Braskem reported strong financial results for the first nine months of 2003, with net revenues increasing 36% and EBITDA growing 43% compared to the same period in 2002. Operating margins improved as average capacity utilization rates rose and sales volumes increased for most products. Braskem also reduced debt through refinancing and expects synergies from recent acquisitions to further boost profitability going forward. The company is well positioned to benefit from anticipated growth in the petrochemical sector and domestic Brazilian market starting in 2004.
2. Disclaimer – Forward-Looking Statements
This presentation includes forward looking statements. Such information is not
merely based on historical fact but also reflects management’s objectives and
expectations. The words "anticipate", “wish", "expect", “foresee", “intend", "plan",
"predict", “forecast", “aim" and similar words, written and/or spoken, are intended
to identify affirmations which, necessarily, involve known and unknown risks.
Known risks include uncertainties which include, but are not limited to price and
product competition, market acceptance of products, the actions of competitors,
regulatory approval, currency type and fluctuations, regularity in the sourcing of
raw materials and in operations, among others. This presentation is based on
events up to September 30, 2003 and Braskem is not liable to update the contents
in the light of new information and/or future events.
Braskem takes no responsibility for transactions or investment decisions made on
the basis of information contained in this presentation.
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3. Braskem – 9M03 Earnings Highlights
Net Revenues (R$ million) EBITDA (R$ million)
+43%
+36%
6,649 1,315
4,894 921
9M02 9M03 Net Income (R$ million) 9M02 9M03
411
9M02
Net Debt/EBITDA (LTM*) R$ 2,247 Adjusted Short-Term Debt**
468
(R$MM)
2,837
9M03
5.1 996
4.1
3.5 3.6
(1,836)
Sep 2003 Sep 2003
Adjusted
Dec 2002 Mar 2003 Jun 2003 Sep 2003
Impact of Concluded (1,841)
Last twelve months: without extraordinary items in 4Q02. Funding and in Progress 3
Adjusted Proforma Short Term Debt ignores any effects of foreign exchange, fiscal, operating as well as other uncertainties that
4. Braskem – Operating Performance
Average Capacity Utilization (%)
Main Products 1H03 9M03 9M02
ETHYLENE 79% 83% 79%
Total Thermoplastics 81% 86% 80%
PP 93% 96% 89%
PE 75% 80% 74%
PVC 79% 84% 82%
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5. Braskem – Sales Performance
Sales Volume - Ton
3Q03 3Q02 Chg% 9M03 9M02 Chg%
Main Products
(A) (B) (A)/(B) (C) (D) (C)/(D)
ETHYLENE* 288,395 278,828 3% 766,841 708,833 8%
Total Thermoplastics 433,319 411,787 5% 1,159,983 1,143,603 1%
PP 116,083 114,113 2% 322,698 307,489 5%
PE 185,004 190,330 (3%) 491,629 494,217 (1%)
PVC 115,863 93,727 24% 306,407 297,691 3%
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Of the total for the quarter, 138,000 tons (48%) were sold/transferred to Braskem’s Business
6. Braskem – Export Sales
(US$ MM)
+22%
Export Markets (in %)
495
9M03
+2%
405
North America
178 40%
175
Asia
19%
Europe
3Q02 3Q03 9M02 9M03 19% Africa
South America
19%
3%
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7. Simplified structure accelerating the capture of synergies
80% of Goal already reached !
Synergies*
(R$ million)
Goal =330
260
240
75
53
Sep/02 Dec/02 Jun/03 Sep/03
7
11. Braskem – Steady EBITDA Growth
EBITDA EBITDA margin
(R$ million) Petrochemical Peers (%)
Extraordinary Items Braskem
Industry Average (*)
1,195
20
19
780*
450 461
14
11
367
315 405
415
2Q02 3Q02 4Q02 1Q03 2Q03 3Q03
9M02 9M03
(*) Average EBITDA margin for the following companies: Dow, DuPont, Solvay, Lyondell, Nova Chemicals and Georgia Gulf
based on public earnings data from 9M03. 9M02 includes Eastman and BASF in addition to those already mentioned.
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12. Braskem – Financial Management of Working Capital
Focus on Liquidity and Reduction of Capital Costs
Liquidity
Cushion
R$ 662 MM Greater
(Cash, Finan. Aplic, Flexibility
G.O.C. Securities) operational,
+ financial and
Competitive
Funding in the
+ strategic.
&
Reduction in
Financial Average
Reduction in cost of Financial
Market
finance lines from Cost
banks and suppliers
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13. Braskem – Program for Refinancing and Funding of ~US$1.0 Billion
Improved Results = Competitive Funding Opportunities
09/30/2003
Gross Debt: R$ 6.8 Bi Adjusted Short-Term Debt*
Net Debt: R$ 6.2 Bi (R$MM)
1,731
R$1.2 Bi via 4-year debenture issue.
996
662 542
US$386 MM via MTN (3 tranches
issued); Sep/03 Sep/03 Sep/03
Sep/03
Adjusted EBITDA Cash balance/ Tax Credit
(Net Value) UDM Fin . Inv./Sec. Balance
US$100 MM via pre-payment of used
exports; Adjusted Amortization Schedule*
(Gross Debt - %)
R$200 MM via structuring of 34
Receivable Fund; 20
18
16
US$50 MM via a trade finance line for 3
9
naphtha imports.
2003 2004 2005 2006 2007 2008
Concluded In progress Oct03-Dec03
13
djusted ST pro forma debt disregards any effect of FX, fiscal, or operating nature, as well as further uncertainties that may occur.
14. Braskem – Exchange Risk Management
Breakdown of Gross Debt by Index (Sep/03) Hedge Policy
TJLP FINANCE LINES LINKED FINANCE LINES NOT
CDI
IGP-M 16% TO EXPORTS. LINKED TO EXPORTS
11%
5% Other
1%
Trade Finance 100 100
~28% 60% 60%
60 % 75 %
69%
0 0
Level of hedge protection
contracted.
Position on 09/30/2003
1. Hedge/Investments Non-export linked
$ 472 MM
75%
Hedge Finance Lines USD 416 MM
2. Export related $ 555 MM
credits
$ 138 MM
Export linked Finance Lines 60%
USD 186 MM
(1 + 2) = USD 610 MM $ 310 MM
USD 602MM
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16. The scenario looks promising for Braskem
The outlook is for higher thermoplastic resin prices on the international front,
with improved margins;
As confirmed by Chem Systems, the fly-up for the petrochemical sector is
expected for 2005;
On the international front, there is also the outlook for a gradual reduction in
oil and Naphtha prices in the next few years, providing the basis for a
consistent improvement in margins;
Domestically, the outlook is for GDP growth - as of 2004. This factor
associated with the high degree of elasticity for thermoplastic resins in Brazil,
indicate improved sales volumes to the domestic market.
Should the above outlook become a reality, Braskem can be expected to report
improved sales volumes, revenues and returns - as of 2004, onwards…
Braskem: Major growth potential in
sales volumes, revenues and margins.
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17. Braskem – an excellent investment opportunity
Leader in the Latin American thermoplastics market.
Integrated operations permitting capture of synergies.
Consolidated businesses and superior margins.
Incorporation of OPP and Nitrocarbono concluded and negotions with
common shareholders of Trikem and Polialden in progress.
Adherance to Bovespa’s corporate governance Level 1 and adhesion to
Level 2 (in 2 years).
Stock split with a view to increased liquidity
Adoption of 100% tag along rights for all shareholders.
Listed on Latibex in October (“ticker symbol” XBRK).
Strong future growth potential in volumes and returns.
A world class Brazilian petrochemical company ! 17