Studies for the construction of a new factory in the United States are underway and the expectation is to increase shipments from Brazil and the new complex installed in Mexico. São Paulo – The weakening demand in Brazil should boost Braskem's business expansion plans in the international market. The manufacturer is already projecting a decline of approximately 7% in total demand in the Brazilian resin market in 2016.
According to the company's new CEO, Fernando Musa, total demand for polyethylene (PE), polypropylene (PP) and PVC resins in the Brazilian market totaled 1,2 million tons in the quarter, down 18% compared to the same period in 2015. Braskem's sales of these products dropped by the same percentage during the period, totaling 780 thousand tons sold. The decline was attributed to the strong comparison base with the previous year, when customers in the manufacturing chain replenished their inventories and made advance purchases before the price adjustment.
“This drop is significant, but the first quarter gives the impression that the situation is much more chaotic than we expect for the entire year,” said Fernando Musa, in a press conference. Despite the situation, the company will make investments to increase its competitiveness. By the end of the year, Braskem is expected to invest R$3,66 billion in its global operations. Of this total, 51% will be invested in Brazil. The investments in the country include R$144 million to make ethane as a raw material more flexible by up to 15% at the company’s plant in Bahia. The plan is part of the strategy to diversify the raw material matrix to avoid dependence and exposure to high prices of naphtha – a petroleum byproduct and one of the company’s main raw materials.
“Today [the extracted input] from gas is still more competitive than naphtha, but if the price of oil drops a little more we can go back to naphtha. But it will depend on the market,” said the company’s vice president of finance and investor relations, Pedro Freitas, at a press conference. In the international market, Braskem’s plans include expanding its Mexican operations. Most of the investments made by the company in the first quarter were directed to the petrochemical complex in Mexico. The unit began operations in December of last year and has already begun the process of exporting from the unit. Musa revealed that the installation of a sixth plant in Texas (United States) is also under evaluation.
The final proposal should be presented to the company's board between the end of this year and the beginning of 2017. Performance Exports in the quarter reached 415 thousand tons of resin, an increase of 62% compared to a year earlier. The increase in sales to other countries helped to offset the drop in volumes in Brazil. In the first three months of 2016, the petrochemical company's net revenue in the country (domestic and foreign sales) increased 14%, to R$ 12 billion, compared to the same period in 2015. EBITDA (earnings before interest, taxes, depreciation and amortization) increased 61% to R$ 2,16 billion. Braskem's operations in other countries also helped to sustain the consolidated performance in early 2016.
Production at plants in the United States and European countries totaled 499 tons, up 8% compared to the first quarter of 2015. Sales increased 9% to 500 tons in the same comparison. Consolidated revenue from the foreign market – considering the United States, Europe and Brazilian exports, excluding the resale of naphtha – was R$5 billion, equivalent to 44% of Braskem's total revenue in the quarter. Exports alone accounted for R$2,5 billion of this amount. Consolidated net revenue, including business in Brazil and internationally, totaled R$12,172 billion, up 19% in the quarter. The expansion was driven by the increase in total sales volume and the 37% depreciation of the Brazilian currency in the period. However, in dollars, the company's net revenue fell 13% to US$ 3,1 billion, negatively impacted by the lower sales volume of thermoplastic resins and the lower price of resins in the international market.
From January to March, Braskem's consolidated net income was R$747 million, an increase of 266% compared to the same period in 2015. In the same comparison, consolidated EBITDA grew 106%, totaling R$3.058 million. In dollars, EBITDA totaled US$780 million, 54% above the amount recorded a year earlier. Debt Cash generation in the period helped the company reduce its debt by 33% compared to the first quarter of 2015, highlighted Pedro Freitas.
The company's debt was 1,72 times its EBITDA generation in dollars for total net debt in the period from January to March. This was the lowest level in 10 years. "The leverage level that we consider comfortable is below 2,5 times. The good operating result opens up possibilities for [investment] strategies, given the space we now have in the balance sheet," said Freitas.
DCI – 06/05/2016
