profitability, efficiency, leverage, and overall return on equity.

Net Profit Margin

The net profit margin shows a gradual increase from the beginning of the period until late 2017, peaking near 15.51% in the third quarter of 2018. Following this peak, there is a discernible decline down to 9.82% by mid-2019. This suggests an initial strengthening in profitability which later faced pressures or challenges leading to margin compression.

Asset Turnover

Asset turnover exhibits a downward trend from the first quarter of 2015, starting at 1.78 and falling steadily to approximately 1.22 by the end of 2016. From 2017 onwards, the ratio demonstrates relative stability with minor fluctuations, mostly ranging between 1.27 and 1.39, before declining again towards mid-2019 to 1.18. This indicates a decreasing efficiency in asset utilization in the earlier years, followed by a period of modest recovery and subsequent slight deterioration.

Financial Leverage

Financial leverage increases in the first half of the timeline, reaching a peak around 3.88 at the end of 2016, suggesting greater reliance on debt financing. After this peak, leverage ratios decline considerably to a low of 2.55 in mid-2018, indicating a strategic reduction in debt or increased equity financing. Towards the end of the observed period, leverage mildly rebounds to just below 3.0, reflecting some increase in financial obligations or capital structure adjustments.

Return on Equity (ROE)

ROE follows a similar pattern to net profit margin but with higher volatility. The metric improves significantly from the initial 58.77% in early 2015, climbing to a peak of 68.41% in the first quarter of 2016. Following this peak, a declining trend becomes evident with ROE falling steadily to 33.77% in mid-2019. The reduction in ROE, despite fluctuating leverage and asset turnover, suggests that overall profitability and efficient capital use have diminished considerably over the latter period.

In summary, the period under review is marked by an early phase of increasing profitability, leverage, and returns, followed by a general decrease in asset efficiency, leverage reduction, and weakened profitability metrics in more recent quarters. These developments may point to changing market conditions, operational challenges, or strategic shifts impacting financial performance and capital structure.

Tax Burden

The tax burden ratio remained relatively stable around 0.72 to 0.74 between early 2015 and late 2016, indicating a consistent proportion of earnings retained after taxes during that period. However, starting in 2017, a notable increase occurred, peaking above 1.0 in late 2018, before declining somewhat but remaining elevated compared to earlier years. This suggests variability in tax-related impacts on profitability and possibly temporary tax benefits or expenses influencing the ratio.

Interest Burden

The interest burden ratio was consistently high, around 0.95 through 2015 and 2016, showing minimal interest expense impact on earnings. Beginning in 2017, this ratio exhibited a slight but steady decline to approximately 0.92 by mid-2019, reflecting a modestly increased relative interest cost or higher debt servicing burden over time.

EBIT Margin

The EBIT margin showed a positive trend during 2015 and early 2016, climbing from about 14.8% to just above 20%. This rise suggests improved operational profitability. From late 2016 onwards, the margin exhibited a gradual decline, descending to below 13% by mid-2019, indicating reduced operational efficiency or increased costs impacting earnings before interest and taxes.

Asset Turnover

Asset turnover decreased from 1.78 in early 2015 to roughly 1.22 by late 2016, signaling diminished efficiency in using assets to generate revenue. Although it recovered modestly in 2017 and 2018 to around 1.37, it fell again to 1.18 by mid-2019. Overall, the pattern points to fluctuating asset utilization effectiveness, with a recent downward trend.

Financial Leverage

Financial leverage experienced a steady increase from about 3.21 in early 2015 to a peak of nearly 3.88 in late 2016, indicating rising reliance on debt or other liabilities to finance assets. Subsequently, leverage declined progressively to approximately 2.91 by mid-2019, suggesting deleveraging efforts or improved equity financing in the latter years.

Return on Equity (ROE)

ROE was notably high throughout the period, reaching above 68% in early to mid-2016, reflecting strong profitability relative to shareholder equity. After this peak, ROE demonstrated a steady decline, dropping to approximately 34% by mid-2019, which highlights deteriorating overall return effectiveness likely driven by lower margins and asset turnover, despite reduced financial leverage.

Net Profit Margin

The net profit margin demonstrates a generally positive trend from early 2015 through 2018, increasing from 10.3% in the first quarter of 2015 to a peak of 15.51% in the third quarter of 2018. This indicates improving profitability relative to revenue during this period. Subsequently, there is a noticeable decline in the margin throughout 2019, moving downward to 9.82% by the second quarter, suggesting a reduction in profitability.

Asset Turnover

Asset turnover shows a decreasing trend initially, dropping from 1.78 in early 2015 to around 1.22-1.26 in late 2016. From 2017 to early 2018, turnover stabilizes somewhat and even shows slight improvement, reaching about 1.39 in mid-2018. However, in 2019, the ratio declines again to 1.18 by mid-year, indicating a weakening in the company's efficiency in utilizing its assets to generate sales.

Return on Assets (ROA)

The ROA follows a pattern consistent with the net profit margin, increasing from 18.31% in the first quarter of 2015 to a peak of 21.6% in the third quarter of 2018. This reflects enhanced earnings generated from the asset base during this timeframe. After the peak, a discernible decline occurs into 2019, with ROA falling to 11.61% by mid-year, signaling reduced asset profitability.

Overall Analysis

The period from 2015 through late 2018 is characterized by improvements in profitability and efficiency metrics, suggesting the company was strengthening its operational performance. Both net profit margin and ROA trends support this, with strong profitability gains. Asset turnover improvement, although more moderate, aligns with these trends. Conversely, the decline across all three measures during 2019 points to emerging challenges negatively impacting profitability and asset utilization efficiency.

Tax Burden

The tax burden ratio remained relatively stable around 0.72 to 0.74 from early 2015 through the end of 2016, indicating consistent effective tax rates during this period. Starting in early 2017, the ratio showed a noticeable increase, reaching above 0.9 in late 2017 and early 2018, and peaking at 1.01 in Q3 2018 before slightly declining towards mid-2019. This upward shift suggests a higher proportion of pre-tax income retained after tax, improving net profitability during that timeframe despite some subsequent moderation.

Interest Burden

The interest burden ratio maintained a steady level close to 0.95 from 2015 until the end of 2016, which implies consistent operating income before interest expense. Thereafter, from 2017 to mid-2019, a gradual but slight decline occurred, with the ratio moving closer to 0.92. This indicates a minor increase in interest expenses relative to earnings before interest and taxes over the later periods.

EBIT Margin

The EBIT margin showed a general upward trend from 14.82% in Q1 2015, peaking at 20.4% in early 2016. Following this peak, a gradual decline ensued, with margins decreasing steadily each quarter to about 12.68% by mid-2019. This pattern reflects an initial improvement in operational profitability, followed by persistent margin compression over the subsequent years.

Asset Turnover

The asset turnover ratio displayed a consistent decreasing trend from early 2015 at 1.78 down to around 1.22 by late 2016. This indicates a reduction in the efficiency with which assets generated revenue. After stabilizing somewhat in 2017 and early 2018 with modest increases, the ratio again declined slightly through 2019, falling to 1.18, signaling continuing challenges in asset utilization efficiency over the longer term.

Return on Assets (ROA)

ROA followed a generally declining trajectory from 18.31% in Q1 2015, with some fluctuations. Although a brief improvement occurred in late 2017 and early 2018 reaching up to 21.6%, ROA dropped again afterward, falling to 11.61% by mid-2019. This overall pattern illustrates diminishing returns on the company’s asset base despite intermittent recovery periods.

The analysis of key financial ratios over the observed quarterly periods reveals several trends and shifts in profitability and cost management.

Tax Burden Ratio

The tax burden ratio remained relatively stable in the range of 0.72 to 0.74 through 2015 and 2016, indicating a consistent proportion of income retained after taxes during these periods. From late 2017, a noticeable increase occurred, peaking above 1.00 in the third quarter of 2018 before declining again to around 0.84 by mid-2019. This suggests a period of reduced tax impact or tax benefits around late 2017 to 2018, followed by normalization.

Interest Burden Ratio

The interest burden ratio demonstrated a slight but consistent decline over the years. Starting at 0.95 in early 2015, it gradually decreased to approximately 0.92 by mid-2019. This indicates a marginally increasing interest expense relative to operating income over time, possibly reflecting a slight rise in borrowing costs or debt service obligations.

EBIT Margin

The EBIT margin showed an upward trend from early 2015 through to early 2016, reaching a high near 20.4%. However, following that peak, a gradual downward trend is observed, with margins declining steadily through to mid-2019, where they reduced to approximately 12.68%. This decline points to decreasing operational profitability, which may be due to increased costs, pricing pressures, or other operational challenges.

Net Profit Margin

The net profit margin mirrored the pattern of EBIT margin initially, rising from 10.3% in early 2015 to a peak above 15.5% in mid-2018. Despite this increase, a sharp contraction is visible thereafter, falling back to under 10% by mid-2019. This indicates that despite stable or improved tax and interest expenses during some quarters, overall profitability after all expenses was under pressure, especially in the most recent quarters, signaling challenges in sustaining net earnings.

In summary, while operational profitability (EBIT margin) and net profit margin both showed improvements through mid-2018, deteriorating margins in later periods suggest emerging financial pressures. The stable tax burden early on followed by volatility, combined with a steady increase in interest burden, points to evolving cost structures impacting net outcomes. These patterns warrant close monitoring to identify underlying causes and potential corrective actions.