Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
LyondellBasell Industries N.V., FCFF calculation
US$ in millions
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).
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An analysis of the cash flow metrics between 2014 and 2018 reveals a general contraction in both operating cash flow and free cash flow to the firm (FCFF), characterized by a period of steady decline followed by intermittent volatility.
- Net Cash Provided by Operating Activities
- Operating cash flow exhibited a consistent downward trend from 2014 to 2017, decreasing from 6,048 million US$ to 5,206 million US$. This period represents a cumulative decline of approximately 13.9%. However, a partial reversal occurred in 2018, with cash provided by operating activities increasing to 5,471 million US$, indicating a recovery in the core cash-generating capacity of the operations.
- Free Cash Flow to the Firm (FCFF)
- FCFF demonstrated higher volatility compared to operating cash flow. After a slight decrease in 2015, a significant contraction occurred in 2016, where FCFF dropped to 3,617 million US$, a 21.8% decline from the previous year. While there was a recovery to 3,974 million US$ in 2017, the figure declined again to 3,700 million US$ in 2018. Over the five-year period, FCFF decreased by 22.9%.
- Cash Flow Conversion and Capital Expenditure Trends
- The divergence between operating cash flow and FCFF suggests fluctuations in capital expenditures. In 2014 and 2015, the conversion of operating cash flow to FCFF remained stable at approximately 79%. This ratio dropped sharply to 64.5% in 2016, indicating a substantial increase in capital investments or expenditures during that fiscal year. A similar trend is observed in 2018, where the conversion rate fell to 67.6%, despite the increase in operating cash flow, suggesting that capital outflows offset the gains in operational efficiency.
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Interest Paid, Net of Tax
LyondellBasell Industries N.V., interest paid, net of tax calculation
US$ in millions
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
EITR = 100 × Income tax expense ÷ EBT
= 100 × 613 ÷ 5,311 = 11.54%
2 2018 Calculation
Interest paid, net of capitalized interest, tax = Interest paid, net of capitalized interest × EITR
= 333 × 11.54% = 38
3 2018 Calculation
Capitalized interest, tax = Capitalized interest × EITR
= 45 × 11.54% = 5
The financial profile between 2014 and 2018 is characterized by a significant reduction in the effective tax burden and an increase in net interest expenditures starting in 2017. While the initial three years of the period showed relative stability in both tax rates and interest payments, the latter two years indicate a shift in the company's fiscal and debt-servicing dynamics.
- Effective Income Tax Rate (EITR) Trends
- The EITR remained stable between 2014 and 2016, fluctuating within a narrow range from 26.49% to 27.86%. However, a sharp decline occurred in 2017, where the rate dropped to 10.89%, and remained low at 11.54% in 2018. This represents a reduction of approximately 60% in the effective tax rate compared to the 2014-2016 average.
- Analysis of Interest Paid, Net of Tax
- Interest payments, net of capitalized interest and tax, showed minimal volatility from 2014 to 2016, ranging between 216 million and 232 million US dollars. A notable increase occurred in 2017, with payments rising to 297 million US dollars, a level that was largely maintained in 2018 at 295 million US dollars. This upward shift suggests an increase in the net cost of debt servicing during the final two years of the observed period.
- Capitalized Interest Patterns
- Capitalized interest, net of tax, exhibited the highest degree of volatility. After a low of 8 million US dollars in 2015, the value trended upward, peaking at 40 million US dollars in 2018. The substantial increase in capitalized interest toward the end of the period indicates a rise in investment activities or large-scale capital projects that allow for the capitalization of borrowing costs.
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Enterprise Value to FCFF Ratio, Current
LyondellBasell Industries N.V., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 33,643) |
| Free cash flow to the firm (FCFF) | 3,700) |
| Valuation Ratio | |
| EV/FCFF | 9.09 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Linde plc | 46.95 |
| Sherwin-Williams Co. | 31.33 |
Based on: 10-K (reporting date: 2018-12-31).
1 Click competitor name to see calculations.
If the company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.
Otherwise, if the company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.
Enterprise Value to FCFF Ratio, Historical
LyondellBasell Industries N.V., historical EV/FCFF 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) | ||||||
| Enterprise value (EV)1 | 40,964) | 49,514) | 44,380) | 39,738) | 47,425) | |
| Free cash flow to the firm (FCFF)2 | 3,700) | 3,974) | 3,617) | 4,626) | 4,800) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 11.07 | 12.46 | 12.27 | 8.59 | 9.88 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| 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).
3 2018 Calculation
EV/FCFF = EV ÷ FCFF
= 40,964 ÷ 3,700 = 11.07
4 Click competitor name to see calculations.
The analysis of the financial metrics from 2014 to 2018 reveals a period of volatility in enterprise valuation and a gradual contraction in free cash flow generation. The relationship between these two variables indicates a significant expansion in the valuation multiple during the middle of the period.
- Enterprise Value (EV)
- The enterprise value exhibited significant fluctuations, declining from 47,425 million USD in 2014 to a low of 39,738 million USD in 2015. A subsequent recovery led to a peak of 49,514 million USD in 2017, followed by a contraction to 40,964 million USD by the end of 2018.
- Free Cash Flow to the Firm (FCFF)
- A general downward trajectory is observed in FCFF, which decreased from 4,800 million USD in 2014 to 3,700 million USD in 2018. Despite a marginal increase in 2017 to 3,974 million USD, the overall trend indicates a reduction in the firm's ability to generate free cash flow over the five-year period.
- EV/FCFF Ratio
- The valuation multiple experienced a notable shift, starting at 9.88 in 2014 and reaching a period low of 8.59 in 2015. Between 2015 and 2017, the ratio increased sharply to a peak of 12.46, indicating that the enterprise value expanded at a faster rate than the underlying cash flows. While the ratio moderated to 11.07 in 2018, it remained elevated compared to the 2014 and 2015 levels.
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