Braskem S.A.: EBITDA reached US$310 million, increasing 5% from 1Q20

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Braskem S.A. (NYSE: BAK) reported its 2Q20 results, highlighting a recurring EBITDA of US$310 million, a 5% increase from 1Q20, driven by lower feedstock costs and reduced expenses. However, there was a net loss of R$2,476 million primarily due to an additional R$1.6 billion provision for geological events and currency depreciation. The company issued US$600 million in subordinated debt to bolster its balance sheet. Sales of resins and chemicals fell by 50% versus 1Q20, attributed to COVID-19 impacts.

Positive

• Recurring EBITDA increased by 5% from 1Q20 to US$310 million.
• Successful issuance of US$600 million subordinated debt to strengthen financial position.
• EBITDA in Mexico rose 25% from 1Q20 to US$98 million.

Negative

• Net loss of R$2,476 million tied to geological provisions and currency depreciation.
• Sales of resins and chemicals decreased by 50% compared to 1Q20.
• EBITDA in Brazil dropped 6% from 1Q20 to US$219 million.

SÃO PAULO, Aug. 5, 2020 /PRNewswire/ -- BRASKEM S.A. (B3: BRKM3, BRKM5 and BRKM6; NYSE: BAK; LATIBEX: XBRK) announces today its results for 2Q20.

HIGHLIGHTS:

Braskem - Consolidated:

• Recurring EBITDA was US$310 million, up 5% on 1Q20, explained by: (i) lower feedstock costs in Brazil, due to low costs in inventories; and (ii) lower selling, general and administrative expenses in Brazil and Mexico. In Brazilian Real, recurring EBITDA was R$1,655 million, 26% higher than in 1Q20, reflecting the depreciation in the Brazilian Real against the U.S. dollar. In relation to the same period last year, recurring EBITDA decreased by 25%, reflecting the lower spreads in the international market and lower volumes due to COVID, and increased 2% in Brazilian Real, given the weaker Brazilian Real against the U.S. dollar.
• In the quarter, global sales of resins and chemicals recycled came to 602 tons, representing decreases in relation to 1Q20 (-50%) and 2Q19 (-2%), explained by the global slowdown caused by the COVID pandemic.
• In 2Q20, the Company posted net loss of R$2,476 million, mainly explained by the recognition of an additional provision of R$1.6 billion related to the geological event in Alagoas and by the exchange variation impact on the financial result due to Brazilian Real depreciation against U.S. dollar on the net exposure in the amount of US$2,854 million.
• In July, the Company concluded a US$600 million subordinated debt issue through its wholly owned subsidiary Braskem Netherlands Finance B.V., with maturity in 2081 and coupon of 8.5% per year. This is the first hybrid debt instrument issued by a Brazilian company with 50% equity treatment by Standard & Poor's and Fitch Ratings, and reinforces the Company's commitment to continue implementing measures to deleverage in order to be reassigned as an investment grade company.
• Adjusted financial leverage measured by the ratio of net debt to EBITDA in U.S. dollar ended the quarter at 6.77x.
• On a year to date base, the recordable and lost-time injury frequency rate stood at 0.88 (events / 1MM HH), which is 72% below the industry average.
• In June, Braskem signed agreements for the supply of petrochemical naphtha for its industrial units in Bahia and Rio Grande do Sul. The agreements, which terms are around five years after the expiration date of the current agreements, establish the supply of a minimum annual volume of 650 kton and, at the discretion of Petrobras, a maximum additional volume of up to 2.8 million tons per year, at the price of 100% of the ARA international reference. Furthermore, and to guarantee access to the naphtha logistics system in Rio Grande do Sul, Braskem also renewed the storage agreement with Petrobras and the transport and storage agreement with Transpetro.
• In June, the Company signed an agreement to purchase renewable energy from Canadian Solar Inc. The agreement will enable the construction of a solar power plant with capacity of 152 MWp in the northern section of Minas Gerais state that will guarantee the supply of this energy to Braskem for 20 years.

Brazil:

• EBITDA from Brazil was US$219 million (R$1,175 million), down 6% from 1Q20, and representing 61% of the Company's consolidated segments EBITDA. The decrease in EBITDA is mainly explained by the lower resin and chemical sales in the Brazilian market due to the impact from COVID on the Brazilian economy. Compared to 2Q19, the increase in EBITDA is explained by lower feedstock costs and by lower general and third-party service expenses.
• In order to create value to its clients, the Company has expanded its chemical products portfolio, with the production of premium gasoline for the Brazilian market. This product has a high octane number and meets the new resolution requirements of the National Petroleum Agency (ANP), which sets international quality standards for gasoline sold in the Brazilian market

United States and Europe:

• EBITDA in United States and Europe was US$45 million (R$235 million), down 29% from 1Q20 and representing 12% of the Company's consolidated segments EBITDA. The performance in the quarter is mainly explained by the lower sales volume in the United States and Europe, due to the global economic slowdown caused by COVID. In relation to 2Q19, the decline in EBITDA is due to the narrowing of PP spreads in the international market.
• During the quarter, the new PP plant in the United States reached 100% completion. The plant's commissioning process began in 2Q20, and the first production operations on commercial scale are expected for 3Q20.

Mexico:

• EBITDA in Mexico was US$98 million (R$523 million), 25% higher than in 1Q20 and representing 27% of the Company's consolidated segments EBITDA. The increase in EBITDA was driven mainly by the higher sales volume and lower general and administrative expenses. In relation to 2Q19, EBITDA growth reflects the lower ethane price in the international market.
• In this quarter, Braskem Idesa imported 42 thousand tons (8,000 barrels per day on average) of ethane from the United States to complement the supply of ethane from Pemex, which corresponded to 13% of the polyethylene capacity utilization rate of the Mexico Petrochemical Complex, which stood at 80% in the quarter. Regarding the Fast Track expected capacity of 12.8 thousand barrels per day, it reached 9.2 thousand barrels per day in June, or approximately 75% of the expected capacity.

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

Braskem will host conference calls to discuss its Results THURSDAY, August 6 at 10:00 a.m. US ET.

Additional information may be obtained from the Investor Relations Department at +55 11 3576-9531 or braskem-ri@braskem.com.br.

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SOURCE Braskem S.A.

FAQ

What was Braskem's EBITDA for 2Q20?

Braskem reported a recurring EBITDA of US$310 million for 2Q20.

Why did Braskem incur a net loss in 2Q20?

Braskem recorded a net loss of R$2,476 million mainly due to a provision of R$1.6 billion related to geological events.

How did Braskem's sales perform in 2Q20?

Global sales of resins and chemicals fell by 50% compared to 1Q20.

What impact did COVID-19 have on Braskem's financials?

COVID-19 significantly affected sales volumes and EBITDA across Braskem's operations.

What financial strategy did Braskem implement recently?

Braskem issued US$600 million in subordinated debt to enhance its financial stability.