LyondellBasell Industries N.V. (NYSE:LYB)

Between 2014 and 2018, liquidity metrics remained relatively stable with an upward trend peaking in 2017, followed by a synchronized decline across all measures in 2018. While the company maintained a strong liquidity position for most of the period, the final year indicates a contraction in the availability of liquid assets relative to short-term obligations.

Current Ratio

The current ratio fluctuated between 2.11 and 2.46 from 2014 to 2017, indicating a strong capacity to cover current liabilities with current assets. A downturn occurred in 2018, with the ratio falling to 1.92, the lowest value in the analyzed period, although it remained near the 2.0 threshold.

Quick Ratio

The quick ratio stayed above 1.0 between 2014 and 2017, reaching a high of 1.33 in 2017, which suggests that liquid assets were sufficient to meet short-term obligations without relying on inventory. In 2018, a significant decrease to 0.87 was observed, indicating that quick assets were no longer sufficient to cover current liabilities fully.

Cash Ratio

The cash ratio showed minimal volatility from 2014 to 2016, followed by an increase to 0.59 in 2017. This was followed by a sharp decline in 2018 to 0.23, representing a substantial reduction in the immediate cash buffer available to meet short-term debts.

The simultaneous decrease in all three ratios during 2018 suggests a tightening of the liquidity position. Specifically, the widening gap between the current ratio (1.92) and the quick ratio (0.87) in 2018 indicates an increased reliance on inventory to support the overall current asset base.

The liquidity profile from 2014 to 2018 demonstrates a consistent ability to meet short-term obligations, as the current ratio remained well above 1.0 throughout the entire period. While the company maintained a strong liquidity cushion, there were noticeable fluctuations in both assets and liabilities that impacted the overall ratio.

Current Asset Volatility

Current assets exhibited a non-linear trend, starting at $11,645 million in 2014 and declining to a period low of $9,599 million by 2016. A significant recovery occurred in 2017, with assets reaching a peak of $11,738 million, before contracting again to $10,566 million in 2018.

Current Liability Movements

Current liabilities decreased from $5,437 million in 2014 to $4,349 million in 2015. Following this decline, a steady upward trajectory was observed over the next three years, ending at $5,513 million in 2018, which represents the highest liability level within the analyzed timeframe.

Current Ratio Analysis

The current ratio fluctuated between a high of 2.46 in 2017 and a low of 1.92 in 2018. The peak in 2017 was the result of a substantial increase in current assets paired with controlled growth in liabilities. Conversely, the decline in 2018 to 1.92 was driven by the simultaneous occurrence of decreasing current assets and increasing current liabilities, marking a contraction in the liquidity margin.

The liquidity position of the entity exhibited volatility between 2014 and 2018, characterized by a period of relative stability followed by a notable contraction in the final year. The ability to meet short-term obligations using only the most liquid assets fluctuated, peaking in 2017 before declining to its lowest observed level in 2018.

Total Quick Assets

Quick assets experienced significant variance, starting at US$ 6,074 million in 2014 and decreasing to US$ 4,512 million in 2015. A steady recovery followed, with assets reaching a five-year peak of US$ 6,374 million in 2017, before declining again to US$ 4,796 million by the end of 2018.

Current Liabilities

Short-term obligations remained relatively stable from 2014 through 2017, fluctuating between a low of US$ 4,349 million in 2015 and US$ 4,777 million in 2017. A sharp increase was observed in 2018, with current liabilities rising to US$ 5,513 million, representing the highest level of short-term debt in the recorded period.

Quick Ratio Trends

The quick ratio remained above the 1.0 threshold from 2014 to 2017, suggesting an adequate capacity to cover immediate liabilities without relying on inventory sales. The ratio peaked at 1.33 in 2017, coinciding with the peak in quick assets. However, a significant deterioration occurred in 2018, where the ratio fell to 0.87. This decline was driven by the simultaneous reduction in liquid assets and the increase in current liabilities, marking the only period in the analysis where liquid assets were insufficient to cover current liabilities on a one-to-one basis.

Between 2014 and 2018, the liquidity position as measured by the cash ratio experienced a period of relative stability followed by a significant decline in the final year. The ratio fluctuated from 0.48 in 2014 to a peak of 0.59 in 2017, before dropping sharply to 0.23 by the end of 2018.

Total Cash Assets Trend

Cash holdings exhibited volatility over the five-year period. After a decrease from 2,626 million USD in 2014 to 1,995 million USD in 2015, assets recovered to a peak of 2,835 million USD in 2017. However, a substantial reduction occurred in 2018, with cash assets falling to 1,293 million USD, representing the lowest level in the observed timeframe.

Current Liabilities Movement

Current liabilities showed a fluctuating but generally upward trend toward the end of the period. A decrease was noted in 2015, falling to 4,349 million USD, but obligations grew steadily thereafter, reaching 5,513 million USD by December 31, 2018.

Cash Ratio Interpretation

The cash ratio remained within a narrow range between 0.45 and 0.48 from 2014 to 2016. An improvement to 0.59 in 2017 was driven by a simultaneous increase in cash assets and relatively controlled growth in liabilities. The subsequent decline to 0.23 in 2018 indicates a weakened immediate liquidity position, resulting from the convergence of significantly reduced cash reserves and peak current liabilities.