Braskem SA ADR

Ladies and gentlemen, and thank you for holding. Welcome to the BrazFam conference call to discuss the results of the second quarter. Today, we have with us Mr. Roberto Simões, the company's CEO, Pedro Trepas, the CFO, and Pozana Abonio, the investor relations director. We would like to inform you that this event is being recorded, and during the presentation, All participants will be in the listen-only mode. In doing this, we will begin the question and answer session, then further instructions will be given. Should any participant require assistance during this call, please press star zero to reach the operator. Both the audio and slideshow for the presentation are being broadcast simultaneously by a webcast and can be accessed through the website www.spam.com. Please bear in mind that the forward-looking statements that may be made during this conference call regarding to the company's business prospects, operating and financial projections and polls are based on beliefs and assumptions of the company management, as well as on information currently available to the company. These forward-looking statements are no guarantees of performance. They involve risks, uncertainties, and assumptions as they refer to future events and depend on circumstances that may or may not occur. General economic conditions, industry conditions, and other operating factors may affect the company's future results and lead to results that differ materially from those expressed in the forward-looking statements. I would now like to turn the conference over to Rosana Abollo, the Investor Relations Director. You may proceed, ma'am. Good afternoon, ladies and gentlemen, and thank you for participating in Braskem's earnings conference call. Today, we will present the results for the second quarter of 2021. Let's go on to slide number three, where we will speak about the petrochemical scenario in the quarter. In the second quarter of 2021, petrochemical spreads continue to improve. This pandemic is mainly explained by a healthy global demand in the period and supply constraints in the United States following the UD winter storm in the country's Gulf Coast. In the second quarter of 2021, the company had recurring results of 1.8 billion reais, 198% higher than in the first quarter of 2021, representing 12.69 reais for common shares and class A shares. For the entire year until the end of the quarter of 2021, Rustam had a net profit of 9.9 billion reais. I would like to highlight that in December 2020, the company had accrued losses of 4.5 billion reais. At the end of July 2021, the company reverted to a profit of 5.4 billion reais. We go on to the next slide. Slide number six. shows the highlights of the Brazilian operation. In the second quarter, the utilization rate of crackers in Brazil was 76%, down 6% to a point vis-a-vis the first quarter of the year. This lower utilization rate is explained by the scheduled general maintenance at the ABC Petrochemical Complex in Sao Paulo. In the Brazilian market, prices have decreased in relation to the first quarter of the year due to the normalization of demand in the region but still at healthy levels. On the other hand, exports increased during the quarter. The recurring operating result for Brazil was of around 1.1 billion, but was up 20% above the first quarter of the year. We go on. Next slide will speak about the latest developments for the tax regime for the chemical industry. the special tax regime known as RAKE was created to improve the competitiveness of Brazil's chemical industry by reducing the fiscal fees tax rates levied on purchases of basic petrochemical feedstocks. In March of this year, the federal government proposed to terminate RAKE through a provisional measure. After discussions and modifications both in both houses of Congress. In June, it was passed by the federal government, and this was sanctioned by the federal government and converted into federal law 14,183. The law provides partial reductions of the rate in four years until the special regime is fully terminated in January of 2025. We will speak about the geological event in Alagoas. The charge on the left presents the provision balance related to the geological event in Alagoas at the end of the second quarter. The balance registered was 7.7 billion reais, and during the quarter, Breskin reversed provisions in the amount of 72 million reais. The graph on the right presents a disbursement schedule of the total balance of provisions of $7.7 billion. 58% was recorded under current liabilities and 32% under non-current liabilities. The company can now predict with certainty that future developments in respect of this matter or its related expenses, and the cost incurred may be different than those currently estimated or provisioned. Still speaking about the geological events in Alagoas, we will speak about the new allocation programs. Brunskamp continues to offer financial compensation to the families living in the Ritz area. The number of families allocated was 15,807, which means 96% of families in this area have been relocated, reinforcing the company's non-negotiable commitment to allow families to live in safe areas. The number of financial compensation increased by 50% with an acceptance rate of the proposals that needed the naming of high levels. Regarding the payments made under the scope of the program, about 1.2 billion Hais had been disimbursed until the end of the second quarter. Now, these amounts were considered since the beginning of the program. We go on to slide number 10, where we present the main highlights of the United States and European operations. In Europe, the capacity utilization rate rose by 20 percentage points. In Europe, the utilization rate increased than in the previous quarter. due to the rebuilding of inventories and meeting the demand in the region. In the United States, the sales volume in the quarter grew by 14% compared to the prior quarter, setting a new quarterly record. It reinforces our leadership in the U.S. polypropylene market. The segment recurring operating results in the second quarter was $493 million, 56% higher vis-a-vis the previous quarter. In the next slide, we will speak about the highlights of the Mexican operation. In Mexico, the capacity utilization rate stood at 58% in line with the prior quarter, reflecting the highest supply of ethane by Pemex in June, which was partially offset by the unscheduled shutdown due to isolated instability and power supply to Braskem-Aideza. The sales volume for the quarter was 155,000 tons, a growth of 15% when compared to the first quarter. The segment's recurring operating result in the second quarter was $200 million, a growth of 113% when compared to the prior quarter. We go on to the next slide to speak about the company's cash generation. In the quarter, Breskin recorded positive operating cash generation of around 1.5 billion reais. The main positive impacts were the strong recurring operating results and the monetization of Peacekeeping's cash credits in the quarter. These positive impacts were partially offset by the negative variation in working capital and higher income tax paid. We go on to slide 13 to speak about the company's progress in reducing the gross debt level Given its robust cash position and strong cash generation, the company completed several liability management operations in the second quarter, totaling $643 million per day reduction. In the first half of the year, Braskem reduced its growth debt by approximately 16%, which represents an amount of $1.3 billion. Additionally, Bras King also concluded in July of this year additional operations to reduce its gross debt of around $355 additional million. As a result, the total deduction during the year has obtained $1.7 billion. Well, we end up doing work and continue to maintain a very long-term maturity profile and a strong liquidity position with a maturity concentrated in the long term. The average debt term was around 14 years. Now, the current liquidity position is sufficient 78 months. It is important to highlight that in May of 2021, the risk rating and usage rating upgrade inductees out went to positive, which reflects the company's permanent commitment to maintaining its liquidity position and cost discipline and to reducing its leverage ratio. Now, let's go to slide 15, in which we will talk about corporate networks. With the objective of being reassigned as an investment-grade company, GRAS can continue to reduce its corporate leverage, reflecting its solid credit metrics, the leverage ratio of its dollars. And in the quarter at 1.1 times, this is the drop of six times in the last several months. We would like to highlight it as the lowest leverage ratio presented by the gain in history and the relevant achievement for the company's credit metrics. Well, the thing is that it maintains a robust cash position and a very long debt maturity profile and is committed to efficient capital allocation and cost discipline to be reassigned as an investment rate company. Let's go to the next slide now. It is important to highlight on this slide that the main factor and a lot of the rating agencies, the company has delivered important progress regarding corporate leverage that can continue to reduce this leverage ratio, which in the second quarter, which is the lowest level ever in terms of making it a strong liquidity position, but can make it a quarter with a robust cash position of $2.3 billion. This is above the minimum established in the financial policy. Barstain also continues to deliver consistent cash generation through the cycle in cash for $2.1 billion during Q1 and $1.2 billion . It is important to note that the company remains committed to capital allocation and . to be reassigned as an investment-free credit company. Now we will talk about the transfer for that .

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Currently, in addition to the recurring annual gains of $147 million in Stage 4, March, that's in the state of Michigan, Stage 1, 2, and 3 that will generate recurring annual gains of $292 million total, $440 million until 2023. I'd like to highlight that the company's previous record annual gains of around $140 million. A new initiative . Now on slide 18, we will talk about highlights in regarding . I used to be involved at the . Now, the social dimension recognized for . in recognition of recognizing the efforts of companies that promote the culture of gender equality of women and the recognition of the results of the equality and inclusion program in 2020 marks the 30% and leadership in the economic dimension, but it's important to advance compliance and governance practice. And the second folder was certified by the ISO 37001, an international standard that is done to provide anti-bribery management for the resource, and commitment to always I think there is a lot of action to be done. For example, at the general meeting in about July, working up to the committee and to the science committee, which was held by quite a number of members that were appointed by a list selected by the next time. Here, we want to the innovation and technology problem. At the end of July, there were 120 projects in the program that were $2.4 million in D.C. And out of these problems presented environmental impact. Until March, there was a relevant contribution of new rates, and the results of this company represent 15% of On the next slide, we will talk about the petrochemical scenario 2021 and 2022. Based on the latest forecast disclosed by independent consulting firms, EE and PBC spreads are expected to remain at some level One is 2022. The highlight is the spread of folic acidase, which are expected to remain at levels above the uptick of the petrochemical industry. On slide three, we will talk about the some scenarios for folic acidase in the similar way to the expedition protein, and you will see that you saw in the previous slide. External consultancies are projecting found peak stress for 2021 and 2022, especially in the U.S. for which forecasts are falling for spreads to widen the third quarter of the year. On the next slide, you will see the short-term perspective for Brazil It is expected higher essence production and normalization operations in the Cracker Navy in terms of sales volume and increase in total sales volume is expected with the maintenance of the prioritization strategy for service-resilient South American markets. three massive stretch will remain at levels above the industry up cycle in contrast to spreads for bp and pbc which are expected to narrow in the period in the ufc outlook for pp production and sales is to remain stable in relation to the second for the pp property spreads in the country remain at some level means we do to continue growing the demand and bp in the region In Mexico, the capacity utilization rate of production provides an expectation of higher from the U.S. Resale logging should increase due to higher availability to product . In Mexico, levels in line with the previous order. Now our next slide. In this slide, we can note that Ruskin remains as an interesting investment opportunity in the global petrochemical sector. Although Ruskin has achieved important advances over the recent period, its multiple remains discounted compared to its peers. We would like to highlight that Ruskin is a global company with characteristics similar to its peers in the U.S. with a well-diversified seed stock profile, leadership position in its market, amongst others. Now, by 2016, to conclude today's presentation, on the slide, we would like to recap the company's main priorities for 2021. The two main priorities are concluding that processes related to the deal, logical events in Alagoas, and reliable supply to . And we continue to make important advances toward resolving both of these issues. can also remain highly committed to its financial health and to the efficient allocation of capital with the objective to be reassigned as an investment-grade company. Another priority is strengthening public and reputation. and innovation and digital transformation. The company's priorities are improving the effectiveness of its innovation action and accelerating its digital transformation. And last but not least, Brooklyn continues to make progress in implementing its ESG commitment with the goal of becoming an industry reference in ESG. Lastly, we want to reinforce That's ACR, and we'll always be a key focus on breastfeeding operations as a perpetual and non-negotiable value of our strategy. That concludes today's presentation of breastfeeding results for the second quarter. Thank you, everyone, for your attention. Now let's go to the Q&A session. Ladies and gentlemen, we will now proceed with the Q&A session. For investors and analysts, if you have a question, please press star one on your phone. If your question has been answered, you can withdraw yourself from the queue by pressing star two. 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