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.

Hello, everyone. Thank you for taking my questions. I have only one question, divided into two themes, which is about capital allocation in view of the company's expressive leverage in surfing this positive petrochemical cycle. So, I wanted to understand between dividends and investment opportunities. In dividends, maybe take a little of the expectation of timing, a potential announcement, and what is the head of the company, of the controllers, in terms of the intensity of using this extra cash that is in the company today to remunerate the pensioner. And in the opportunity of investment, I know that you have already concluded a lot of what had to be done. There are these green PE projects that are super interesting. but I would like to get your head around, if you could, perhaps, list, outside of the Green Party, what would be the potential for new, more voluptuous investments, be it in Brazil, be it in Mexico, the United States, and what we could expect coming in the future.

Thank you very much. Hi, Bruno. Good morning. Thank you for the question. It's a pleasure. conversar com vocês aqui, os nossos investidores, analistas, nesse call hoje. Acho que é uma pergunta muito natural, a gente tem conversado nas últimas apresentações de resultado, a gente tem trazido essa questão de alocação de capital como um tema importante, a geração de caixa muito forte que a Braskem vem tendo esse ano, gera essa pergunta de maneira muito natural. A gente, como você mesmo falou, a gente já fez um trabalho muito extenso de pagamento de dívida. A dívida bruta foi reduzida de maneira muito expressiva ao longo do ano. E aí sobram essas duas outras alavancas de alocação de capital. Eu vou começar com a pergunta de dividendos. A gente não tem hoje um pipeline aí extraordinário de dividendos em vista, de investimentos em vista. Então, a nossa perspectiva de investimentos para os próximos, pelo menos nesse momento, a gente não tem, por exemplo, uma planta nova de polímeros, um novo complexo, como o que a gente tem aí, um complexo do México que foi feito, ou o Delta que foi feito nos Estados Unidos, a gente não tem um investimento dessa magnitude aí no pipeline hoje, tá? This type of project takes one to two years to be developed. I mean, if something like this were to enter our pipeline, and we, again, don't have visibility of this now, it would be more for maybe in two years, two to three years, we would have the most material investment of this order of magnitude. Where we do have investments... em desenvolvimento, são investimentos em duas áreas principalmente, na área de renováveis. A gente anunciou, por exemplo, um MOU, que ainda é um MOU de um estudo de uma planta nova de eteno verde na Tailândia, mas é um estudo agora para uma decisão de investimento mais para frente e um investimento menos material do que, por exemplo, foi o Delta. O Delta foi mais de 700 milhões de dólares de investimento. Here we would be talking about a value, at least initially, the price had a lower value. And again, more time. So, when we look at the renewable business, which is a focus of investment of the company, there is nothing there now in the short term. And what we call circular economy, which includes all initiatives related to recycling, mechanical recycling, chemical recycling, we do have short-term projects in maturation, But in relation to these investments, typically they are of lower values. We are talking here about investments worth tens of millions of dollars. Maybe adding up the entire portfolio that we have of renewables, it will add up to one or two hundred million dollars in the next few years. But again, it is not so material. The other investment that is public, It's going to start now. It's the ethano import terminal in Mexico, but this is an investment from Braskem Ibeza, which doesn't talk directly with the allocation of capital from Braskem. So, again, when we look at investments, just to reinforce, investments that are not so material now, in this cycle of the next two years, Depois, sim, pode vir algo mais material na linha de renováveis. A gente vai manter um portfólio vivo de reciclagem, mas investimentos menores. E o investimento do México, o investimento local lá. Então, quando a gente olha para o volume de caixa disponível, para a situação financeira, o nível de alavancagem baixa, naturalmente, o que a gente tem aí is the space to allocate this capital in dividends. The company has been actively studying for a possible distribution of dividends in the short term. A gente tem uma polícia de dividendos que ela pede uma análise prospectiva. A gente está afinando os números aí, porque os números que a gente pretende usar são os mesmos números que vão estar no nosso orçamento para frente. Então, a gente está afinando os números e temos aí um alinhamento de levar essa proposta em breve para o Conselho de Administração da Braskem. So, I would say that our proposal will follow the dividend policy in relation to the requirements of prospective leverage. It is a proposal that is not consolidated yet, it is in development, and we hope to have the possibility to take it

Our next question is from Pedro Soares, PTG Pactual.

Good morning, guys. Good morning, everyone. I have talked about the previous presentation, about the dividend ethics, and, in fact, I'm trying to bring a somewhat distinct ethics here, linking it with the dynamic of the 4.5% spreads that you brought, and also about what we talked about in the last trio, about that, in a way, informal guidance of an increased leverage below 2.5x. There is, in your view, along with this perspective that you just mentioned about the medium-term business plan, do you see any risk for this spread dynamic to normalize in a faster way than it does for you? maybe postpone or reduce what you expected to pay in dividends at the end of the year.

Pedro, can you please, Rosana here speaking, good morning, can you repeat the question? We had a technical failure, if you can, please, I appreciate it.

Of course, of course, do you hear me well?

Now it's great, thank you.

The question was a follow-up to the previous question about dividends, trying to link this with not only the leverage level that you mentioned in the past call, which should be something below 2.5x, given the current situation of the company today, it would allow you to pay a lot of things, given all this cash generation that we are seeing, but if somehow this petrochemical spread dynamic, normalizing as we have seen, what you have mentioned now, that you are somehow waiting to join with what you are waiting for a business plan for the medium term, if there is any risk that, in your view, this spread dynamic Thank you. Hi, Pedro.

The scenario we have is a vision that has been maintained, that next year is a year of a very, very good level of results, historically, but obviously smaller than this year, given the petrochemical scenario, the spread perspectives that we are seeing from industry specialists. And 2023, a level still a little smaller, than 2022, which is also the scenario of industry specialists. So, I would say that our vision of the future has not changed. We have maintained a favorable perspective. Obviously, the result is not as good as this year, but I think it is favorable for the next few years. This dividend analysis, including in line with the policy, is an evaluation of several scenarios, it is not an analysis made with one scenario only. You have to remember that Braskem has, if you look at the liquid profit line, the accumulated liquid profit in the first three quarters of the year, reaches R$ 14 billion. But we have to absorb the loss of last year, we have to constitute legal reserves that were, due to the loss of last year, that were zeroed because of that. So we have an analysis that is being done of how much it is possible to pay, because we have to absorb these issues from last year. We have to remember that the company has a precedent of distributing a dividend in advance, it was done in 2017, and even at that time we did not distribute all the liquid profit in advance. So, what we have there is, again, an analysis that will follow the political patterns, but within a scenario I would say that it hasn't changed from what we had a few months ago, in a material way, and we will probably follow a precedent from 2017 to make a reasonable distribution in a more specific way. and in a second moment, after the Assembly, a complement. But this is still subject to, again, the conclusion of this analysis and the approval of the Council.

Thank you.

Our next question comes from Luiz Carvalho, UBS.

I'm sorry, I was on mute. Thank you. Hi Pedro, Rosana, how are you? I basically have a few questions too. Pedro, if you could go back to the first question about the dividend. You talked about the first question, you don't have big projects, I would say, big CAPEX increases going forward, at least that's what I understood. Obviously, even with this scenario of the spreads slowing down a little, you would still be able to maintain a very robust cash generation, let's put it that way. So, the idea is that this eventual cash accumulation would be, as a rule, let's put it that way, would be returned via dividend, via buyback, something like that. That's the first question. The second, if you could give some kind of, I don't know, of color, about, obviously, the increase in the import of ethanol from the United States to Braskem. You recently announced, obviously, an agreement with, I mean, you, I say Braskem and Beza, with Pemex, to, in fact, increase this supply via import. So, if you could give a little more Maybe some details here would be nice. And if you allow me, one last thing, which is, perhaps, even out of conscience, I don't know how much you'll be able to add, but some news or some kind of additional demand from the controller for the company's management that may indicate some kind of movement from the point of view of liquidity or exactly of company exit. Thank you.

Good morning, Luiz. Thank you for your questions. This accumulation of cash, its natural path, is to pay dividends. I think that's what we've said. There's a point that we have on the radar, which is that Braskem, because of COVID, in 2020, made a smaller investment. We postponed the maintenance stop for this year. and this year it was postponed to next year. So you have a backlog of maintenance investment, but again, it is not so material to be done. I think the only difference of a normal investment rate, I think the investment portfolio that we will announce for next year may be a little more embedded in this part of the investment in maintenance, plant modernization, to do the catch-up of what was not done last year and a part of what was postponed this year as well. But again, I would not say that it would be material for our discussion here about the allocation of capital. So, this path is natural. Regarding the import of ethane from the United States to Mexico, in fact, the import has gone up a lot. At the end of the second and third quarter, we made an expansion of the capacity to import ethane to Mexico. Today it is around 26,000 barrels per day. And the expectation that we have over the next six months is to make a new expansion of this capacity to 35,000 barrels per day. As Brasquinideza consumes 66,000 barrels per day, we are saying that more or less half the need for feedstock from Brasquembeza would come from Fast Track and the other half would come from Pemex. We have already operated some days in October, but the average of the month was in October at about 75%. If we compare with the third quarter, this number was 68%. So, from 68% in the third quarter to 75% in October, and a perspective of, over the next six months, adding up the volume of the contract, of the change that was made with Pemex, their new commitment, plus this new capacity, expanding the capacity of Fast Track, we think it could reach close to 100% of the use rate in a recurring and stable way from the second semester of next year. Obviously, these projects have to be completed, but we have an important track record of expansion and to show that this expansion is viable, possible and safe. We have done all this with confidence, which is also fundamental for us. So, I would say that we have been successful in this strategy. And the final import project takes another three years to put up. We hope to have a final investment decision soon, I would say a few weeks of work to be able to finalize all this design, but the expectation is to have a decision soon of investment also in the final terminal, but this final term would take another three years to be ready. And the advantage of it, first, you have a cost advantage, it reduces the cost. The second advantage is a risk reduction advantage too, because obviously you transport truck raw material, although we do this in some places, you put a pipe there, it is always safer. So this is in process. but the import has been having very interesting results. On the management issue, we have not received any request or guidance to proceed with any action by the company. So, for now, we are in a waiting mode. The company knows, through newspaper news and even the reports that were made by both NovoNor and Petrobras, that there is an interest for them to assess the sale of their shares, that there are several ways that this can be done, whether in an M&A transaction or in a stock sale. We... As far as possible and what is reasonable, which does not lead the company to incur disproportionate costs, we have been preparing, understanding how it would be a process, how it can be both in an M&A process and in an offer process. What is within the scope of the company and that is possible to be done, we have sought to anticipate but also in a reasonable way, without doing anything extensive. And waiting for their decision on which path to follow, because we still don't have that definition.

And if I could just go back to the second question, when do you intend to disclose the five-year strategic plan and if in this plan we will have more details of this definitive import project, capex tools, we will have this complete panorama?

Normally what we disclose is the number of capex for the year, but this is usually done at the beginning of the year, so it would be there, I don't know, within the capital market, I'll say, maybe in March of next year, something like that. But again, the parameters are more or less those known. In 2020, we invested maybe 200 million dollars less than expected in maintenance. We always say, our maintenance number is between 500 and 600 million dollars per year. These 200 million dollars were not recovered now in 2021, Therefore, we can expect for 2022. As I said, strategic growth investment should not be very material, maybe it is in line with what we have in the last two years. So you can already get 500, 600, plus a catch-up of about 200, plus some strategic investment, the number for next year would be something of this magnitude. It falls a little forward because this catch-up will already have been done. Então, essa é um pouco a visão aí. A gente vai ter o nosso evento aí, o Brasking Day, em conjunto com a PMEC, no dia 10 de dezembro. Então, lá a gente deve falar um pouco mais da estratégia de negócio, um pouco mais de informação, até convido a todos a participar. Mas ali a gente vai ter um pouco mais de informação sobre isso, Luiz.

Tá certo, superobrigado.

Our next question comes from Gabriel Barra, Citibank.

Good afternoon, Rosana. Thank you for your participation. I have a few questions. I'll start with the subject of Novo Nó. One of the things that caught my attention yesterday was the relevant issue regarding the creation of a conformity committee, an auditorium. As far as I understand, I don't know if I'm wrong here, to see migration to the new market, this is an obligation that you have to fulfill. And looking at this point, I think it's a point of reference that I had asked before, how would this process of migration to the new market be? In the case of having this offer, occurring this offer to the market, and that was ventilated in the media, would it be a possibility of migration, also in this potential migration to the new market? In addition to this committee, this Council of Auditory and Compliance, what else would have to be done? And what is the timeline of this? How long would it take? This is my first point. Second point, I want to understand a little more about Mexico. Really, many of the things that were to be decided, I think, were already decided. Regarding the e-mail contact, I think part of it was already Looking forward, I would like to understand a little more about the operational part. From what we see, a large part of the Tano will come from imports. And I would like to understand how the margin is, considering a larger capacity use than you have today, compared to last year. And you pointed out a lot that it could go up to 100% capacity use today. with a slightly higher cost of raw material. How is this equation at the end of the day? These are my three points. Thank you.

Gabriel, thank you. I think you asked two excellent questions, because it also allows me to elaborate a little more on, first, this change that was made in Braskem's governance, which I think is quite relevant. And secondly, a little more about the future of Mexico. About the formation or alteration of... Braskem, in 2016, created the Compliance Committee, which is a committee of conformity of the Council, which is composed... It is a statutory committee, composed by three independent members until then. And now, we had been studying for some time to adopt an audit committee. Braskem, for the purposes of American legislation, the audit committee until then was the tax council. And for the purposes of the CVM rule, you don't have an obligation at level 1, which is where we are, to have an audit committee. But, as you said, the best governance practices, even looking at the new market, pass through having an audit committee. So we converted the conformity committee into an audit conformity committee, and then this committee follows the parameters of both the American legislation, so it serves as an audit committee for the purposes of the SEC, and also an audit committee for the purposes of Brazilian legislation, and then it follows all the parameters of Novo Mercado, In fact, from now on, it has two more members, who are external members to the Board of Directors, two independent members, external specialists who join the Compliance Committee. So, it's a very relevant change in the governance that we did. It brings to the Board of Directors a perspective and, I would say, the strengthening of this governance on the disclosure and financial demonstrations of the company. It already existed, obviously, supervision, but I think that now, in a formal way, it gains more weight. So that was a fundamental change. Internally, we are very happy, very satisfied that this has been approved at the shareholders' assembly a few months ago. Finally, we did the whole process of selection of external members with the support of a headhunter. And finally, we are very satisfied that it is now possible to install the audit committee. Another change that we also made at the same time, but that is a change that, as it does not move in statute, does not move in an assembly rule, we gave a little less emphasis, but I would like to highlight here, is that our strategy committee of the council, which was the strategy and communication committee, now it becomes the strategy and communication committee ESG. So he already had an oversight, this committee, on the actions related to all the ESG issues of the company, but we had done a gap assessment and it was important to have this formalization of the ESG committee in the council in a formal way, So, we address a GAP assessment. This is part of the external auditing evaluation, of ESG rating agencies. So, we hope, with these two changes, to improve our assessment from the governance point of view by these third parties that do this independent evaluation. And all of this is within our macro objective number two, macro objective of economic and financial results, which also includes the improvement of Braskem governance. So, in relation to this movement of the audit committee, I think it is part of a larger scope of Braskem governance improvement that we have been undertaking for several years. It is a really very relevant, very important step. e que a gente espera que dê frutos aí no curto prazo. Com relação à migração para o novo mercado, a gente no passado estudou isso, alguns anos atrás, eu sei que houve uma ou outra mudança de regulamentação, então talvez eu esteja um pouco desatualizado, but we know that it is a process that takes something like two to three months. You have to submit protocols to CVM, you have to make revisions, go and come with CVM. At this moment, we are not actively studying a migration to the new market, but within all the news of the newspaper, obviously, we have updated our understanding, we are seeking to understand what will be necessary. but the prospect is more or less this, of two to three months. Before I change the subject, I think there is a point here that is also very relevant, Gabriel, in the way you ask the question, you join the issue of the shareholder movement with this movement, this decision of the company. I would just like to emphasize that one thing has nothing to do with the other. As I said, Braskem has been evaluating the adoption of the audit committee, and this movement is a movement of the company, which was obviously referred to and approved by the shareholders in the Assembly in July, but it was a movement of the company of a better governance. With regard to Mexico, in fact, I think that Mexico, we completely change It's a transformation of the way of operation. So, I think your question about how the operation goes forward is, in fact, very relevant, because we not only have the addition of the contract with Pemex, the commitment to have an import terminal to import raw material and, with that, have an alternative supply, and also a... reformulation of Braskem Ideias' capital structure, which generates a series of benefits. I think you may know that operating with Project Finance is always very complex. You have a series of reserve accounts, guarantee accounts, cash usage cascades, a fiduciary agent doing all the custody of the company's resources, low flexibility for the company's financial management, so the refinancing of the project finance debt is also a fundamental framework that greatly simplifies the internal management of Braskem Intesa, changes the debt profile over the medium term, which was around 4 years to 9 years, which is much more in line with the petrochemical cycle, so from the point of view the financial health, the financial resilience of Braskem Indesa, it changes its level, it transforms the company into a much more connected company, in line with what is expected of a petrochemical company. It changes the cash flow, we now start to see the possibility of Braskem Indesa paying dividends to Braskem, which is a cash flow that we Nunca contou no passado, sempre contou com uma perspectiva de dividendos mais no longo prazo para a Brasquendesa. E agora a gente pode ter sim com o fato de que não temos amortizações no curto prazo na Brasquendesa. Abre-se um espaço para isso. Não estou dizendo que vai ser feito, mas a possibilidade antes de não existir agora passa a existir. So, in fact, it is a change, a transformation, it is practically a new company that we have in Mexico today with this new capital structure. And then, going to your question, which is how the operation goes forward, the import freight is more or less, total import costs, about 170 dollars per ton. So this fits perfectly within the spreads that exist between the polyethylene and the ethane. Remembering that as the fixed cost and the CAPEX is already all paid for the operation that existed, each new percentage of production, each ton of additional production, it only has to pay the variable cost. It pays this freight, which the ton produced with Mexican methane does not pay, But on the other hand, the fixed cost is already all amortized, the CAPEX is all amortized. So this is cash flow in the vein, which, by increasing the operating rate, the Brasquendesa extracts. And with that, the Brasquendesa, which is already one of the most profitable assets we have, will be even more profitable in the future. This number of 170 dollars per ton, the number we have on this horizon of three years until the entrance of the terminal, Then, as I said before, with the entry of the terminal, this number tends to decrease. We are tuning the numbers of the business case to see how much it decreases, but the trend is reduced. So, I think that Braskem's idea, just to address another point that you mentioned, it not only has the potential to reach 100% use rate, but in the past we saw that the plants have the capacity to run above. So the import terminal is being designed for 125% of the capacity. If necessary, we could make an investment in the plant to increase the capacity of the cracker production, because the polyethylene plants have already shown a production capacity far above 100%. So we would have a very high return investment to make in Mexico with the entry into operation at the terminal as well. Another point to keep on the radar.

Thank you very much for the answer. I'm going to read a question that came here on the webcast. I'm going to translate, actually, it's a question that came from Declan. Thank you, Declan, for the question. So, he asks us here about FIT, in relation to the last conversations with FIT, with Mures, in the context of the return of the degree of investment. And he asks a question in the sequence, if this short-term expectation, in the context of commodities, and the expectation of future spreads, if this changes anything in our confidence and expectation of this return on investment. Thank you, Declan. So, talking here about discussions with the agencies, first, I wanted to reinforce some points here. Remembering that we took a downgrade of the agencies there in the second tri of 2020, it was in July of last year. From then on, we did a very big exercise. If we go back to the company's gross debt, at the time it was 8.7 billion dollars. We are closing a gross debt in the third TRI of 6.3 billion dollars. So, just from the point of view of gross debt, we reduced almost 2.5 billion dollars. Liquid debt too. In the second TRI of 2020, we closed with a liquid debt of 6.3 billion. We are closing this TRI with a liquid debt of 4 billion dollars. There was also an exercise by the company of a reduction of liquid debt at a level of 2.3 billion dollars and leverage as a consequence, reducing in an important way, reaching a lower level since the formation of Company 2. So I'm bringing these variations here, because at the end of the day, the numbers speak for themselves. And then when we look a little forward, of course we're in a moment of super cycles, very strong spreads, but the expectation... Ela é positiva e, de novo, a companhia fez um exercício de redução justamente para se preparar para qualquer virada do ciclo. Então, a gente vem conversando com as duas agências de forma recorrente, tanto com a FIT quanto a Mudes. A gente, claro, que respeita todo o trabalho que as agências fazem, mas a gente, sim, está confiante. by the return of the company's investment rate. And then, finally, just to highlight, if we look here from the leverage point of view and make a comparison with the average of the main players in the industry in the United States, by making this comparison, the company is also with a very positive credit profile. It has a leverage even lower than this average of American global petrochemical companies. So, I think it's just another argument que nos leva a ter essa confiança que vamos sim recuperar o grau de investimento nesse curto prazo. A SEMP, em setembro, como você deve ter acompanhado, já fez essa mudança. Estamos conversando com as agências e temos sim uma expectativa, claro, respeitando toda a análise que as agências fazem de forma independente, que vamos sim recuperar esse grau de investimento.

And our next question comes from Christian Aldi, Santander.

Thank you. Hi, Pedro and Rosana. I had three questions. First, very quickly, you already had such a strong deleveraging And I just wanted to understand to what extent, what level of negativity do you now think is healthy? Obviously, you are already at a very low level, but what is the level that you want, in the medium term, to stay more or less in this number, please? Well, these two other questions have more to do with the operational side. If you could detail a little more, I know that Rosana has already gone through a little bit of this in her initial presentation, but if you could talk first sobre o outlook de demanda por região, não só para o quarto trimestre, mas para o ano que vem, por favor. E a última pergunta é se puder deixar bem claro aí que 2021 foi um ano recorde de spreads, que os spreads vão abaixar em 2022, mas ainda vão estar em níveis historicamente recordes. Então, se pudesse só dar um pouco mais de grande realidade de Thank you very much. Christian, how are you? Thank you for the questions.

Regarding the debt level, today, in fact, we have a very low leverage level. I think there are two evaluations that we make in relation to this. One of them is the evaluation of the number of leverage. We have as an internal reference an average cycle of something around 2, twice the liquid debt per EBITDA, being able to reach, at the moment of low cycle, 2.63, as has already happened in the past. So we know that in the low cycle the leverage will rise a little. And in the average cycle, a leverage of around 2 is more or less what we have as a reference. There may be variations, but it is a reference that we have. That is, today it is very low, we know that we have to balance the level of the company's leverage. And then another number that we also have as a reference is this historical number of liquid debt that Braskem has. There is even a slide in the presentation, slide 16, that shows The historical liquid debt, since 2020, is not a long history, but if we go back to a longer history, the liquid debt of Braskem is around 5 billion dollars, a little more, a little less, in a very stable way. So we think that this number, now there are new operations, this number could even be a little bigger, but if we look at the level of 5 billion dollars of liquid debt, we ended the quarter with 4 billion. So, I think we would still have a space for an increase in liquid debt. And then, again, we return to the discussion of capital allocation. There's a billion dollars to adjust, at least a billion dollars to adjust. We think it's something that connects well with that discussion of capital allocation. Regarding demand, We have a vision of GDP. We use several market economists, analysts, etc. We don't have our own internal GDP projection, but what we see is the market talking about a GDP of around 1.2% next year. So, the new demand elasticity in Brazil is more or less once and a half GDP. There will be demand increases around 1.8%, 2% per year. So, that's more or less what we see for demand in Brazil. The global demand, we think, continues in a range of 3% to 4% growth in the world. So, what affects us the most, even the global demand, is not so much that of Brazil. Brazil simply takes a reallocation of export volumes to the domestic market. But the global, yes, affects spreads. So, a range of 3% to 4% growth No mundo, a nossa visão para Estados Unidos, o nosso mercado de PP nos Estados Unidos, cerca de 3%. Então, é mais ou menos isso que a gente está vendo. Tem ofertas entrando, então, isso leva a essa queda de spreads em relação a esse ano, mas ainda para um patamar muito bom no ano que vem. Tem um outro slide na apresentação que tem alguns números, slides 23, 24 e 25, mostra a perspectiva para 2022. So there you can see that the perspective is that the spread falls, but it still falls in the main chemicals with a good level, above the average of the 16 to 20 cycle, looking at 2022. When we look at the PE spread, all PE spreads are above the average of 16 to 20 as well, for 2022. PVC is the same thing, PP propene, only the Asian PP would be below this average of 16 to 20. All the others, both in Europe and in the United States, would be above. The Asian spread is what applies to Brazil, but today most of our PP production capacity is outside of Brazil. So, I would say that in general, all very favorable spreads, The global logistical disruption has brought an additional benefit for those who produce outside Asia, so this also has to be followed. I've already heard consultants say that it still takes 18 months to solve this issue. So our perspective for next year is still a perspective of, I would say, some margin above the normal, which would be the normal of the industry, in function of the logistics issues of global supply chain. So, there are people saying that it will resolve in the middle of next year, there are people saying that it will take 18 months, we are considering something for next year, in function of a continuity of the logistics disruption, but for 2023, in our budget premise, we are not putting this factor, that's why 2023 also falls more, the expectation of results, perhaps for a more average level of cycle. Looking at 2022-2023, next year is still a good level, perhaps among the three best results of Braskem, and 2023, I would say a drop, perhaps with a more average cycle level, something like that, but still with a lot of volatility, a lot of uncertainty within the scenario, given these supply chain issues that need to be resolved. For 2025, just extending a little further, we do not identify new capacity in construction at this moment or investment decisions that lead to the entry of production of new plants in 2024-2025, which means that probably in 2024-2025 the occupancy rates will increase and then we face já um novo ciclo de alta nesses dois anos aí pra frente.

Sempre claro, Pedro. E última, só um follow-up rapidinho com relação ao Brasil. Vocês comentam muito desse tópico de normalização da demanda. Então, como é que você está vendo isso para 2020? Quando vocês falam normalização da demanda, o que isso significa exatamente, por favor?

When we talk about demand normalization, we had a demand, I would say, above what would be expected, especially at the end of last year and the turn of this year. So, when we see the demand volume, especially in the Brazilian market, in the fourth quarter of last year, the first and second quarter of this year, until, I would say, April, May,

but the demand in the Brazilian market resumed what I'd call normal levels. It continues to grow, but at a lower pace, more fitting to what the market is used to. But if we have a demand disruption in Brazil, driven by some macroeconomic effect, we will have a foreign exchange devaluation, which could be beneficial for the company, whereas CAM is a company that improves significantly when there is a foreign exchange deval. So we have a natural hedge vis-a-vis the political slash economic conditions or situation in Brazil, okay? Thank you, Pedro. Our next question comes from Gabriel Barra, Citibank. I have another question. As for the green PE, I'd like to understand the size of that market. remember when you released the relevant or material fact some time ago, and you talked about 200,000 tons through 2025, that target doesn't seem to be so aggressive. So I'd like to understand the size of that market, both for ethane and polypropylene, and what would be the return for that investment in SCG And if you could perhaps invest in the plants and participate more actively in the production. That's what I wanted to know, thank you. Okay, Gabriel. I think those two announcements we made, material facts we released, they are part of a biopolymers strategy that we have been developing. So they didn't happen at the same time by chance. On the one hand, we are assessing several growth opportunities under renewables, especially biopolymers. What we call the green P, that joint venture with SCG, or for now it's only an MOU, falls under that scope of speeding up the capture of that market by having new production volumes in place. Of course, the global market for polyethylene is 100 million tons a year. Our forecast internally, which is more conservative, is of a market of around 1.3 million tons in 2030. If we had green polyethylene, a million tons today, we would sell the whole amount today. I think the market is there today for a million tons. The issue is how can we accelerate the implementation of those new plants? Yeah, for this business, we are able to have some kind of hedging or hedge for raw material. The cost of ethanol we can pass on in our sales contract. So any potential oscillation in commodity prices, we can recover commercially. We do have clients who are willing to enter into long-term contracts for that product. So when we look, at the clients alone, we are already getting close to that 1.3 million for 2030. So the market is much larger than that. So we are now trying to develop or to expand what we already have in Rio Grande do Sul. And we see SCG as a partner for the second plant. and partners for a fourth or fifth plant. So we are assessing all those avenues of growth, be it through partnerships or be it through new plants, which we will own, brass cams plants. So that's part of the strategy to seize market opportunities. And that has accelerated throughout the pandemic because there was a higher for renewable projects or products. For that to happen, you need to have the deployment of that technology across different areas of the world. So for Braskem, it would be interesting to have a partner that would have that competence to license new technologies, a partner that could provide us with support as we expand those projects globally. and simultaneously. So there is a rationale around royalties underlying the material fact, but the main value of the partnership is not financial per se. Of course, there is financial gain, but it's much more important is the fact that the project will be an enabler of our capacity to quickly deploy that strategy in a market with high demand and very attractive returns. So Lumos provides us with that possibility to deliver several projects. Another benefit that's not as tangible is that once Lumos started licensing technology for third parties, BrassCam, as a partner of Lumos, will now be able to partner with those new projects. So it also becomes an arm to explore new growth partnerships. So there are several possibilities at the table being brought by Lumus. And we, on our end, we have 10 years of experience and the market will demand new developments across the world. So it's a complementary complementary move and that's the start of something much larger going forward. Thank you. This concludes the Q&A session. I'd like to turn the floor back over to the company for their final remarks. Please, you may carry on. I'd like to thank you all for participating in our earnings call for Q3. And just to close, a couple of final observations to reinforce some of the points that myself and Rosanna presented. I'll start by the results. Yet another quarter of very strong results. I was talking with Rosanna earlier today. We've had years which were similar to this one single quarter. So exceptional results for one single quarter. We continue to generate cash at historical levels. If we look at the return on cash flow on the share price, it's sitting above 20% above any other company in the industry. So our performance was quite exceptional. We have also maintained our commitment to the company's financial health. Our leverage level also at a low record, 0.8 times, 0.83 times net debt over EBITDA. Our target is to recover investment as it was mentioned, we have already done it with one agency, but we are now trying to get the same grade with other agencies and we're working with them to also be able to recover that. And we are confident that we'll be able to make it with the other rating agencies. Also important, our operations in Mexico, a final solution to supply ethane, which was one of the main objectives for 2021. And we are once again reinforcing the company's delivery capacity. We had a clear objectives for this year. An important progress in Alagoas also. That's also ongoing. The other objective, which was important, was Mexico. So this is done and over with as we have signed the new contract amendment with Pemex, a 15-year contract for the supply of natural gas, the replacement of the debt with the project finance, the issuance of debt bonds, which are sustainability linked, the largest sustainability linked bond issuance in Latin America, $1.2 billion done by Braskang Edesa's team for a company which is not investment grade. So based on their rating that we have, it is an even larger accomplishment. And all of that in line with our commitments to reduce our carbon footprint announced earlier in the year. Also ESG, I'd like to remind you and reinforce the implementation of our audit and compliance committee, the expansion of our strategy and communication committee at the board level, also to include an ESG committee. And we remain very confident in terms of cash generation for the coming quarters. The outlook for international petrochemical industry is very positive. healthy levels of results, of spreads. So we remain confident and committed to increase competitiveness, productivity, also working always with safety in mind, cash generation, and creating value to all shareholders. So I I'd like to close by thanking you all, thanking my team for the results we have achieved, and a big thank you to Brascam's shareholders for their trust in the company. We hope to live up to their trust. And I'd like to remind you we're getting close to Black Friday, so Brascam's shares are going up. through a good moment or positive moment. So we have another opportunity coming up. Opportunity that is emerging right now. So once again, thank you. I'd like to invite you to join us at APIMAC on December 10th. But as CAM's audio conference is now over, we'd like to thank you all for participating and have a nice day, everyone. And thank you for using Chorus Call.