Braskem SA ADR

Good afternoon, everyone, and thank you for waiting. Welcome to Brascam's second quarter of 2025 Results conference call. With us here today, we have Mr. Roberto Ramos, Brascam's CEO, Mr. Felipe Jens, Brascam's CFO, and Ms. Rosana Avoglio, Investor Relations, Strategic Planning, and Corporate Market Intelligence Director. we inform you that this event is being recorded. The presentation will be held in Portuguese with simultaneous translation into English. All participants can choose which language to listen to and see the presentation in, using the show captions and view options buttons, as well as the interpretation button. After Brascam's remarks, first we will announce in English, The event will be held in Portuguese with simultaneous translation into English. All participants can choose which language to listen to and see the presentation in, using the interpretation and view options buttons respectively. After Brascam's remarks, there will be a Q&A session. At that time, further instructions will be given. After Brascam's remarks, there will be a question and answer session. At that time, further instructions will be given. This event's audio will be available on the Investor Relations website after it concludes. We remind you that participants may choose what may submit questions to Brascam's board, which will be answered by the Investor Relations department. Before proceeding, we'd like to clarify that any statements that may be made during this conference call regarding Braskem's business prospects, projections, operational and financial goals constitute beliefs and assumptions of the company's management, as well as information currently available to Braskem. Future considerations are not a guarantee of performance and involve risks, uncertainties and assumptions. as they refer to future events, and therefore depend on circumstances that may or may not occur. Investors and analysts should understand that general conditions, industry conditions, and other operational factors may affect Braskem's future results, and may lead to results that differ materially from those expressed in such future conditions. Now, I'll turn the conference over to Ms. Rosana Avoglio, investor relations, strategic planning, and corporate market intelligence director. Ms. Avoglio, you may begin your presentation.

Good morning, ladies and gentlemen. We appreciate everyone for participating in Braskem's earnings call for the second quarter of 2025. According to the agenda on slide number 3, we will start with the main companies highlights in the period, which can be found from slide number 4. In the second quarter of 2025, The performance of the industry continues to be affected by the continuation of the downturn in the petrochemical industry in addition to the global tariff uncertainties. In this scenario, the utilization rates of petrochemical plants remained stable in relation to the previous quarter, especially in Brazil and the assets in the United States and Europe, both with 74% of utilization, while Mexico, impacted by the general maintenance shutdown showed a drop of 35 percentage points in its utilization rate when compared to the previous quarter. In addition, Breskin recorded an average global accident frequency rate of 1.11 events per million hours worked, well below the global industry average, which reinforces the non-negotiable commitment to the safety of the company's operations. Regarding its results, the company reported a consolidated recurring EBITDA of $74 million, 67% lower when compared to the first quarter of 2025, in face of a challenging conjunctural scenario. In addition, Despite the lower working capital consumption when compared to the previous quarter, the company presented operating cash consumption of $31 million, an increase of $129 million compared to the previous quarter. Regarding its debt profile, the company ended the quarter with an average debt maturity of about 9 years and with more than 68% of the maturity as of 2030. Breskin's cash position at the end of the second quarter was approximately $1.7 billion, sufficient to cover debt maturity in the next 30 months, not considering the international revolving credit line available in the full amount of $1 billion and maturing in December 2026. The company's order liquidity, including this line, ended at approximately $2.8 billion in the quarter. Now let's move on to the next slide. The performance of each segment of the company will be presented below, starting with Brazil, on slide 6. The petrochemical plants in the Brazil segment presented an average utilization rate in line with the first quarter of 2025, with emphasis on the gas-based plant in Rio de Janeiro, which operated at 95%. Regarding sales, the volume of resin sold in the Brazilian market and in the international market were higher compared to the previous quarter, impacted by the anticipation of purchases in the transformation chain due to the lower prices in the international market in the quarter due to tariff uncertainties and the market's expectation of price increases throughout the second half of 2025. As for the international spreads that impacted the segment, although the average rising spreads increased in the quarter due to the 17% increase in the PPE spread, the lower PE spread at 4% had an influence on the result of the business. Recovery EBITDA for the segment was $152 million, 24% lower than the previous quarter, mainly impacted by the stock effect or feedstock acquired in the previous periods, the appreciation of the average real against the average dollar in the period, and the increase in fixed costs and other expenses resulting from the reclassification of expenses from the corporate unit to the business due to changes in the company's organizational structure. Now let's move on to the next slide, please. In the second quarter of 2025, the utilization rate of the green ethylene plant was 71%, 16 percentage points lower than in the previous quarter, impacted by the inventory optimization carried out in the period. On the other hand, sales of green polyethylene were higher due to the increase in demand from new and existing customers, with emphasis on the higher volume sold in Brazil compared to the previous quarter. In this context, the green polyethylene business was 18% higher in revenue in conjunction with the company's ETBE business. The positive quarterly results benefit the company's transformation journey, focusing on its migration to renewables pillar with the objective of strengthening the resilience and longevity of the business. Currently, the presence of its own innovative ecosystem focused on developing renewable solutions and the strategic partnerships established through Sustenilla and Braskem SIA support the advancement of this journey. Now let's move on to the next slide, please. In the United States and Europe segment, the plant utilization rate remained in line with the second quarter of 2025 compared to the previous quarter at 74% of utilization. On the other hand, the volume of PP sales in the segment was higher than in the previous quarter by 7,000 tons. Despite the higher volumes, For use volumes, the segment recurring habitat was negative by $8 million, mainly impacted by the following inventory effects due to the average cost of goods sold, referring to the feedstocks acquired in the previous periods, which partially offset the improvement in spreads in the segment. and the higher SG&A, explained by the reclassification of expenses from the corporate unit to the business due to changes in the company's organizational structure. Now, moving on to the next slide, we'll discuss the segment Mexico. In June, the general maintenance shutdown of Braskem Ideza plant began, which significantly impacted the segment's operation in the period that operated at a utilization rate of 44% in the second quarter of 2025. The volume of polyethylene sales in the period was also lower compared to the first quarter of the year, impacted by the lower availability of product due to the schedule shutdown, and also the lower supply of ethane by PAMEX, impacting the inventory formation process prior to the general maintenance shutdown. In this scenario, the segments recurring EBDA in the period was negative by $9 million also impacted by the lower spread of ethane-based polyethylene in the period at about $95 per ton, by the higher expenses of PE storage and ethane tankage due to the schedule shutdown, which was partially offset by the positive impact on other revenues. Now, next slide. In the second quarter of 2025, the Mexico segment performance was impacted by a combination of significant factors. The reduced domestic ethane supply in recent months below the volume contracted with PAMEX has posed an additional operational challenge, especially in a context of a downturn in the global petrochemical cycle where international spreads are expected to remain challenged in the short and in the medium terms. These factors have exerted additional pressure on Braskem IDEA's results, which operates with a significant debt structure, imposing constraints that require continued attention to cash preservation and financial discipline in this segment. Now, next slide. Moving on to the next chapter, I will discuss the consolidated results of the company, starting with the updates regarding the work fronts in Alagoas. By the end of June 2025, all work fronts in Maceió continued to advance according to plan. the relocation and compensation front continued to show evolution in its indicators and ended the semester with 99.9% of execution of the resident relocation program. The same percentage also applies to the number of proposals submitted for the financial compensation and relocation support program, of which about 99.5% were accepted and 99.4% were paid. In parallel, the execution of the closure and the monitoring of the salt cavities still being implemented. after the provision of all actions, if necessary, that ensure that the 35 cavities reach a maintenance-free state in the long term. We highlight in this quarter the approval by the ANM of the confirmation of the filling of cavity 18. With this, there are already six naturally filled cavities. Regarding the financial provision, the total provision for the Alagoas event was about R17.5 billion, of which about R13.1 billion had already been disbursed, and approximately R439 million had been recorded in other obligations payable. Therefore, the total balance provisioned at the end of the second quarter of 2025 was R4.7 billion, 8% lower than the balance at the end of the first quarter of 2025. Now let's move on to the next slide. In the second quarter of 2025, despite the greater working capital management when compared to the previous quarter, due to the resilience measures implemented, the company presented a cash consumption of R175 million, given the results presented in the quarter. The lower recurring cash consumption, when compared to the previous quarter of approximately 1 billion reals, was mainly influenced by lower semi-annual interest payments on the debt securities issued in the international market by the company, which are concentrated in the first and third quarters of the year. Considering the disbursements from Alagoas, the company presented a cash consumption of 1.5 billion reals. Now, let's move on to the next slide. Braskem ended the second quarter of the year maintaining an extended profile of its corporate debt, with an average maturity of 9 years and 68% of the debts concentrated as of 2030. Considering the company's liquidity level, the available cash of $1.8 billion is sufficient to cover its obligations for the next 30 months without considering the available international credit line in the amount of $1 billion. Finally, the corporate leverage stood at 10.59 times at the end of the second quarter of 2025 due to the lowest EBITDA in the last 12 months. Following our agenda, we will move on to the next slide. Thus, we conclude the overview of the second quarter of 2025, and I will now comment on the company's resilience and transformation program. The outlook for the international petrochemical industry remains challenged in the coming years, where By 2030, China will continue making significant investments in the expansion of ethylene and propylene chains using various feedstocks. This represents a significant increase in stall capacity, with more than 40 new crackers planned, increasing ethylene capacity by about 100 million tons and propylene by around 70 million tons, which reinforcing reinforces the expectation of oversupply and increased idleness in the sector. The average idle rate of ethylene production, without considering a rationalization of the industry, already shows an upward trend, and the data projects a growing gap between supply and demand by the end of the decade, which will put pressure on the margins of the entire industry. In a challenging chemical and petrochemical scenario, it is important to highlight the importance of the chemical industry for Brazil. The national chemical industry is home to the fourth largest chemical industry in the world, responsible for 11% of the industrial GDP and occupying the third position among the largest industrial sectors in the country. The chain generates 2 million direct and indirect jobs and is present in practically all segments of the economy, from fertilizers to pharmaceuticals, from personal hygiene to pesticides. In addition, It's an important competitive advantage. The production of chemical inputs in Brazil is now the cleanest in the world, with carbon emissions up to 51% lower than those of the main international industries. However, despite its relevance and potential, the Brazilian chemical industry faces important structural challenges. Today, the industry operates with the highest level of autonomous industry, reflecting the growing pressure from imports and an uncompetitive cost structure. In the case of the Brazilian petrochemical company, the production based on NAFTA will continue to present a growing gap in competitiveness in relation to ethane challenging the margins for the producers who use naphtha as a feedstock now let's move on to the next slide in this context brass can remains committed to the execution of the initiatives set out in its resilience and transformation program with a focus on overcoming the structural challenges of the global petrochemical industry and the national chemical sector. In this scenario, the company has been implementing initiatives aimed at sustainable value generation with an emphasis on maximizing EBITDA and generating greater cash. Now, moving on to the next slide. Regarding initiatives related to the defense of the Brazilian chemical industry, BRESKIN, together with ABECIM and other companies operating in the sector, reinforces the importance of implementing mechanisms to protect the national industry in order to ensure greater competitive balance. As an example, Bill 892-25 stands out, which establishes the special sustainability program for the chemical industry. Prezic aimed at promoting the sustainability and competitiveness of the sector through fiscal incentives. Breskin reaffirms its support for the approval of the project, recognizing it as an essential measure to strengthen the entire production chain. Additionally, with the proximity of the end of the special regime for the chemical industry, REC, scheduled for the end of 2026, it's urgent to adopt measures to ensure the competitiveness of the Brazilian chemical industry in the face of the structural and conjectural challenges of the sector. For Breskin, the resumption of the tax credit on the purchase of feedstocks to the level of 8.25%. A rate originally approved in the implementation of FREIC in 2013 represents an opportunity for competitive equality, creating value for the entire chain and for the country. Additionally, with the end of RAKE, the proposal would be the institution of a new financial regime between 2025 and 2029 with incentives for purchase of feedstocks and for the expansion of the production capacity. At the same time, the approval of anti-dumping measures is essential to correct market distortions and protect the domestic market, especially in the face of the growing pressure caused by the increase in imports made with unfair pricing practices. Several countries, such as the United States, Europe and China and South Korea, have already implemented robust policies to encourage the chemical industry, with trillions of dollars in subsidies, support for innovation and trade defense mechanisms. Although each adopts specific strategies, they all share the same goal, to strengthen the chemical industry, an essential basis for several other production chains, in addition to generating significant multiplier effects for their economies. Now let's move on to the next slide. Within the transformation pillar, the optimization of NAFTA-based assets is one of the company's objectives, aiming firstly to maximize the utilization rate of the most competitive production lines, such as the one in Rio de Janeiro, which operated at 95% in the last quarter. Another advance was the approval of resources via REC of initiatives that enable the expansion of the capacity of PVC assets in Alagoas. Meanwhile, the companies also evaluated the hibernation of the least competitive production lines globally, which considers the criteria such as plant age, technology used, production cost, scale and operational synergies, aiming at a greater efficiency and profitability. Now let's move on to the next slide. In relation to this front, we will seek to enable the expansion of our gas-based assets with a focus on greater competitiveness and resilience of the business by expanding the use of more competitive feedstock. This includes projects to expand gas-based capacity, the expansion of the flexibility of petrochemical plants in Brazil, and initiatives that ensure the operational stability of our crackers, such as the recent expansion of our own fleet dedicated to transport ethane between the United States, Brazil, and Mexico. As an example of an initiative to expand gas-based assets is Transforma Hill, a project to increase the capacity of the petrochemical complex in Rio de Janeiro by 230,000 tons, with equivalent expansions of P. So far, 233 million rios have been approved. for the contracting of conceptual basic engineering studies. The final investment decision of the project is conditioned to the signing of a long-term retained supply contract and the use of resources within the scope of REIC investments. In addition to promoting a greater competitiveness for the company, the project has the potential to unlock important socio-economic benefits for the region, such as increased revenue and national collection, in addition to the need for around 7,500 jobs during its execution. Now let's move on to the final slide. To conclude, I would like to reinforce our priorities that guide our actions in 2025. We will continue to advance in the transformation of our assets with a focus on competitiveness, efficiency, and sustainability. This journey is essential to ensure the resilience of our business in the face of the challenge of the sector. At the same time, implementing contingency initiatives for the petrochemical cycle with special attention to the financial preservation and cash flow management, ensuring solidity and responsibility in our decisions. We will also continue our work in the competitiveness agenda of the Brazilian chemical industry, seeking measures to promote competitive equality and strengthen the sector as a whole. And finally, we will maintain our commitment to the agreement signed in Maceió, fulfilling each stage with transparency and responsibility. All this without giving up safe actions in our operations. Safety is and will continue to be a non-negotiable value in our strategy, guiding Braskem's every action and decision. Thus, we conclude the presentation of Braskem's results for the second quarter of 2025. Thank you very much for everyone's attention. We will now start the Q&A session. Ladies and gentlemen, We will now start the Q&A session. To ask a question, please click on the Raise Hand button or send your question using the Q&A window. To remove your question, click again on Raise Hand. And our first question comes from Gabriel Barra, Citi. Gabriel, you may proceed.

Hi, everyone.