Braskem. November, 2015

Transcription

1 Braskem November, 2015

2 2 Disclaimer on forward-looking statements This presentation includes forward-looking statements. These forward-looking statements are not solely historical data, but rather reflect the targets and expectations of Braskem s management. The terms anticipate, believe, expect, foresee, intend, plan, estimate, project, aim and similar terms are used to indicate forward-looking statements. Although we believe these forward-looking statements are based on reasonable assumptions, they are subject to various risks and uncertainties and are prepared using the information currently available to Braskem. This presentation was up-to-date as of September 30, 2015, and Braskem does not assume any obligation to update it in light of new information or future developments. Braskem assumes no liability for transactions or investment decisions taken based on the information in this presentation.

3 3 Agenda Braskem Overview & Highlights Petrochemical Industry Global petrochemical scenario Strategy Growth Strategy Outlook and Priorities Appendix

4 Overview & Highlights

5 5 Leader in thermoplastic resins production in the Americas Leading presence in the Brazilian market: only integrated petrochemical company in 1st and 2nd generation 29 facilities in Brazil, 5 in USA and 2 in Germany Naphtha, hybrid and gas based crackers Leading player of thermoplastic resins (PE+PP+PVC) in South America Largest PP producer in USA Leader in sustainable chemicals (focus on renewable raw materials) 1 W.Virginia 2 PP (Wesseling and Schkopau) Listed on 3 stock exchanges: BM&FBovespa, NYSE and Latibex - 100% tag along Market Cap of US$ 3.7 billion and EV of US$9.0 billion (11/10/15) Investment grade by all 3 global rating agencies: 3 Texas 1 naphtha cracker 4 PE 1 PP 1 PVC 1 chlor-alkali 1 Philadelphia 2 PVC 1 chlor-alkali 1 gas cracker 1 PP 1 PE 1 naphtha cracker 1 ethanol cracker 5 PE 2 PP Industrial Assets 1 hybrid cracker 2 PP 3 PE

6 6 3Q15 Highlights The dynamics of the international market and the new foreign exchange level were favorable and once again supported stronger sales in the overseas market. Braskem's resin exports totaled 454 kton, increasing 22% and 43% from 2Q15 and 3Q14, respectively. In the case of main basic petrochemicals, exports amounted to 482 kton, up 35% and 19% from 2Q15 and 3Q14, respectively. USA and Europe posted record-high PP sales volume, of 502 kton, a growth of 2% and 7% from 2Q15 and 3Q14, respectively. The average capacity utilization rate of the PP plants was 97%, influenced by the scheduled maintenance shutdown at the Schkopau Unit in Germany. Integrated Project in Mexico: The project reached 98% completion and pre-commissioning activities continued to progress. The Brazilian market for resins (PE, PP, PVC) amounted to 1.2 million tons, virtually stable over 2Q15, increasing 1%, while Braskem s sales amounted to 866 kton, an increase of 9%. Compared to 3Q14, demand contracted by 11%. The average cracker utilization rate stood at 92%, in line with the previous quarter and up 2 p.p. from 3Q14. Excluding the Rio de Janeiro site from the analysis, whose production is limited by low feedstock supply, the crackers operated at an average utilization rate of 95% in the quarter. Braskem posted EBITDA of R$3 billion in the quarter. In U.S. dollar, EBITDA came to US$870 million. Net Income was R$1,482 million. Braskem's leverage, as measured by the ratio of Net Debt to EBITDA in U.S. dollar, stood at 2.05x, which is the lowest level of the last nine years and represents declines of 10% from 2Q15 and 24% from 3Q14. Incentives for Innovation and commitment to Sustainability: Braskem was included for the fourth straight year as a component of the Dow Jones Sustainability Emerging Markets Index, the sustainability index for emerging markets of the New York Stock Exchange NYSE.

7 7 Brazilian Market of Resins and Braskem s Sales The Brazilian market of thermoplastic Resins (kton) Braskem Sales of Thermoplastic Resins (kton) +1% -11% +9% -8% -5% -4% The deterioration in Brazil's economic scenario and the consequent contraction in the durable and non-durable goods sectors continue to negatively impact the demand for resins in Brazil. Braskem s sales came to 866 kton in the 3Q15, 8% lower than the same period of In 9M15, Brazilian demand for resins and Braskem sales are respectively 5% and 4% lower than 9M14.

8 * Polyethylene, Polypropylene and Polyvinyl Chloride Source: Braskem, Ipeadata and IBGE 8 Braskem s Sales Profile (PE, PP, PVC) Diversified sales profile in Brazil 3Q15: Consumer driven

9 9 Braskem s Revenue Breakdown Greater exposure to international markets. 9M14 Revenue 9M15 Revenue 17% 7% Brazilian Sales Brazilian Exports (Ex-resale)* 17% 8% 19% 57% United States and Europe Resale 23% 52% R$34 billion R$35 billion *Exports of products made in Brazil

10 10 Natural Hedge: US dollar linked cash flow leads to a net debt ~75% dollarpegged Braskem prices follow the international market: 100% of Revenues is linked to dollar as well as approximately 80% of Costs¹ 100 Basis: 1Q08 Partially dollarpegged Braskem Financial Policy Considering that operating cash flow is strongly correlated to the U.S. dollar: Totally dollarpegged Short Term: The maintenance of minimum cash or hedge in U.S. dollar should be sufficient to cover (i) the operating exposure (operating cash flow) in U.S. dollar estimated for at least the next 6 months, and (ii) debt (principal and interest) in U.S. dollar maturing within the next 12 months. Long Term: Braskem must maintain a percentage of at least 50% of its net debt denominated in U.S. dollar.

11 11 EBITDA 9M15 vs. 9M14 R$million EBITDA was R$7,138 million, increasing 67% from 9M14. Highlights: the 38% average Brazilian currency depreciation; better thermoplastic resin spreads in the international market; higher volume of total sales. ( ) ( ) * Gain recognized from the divestment of non-strategic asset. Avg. FX 9M14: 2.29 R$/USD Avg. FX 9M15: 3.16 R$/USD ** It includes the recognition of the R$202 million refund related to the retroactive adjustment of the amendment to the naphtha supply agreement.

12 12 Longer debt profile and high liquidity levels Diversified Funding Sources Net Debt / EBITDA (US$) US$ million 3Q14 2Q15 3Q15 Net Debt ( ª ) 6,430 5,855 5,706 EBITDA (LTM) 2,375 2,553 2,763 Net Debt/EBITDA 2.71x 2.27x 2.05x (a) It does not include the financial structure of the Mexico project

13 13 Credit Rating Agency Rating Outlook Date Global Scale Moody s Baa3 Negative 08/20/2014 Fitch BBB- Stable 09/28/2015 S&P BBB- Negative 07/28/2015 S&P April 30th Rating affirmation The stable outlook is based on our expectation that Braskem S.A. will continue to reduce its debt by improving cash flow generation as the Brazilian real remains weak. [ ] The stable outlook also incorporates a strong liquidity July 28th Following the revise outlook to Negative for the Brazilian sovereign rate we understand the company could pass our quantitative hypothetical stress test related to a sovereign default, we're less certain that the company could withstand it on a qualitative basis. September 10th After downgrading Brazil s sovereign rate We placed the rating on Braskem on CreditWatch negative because we need to further test its resiliency to a potential sovereign distress Fitch September 28th Ratting affirmation [ ] For 2016, Fitch continues to expect favorable spreads, despite some potential volatilities in oil prices, which should continue to drive the company's ability to generate robust positive free cash flow generation...track record of strong liquidity position and manageable debt amortization schedule Uncertainties regarding the naphtha contract with Petroleo Brasileiro S.A. (Petrobras) continue to be a negative headwind for Braskem's ratings. Moody s August 20th, 2014 Ratting affirmation [ ] we regard as credit positives Braskem's above-average level of disclosure, its overall good governance practices[ ] [ ] Braskem's sound liquidity should provide the company the financial flexibility necessary to ride through industry downturns[ ] [ ]weak domestic economic growth in Brazil, and the uncertainties surrounding the naphtha-supply contract with Petrobras.

14 Petrochemical Industry Global petrochemical scenario

15 15 Petrochemical Scenario Naphtha Prices and Brent Ethylene Capacity Additions (MM ton) HDPE Spreads (US$/ton) October 2014 Forecast Average Annual Demand Growth July 2015 Forecast Greenfield projects postponed or cancelled; Reduction of oil prices; Supply increase mainly by non-opec countries. Iran embargo (?) Naphtha follows oil price dynamics; Petrochemical spreads remain at favorable levels. China: High cost/investments to access available feedstock; Infrastructure issues; Reduced attractiveness of coal projects with lower naphtha prices USA: New capacities to come online as of 2017/2018.

16 Strategy Growth Strategy Priorities

17 17 Mexico Project Ethylene XXI First greenfield project to start-up in North America Overview JV between Braskem (75%) and Idesa (25%); Integrated project for the production of 1 million tons of PE. Differentials Long-term contract with PEMEX for feedstock supply; Competitive feedstock, with price reference to Mont Belvieu ethane. Highlights YTD 2015 Project reached 98% of physical completion in 3Q15; Major utility systems are already operational and the entire logistics area was completed. Pre-marketing activities continues to advance with a portfolio of 340 clients. First lots of rail freight cars already delivered. CAPEX (ongoing) Total investment US$5.2 billion, of which: US$3.2 billion structured under a project finance model; and US$2.0 billion shareholders contribution.

18 18 Mexico Project Ethylene XXI PE Cash Margins: Competitive feedstock to support regional growth Expected margin of an integrated PE player ethane-based in USA Source: Braskem, IHS PE Demand (million tons/year) Focus on PE Mexican market (net importer market): ~70 of its needs supplied by imported product

19 19 U.S. assets overview

20 20 PP Market United States Spread PP PGP (USD/ton) Competitive Environment North America Largest PP producers Ranking by capacity (000 s tons per year) Braskem Player A Player B Player C Player D Source: IHS

21 21 Growth projects Exploring the shale gas opportunities - Growth Projects in USA PDH Long term contract with Enterprise; Enterprise will supply over 50% of the propylene required for our three plants in the U.S. Gulf region; Start-up on 1H16. UTEC In June 2014, Braskem announced an investment to produce Ultra High Molecular Weight Polyethylene (UHMWPE) at its site in La Porte, Texas. The resin, which is commercially known by UTEC, has in a vast array of applications in various industries, such as oil extraction, military items and construction. ASCENT Appalachian Shale Cracker Enterprise Attentive to the opportunities created by the feedstock availability in North America. Given the recent developments in world energy markets, new scenarios are being incorporated into the project analysis. Adding value to the current streams Growth Projects in Brazil Expansion of polyethylene in the 1 st quarter 2015 Expand and convert one of the production lines to metallocene-based LLDPE (newer technology); Capacity: 120 kton; Investment: ~R$50 million. Basf acrylic complex in the 2 nd quarter 2015 Braskem will supply propylene to the Basf acrylic complex;

22 22 Braskem - Diversification through competitive raw material Cracker Raw Material Profile (Ethylene Capacity) Raw Material Profile US and Europe (PP Capacity) Source: Braskem

23 23 Capex R$ million In 9M15, Braskem invested R$1,358 million. Excluding the Mexico project from the analysis, total investment came to R$806 million: ~90% of the total (R$758 million) - was allocated to industrial operations, including the investments related to operating efficiency, HSE, productivity and maintenance. The remainder was allocated to other projects, such as the investment in UTEC production in La Porte, United States. Operational: Maintenance, replacement, productivity, others Mexico Project US$ million Braskem disbursed US$180 million (R$552 million) on the project in 9M15. The project estimated investment for 2015 is US$300 milhões.

24 Strategy Growth Strategy Outlook and Priorities

25 25 Outlook and Braskem priorities 2015 Global Scenario The modest recovery in advanced economies and weaker growth in emerging economies were the factors that motivated the IMF to revise downward its forecast for world GDP growth in 2015 from 3.3% to 3.1%. In Brazil, GDP is expected to decrease 3,0% in With regard to the petrochemical industry, the near-term expectation is for spreads to remain at healthy levels. Priorities 2015 Sign the naphtha supply contract. Resume production of the petrochemical complex in ABC. Mexico Project: Conclusion of construction and start-up of the complex in the end of 2015; Advance the business strategy and expand the clients base. Support an industrial policy that, in parallel with the fiscal austerity policy, leads to the gradual recovery of the competitiveness factors of the Brazilian industry. Increase the competitiveness of Braskem s feedstock, by reducing its cost and by its diversification. Maintaining liquidity levels, cost discipline and financial health. Focus on the cash generation; Make progress in the program to reduce fixed costs on 11 work fronts, for potential recurring annual savings of R$400 million, to be fully captured by 2017.

26 Appendix

27 27 Solid business model based on the competitive integration of value chain

28 28 Consistent delivery of results: successful trajectory of organic growth and acquisitions Capacity (kton/year) Leadership in Brazil Leadership in the Americas Sunoco PP Plants Going Global Dow PP Plants PVC Expansion Braskem (Aug, 2002) Green Ethylene Copene Nitrocarbono Proppet OPP Trikem Polialden Politeno Resigns Ethylene EBITDA¹ (US$ million) 1 Pro-forma figures for 2009: Quattor+Braskem America CAGR: 14% 1,626 1,385 1,638 2,308 2,246 2,003 2,216 2,392 2, LTM

29 29 Unique position in the global industry Braskem is responsible for over 60% of the capacity share of thermoplastic resins* in South America and for 71%** of the market share in Brazil. North America # 32 players W.Europe # 29 players South America: Second player has around 10% of Braskem s capacity Capacity (000 Metric Tons) Braskem: 5,740 PBB Polisur (Dow): 650 Ecopetrol: 558 Solvay Indupa: 541 Mexichem: 504 Polinter: 470 Petroken (LYB): 180 Petroq. Cuyo¹: 130 PETROQUIM : 120 Propilven : 115 Pequiven : 65 Petro Dow: 42 South America # 12 players M.East # 38 players N.Asia ~# 150 players S.Asia ~# 40 players ¹40% Petrobras Energia; 50.5% Admire Trading Corp and 9.5% Panam SA * PE, PP and PVC ** 9M15 Source: Analysts reports, IHS capacity list

30 Governance Benefits of the consolidation 30 Ownership structure Minority Shareholders 50.1% / 38.3% 2.9% / 25.6% Voting Shares / Total Shares 47.0% / 36.1% Braskem as a sole corporate vehicle for Odebrecht and Petrobras petrochemical assets Larger corporate size levers growth and internationalization projects Strengthening of leading position in thermoplastic resins New potential synergies with Petrobras Refineries and Research Centers Odebrecht as the controlling shareholder reinforces Braskem s condition as a listed privately-owned company Rules for choosing the CEO and Directors Odebrecht appoints the Chairman, the CEO and the CFO; Petrobras appoints the Vice-Chairman, as well as 2 options for Portfolio & Investment Director, one to be selected by the CEO; All the positions will be filled by highly qualified professionals with recognized competency for the position. Braskem Executive Directors in charge of operational issues and the Company s Business Plan, which is subject to Board approval On 09/30/2014

31 Source: IHS, Braskem 31 Thermoplastic Resins Capacity Global Ranking Global capacity (kty) 6 th Americas capacity (kty) 1 st

32 32 Ethylene and Resins Supply/Demand Global Dynamics Global Ethylene Supply/Demand (Mton/y) Global Resins Supply (Mton/y) Global Resins Demand (Mton/y) Source: IHS, Aug 2015

33 33 Outlook for the petrochemical industry Feedstock profile of new capacity ( ) In million tons Source: IHS, Aug 2015

34 34 Global Resins Demand by Region Resins (PE, PP, PVC) Demand by Region 2015e 2018e Source: IHS 2015

35 35 EBITDA 3Q15 vs. 2Q15 Braskem recorded EBITDA of R$3,044 million in the 3Q15. Highlights: the 15% average Brazilian currency depreciation; better basic petrochemical spreads in the international market; the good operating performance; higher sales volume in the domestic market combined with higher exports. R$million ( ) ( ) Avg. FX 2Q15: 3.07 R$/USD Avg. FX 3Q15: 3.55 R$/USD

36 36 Brazilian Market PE + PP 3Q15 PVC PE + PP 9M15 PVC Polyolefins (PE and PP) and PVC imports accounted for 24% of the domestic market Source: Aliceweb

37 37 Polymers (PE&PP) Export by Region (Net Revenue) 2Q15 (R$1,650 million) 3Q15 (R$1,898 million) Qualified Sales Qualified Sales

38 ¹Includes pre-marketing activity in Mexico *Exports of products made in Brazil 38 Revenue breakdown 9M14 Revenue 9M15 Revenue 9M14 Revenue 9M15 Revenue R$34 billion R$35 billion

39 39 Brazilian demand of resins Braskem is well positioned to capture the emerging market potential growth Brazilian thermoplastic resins demand growth Per-capita consumption of PE, PP and PVC* kg/person CAGR: 4.5% Brazil 71% 70% 65% 70% 68% 67% World (2014) Braskem s Market Share Source: Braskem, IHS (Aug 15)

40 40 USA and Europe PP demand PP demand recovery lead by gradual acceleration of the advanced economies USA polypropylene demand growth (kton) West Europe polypropylene demand growth (kton) CAGR: 1.7% CAGR: 0.8% PP propylene spreads outlook shall remain attractive; No new greenfield PP projects announced in both regions ; USA: opportunities may arise due long propylene market. Source: IHS (Aug 15)

41 41 Accounting Practices Hedge Accounting of Exports To better reflect the exchange variations impacts in its result and in compliance with accounting standards IAS 39 and CPC 38, Braskem decided to designate, as of May 1, part of its dollardenominated liabilities as a hedge for its future exports. The exchange variation from these designated liabilities will be temporarily recorded under shareholders equity and transferred to the income statement only when such exports occur. If hedge accounting had not been adopted, the financial result in the 9M15 would have been a loss of R$12,119 million. 41

42 42 Braskem s Control Environment Timeline 2002 Level 1 on Corporate Governance within Bovespa Shares listed on NYSE (ADRs Level 2) and on Latibex, from Madri s stock exchange. Braskem s creation Code of Conduct approval Securities Trading Policy approval 2003 Creation of the Enterprise Security area Financial Management Policy approval 2004 Code of Conduct Review Ethical line creation Joined the ISE - Bovespa`s Enterprise Sustaintability index) Fórmula Braskem project : Implementation of the new ERP Creation of the Supplier s Code of Conduct Code of Conduct Review 2008 Investment Policy approval 2009 Elected one of the ten most transparent companies in Brazil by ANEFAC Code of Conduct Review Supplier s Code of Conduct Review Creation of the Board of Directors supporting Committees Early SOX certification Code of Conduct Review Investment grade by agencies S&P e Moody's

43 43 Enterprise Security Program Ensure systematic procedures instituted to ensure, with the support of Company s areas, that the provisions of the regulations imposed by a government agency, laws, internal policy and procedure are being met. We report the results of the Compliance Program to Braskem`s leaders and Fiscal Council periodically The Risk Management activity helps Braskem accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of governance, risk management and control processes. Investigate all reports received from the ethical line channels. Disseminate the code of conduct values to the employees through internal communication and trainings. We have dedicated resources to develop, maintain and continuously improve our Enterprise Security Program

44 BRASKEM