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.

That's very clear. Thank you, Rosana. Thank you, Pedro.

Our next question comes from Gabriel Barra with Citi. You may proceed, sir.

Hi, thanks. Thanks for taking my question. I'd like to ask for two follow-ups with regard to the first point and also based on what Rosana mentioned. I'd like to understand how quickly we can forecast to see the return of spreads. For the past year, we've been expecting the return to normal. We had a very difficult year last year, and the start of this year seems to be improving. When we look at companies abroad, they're all returning, performing much better than what we saw last year. So my question is how quickly this could happen for us and what are some potential triggers we should pay attention to in the short term to try to see this return coming back and improving the company's results. Two quick follow-ups. One, could you please give us an update about the PI and what the potential impacts are for the company and how the timeline is for the negotiation for the CPI inquest process? And lastly, a quick question, could you please Talk about Triunfo and Rio Grande do Sul and the whole catastrophe that's happening in Rio Grande do Sul and how that has impacted the company in that region where you have operations there in Rio Grande do Sul. Thank you.

Thank you, Gabriel. I'm going to answer your question related to spreads and then I'll turn to Pedro for the other answers. Your question is very good, and this is a question that has been asked recurrently, this return of the cycle, considering that the spreads had important improvements. As we have announced, we saw 20% spreads in a better situation for polyethylene, or maybe one product or the other. We don't see a very important recovery. I'm going to talk about supply and demand at the global level, And this is associated with the rationalization that I mentioned. First, talking about the global supply and demand, we consider a growing demand. The world continues growing at a slower pace, maybe, from what we saw in the past 18 months. But we see a growing demand. So we see that we... The PE and PP will grow by 3.5% a year. And then we look at the offer, which is more predictable, considering that those complexes have their own time for construction. When we look at the supply, we see less supply coming in. When we look at polyethylene, when compared to last year, we see that in 2023, we saw some... a higher capacity, which was very competitive on ethane base. But when we look at this year, we see Asia coming in with more capacity and with a higher cost of production. So we see a better balance when we look at polyethylene. And as to polypropylene, we see that there is a household sufficiency estimates by China, but polypropylene is more generalized. since I'm talking about the impact on sales volume for the company. In terms of supply and demand, we see a very positive trend and a trend of balance. And then I'll talk about rationalization. If we look only at supply and demand, we see that spreads are improving gradually, as Pedro said, quarter by quarter. And for the future, we see a direction of normalization of spreads, which is very positive. And then we talk about rationalization. We see external consulting firms talking more about this and quantifying the spreads. But today we believe that we should see a rationalization that would be more accelerated, considering the assets of Breskane and their qualities, the cash cost quality and the position at the global level and the results we have been posting. You said that you saw the recovery of petrochemicals. That is right. The EBITDA of the company has started recovering as well. But both Braskem and the global petrochemical industries show EBITDAs which are lower than the cycle average in the United States or in Europe, wherever. But we still see the spreads with more impact. in the short, medium, and long terms.

All right, Gabriel. And moving on with the other topics you asked, there was one about the CPI inquest and the timeline and impact. Breskem has been collaborating with the CPI. We've been providing all information that is requested of us. And we remain available to the authorities, to the senators, to answer with transparency about all our activities in Mateo. We do not control the CPI's timing. We are not aware of the content of the report they are going to produce. Our forecast is based on what was published by the voting process on the 22nd. But that is not a process where we have any control. We cannot define what will happen. This is public information. It was published by the Senate. And the expectation is that on May 22nd, they're going to vote on the report. So typically, the report is going to be published a few days earlier for it to be read and then voted on on May 22nd. So we should see some new development over there. coming two to three weeks. But again, this is not a schedule that we have any control over or really any capacity to make any statements with any kind of certainty. With regard to Rio Grande do Sul, I'd like to emphasize a few points that are critical for us. Firstly, the safety of our operations. Over the weekend, we found that as a result of some logistics conditions, the continued operation would become inviolable. So, actually, it was not just logistics, also the supply of water and the treatment of wastewater at the site. Broadly speaking, the conditions for the operation were all pointing to halting the operation. We performed a safe halt, which takes one to two days. So we did that over the weekend. So that was the first major focus. The second focus that we have now that's already been happening for a couple of days is supporting our employees and staff who were impacted by the tragedy and also the third-party workers as well as all residents in the vicinity of our operations. So we've been working by donating hygiene kits, mattresses to all of these people and communities. We've also been trying and we created an internal canner here at BreastCamp. We have a very strong tradition of volunteer work and our volunteers really want to support in whatever they can the region in Ribera. So we have an internal donation program where we donate funds to support people there and a number of other actions too. We can go into further detail if you're interested, but I would say that the major focus at the current time is to bring stability to the lives of everyone there, to bring them safety, to bring them to allow them to at least protect their lives first and foremost. And we want to make their safety very clear and support their safety. Next, the next step will be cleaning. We're already working in that front with our partners and clients. To give you an example, we have a partner that manufactures plastic buckets. So we are donating resins for them to produce plastic buckets to be used in the cleaning efforts. So firstly, physical safety, second, cleaning, third, reconstruction. And then in the future, we'll see what is needed and how Brascam can support efforts in those fronts. But Brascam has been supporting everyone, as we always do in these types of situations, as we always support the population in Rio Grande do Sul, especially those in the cities that are located in the vicinity of our operations. I could go on. There are a number of other initiatives we've been working on to support the population. But let me go back to the crux of your question, which is the impact on our operations. So when we halt our operations, we have approximately 30% of our population Brazilian production capacity, not the global, but the Brazilian, 30% of that is in Rio Grande do Sul. So, of course, that 30% has been halted. The situation has been developing favorably. I think the first point I can make here is that our assets are 100% protected. Our assets were not directly hit. The industrial plant, our site, they were not hit. So they're in good condition there. The operations for the supply of water, our local water supplier has resumed operation. The site does have access to the power grid, so that's not a concern either. The question that still remains today, and that's a question that needs to resume, is logistics. So in the field of logistics, I would say we have three topics. One is the logistics of people, the access of buses, to bring people to the site. In the halt process, there were shift changes that needed to be done, and so we used some helicopter operations, but that is not sustainable to keep our operations ongoing for a long period of time. So we must have highway and roadway access cleared for access to the site. And that also means the logistics of trucks. So, broadly speaking, the highways and roadways. So, when the level of water drops and the roadway access is minimally resumed, then we can start thinking about operations. And first, we need for the water level to drop. And there's another aspect of the logistics, which is the Santa Clara terminal. Part of our production is exported through Lagoa dos Patos. And Today, the Santa Clara shipping terminal is currently flooded. So again, we need for the flood to subside so that we can see if the terminal is still operational. But today, I would say that all of that falls under logistics. So we need to wait for the water level to drop and see if there have been any material impacts or if it's just a matter of cleaning everything and going back to operation. As everyone knows, it's difficult to foresee when that will happen. If we look at historical data, it could take a few days or even longer. As we know, it's now raining again in the south, but we don't have any way of forecasting when that will improve. So those are the primary impact sources in that field. Oh, there's something else that I think is important, too. We treat Brazil as an integrated platform. So when Rio Grande do Sul stops producing, part of that production is assigned to our other sites. So we do have some optimization, some recovery of our sales and production. And this is slightly improving our operation rate both in São Paulo and in Rio and in Bahia. So it's not a full compensation, but it is a partial compensation of this, let's say, this drop in production in the south. And a reminder that we have a client base in the south. So some of our clients are requesting products and they're asking for us to deliver products. And we are studying the best logistics to do that. and some of our clients are offline too. We don't yet know the specific numbers quantitatively. We don't know what the balance is of demand in Rio Grande do Sul. We haven't produced that data yet. But certainly our countrywide optimization, which we do have implemented, is a point of value that we have been able to successfully mitigate part of the loss of volume thanks to our country-wide integration. Thank you, Pedro. That was very, very clear.

Our next question comes from Rodrigo Reis de Almeida with Santander. You may proceed, sir.

Good morning, everyone. I have a few questions here on my side, mostly trying to understand what we can see in terms of results not spreads but results for brass cam moving forward I think let's start with Brazil and we had this whole effect of importing resin over the past few quarters and now we've got some discussions moving forward imports are back up now for several products so I'd like to understand how we can start thinking. I know that there's nothing really defined in terms of Abikim, but what about the health of Graskem? How can we work with our prices and market share, especially given the lower optimization of the industry? I'd like to understand that. And also, how the rise in share can be materialized for the price balance and market share to the rise in rate also looking at Mexico I'd like to I'd also like to get some idea on the volume we have there combining volume and spread I think a great deal of the spreads that we track and that you also publish on the release they are only going to be captured in the second quarter maybe a little bit further into the future given the level. So I'd like to understand how we can have this effect where we combine stronger effects with high utilization and how we can interpret that given that this effect can be a little difficult to calculate for our budget. And lastly, talking about the United States, I'd like to get your take on what what you think about the raw material market in the U.S. Do you have any competitive advantage in the face of other PP producers? I think those are my main questions, really, to understand Brascam's results in this context, much more so than spreads. All right, Rodrigo, thank you for your questions. I'll begin in the order that you asked, so I'll start with Brazil. In fact, we do see a global dynamic in terms of foreign trade that is strongly impacted by the drop in domestic youth in China. So China has been targeting its sales to export, its production to export. And in our analysis, they are selling under cost at a loss. to some countries. And so some of the vendors would sell to those countries in Asia are now aiming their sales toward Brazil or Latin America as a new market, which are traditionally not traditional markets for those producers. And I think when Avikim analyzes this scenario, they brought that question. That's not happening just to our products. This is happening broadly to many products in the chemical industry. And by studying the scenario, we found that we do have a scenario where it's not exactly an illegal or unfair competition, but it is being caused by market dynamics. So since this product that's coming into Brazil is not necessarily being sold below cost, so anti-dumping does apply in some cases. We do have some cases where it is happening, but it's a technical discussion that is gone into with the government. But the effect that is occurring is an indirect effect. And the way we can deal with that situation ends up, at the end of the day, it's through the import rates. So we do have that discussion, that request made with the federal government, but it's a decision that is up to the federal government. ABICIM is working hard. They're trying to show the government the scope of that impact and the fact that that is bringing a drop in production rates of Brazilian producers. And it's not based solely on the competitivity that we have here in Brazil. It's actually owed largely to actions from producers located in other countries that do not follow market rules located elsewhere. So the question is, what impact does this have on us? Well, we have seen that we have lost some market share as a result. If you see our market share, it did drop. And that also brings down the utilization rate. So part of the positive impact that Brazil might have seen through the increase in imports is also that owed to the increase in local production because you establish a more balanced competition and competitive rate. in the market. So that's one aspect. I can't really give you any forecast about whether or not the government is going to adopt any of these measures, and I also can't really say what impact this might have on volume. We believe the impact would be a growth in sales in the domestic market, but today we can't do that math. It really, really depends on the effective actions that the government will make. We know that they will have, if they do, a positive impact, not just on Braskem, but all over Brazil, given the scope of the impact that has been occurring as a result of this attack that we've been suffering. The Brazilian competition has been suffering this attack. With regard to Mexico, we do have spreads recovering, as you mentioned, in Q2. We have the implementation of the terminal now, starting this year, but more so in early 2025. We do expect to see operation rates improving. Today they're at 85%. This will be closer to 100%, 95% or 98%, or maybe even 100%. So if we have an increase in volume, approximately 130,000, 150,000 tons of additional product that we will have in Mexico with a fixed cost that has already been paid without any capex. In other words, only additional contribution margin. And with a drop in the import costs of raw material in the order of $100 per ton. So in Mexico, our forecast is to reduce import costs and increase the operation rate. So this can bring us more favorable results in Mexico. And I think, on the other hand, we also see Mexico with a very challenging capital scenario. They also have a significant short-term challenge. But with the perspective of that terminal, it should help to change that game, that status, that situation a little bit. And finally... thinking about the United States. I think we've mentioned in past calls already, but we have raw materials in the US and you can consider two major hubs, one in Texas and one in the American Northwest. In the Northwest, we buy propene from many different refineries. And over there, pricing is done at the local level. And since that propene is refinery grade. So it still has a substantial participation of other products, that propene or propylene. So we purchase that material and we bring it from refinery grade to polymer grade. It's a very pure propylene that we need in order to use. And we do that in the Northwest United States. And that makes our propylene purchase price more competitive. And this remains. This market still exists. Now, as for the Texas hub, we have over 15 suppliers of propylene. And over there, our dynamics are different. We don't set prices, but we have many suppliers with many contracts. many pricing methods across these contracts. So within that portfolio, we can strive for optimization. It's important to mention that today, the first quarter saw a number of unscheduled stops in the production sites on the propylene on purpose, the PDHs in the Gulf, in Texas. those sites have resumed operation. So now the propylene price has dropped by approximately 15%. It had gone up by 18% and now dropped by 15%. So it's more or less pretty much at the level that it was at before. And so this also brings us more interesting competitivity in USPP. So that's the summary for each region. Pedro, thank you for your explanations. Could you please go back to Mexico a little bit and give us a medium to long-term outlook as you are now moving into a more interesting operations level with the seaport and the terminal? And what about the spreads? Do you have any opinion with what's happening in Mexico with regard to volume? I know you have markets there, but How can we start thinking about the fact that the growing Mexican market will have an impact? And looking into a 10-year window, perhaps. Do you have any ideas already about that? Well, Rodrigo, we do see nearshoring occurring. For the time being, we don't yet have any very material impact. Of course, we stand to gain because the market will grow more. But right now, thinking about polyethylene, which we have there, we don't yet have a very significantly material impact right now. We sell roughly half of the volume we buy in Mexico. We sell it on the domestic market. So this situation can change a little bit. But I would not say that there's an impact right now. If I look at the longer scenario, longer horizon, as you say, 10 years, then we are going to have a material impact. we start seeing more space on the market. And so we do have that scenario in that long-term. What else we can say about Mexico in the long-term scenario is the perspective for expanding the site. Today, the site is prepared to be expanded. It is extremely low-capacity because the site was built with a project that was already prepared for expansion. right from the design phase so we can improve capacity by 15 to 20 percent with a very low cap and as soon as the terminal starts operation we will have raw material that's going to be the bottleneck raw material so we will have the raw material for expansion so we have the perspective for a high value investment and a an investment with high return with low capex with the shipping logistics already defined I would say that it's a very obvious investment for us to make in the long term. Perfect. Thank you, Pedro.

Again, we'd like to remind you, if you wish to ask a question, click on the raise button. head button or send your question through the Q&A window. Excuse me. We'll start reading the questions that came from the Q&A. You may proceed. I'm going to read a question, and I would like to thank all the questions asked via chat. And I'm going to make some of the questions, and this is from an individual. The person asks us to make comments about the maintenance during the cash consumption. And the person also asks about the future demand.

Well, with regard to plant maintenance, this year, as a result of the low cycle, we engaged in a very in-depth exercise in prioritizing investment. So we do have a drop in capex now for 2024. And this occurs as a result of two factors. The first one, which is relevant, is a program Braskem began many years ago, almost 10 years ago, which is a program to extend the downtime cycle. If we look at petrochemical sites and installations in Brazil, we had a dynamic where we had downtime every six years. And roughly 10 years ago, We started changing the planning for the maintenance and how Brascam handles maintenance downtime. And we were able to extend that up to seven, eight, or in some cases nine years between downtime for the different centers. So if we see what's happening in 2024 is that we do not have any centers being downtime this year. And those can be valued at 60 to even 90 million dollars. So this year, we do not have that capex for a significant downtime in a petrochemical center. This is a factor that led us to reduce capex. Another factor that reduced our capex is that in this prioritization of our investments that I mentioned, we ended up significantly limiting our investment on strategic and growth projects. This year we are devoted to studying engineering projects, for instance, the Thailand project and perhaps some polypropylene projects in the US or green mag. We've also got ongoing engineering projects, but we don't have capex for building a new plant, so that's another reduction process. And again, in this process of being more selective about our investments, we kept those investments that pertain to the safety of our operation, and we also kept investments that pertain to plant reliability. So, your question is whether that's impacting the plant. Well, we maintain those investments. What can potentially happen is the following. We have some investments we make which are investments into plant availability. Now, in a high cycle, you want your plant to be running 100% of the time, all the time. And so you employ additional capex to keep that ongoing. This investment to make assets available is part of our priorities. We don't need plants to be available 100% of the time right now. So we have kept part of the prioritization involved reducing plants because we don't need them at 100% operations all the time. We're not in that market. So part of our CapEx optimization comes from that part. With regard to your other question, which is about how demand can have an impact, I would say that And also the outlook, whether the demand and prices will improve. We've talked a little bit about prices and spreads and the slow recovery. Demand really depends on the Brazilian GDP. For this year, our projection is that demand will grow. Demand for polymers will grow by 8% in the Brazilian market. So it is significant growth. PP is a little bit lower at 5%, approximately. PE at 10%, PVC 8%. So if I were to highlight any of these segments and say which one had greater demand, I would say the public health and sanitation, so tubes, connections, both polyethylene and PVC. So in those fields, we do see growth in demand of these segments. That would be measured at approximately 8%. in Brazil this year. So it's a quite interesting growth.

Excuse me. We end the Q&A session now. I would like to turn the floor over to the company to Mr. Roberto Bishop for his final remarks.

Hello. Good morning, everyone. I'd like to thank everyone for taking part in our earnings call this time. And I'd like to make some final remarks before I once again talk about Rio Grande do Sul, which is very important. As we presented today, we had a quarter with improved results, considering improved spreads in the petrochemical scenario. Also, as Pedro mentioned, also considering efforts already implemented by the company in the search for and implementation of initiatives seeking financial resiliency and preservation. Some of these were already begun in 2023 and whose results are now materializing over the course of 2024. I think it's important to highlight that this will always be our commitment to all of you, our discipline in allocating capital and never forgetting and also continuing to advance in implementations, very selectively, very selective implementation of our growth strategy. So this is something we've been balancing at the current time. I'd also like to take this time to talk about the situation in the South. This was mentioned quite often, but I'd like to mention once again the situation in the Brazilian South, which everyone knows has been suffering heavily due to climate events. Firstly, Due to our operation, as Pedro mentioned, we completed our safe halt. This began on Friday. We made the decision to halt. This occurred over the course of the weekend. So we concluded the halt process safely. It was a scheduled halt of all plants located in the state of Rio Grande do Sulto. that includes the tractor, the second generation plants. This represents roughly 30% of our production capacity for ethene in Brazil. As was mentioned, part of that can be reassigned to other centers that are currently operating at lower capacity and others for specific purposes. characteristics cannot be replaced immediately. From the perspective of assets, we don't have major concerns because they were all halted in a planned manner and they were not significantly impacted directly by the rain. So our forecast for resuming operations more clearly depends on, as Pedro mentioned, the more general infrastructure context and logistics context throughout the state. But we have not yet had the chance to perform a more complete assessment, but we are monitoring the impact there, and we will keep everyone up to date, particularly if there are any relevant developments in that sense. Secondly, and without a doubt, even more importantly, I'd like to share with all of you that we all feel for and care for all the victims of this terrible situation. And we'd like to highlight that everyone is important in making a difference here. And so I would like to highlight our engagement in firstly the safety and also the implementation of initiatives to support them, support not just our employees and friends, but also the residents of all the nearby communities and the Brazilian South as a whole, particularly Rio Grande do Sul. Brescam as a company is engaged in supporting and will remain engaged in supporting not just to face this present emergency, but also the reconstruction process which will follow. To conclude, I would like to thank all of you once again for the trust you invest in us and for taking part in this call. And I hope to see you all in August when we publish our results for the second quarter. Have a great day, everyone.

That concludes Raskin's earnings conference for today. We would like to thank you for your participation and have a nice day.