LyondellBasell Industries N.V.LYB entered into a definitive agreement to buy 50% interest in Quality Circular Polymers ("QCP"), a high standard plastics recycling company located in Sittard-Geleen, Netherlands.
Per the agreement, LyondellBasell will be a 50/50 partner in QCP along with SUEZ, a French company specializing in waste and water management.
Notably, this is the first time that a major chemicals and plastics company entered into partnership with a leader in resource management to contribute to circular economy objectives. The CEOs of both LyondellBasell and SEUZ stated in a joint statement that increases in prominence and importance of circular economy is likely to boost the demand for recycled materials.
The deal combines LyondellBasell's technical capabilities and European market presence with SUEZ's ability to collect and recover waste into new materials. The new venture is likely to provide a strategic platform for sustainable growth.
QCP's Sittard-Geleen facility is capable of converting consumer waste into 35,000 tons of high-density polyethylene (HDPE) and polypropylene (PP) per annum, beginning 2018. Following the completion of the deal, which is subject to regulatory approvals, LyondellBasell will market QCP materials. SUEZ and LyondellBasell are looking to obtain regulatory approval by the end of 2017.
LyondellBasell's shares have moved up 16.5% in the last three months, outperforming the industry 's 12.4% growth.
LyondellBasell is benefiting from the favorable North American natural gas environment. It is executing its expansion projects to leverage the U.S. natural gas liquids advantage. The company's expansion initiatives are likely to boost the capacity and add to its earnings.
The company is constructing a HDPE plant on the U.S. Gulf Coast that will employ its proprietary Hyperzone PE technology. The facility is expected to have an annual capacity of 1.1 billion pounds.
LyondellBasell has also commenced production at its PP compounding plant in Dalian, China. The 20 kiloton per year plant is the company's third facility in China. It is strategically located to cater the country's growing automotive market.
However, LyondellBasell faces headwind from Hurricane Harvey, which is expected to impact its fourth-quarter results. Hurricane Harvey adversely impacted the company's nine major U.S. Gulf Coast sites during the third quarter, which led to the shutdown of an ethylene cracker. LyondellBasell sees lost sales and expenses from Harvey to impact its fourth-quarter 2017 results by roughly $100 million.
LyondellBasell Industries NV Price and Consensus
Zacks Rank & Stocks to Consider
LyondellBasell currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the basic materials space are Koppers Holdings Inc. KOP , Daqo New Energy Corp. DQ and Kronos Worldwide Inc. KRO . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks Rank #1 stocks here .
Koppers has an expected long-term earnings growth rate of 18%. Its shares have moved up 20.4% year to date.
Daqo New Energy has an expected long-term earnings growth rate of 7%. Its shares have surged a whopping 166.1% year to date.
Kronos Worldwide has an expected long-term earnings growth rate of 5%. Its shares have rallied 142.7% year to date.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report