Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Debt Ratios
Coverage Ratios
LyondellBasell Industries N.V., solvency ratios
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
The solvency profile between 2014 and 2018 exhibits a distinct cycle of increasing leverage followed by a period of deleveraging and stabilization. A peak in debt-related ratios occurred in 2016, after which the organization successfully reduced its reliance on borrowed funds and improved its capital structure.
- Leverage and Capital Structure Trends
- A consistent upward trend in leverage is observed from 2014 through 2016. Debt to equity rose from 0.85 to a peak of 1.48, while financial leverage increased from 2.92 to 3.88 during the same interval. This trend is mirrored in the debt to capital and debt to assets ratios, which reached their highest points in 2016 at 0.60 and 0.38, respectively. From 2017 onward, a reversal is evident; debt to equity declined to 0.92 and financial leverage contracted to 2.76 by the end of 2018, indicating a strategic reduction in debt or an increase in equity holdings.
- Debt Servicing and Coverage Capacity
- Capacity to service debt remained robust throughout the analyzed period, although coverage ratios experienced volatility. Interest coverage peaked in 2015 at 21.03 and reached a period low of 12.19 in 2017, before recovering to 15.75 in 2018. Similarly, fixed charge coverage declined from a high of 9.48 in 2015 to 6.90 in 2017, with a marginal recovery to 7.20 in 2018. Despite these fluctuations, the magnitude of these ratios suggests a significant cushion for meeting all fixed financial obligations.
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Debt to Equity
LyondellBasell Industries N.V., debt to equity calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current maturities of long-term debt | 5) | 2) | 2) | 4) | 4) | |
| Short-term debt | 885) | 68) | 594) | 353) | 346) | |
| Long-term debt, excluding current maturities | 8,497) | 8,549) | 8,385) | 7,671) | 6,757) | |
| Total debt | 9,387) | 8,619) | 8,981) | 8,028) | 7,107) | |
| Total Company share of stockholders’ equity | 10,257) | 8,949) | 6,048) | 6,550) | 8,314) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 0.92 | 0.96 | 1.48 | 1.23 | 0.85 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Linde plc | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Debt to equity = Total debt ÷ Total Company share of stockholders’ equity
= 9,387 ÷ 10,257 = 0.92
2 Click competitor name to see calculations.
The solvency profile from 2014 to 2018 is characterized by a period of rising leverage that peaked in 2016, followed by a significant improvement in the capital structure through 2018. While total debt increased over the five-year period, the substantial recovery and growth of stockholders' equity in the latter years effectively reduced the overall debt-to-equity ratio.
- Total Debt Trends
- Total debt exhibited a general upward trajectory, increasing from 7,107 million US$ in 2014 to 9,387 million US$ by 2018. A steady rise was observed between 2014 and 2016, with a brief deceleration in 2017 before reaching the period peak in 2018.
- Stockholders' Equity Fluctuations
- Equity experienced significant volatility, declining from 8,314 million US$ in 2014 to a low of 6,048 million US$ in 2016. This contraction was followed by a robust recovery, with equity increasing to 8,949 million US$ in 2017 and further expanding to 10,257 million US$ in 2018.
- Debt to Equity Ratio Analysis
- The debt-to-equity ratio mirrored the inverse relationship between rising debt and falling equity during the first three years, climbing from 0.85 in 2014 to a peak of 1.48 in 2016. Following 2016, the ratio declined sharply to 0.96 in 2017 and 0.92 in 2018. This downward trend indicates a shift toward a more conservative capital structure, as the growth in equity significantly outpaced the growth in total debt during the 2017-2018 period.
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Debt to Capital
LyondellBasell Industries N.V., debt to capital calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current maturities of long-term debt | 5) | 2) | 2) | 4) | 4) | |
| Short-term debt | 885) | 68) | 594) | 353) | 346) | |
| Long-term debt, excluding current maturities | 8,497) | 8,549) | 8,385) | 7,671) | 6,757) | |
| Total debt | 9,387) | 8,619) | 8,981) | 8,028) | 7,107) | |
| Total Company share of stockholders’ equity | 10,257) | 8,949) | 6,048) | 6,550) | 8,314) | |
| Total capital | 19,644) | 17,568) | 15,029) | 14,578) | 15,421) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.48 | 0.49 | 0.60 | 0.55 | 0.46 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Linde plc | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Debt to capital = Total debt ÷ Total capital
= 9,387 ÷ 19,644 = 0.48
2 Click competitor name to see calculations.
The solvency profile from 2014 to 2018 reflects a cyclical shift in capital structure, characterized by an initial rise in leverage followed by a period of capital expansion and ratio stabilization.
- Total Debt Trends
- Total debt experienced a general upward trajectory, increasing from 7,107 million US dollars in 2014 to 9,387 million US dollars by 2018. A period of steady growth occurred through 2016, followed by a marginal decrease in 2017, and a subsequent peak in 2018.
- Total Capital Evolution
- Total capital exhibited a slight contraction in 2015, falling to 14,578 million US dollars, before entering a phase of consistent growth. By the end of 2018, total capital reached 19,644 million US dollars, indicating a significant expansion of the capital base in the latter half of the observed period.
- Debt to Capital Ratio Analysis
- The debt to capital ratio rose from 0.46 in 2014 to a peak of 0.60 in 2016, signaling a temporary increase in financial leverage. This trend reversed in 2017, with the ratio dropping to 0.49 and further stabilizing at 0.48 in 2018. The decline in the ratio during the final two years, despite an increase in absolute debt, is attributed to the more rapid growth of total capital, which effectively reduced the proportional weight of debt within the capital structure.
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Debt to Assets
LyondellBasell Industries N.V., debt to assets calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current maturities of long-term debt | 5) | 2) | 2) | 4) | 4) | |
| Short-term debt | 885) | 68) | 594) | 353) | 346) | |
| Long-term debt, excluding current maturities | 8,497) | 8,549) | 8,385) | 7,671) | 6,757) | |
| Total debt | 9,387) | 8,619) | 8,981) | 8,028) | 7,107) | |
| Total assets | 28,278) | 26,206) | 23,442) | 22,757) | 24,283) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.33 | 0.33 | 0.38 | 0.35 | 0.29 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Linde plc | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Debt to assets = Total debt ÷ Total assets
= 9,387 ÷ 28,278 = 0.33
2 Click competitor name to see calculations.
The solvency profile between 2014 and 2018 is characterized by a general increase in total leverage, offset by a corresponding expansion of the asset base in the latter half of the period. While the reliance on debt increased, the solvency ratio stabilized after an initial period of volatility.
- Total Debt Trends
- A consistent upward trajectory in total debt is observed, rising from 7,107 million US dollars in 2014 to 9,387 million US dollars by 2018. The most significant growth occurred between 2014 and 2016, followed by a brief contraction in 2017 before returning to an upward trend in 2018.
- Total Asset Evolution
- Total assets experienced a contraction in 2015, falling to 22,757 million US dollars from 24,283 million US dollars in 2014. Following this dip, a period of steady growth was maintained, with assets increasing to 28,278 million US dollars by the end of 2018, representing a strengthened resource base.
- Debt to Assets Ratio Analysis
- The debt to assets ratio increased from 0.29 in 2014 to a peak of 0.38 in 2016, indicating a heightened proportion of assets financed through debt. However, this trend reversed in 2017, with the ratio declining to 0.33 and remaining constant at that level through 2018. This stabilization suggests a deliberate alignment of debt acquisition with asset growth to maintain a consistent solvency level.
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Financial Leverage
LyondellBasell Industries N.V., financial leverage calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | 28,278) | 26,206) | 23,442) | 22,757) | 24,283) | |
| Total Company share of stockholders’ equity | 10,257) | 8,949) | 6,048) | 6,550) | 8,314) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 2.76 | 2.93 | 3.88 | 3.47 | 2.92 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Linde plc | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Financial leverage = Total assets ÷ Total Company share of stockholders’ equity
= 28,278 ÷ 10,257 = 2.76
2 Click competitor name to see calculations.
The financial leverage profile from 2014 to 2018 exhibits a distinct cyclical trend, characterized by an initial period of increasing leverage followed by a significant deleveraging phase and capital strengthening.
- Total Assets Trajectory
- Total assets experienced an initial decline between 2014 and 2015, moving from 24,283 million US$ to 22,757 million US$. Following this dip, a consistent growth pattern emerged from 2016 through 2018, with the balance sheet expanding to a peak of 28,278 million US$. This indicates a period of asset accumulation and expansion in the latter half of the analyzed timeframe.
- Equity Dynamics
- Stockholders' equity showed a downward trend in the first three years, decreasing from 8,314 million US$ in 2014 to a minimum of 6,048 million US$ in 2016. This contraction was followed by a sharp recovery; equity rose to 8,949 million US$ in 2017 and reached 10,257 million US$ by 2018. The substantial increase in equity after 2016 served as the primary driver for the improvement in the company's solvency position.
- Financial Leverage Ratio Interpretation
- The financial leverage ratio rose steadily from 2.92 in 2014 to a peak of 3.88 in 2016, signifying an increase in the proportion of debt used to finance assets. A reversal of this trend occurred in 2017, as the ratio dropped to 2.93, and continued downward to 2.76 in 2018. By the end of the period, the leverage ratio reached its lowest point in five years, reflecting a reduced financial risk profile and a more conservative capital structure.
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Interest Coverage
LyondellBasell Industries N.V., interest coverage calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to the Company shareholders | 4,688) | 4,879) | 3,836) | 4,476) | 4,174) | |
| Add: Net income attributable to noncontrolling interest | 2) | (2) | 1) | (2) | (6) | |
| Less: Loss from discontinued operations, net of tax | (8) | (18) | (10) | (5) | (4) | |
| Add: Income tax expense | 613) | 598) | 1,386) | 1,730) | 1,540) | |
| Add: Interest expense | 360) | 491) | 322) | 310) | 352) | |
| Earnings before interest and tax (EBIT) | 5,671) | 5,984) | 5,555) | 6,519) | 6,064) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 15.75 | 12.19 | 17.25 | 21.03 | 17.23 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Linde plc | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Interest coverage = EBIT ÷ Interest expense
= 5,671 ÷ 360 = 15.75
2 Click competitor name to see calculations.
The solvency profile between 2014 and 2018 is characterized by a consistently strong capacity to service interest obligations, with the interest coverage ratio remaining well above critical thresholds throughout the period. Although the ratio experienced volatility, the overall trend indicates a robust margin of safety regarding debt servicing.
- Interest Coverage Ratio Trends
- The interest coverage ratio reached a peak of 21.03 in 2015, indicating a very high ability to meet interest payments. A subsequent decline is observed, reaching a period low of 12.19 in 2017. This downward movement was reversed in 2018, with the ratio recovering to 15.75. Despite these fluctuations, the ratio never dropped below 12, suggesting that operating profits remained more than sufficient to cover the cost of debt.
- Earnings Before Interest and Tax (EBIT) Performance
- EBIT exhibited moderate volatility over the five-year window. Earnings increased from 6,064 million USD in 2014 to a peak of 6,519 million USD in 2015, before declining to 5,555 million USD in 2016. A partial recovery occurred in 2017 (5,984 million USD), followed by a slight contraction to 5,671 million USD in 2018. The EBIT levels provided a consistent and substantial cushion for financial obligations.
- Interest Expense Analysis
- Interest expenses remained relatively stable between 310 million USD and 352 million USD from 2014 to 2016. A significant spike occurred in 2017, where expenses rose to 491 million USD, which served as the primary driver for the compression of the interest coverage ratio in that year. By 2018, interest expenses normalized, decreasing to 360 million USD, contributing to the improvement in the solvency ratio.
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Fixed Charge Coverage
LyondellBasell Industries N.V., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to the Company shareholders | 4,688) | 4,879) | 3,836) | 4,476) | 4,174) | |
| Add: Net income attributable to noncontrolling interest | 2) | (2) | 1) | (2) | (6) | |
| Less: Loss from discontinued operations, net of tax | (8) | (18) | (10) | (5) | (4) | |
| Add: Income tax expense | 613) | 598) | 1,386) | 1,730) | 1,540) | |
| Add: Interest expense | 360) | 491) | 322) | 310) | 352) | |
| Earnings before interest and tax (EBIT) | 5,671) | 5,984) | 5,555) | 6,519) | 6,064) | |
| Add: Rental expense | 496) | 440) | 426) | 422) | 412) | |
| Earnings before fixed charges and tax | 6,167) | 6,424) | 5,981) | 6,941) | 6,476) | |
| Interest expense | 360) | 491) | 322) | 310) | 352) | |
| Rental expense | 496) | 440) | 426) | 422) | 412) | |
| Fixed charges | 856) | 931) | 748) | 732) | 764) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 7.20 | 6.90 | 8.00 | 9.48 | 8.48 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Linde plc | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 6,167 ÷ 856 = 7.20
2 Click competitor name to see calculations.
The analysis of solvency metrics between 2014 and 2018 indicates a consistently strong capacity to meet fixed financial obligations, although the coverage margin experienced a notable contraction toward the end of the period.
- Earnings Before Fixed Charges and Tax
- Earnings demonstrated moderate volatility over the five-year period. A peak was reached in 2015 at 6,941 million USD, followed by a significant decline to 5,981 million USD in 2016. A partial recovery occurred in 2017, reaching 6,424 million USD, before settling at 6,167 million USD by the end of 2018.
- Fixed Charges
- Fixed obligations remained relatively stable between 2014 and 2016, fluctuating within a narrow range of 732 million USD to 764 million USD. A substantial increase was observed in 2017, where charges rose to a period high of 931 million USD, representing a significant uptick in fixed cost commitments. This figure moderated slightly to 856 million USD in 2018.
- Fixed Charge Coverage Ratio
- The coverage ratio reflects the combined impact of earnings volatility and shifting fixed costs. The ratio peaked at 9.48 in 2015, signifying an exceptionally high margin of safety. A downward trend followed, resulting in a period low of 6.90 in 2017, driven by the simultaneous occurrence of increased fixed charges and lower earnings compared to the 2015 peak. A slight recovery to 7.20 was noted in 2018. Despite the decline from the 2015 high, the ratio remained well above 6.0x throughout the entire period, indicating a robust solvency position and minimal risk of default on fixed obligations.
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