Braskem SA Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Safety: The average global accident frequency rate in 2024 was 0.91 events per million hours worked, a 16% reduction from 2023, demonstrating the company's commitment to safety.
• CapEx: Capital expenditures disbursed in 2024 were 40% lower than the average of the last five years, aligning with the strategy of optimizing and transforming assets.
• Utilization Rates: Brazil had higher utilization rates due to post-maintenance normalization, while Mexico saw higher utilization due to increased feedstock supply. The United States and Europe had lower utilization due to maintenance shutdowns.
• Sales Volume: The company achieved higher sales volume in 2024, with Brazil experiencing growth in main chemicals sales and Mexico a 5% increase in sales. Green polyethylene sales reached an all-time annual record.
• Financial Preservation: Actions such as prioritizing sales and optimizing costs resulted in a ~US$82 million reduction in general and administrative expenses in reportable segments.

Segment Performance

• Brazil Segment: The Brazil segment had a recurring EBITDA of $889 million in 2024, a 1% increase compared to 2023. Utilization rates were higher due to the normalization of operations after maintenance shutdowns in late 2023, and sales volume of main chemicals in Brazil and green polyethylene reached record levels.
• United States and Europe Segment: The recurring EBITDA for this segment in 2024 was US$177 million, which was 34% lower than in 2023. This was due to scheduled and unscheduled maintenance shutdowns at polypropylene plants in both regions.
• Mexico Segment: The Mexico segment saw a recurring EBITDA of US$280 million in 2024, a 166% increase from 2023. Higher feedstock supply and production volume led to a 5% increase in sales volume in 2024, with the highest production volume in the segment since 2017.

Guidance

• 2025 Operations: All segments are expected to have higher utilization rates in the first quarter of 2025, driven by no planned operational events and stable feedstock supply. Brazil's resin sales are supported by resuming stock building in consumer goods and retail sectors.
• Petrochemical Scenario: The first quarter and year of 2025 will face challenges from a prolonged downturn due to new capacities oversupplying the market. However, Q1 2025 is expected to see higher PE prices due to increased demand and low ethane levels. The PP market remains challenged by propylene prices. Long-term improvement could come from global demand recovery and capacity rationalization.
• Strategic Direction: The company will focus on three pillars: foundation (safety, people, culture), resilience/financial health (mitigating petrochemical downturn impact), and transformation (increasing ethane use, accelerating green business growth, prioritizing assets and investments).

Risks

• Geopolitical Impact: Conflicts in the Red Sea affected sea freight costs, impacting spreads.
• Market Downturn: A prolonged petrochemical downturn due to oversupply of capacities poses challenges to spreads and margins.
• Operational Disruptions: Scheduled and unscheduled maintenance shutdowns in plants can disrupt production and utilization rates.

Question and Answer

• Q: Nicolas Barros from Bank of America inquired about the competitive scenario post-import tax increase, market share recovery, capacity across the sector, and midterm price/margin expectations. A: Rosana Avolio responded discussing the balance between market share and price policy, the impact of exchange rates, global demand dynamics, and capacity rationalization considerations. She mentioned external consulting views on capacity closures and differences in global producer costs.
• Q: Henrique Perez from BTG Pactual asked about logistics optimizations, fleet acquisition, and updates on M&A due diligence. A: Felipe Jens and Rosana Avolio discussed the benefits of owning ethane ships, which reduce dependency on external transport, and the planned operation of a terminal in Mexico. They also noted that M&A due diligence focuses on Braskem's internal challenges rather than external processes.
• Q: Pedro Gama from Citi asked about 2025 CapEx, the switch to gas strategy, and the impact of the Mexican terminal. A: Rosana Avolio and Roberto Ramos responded on the breakdown of 2025 CapEx, the maintenance of CapEx for operations, the switch to gas strategy for cost competitiveness, and the expected operation of the Mexican terminal in 2025/2026 leading to increased operation rates and future expansion.