Braskem SA ADR

Bom dia e obrigada por aguardarem. Sejam bem-vindos à teleconferência da Braskem para a discussão de resultados referentes ao terceiro trimestre de 2021. Estão presentes hoje conosco os senhores Roberto Simões, CEO da Braskem, Pedro Freitas, CFO da Braskem e Rosana Volho, Diretora de Relações com Investidores. Informamos que este evento está sendo gravado e que todos os participantes estarão apenas ouvindo a teleconferência durante a apresentação da Braskem. Em seguida, iniciaremos a sessão de perguntas e respostas, quando mais instruções serão fornecidas. Caso algum dos senhores necessite de alguma assistência durante a teleconferência, queiram, por favor, solicitar a ajuda de um operador digitando asterisco zero. Este evento também está sendo transmitido simultaneamente pela internet via webcast, podendo ser acessado no endereço http://www.braskem.com.ri, onde se encontra disponível a respectiva apresentação. A seleção dos slides será controlada pelos senhores. Este evento estará disponível logo após o seu encerramento. Lembramos que os participantes do webcast poderão registrar via website perguntas para Braskem, que serão respondidas após o término da conferência pela área de RI. Antes de prosseguir, gostaríamos de esclarecer que eventuais declarações que possam ser feitas durante esta teleconferência relativas às perspectivas de negócios da Braskem projections, operational and financial goals, constitute beliefs and premises of the company's administration, as well as information currently available to Bracken. Future considerations are not performance guarantees and involve risks, uncertainties and premises, as they refer to future events and therefore depend on circumstances that may or may not occur. Investors and analysts They must understand that general conditions, sector conditions and other operational factors can affect the future results of Braskem and can lead to results that differ materially from those expressed in such future considerations. I would now like to give the floor to Ms. Rosana Avoglio, Director of Relations with Investors, who will give the presentation. Please, Ms. Avoglio, you may proceed.

Good morning, ladies and gentlemen, and thank you for participating in the Braskem results teleconference. Today we will present the results of the third quarter of 2021. Let's go to slide number 3, where we will talk about the petrochemical scenario of the quarter. In this slide, we bring the spreads that most impact the profitability of the Braskem business, because together they represent two-thirds of our global production capacity of thermoplastic resins. In the third quarter of 2021, petrochemical spreads remained at high levels and above the cycle of high in the petrochemical industry. In comparison with the third quarter of last year, the high of the spreads is significant, and the three spreads presented in the slide exceed 120% of the high, mainly due to restrictions in the global supply chain related to impacts of natural events, closure of ports as a measure of containment of the Delta variant in Asia, lack of containers in the world and the consequent rise in freight prices. In slide number 4, we will comment on the consolidated result of the quarter. In the third quarter of 2021, the company's recurring operating result was approximately US$1.5 billion, 17% lower than the second quarter of the year. This result is mainly explained by the smallest international resin spreads in Brazil, GDP in Europe and GDP in Mexico, but still above the historical average of the last 10 years and for the lowest volume of GDP sales in the United States and Europe. Comparing the results of the year's accumulation until September with the same period last year, the company had an increase of 261% in its recurring operating result in dollars. The largest profitability of the business in 2021 can be observed through the largest recurring operating margin, with a 31% margin in the first nine months of 2021, an increase of 15 percentage points when compared to the same period of 2020. Moving on to the next slide, we will comment on the company's liquid profit. In the third quarter of 2021, the company recorded a net profit of about R$ 3.5 billion. In the accumulated year until September 2021, Braskem recorded a net profit of approximately R$ 13.5 billion. It is worth noting that in December 2020, the company had an accumulated loss of about R$ 4.5 billion. At the end of September 2021, the company reversed this accumulated loss for an accumulated profit of approximately R$ 8.9 billion. Moving on to the next slide. In slide number 6, we present the main highlights of operations in Brazil. In the third quarter of 2021, the use rate of petrochemical plants in Brazil was 79%. three percentage points higher than the second quarter of 2021. This increase is explained, mainly, by the return of operations after a general maintenance stop scheduled at ABC's Petroquímica Central in São Paulo. Still in the industrial context, the use rate of the Eteno Verde plant was 106%, the company's historic quarter record. In the Brazilian market, resin sales showed an increase in relation to the second quarter of 2021. In line with the strategy of prioritizing service in the Brazilian market, the company reached 64% of the market share of resins in the domestic market, 12 percentage points higher than the previous quarter, mainly due to the return of operations after the General Stop of Programmed Maintenance at ABC's Petrochemical Center in São Paulo. In this scenario, Brazil's recurring operational result was approximately US$ 828 million and represented 55% of the recurring operational result consolidated by the company's segments. In the next slide, we will talk about the update of the Geological Event of Alagoas. The graph on the left shows the balance sheet of the provisions related to the Geological Event of Alagoas at the end of the third quarter of 2021. The balance sheet was approximately R$ 7.1 billion. In the graph on the right, we present the balance sheet. Of the total provided of R$ 7.1 billion, about 68% was registered in the circulating passive and 32% was registered in the non-circulating passive. It is important to mention that the company cannot discard future deductions related to the subject or its associated expenses, and the costs incurred by Braskem may be different from its estimated or provided value. Moving on to the next slide, still in the context of the Geological Event of Alagoas, we will talk about the advances in the financial compensation program and support for relocation. Braskem continues to advance with the process of relocation and financial compensation of the families located in the neighborhoods in areas of risk in Maceió. Until October 31, 2021, the number of reallocated families was 13,986 families, reaching the mark of approximately 97% of reallocated families in the risk areas, reinforcing the company's unnegotiable commitment to the safety of the families located in the unemployment areas. In addition, the amount of financial compensation proposals presented increased by 26%, with a highlight for the maintenance of the high acceptance rate of the proposals presented by the company. Regarding the payments made under the scope of the program, about R$ 1.6 billion had been debited until October 31, 2021. This value is considered the debited values since the beginning of the program. Moving on to slide number 9. In this slide, we will present the main highlights of operations in the United States and Europe. In the United States, there was a reduction of 4 percentage points, resulting in a use rate of 94%. In Europe, the use rate also reduced 4 percentage points compared to the previous quarter. Despite the reductions, in both regions, the use rate was on levels above the industry average. Moving on to commercial performance, in the United States, the volume of sales in the quarter was 442,000 tons, which represents a drop of only 2% compared to the previous quarter. The recurring operational result of the segment in the third quarter of 2021 was US$ 519 million and represented 34% of the recurring operational result consolidated by the company's segments. Moving on to the next slide, we will talk about the highlights of Mexico's operations. In Mexico, the use rate of the third quarter of 2021 was 68%, an increase of 10 percentage points in relation to the second quarter of 2021, explained mainly by the increase in US ethanol imports by the Fast-Track solution, which compensated for the reduction in ethanol supply by Pemex. In relation to sales, there was a 3% increase compared to the second quarter of 2021, due to the greater availability of product for sale as a reflection of the increase in the use rate in the quarter. The recurring operational result of the segment in the third quarter of 2021 was US$ 182 million, representing 11% of the recurring and consolidated operational result of the company's segments. Moving on to the next slide, we will talk about Fast Track, which has been important to increase the supply of raw materials in Mexico. In August, Brasquendesa concluded the Fast Track Import Capacity Expansion Project, which currently has 25,000 barrels per day of ethane. As a result, during the month of September, Brasquendesa reached a historical volume of 22.4 thousand barrels per day. In the third quarter of 2021, in order to complement the supply of ethanol by Pemex, Brasquendesa imported an average of 18.6 thousand barrels per day of ethanol from the United States, which represents about 74% of the current capacity of Fast Track. In addition, the company is working on planning an additional expansion of the FastTrack solution, which consists of the incorporation of additional discharge stations, which will allow Brasquendesa to achieve a maximum capacity for the import of ethanol in the volume of 35,000 barrels per day, with the expectation that the expansion will be concluded during the second quarter of 2022. In the next slide, we will talk about the Brasquendesa's agreements with Pemex and other Mexican government entities. In recent months, we have seen significant advances in the situation of Brasquendesa. As we have communicated, Brasquendesa signed an additional supply contract with Pemex, as the additive changes the minimum volume commitment to 30,000 ethane barrels per day until the entry into operation of the ethane import terminal scheduled for the second half of 2024 or the deadline of February 2025, if there are delays with licenses. The additive establishes a right of preference for Brasquendesa to acquire all the ethanol that Pemex has available and does not consume in its own production process until 2045 at prices according to international references. In addition, Brasquendesa also signed an agreement with Pemex and other government entities that establish support measures for the construction project of an ethanol import terminal with the capacity to meet the totality of the need for raw material of Brasquendesa. It is important to emphasize that Brasquendesa has already obtained the applicable social approvals, including the final approval of its shareholders and creditors, as for both documents, both the additive and the terminal agreement. Moving on to the next slide, we will still talk about Brasquendesa, specifically about the profile of our operation in Mexico. Brasquendesa concluded its debt refinancing plan with the replacement of the remaining $1.35 billion of Project Finance for new debts in corporate format with an extended profile, increasing its average debt period to nine years. With the withdrawal of the Project Finance debt, the guarantees provided by Braskem to BI will be extinguished, in a total amount of US$ 358 million. The new BI capital structure includes the issuance of debt titles with compromises and interest linked to carbon emissions reduction targets, in line with the long-term sustainable development strategy of the company. In this way, Braskem fulfills its goal established for 2021 of negotiating a definitive additive with Pemex and expansion of the ethane import operation and, through BI, reinforces its commitment to Mexico, local petrochemical and with the continuous search for an increase in the availability of raw materials for the plastic transformation industry. Let's go to the next slide, where we will talk about the consolidated cash generation. In the quarter, the company presented a positive operating cash generation at a value of approximately R$ 3.9 billion, the company's historic quarterly record. The main positive impacts were the strong recurring operating results and the monetization of PIS or FINS credits in the quarter. These positive impacts were attenuated by the negative variation of the turnover capital, the payment of interest in the quarter of bonds issued by the company, and the payment of income tax and social contribution, and the consumption of operational CAPEX. Moving on to the next slide, we will present the debt profile. At the end of September, the company maintained a fairly elongated debt profile, with a strong liquidity position, and with most of the debt with long-term earnings. The average period of debt was about 15 years, and the company's current liquidity level guarantees debt earnings coverage in the next 75 months. Let's move on to the next slide, where we will talk about the corporate leverage of the company. In the quarter, Braskem continued to reduce its corporate leverage and continued to present solid credit metrics. The dollar leverage index presented in the quarter was 0.8 times. It is worth noting that this is the lowest leverage presented by Braskem since its creation. Braskem reiterates that it maintains a robust cash position, a fairly elongated debt profile and is committed to the allocation of efficient capital and cost discipline. Moving on to the next slide. In the quarter, we had an important recognition by the S&P Risk Risk Agency, which raised Braskem's rating to the level of risk-degree investment. The agency highlighted the considerable improvement of the profitability and cash generation indicators and the company's commitment to its leverage. In addition, Braskem maintains constant conversations with FIT and Amuris, with the aim of keeping agencies up to date on the company's corporate credit risk. Finally, we emphasize that Braskem has credit rating above Brazil's sovereign rating, and with the S&P's rise, we are approaching the risk level of US petrochemical companies. Moving on to slide 18, where we will talk about our highlights in ESG. I'll start the SG part by talking about two important Bresken projects. In September, we signed a memorandum of understanding with SCG Chemicals to carry out viability studies to jointly invest in a new biothenol dehydration plant in Thailand, with the goal of producing biothenol and polyethylene imgreen biobased. If the project is implemented, the unit should be located in Thailand, within the SCG Chemicals petrochemical complex, and can even double the existing capacity of the company's PAM Green Biobase. In this project, Braskem would contribute with its technology and know-how in the process of ethanol dehydration, experience in PAM Green Biobase marketing, while SCG Chemicals would use its polyethylene units and production expertise to manufacture the PEM Green Biobase for the project, in addition to contributing with its knowledge of the polyethylene market in Asia. It is worth noting that the execution of the investment is subject to the conclusion of the studies, mutual agreement between Braskem and SCG Chemicals and approval by competent governance bodies. In addition, at the beginning of this week, we announced the signing of another memorandum of understanding with Lumos Technology, for the joint licensing of Braskem's green ethene technology, with ethanol and ethene conversion, for two projects in different regions of the world, demonstrating global interest in technology. They are a project in development in North America and the project in analysis in Thailand that I just mentioned. In parallel, the two companies are discussing a long-term agreement for students to license Braskem's green ethene technology as a way to accelerate the use of renewable raw materials by the chemical sector worldwide, contributing to combat climate change through the conversion of carbon captured in the atmosphere into plastic. Moving on to the next slide. Recently, Braskem signed a partnership with Ecovades to strengthen the supplier management program with analysis in ISG criteria. Ecovades is one of the largest sustainability classification companies for global supply chains in the world, and the new partnership aims to engage suppliers on ISG issues and make the Braskem supplier assessment program even more robust. Moving on to the next slide. In recent weeks, we have had an important recognition for our achievements in circular economy. Braskem was recognized by Bloomberg as the best circular economy company among plastic producers. This recognition increases our responsibility and motivates us even more to continue looking for initiatives related to the circular economy. The Bloomberg Circular Economy ranking follows the sustainability strategy of the world's largest brain owners and plastic producers, and assesses its achievements, ambitions and quality of information released to the market. Moving on to the next slide. Another important ISG recognition came from the United Nations High Commission for Human Rights and the UN Global Pact. Recently, Braskem was recognized for the practices related to the preservation of human rights within its business performance. In the case of Braskem, two cases were selected, one related to social responsibility and human rights and one of public reporting on human rights. Moving on to the next slide, we will talk about another recognition of the company. Braskem was elected one of the best companies in the world to work, according to Forbes. The ranking, made up of the best employer companies in the world, and more than 150,000 people were interviewed. Among the criteria evaluated are the posture and concern of companies with environmental impact, search for the development of new talents, social responsibility and, finally, diversity. Braskem is one of the three Brazilian companies that participate in the ranking, among the 750 participating companies, and obtained an improvement of placement in six positions before 2020. Moving on to the next slide, we will talk about the petrochemical scenario. According to more recent external consultancy projections, the expectation is that the spreads of the main chemicals remain at levels above the recent historical average in 2022. Among the main chemicals, one of the highlights is butadiene, which in the third quarter of the year had a spread of US$ 1,200 per ton, due to the high domestic demand in a scenario that the supply did not follow. Let's move on to slide 24, where we will talk about the scenario for polyethylene and PVC. Similar to what has been observed in main chemicals in the previous slide, external consultancies are projecting polyethylene and PVC spreads on levels also above the recent historical average in 2022. I emphasize that in the case of polyethylene-based and gas-based spreads, if this scenario really takes place, It is an extremely favorable scenario for petrochemical producers, even at lower levels than observed in 2021. Let's move on to slide 25, where we will talk about the scenario for polypropylene. Regarding polypropylene spreads, according to external consultancies, the United States should continue to be the most profitable region and still at levels above the recent historical average. Moving on to the next slide, we will present short-term prospects. For Brazil, the expectation is an increase in the production of ethanol with a return to the availability of raw materials in Rio de Janeiro. As for the volume of sales, despite the lower seasonality, an increase in total volume of sales is expected and maintenance of the strategy of prioritizing the service of the Brazilian market and South America. The NAFTA-based polyethylene spreads should remain at levels above the recent historical average, and the PP and PVC spreads should increase. In the United States, the volume of polypropylene sales should remain in line, despite the lower production in the period. And the propene polypropylene spreads in the United States should remain at levels above the recent historical average. Regarding Mexico, despite the expected drop in production due to the planned maintenance stop in the next quarter, the prospect is that the volume of sales of polyethylene remains in line with the previous quarter, due to the availability of stock products built in recent months. Polyethylene-based spreads in the United States should also remain above the recent average. Moving on to the next slide. In this slide, we can see that Braskem continues as an interesting investment opportunity in the world petrochemical sector. Although Braskem has made significant advances in recent years, the company's multiple continues to be discounted in comparison with its peers. We would like to highlight that Braskem is a global company and has characteristics similar to its peers in the United States, such as a diversified raw material profile, leadership position in the performance markets, among others. In addition, in 2021, Braskem presents credit profitability indicators above the average of its peers in the United States, as can be seen in the slide. In the accumulation of the year until September, the recurring operating margin and the company's liquid margin was higher than the average of its peers in the United States, and in the case of leverage, we have a liquid debt indicator divided by the recurring operating result below the peers in the same region. Moving on to slide 28 to conclude the presentation. In this slide, we would like to recap the company's main priorities for the year 2021. Among the company's priorities, it is worth noting that the two main fronts are related to the conclusion of the topics related to the geological phenomenon in Alagoas and the definitive solution for the reliable supply of ethane to Breském and Beza. Both fronts continue to advance in an important way to their conclusion. In terms of financial agility, Breském continues to be committed to maintaining its financial health and allocating efficient capital to return to the level of risk, level of investment by all rating agencies. Another priority is strengthening the image of Braskem and its recognition throughout society. As far as innovation and digital transformation are concerned, the company is focused on increasing its efficiency in innovation and accelerating digital transformation. And last but not least, the company continues to advance in implementing ESG commitments with the aim of becoming a reference for the industry. Finally, we would like to reinforce that security is and will always be the focus of Braskem's operations, being a perpetual and negotiable value in our strategy. So we conclude the presentation of the results of the third quarter of Braskem. Thank you very much for the attention of all of you. We now move on to the Q&A session.

Ladies and gentlemen, Iniciaremos agora a sessão de perguntas e respostas para as falas de português e inglês. Para fazer uma pergunta, por favor digitem asterisco 1. Para retirar a pergunta da lista, digitem asterisco 2. Nossa primeira pergunta vem de Bruno Montanari, Morgan Stanley.