In a challenging petrochemical scenario, Braskem reports net

|Apr 6|magazine15 min read

SÃO PAULO, April 3, 2020 /PRNewswire/ -- BRASKEM S.A. (B3: BRKM3) (B3: BRKM5) (B3: BRKM6) (NYSE: BAK) (LATIBEX: XBRK) announces today its results for 4Q19 and 2019.

HIGHLIGHTS:

Braskem - Consolidated:

  • In 2019, recurring EBITDA came to US$1,514 million, down 50% from 2018, mainly explained by the narrower spreads in the international market, given the slower growth of the world economy and the new capacities coming online for PE in the United States and for PP and refineries in Asia, with these factors partially offset by the higher sales volume of PP in the United States and PE in Mexico. In Brazilian real, recurring EBITDA came to R$5,936 million, decreasing 46% from 2018.

  • In the year, the Company recorded a net loss of R$2,798 million1, which is explained by the accrual of a provision in the amount of R$3,383 million for implementing the Financial Compensation and Support for Relocation Program in Alagoas, by the actions to close certain salt wells of the Company and by the Program to Support the Recovery of Businesses and Educational Activities, as well as the adverse effect from the depreciation in the Brazilian real depreciation against the U.S. dollar on the Company's net exposure not designated for hedge accounting.

  • In 2019, the Company made investments in its operations (US$470 million) and strategic projects (US$229 million) in the amount of US$700 million, which was US$187 million (21%) lower than the amount estimated at the start of the year and surpassed the reduction target of US$100 million set at the end of 1H19, demonstrating the Company's commitment to financial solidity.

  • Free cash generation in 2019 was R$3,108 million, down 56% from 2018, due to the lower EBITDA and the payment of interest related to the full/partial prepayment of certain bonds (breakfund costs), with these factors partially offset by: (i) the decrease in accounts receivable, due to the lower sales volume and lower sales prices of products; (ii) the lower volume and costs of feedstock and finished goods inventories; (iii) the higher volume of naphtha imports with longer payment terms; (iv) the monetization of R$281 million of the PIS/COFINS balance (exclusion from the ICMS tax base); (v) the receipt of advances from clients related to future sale of chemicals in the Brazilian market and to future exports of PE and PP; and (vi) the lower payment of income tax and social contribution (IR/CSLL) in Brazil and the United States.

  • Financial leverage measured by the ratio of net debt to EBITDA2 in U.S. dollar ended the quarter at 4.71x.

  • The recordable and lost-time injury frequency rate (CAF + SAF), considering both team members and partners per million hours worked, stood at 1.31 in 2019, 58% below the industry average.

Brazil:

  • Demand for resins (PE+PP+PVC) was 5.3 million tons, growing 2% from 2018, driven by the cuts in Brazil's policy interest rate and the improvement in business and consumer confidence, which leveraged primarily the agribusiness and food industries and the start of a recovery in construction industry.

  • The capacity utilization rate of petrochemical complexes stood at 85%, down 6 p.p. from 2018, due to: the lower supply of feedstock at the crackers in Bahia due to the shutdown of the chlor-alkali and dichloroethane (EDC) plants in Alagoas state; (ii) the scheduled shutdown of one of the production lines of the cracker in Bahia in 4Q19; (iii) the logistics problems involving inbound feedstock at the cracker in Rio Grande do Sul; and (iv) the lower utilization rate at the crackers due to lower marginal profitability of exported resins.

  • In 2019, the Company recognized R$2,049 million related to PIS and COFINS tax credits overpaid in prior fiscal years and monetized R$281 million of the balance for said credits through the payment of other lower federal taxes. As a result, the recoverable balance of these credits at year-end was R$2,351 million, of which R$783 million should be monetized by the Company during 2020, as registered in its current assets.

  • EBITDA from Brazil was US$821 million (R$3,205 million), down 57% from 2018, and accounting for 55% of the Company's consolidated EBITDA.

United States and Europe:

  • PP demand in the U.S. market was 3.1% lower than in 2018, reflecting the slowdown in the manufacturing and automotive industries. In the European market, PP consumption grew 0.7% compared to 2018, due to the stronger demand for consumer goods and services, which offset the contraction in the region's automotive industry. In the year, the volume of PP imports in the United States was 622 kton.

  • The capacity utilization rate of the PP plants stood 88%, up 1 p.p. from 2018, mainly due to the better operational performance of the United States plants, which counterbalanced the lower production of the European plants, explained by the logistics constraints on inbound propylene caused by operational problems at suppliers and the low level of rivers in the region. In this scenario, PP sales amounted to 1.9 million tons, in line with the previous year.
     
  • Construction of the new PP plant in the United States reached 89.7% completion at year-end, with total investment to date of US$555 million. In 2019, Braskem America imported 130 kton of PP from Braskem in Brazil to conduct pre-marketing activities for the new plant.

  • The United States and Europe units posted EBITDA of US$316 million (R$1,247 million), down 48% from 2018 and accounting for 21% of the Company's consolidated EBITDA.

Mexico:

  • Mexico's demand for PE was 2.2 million tons, 4.5% lower than 2018, due to the slowdown of the Mexican economy, mainly in the industrial sector.

  • The PE plants operated at a capacity utilization rate of 76%, down 1 p.p. from 2018, reflecting the low supply of ethane.

  • PE sales amounted to 813 kton, up 2% from 2018, due to the higher resale volume of PE produced in Brazil. As part of the commercial strategy for allocating PE to more profitable regions, exports to the United States and Europe grew by 51% and 29% in 2019 compared to 2018, respectively.

  • In January 2020, Braskem Idesa imported the first shipment of ethane to increase the capacity utilization rate of its petrochemical complex. With investment of approximately US$4 million, this solution to complement its feedstock supply enables imports of up to 12,800 barrels of ethane per day, equivalent to 19% of the Company's its needs for PE production.

  • The Mexico unit posted EBITDA of US$361 million (R$1,427 million), down 41% from 2018, and accounting for 24% of the Company's consolidated EBITDA.

The full earnings release is available on the Company's IR website: http://www.braskem-ri.com.br/home-en

Braskem will host conference calls to discuss its Results WEDNESDAY, April 8 at 2:00 p.m. US ET.

Additional information may be obtained from the Investor Relations Department at +55 11 3576-9531 or [email protected]

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SOURCE Braskem S.A.