Braskem SA ADR

Good morning, and thank you for standing by. Welcome to Breskin's Congress Call to discuss the results related to the first quarter of 2024. With us here today, we have Mr. Roberto Bichon, Breskin's CEO, Mr. Pedro Freitas, Breskin's CFO, and Ms. Rosana Volio, Professor of Relations, Strategic Planning, and Corporate Marketing Intelligence Director. We would like to inform you that this event is being recorded. The presentation will be held in Portuguese with simultaneous translation into English. The descriptions will be in the language you listen to and see the presentation using the buttons Interpretation and View Options respectively. After breath and remarks, there will be a question and answer session and at that time further instructions will be given. The audio of this event will be available on the investor relations website after it ends. I would like to remind you that participants will be able to register questions for Braskem, which will be answered after the end of the conference by the IR department. Before proceeding, we would like to clarify that any forward-looking statements may be made during this conference call regarding Braskem's business prospects, projections, operational and financial goals, beliefs and assumptions of the company's management, as well as information currently available to the restaurant. Future considerations are to guarantee a performance as they involve risks, uncertainties, and assumptions, as they refer to future events, and therefore, depending on circumstances that may occur. Investors and analysts should understand that general conditions, industry conditions, and other grading factors may affect and may lead to results that differ materially from those expressed in such future conditions. We will now turn the conference over to Jose Antonio, Investor Relations, Strategic Planning, and Corporate Market Intelligence Director to start the presentation. Jose Antonio, can we begin? Hello, ladies and gentlemen. Thank you for participating in this earnings call. Today, we will present the results to the first quarter of 2024. In slide number three, we can check the agenda, which begins with the company's main highlight for the period presented in slide number four. In the first quarter of 2024, we observed an increase in the majority of the petrochemical spreads in the international market when compared to the fourth quarter of 2023. This increase is explained by the conducive effects, such as the winter storm that affected the Gulf Coast of the United States and the conflict in the Red Sea, impacting the international trade and positively impacting the housing prices. In this scenario of bearish threats, added to the company's effort to ensure the resilience and the financial health of the company, the recurring EBITDA in the first quarter of 2024 was $230 million, 9% higher than compared to the previous quarter. Additionally, in line with the depreciation of the Brazilian ring against the dollar, the company recorded the loss of approximately $123 million, while the operating cash generation increased by 189%, making the registry at $96 million through the period. Also during the period, Breskin maintained its robust liquidity position with $3.8 million in cash, and is positioned now to cover the debt maturities over the next 69 months. Additionally, Breskin's debt profile remains very long, the leverage of 12 years with more than 63 percent of the debt returned after 2030. therefore the company entered the quarter with a leverage of 8.2 times in line with the fourth quarter of 2020 it's important to highlight that these results were reinforced by investment commitment to financial resilience and financial health In the quarter, we observed a positive impact of about $38 million in EBITDA and about $166 million in cash generation. In the next slide, I will comment on the company's main operational and strategic plans. Regarding operation highlights, the Bilobo FDIC frequency rate has increased by 23% when compared to the previous quarter, with a rate of 0.78%. events were the industry average, reflecting the commitment to the safety of these operations. The first quarter, the utilization rates of almost all the companies were higher than in the previous quarter. Emphasis on the green polyethylene segment whose utilization rate increased by 36%. reaching 98% of installed capacity after the normalization of the ethanol supply, which was affected in the previous quarter by weather conditions. In the blue segment, the resumption of operations at the Bahia-Petokounmpo complex after a scheduled maintenance shutdown in the fourth quarter of 2023 and various scenario conditions contributed to the decrease of 8 percentage points In conclusion, throughout the first quarter of 2024, Rustin maintained its effort in implementation of its growth agenda. In the traditional avenue, the construction of its main import terminal reached a progress of 62%. Project conclusion remains expected by the end of 2024 with the start of operations for the first quarter of 2025. Regarding decarbonization, Ruskin and Veolia announced another agreement to work together on the research and implementation of high-impact solutions for decarbonization at the Triunfo Petrochemical Complex in Rio de Janeiro, Brazil. The solutions to be provided by the partnership have the potential for reducing the equivalent of 500,000 tons of CO2 per year. In recycling, we have a demand for the state's self-diversification agenda, with the start of a bio-attributed and circular formula for cleaning up supply in Europe and the United States, made possible through the partnership with the Shell Charity Fund. Lastly, a new partnership with the U.S. Technical Agency was signed to develop an electrification study of the company's checking premises. To expand it, the use of electricity and renewable materials would allow brass can use its carbon footprint in the production of ethylene, propylene, and other chemical products. This initiative is part of Brazil's ambition to combat climate change. Now let's move on to the next slide. Moving on to the next topic, I will present the operating performance of the company segment, starting with the Brazil segment, as one of the segments. The utilization rate of Brazilian petrochemical plants in the first quarter of 2024 was 74%. The rate was twice higher than that of the fourth quarter of 2023, mainly due to the resumption of operations in Bahia after a terrible recession. In the Brazilian markets, the volume of gas in sales was higher than in the previous quarter by 7%. Now we explain why the higher demand of polyethylene and polypropylene leads to the movement of inventory and composition in the chain. On the other hand, the deterioration of sales in the earlier markets produced exports by 8% in the quarter. As a result, the loss of recurring revenue in the first quarter of 2024 was $210 million. an increase of 70% compared to the previous quarter, and accounting for 66% of the company's consolidated evidence in the quarter. In the bottom right, this graph refers to green polyethylene. The utilization rate of green ethylene was 46% much higher compared to the previous quarter, reaching 98%. The normalization of ethanol supply after the impact of the weather conditions in the south of the country in the last quarter was the main factor that contributed to the disease. During the period of green, the ethanol in green sales decreased by 8% mainly due to the lower demand associated with the training of the year. This event has an impact on the segment, given that, historically, Asia represents about 40% of the sales volume of krill for DNA. We'll go to the next slide. In the United States and Europe and Sydney, the utilization rate in the last quarter was 76%, a reduction of 60% at points, while in the years before, This increase is mainly explained by an unscheduled shutdown with events in the United States lasting about a month in January and February, with exemption of operations in February. On the other hand, sales volume remains in line with the previous quarter. In this scenario, the first quarter of the year, recurring average debt was $59 million. In Mexico, the utilization rate for the quarter was 83%, in line with the last quarter of 2013. With regard to sales, the volume was higher by 17%, mainly due to the weak composition of polyethylene inventories in the market and the seasonality observed in the previous quarter, recurring evidence that the period was 37 million dollars. 39% higher than the result of the fourth quarter of 2020, representing 10% of the company's consolidated recurring evidence in dollar terms in the quarter. Next, starting from slide 11, we'll talk about the company's consolidated initial performance. In the first quarter of 2014, Raskin's recurring evidence was $230 million, an increase of 9% compared to the previous quarter. This result was positively impacted by the increase of most spreads in the global petrochemical industry. In the polyethylene market, the spread with respect to NAFTA was higher by 20%, while the charge of polyethylene within the base was higher by 20%. The general factors of the period, such as weather conditions in the Gulf, coasts of the United States, and the logistics of strength in the now and in the red sea influence the increase in the prices of presence and spreads in the national market sales volume also contributed to the increasing evidence with increasing sales in the business segment for the main chemicals by 19 percent and for resin by seven percent Mexico, the 17% increase in the sales also had a positive impact on the consolidated area. In addition, the reduction of 6% compared to the quarter, which was first in the 50% as a result of corporate resilience and corporate health initiatives also contributed positively to the company's recovery habitat. On the next slide. This is when he presented a great integration of 973,000,000 reals in the first quarter of 2014. That is how he presented 3,000,000,000 reals compared to the fourth quarter of 2023 at 183%, which is mainly explained by the lower disbursements with operational and strategic capex by 363,000,000 reals. by the positive variation of the World Cap Code, higher by 181 million rials, and the increase of 91 million rials from the Green Canada. Regarding the green cash generation, wrestling with the lower cash consumption by 22 million rials compared to the first quarter of 2022. due to higher operating cash generation, as mentioned before, and a higher interest payment limited to the spending and repayments of the debt securities that were issued to international markets back in the day. Considering the diversity related to Lagoa's cash consumption, it will be approximately $529 million in the first quarter of the year. Next slide, please. Breskin ended the first quarter of 2014 maintaining a very low debt supply, with an average payment for about 12 years, with 53% of the debts concentrated at the end of 2013. The company's reverse liquidity line is sufficient to cover its obligations for the next six to nine months. At the end of the quarter, corporate leverage was 8.12 times. In line with the order of 2013, And with that, it was approximately $1.3 billion. Regarding to rating agencies, if you watch, fixed rating and S&P rating maintain best cancer rating as level 3+. It's important to note that the company maintains its commitment to maintaining its individual position. cost discipline, and continuing to implement measures to reduce its cost of leverage. In the quarter, we acted continuously on the work of the MSEO, focusing on the fulfillment of the agreements. In this way, I will comment on the main updates of the period, starting with relocation and completion social, urban measures on the next slide. By 2024, the residence relocation program will reach an execution percentage of 99.7%, as for the proposals related to the financial compensation and written relocation support program, more than 99.9% of the estimated proposals have already been made, which is about 19%. and about 95.7% have already been paid with an overweight weight of 99.5. The total provision within this grant so far was 5.8 billion riyals, of which 4.6 billion riyals have already been dispersed and 1.3 billion riyals in balance at the end of the first quarter of 2024. Regarding the progress of measures, mobility projects are in the physical execution phase. Out of the 11, regarding the actions in the vacant areas, the project on the move ranges over the range to 72.7% of execution. On the social and urban action plan, 47 actions have already been carried out by the signatory authorities. Until April, together with the flexible agreements, the financial support program reached about 18.6% of the proposed rate, while 14 of the 23 socio-economic measures provided in the agreement have already been implemented. On this one, 1.7 billion rials have already been provisioned so far, of which about 600 million rials have already been dispersed, and 1.3 billion rials were announced at the end of the first quarter of 2024. Regarding the closure and monitoring of lines, I will present below the current status of the closure plan. The sand filling group has a total of 13 mines, of which 5 are fully filled and 2 are in progress. 6 mines were recently included after the conclusion of the monitoring actions and were in a busy planning. The natural fill group has a total of 6 mines, of which 5 are in full fill operation. Cavity 15 is in the evaluation phase with an indication that no sampling measures will be necessary. A conclusion of the 16 wells directed to the buffering and pressurization routes 7 have been pressurized and monitored while 9 are in the pressurization confirmation stage. And after the pressure check process, any additional measures may be necessary. On this note, 3.9 billion rials have already been petitioned until March 2024, of which 2.5 billion RIAs have already been disbursed, and 1.5 billion RIAs are imbalanced at the end of the quarter. The actions mentioned are estimated to be completed by 2026. Thank you. The total of conditions related to Alagoas event were around 15.5 billion rials, of which about 10 billion rials have been registered and approximately 1.2 billion rials have been registered in other applications to be paid. Additionally, about $500 in performance of the present value adjustment. At the end of the first quarter, the provision to balance was $4.9 billion. It's important to highlight that the actions of the environmental plan, according to conclusions made, are still in progress and are expected to be completed in 2028. Next slide. Next, we will present operational and spreads perspectives for the next quarter, in addition to making some comments on the company's main advances in its resilience and financial health problems, and also the priorities for the year. For the second quarter of 2024, the expectation for the utilization rate in the Brazil side demand in green polyethylene remained in line with the prior quarter, as well as the same volume in accordance with the schedule down of the two-year-old petrochemical complex. In consequence of the defense that we state in the last three days, the impact from this bank is still being evaluated. Regarding strats, the trend according to external consultants is to maintain . In the United States, the expectation is that utilization rate will also in line with the previous order. Just to shut down in the United States, offset by the increase in the transition rate in Europe. In this way, the state's volume also remains stable compared to the previous quarter. Lastly, in relation to the international spreads, the expectation is an increase for the next quarter, which is driven especially by the reduction in the price of raw material. Finally, in Mexico, the trend for the second quarter is for increasing production as the expectation of a stable supply of ethanol As a result, increased product availability is expected for the quarter. The spreads in international markets tend to be in line with those recorded in the previous quarter. $20 million with a cost reduction. Additionally, we captured $109 million through the prioritization of initiatives and $37 million with an optimization of working capital added to the cash generation. Additionally, we captured $20 billion that were used after the tech revolution popularization carried out through the policy agreements, which impacted all the revenues by approximately $80 billion in the quarter. In 2020, for breastfeeding, made a commitment to speech priority this early year, and during the first quarter of 2004, we had the following events. In Maceió, all fronts of action showed progress in the quarter, with about 10 billion euros already disbursed by the end of the quarter, referring to the financial provisions of 15 million euro, In relation to the priority of resilience and financial health, sales and distribution expenses increased by $13 million, and the variation of the working capital per quarter was higher by 181 mid-year yields, ranking higher to the previous quarter. And the optimization and strategy of the capital growth. Moving on to the next slide. In 2024, the U.S. government made a commitment to cease crime in its body, and during the first quarter of 2024, we had the following advances. Eight months ago, all fronts of action showed progress in the quarter, with about 10 billion rials already reduced by the close of the quarter, referring to the financial provision of 15.5 billion rials. Recovering the priority of resilience and financial health, sales and distribution expenses increased by $13 billion, and propagation in working capital was higher by $181 billion compared to the previous quarter. In the S-Net operations strategy optimization, the company showed a quick response from the return of the maintenance shutdown in Bahia and from the impacts on ethanol supply results in the last quarter and increased its utilization rate in the segment by 8 percentage points and increased by 36 percentage points. Investing years to implement initiatives that we need to reduce the problem of separation and in partnership with LUMS technology as a continuation to study the electrification of its packing premises. In the quarter, we also had a business authorization for the use of products developed from the chemical recycling for food product applications. In investments, the company was able to optimize around 36.3% of its sales and profits compared to the previous quarter. As a result of the company's global product polarization strategy, what are we creating is a new level of pollution safety and reliability. In conclusion, we expect to continue the efforts to complete the construction of the main terminal, achieving a peaceful progress of 62% and 2% higher than the stage from December 2020. And we hope the presentation will address these results for the first quarter of 2022. Thank you very much for your attention. We will now begin the Q&A session. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please click the raise hand button or submit your question via the Q&A window. To remove the question from the queue, please click the lower hand button or signal the Q&A window. Our first question comes from Luis Carvalho with UBS. You may proceed, sir.

Hello, everyone. Good afternoon. Thank you for taking my question. I'd like to start by asking Pedro, as you mentioned in your presentation, we see a spread scenario. where perhaps the worst has already been behind us. The levels used to be quite compressed, but now, looking into the future, we're starting to see a scenario with low recovery in the 18-month horizon. And next year, as you mentioned, we expect to see the entrance of the Mexican Fast Track program, This seems like it will in some way contribute to improve the company's outlook. Could you please give us a few words about the dynamics you're seeing in terms of the perspective of result, both in recovering the spreads and in the contribution of the Mexican facility? That would be great, please. My second question, and of course it We must ask. It's inevitable. We need to ask about the shareholder situation. We had Adidoc participating in the process. They have left. Alain Bell also in the past also participated and also gave up. Petrobras made some public comments that it could potentially increase its participation on Brexcam to then later on sell them. Could you please help us to understand what the situation is like in terms of what the management has been doing to contribute to this discussion? And are there any discussions, any due diligence processes underway? There was the quieted company as well. And also along those lines, if there is a question from Petrobras With regard to that NovoNor stake, that 5%, would there be a tag-along in that case? Good morning, everyone. Thank you, Luis, for your questions. It's a pleasure to talk to everyone here. We recently presented our yearly results. It hasn't been very long since last time we met, but there have been some updates. Rosana presented the main ones, but to explore some of these topics that you asked, Luis, specifically with regard to the spreads, what you mentioned is what we see, a slow recovery in the supply and demand scenario. This year, polyethylene is looking to have more demand sorry, more supply than demand. And I think the scenario is going to reverse next year. So what we have seen is slow recovery in our results. April was a month in which spreads improved compared to March. So we have seen a very gradual, very slow recovery, as you mentioned. But nevertheless, the spreads have been improving over this year. And we expect things to accelerate next year. and also with the polypropylene scenario. And based on that, you asked a more focused question about the Mexico terminal, but I'll expand a little bit. Since the past year, we have been implementing a number of actions and initiatives to improve our results. Some came to maturity last year already. But even those that did have an impact last year, they do end up being reflected in the 12 months of 24. Many of them didn't have an impact on the 12 months of the year, and this year we forecast that they will have an impact over the 12 months of the year. So part of the impact that we expect comes from those spreads, but also some come from having the full year of the measures implemented. in implementation that's actually one of the slides in our presentation when we talk about the financial resiliency and rigidity plan this year we expect to see additional a bit above and beyond last year approximately 200 to 250 million dollars as a result solely of these measures and that add to our strong cash generation as a result. With regard specifically to the Mexican terminal, we expect that it will be completed by the end of this year and Q1 2025, so of course we're not going to see an impact on our results for this year, that will come next year, and it will depend heavily on the volume of deliveries that Pemex makes, because logistics is always going to be less expensive when we buy from the local supplier but we will have a drop in the cost of importing from for Bresca Medesa and importing ethane and also an improvement to the operation rate this last quarter we had something close to 85 and this next quarter we expect to be closer to 95 or 98 at least if not 100 now that's With the terminal, we will have improvements to fixed cost and a significant improvement in Mexico. So it's not just about spreads and volume. We also have the result recovery initiatives that we've been implementing. On the sale process efforts, you asked a question that I'll answer first. which is Breskin's contribution to discussion. Well, our contribution is in the due diligence process. If we do not take part in discussions, when we have obligations involved with shareholders, they do notify about critical landmarks and events that are occurring. But what the law sets forth is that if any development persists within a NDA process and there is no leak to the press, then the company is not required to disclose it, not least of which because any such disclosure could have a negative impact on the negotiation. So our shareholders are not required to notify us of everything that's happening. Now, if there is some kind of a leak or some kind of a press release, then they do need to notify us so that we can keep the whole market up to date. But what I can tell you is that we were notified on Sunday about the ad hoc decisions, We received mail from NovoNor and we immediately reproduced it to the market. The ad-hoc decision to not proceed with the process. NovoNor also says that it remains engaged in the sale process. And what I can tell you is that where Brascam is involved is there is an ongoing due diligence. So there's an ongoing process involving the exchange of information. or actually the provision of information, it's not really an exchange. And Braskem is providing information, it's making it visible for potential interested parties. And if any other interested parties arise, we will continue to support shareholders in their demand for this process. Now, with regard to the question of Petrobras, we don't know what their decision is. What we do know what is public information is that they have a due diligence process, which was, I would say, practically, materially included a while ago, but there's always some kind of an update. It's a process we consider to still be open or pending. It's a second open process. And every now and then, sporadically, they ask us for some additional information. But Petrobras makes it very clear that their goal with this process with the process they are evaluating, is with the goal and the sense of making a decision that they will need to make in the future about the rights that they have, both tag-along rights and the preference for purchase, the right of purchase refusal. So with regard to anything else, we don't have any additional information. Now, with regard to your other question, if Petrobras does make a purchase, I must say that our tag-along clause is defined by our articles of incorporation, which do not consider, which exclude acquisition by Petrobras, as it would for Novenor. So, these situations do not encompass the 100% Tagalong. So Petrobras makes a purchase. The SA law in Brazil says that Tagalong only exists for ordinary shareholders of the... Sorry, it's not the SA law. It's level one in B3, the Brazilian B3 exchange. And that will occur only for the ON, the venture holders. So there is no tag-along as defined by the articles. In the case of Petrobras buying, then we do have tag-along from the exchange program, which for us, for our governance, is 80% of the price for ordinary shares. And I'd also like to take the opportunity to say that if Petrobras makes a purchase, this does not encompass... a change of control in the bonds and the capitals market participations where we are. All right. Thank you, Pedro. That was very clear. I think Rosana has something else to add.

Good morning, Luis. Let me turn on my camera just a moment. It's one aspect in relation to the first question about spreads. We're talking about global petrochemicals. And we have been observing this in the past 18 months with the spreads of low cycle when compared to the normal cycles and even lower levels. It's important to understand the cash cost curve fundamentals. So we expect rationalization in the industry as we have seen in the software way last year or maybe in the beginning of this year. And we saw major capacities especially in Europe, by major players. So we expect rationalization, as we had seen in previous moments in the industry or in other moments of crisis, when we see this rationalization of industry. And when we see how consulting firms see this, they have a more conservative way of looking at it with less capacity. But when we look at the basic, the fundamentals about the spreads that we have been seeing we do not see an important level of resonantization that the industry sees when we consider the marginal producers, the ones which have higher cost of production, especially in Asia. So we are likely to see a stronger movement in this direction that would provide support to major spreads than what we see by the consultants in general.