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Presentation – 1 q04 results

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  • 1. Presentation of 1Q04 Results Visit our website: www.braskem.com.br
  • 2. Disclaimer – Forward-Looking StatementsThis presentation includes forward looking statements. Such information is notmerely based on historical fact but also reflects management’s objectives andexpectations. The words "anticipate", “wish", "expect", “foresee", “intend", "plan","predict", “forecast", “aim" and similar words, written and/or spoken, are intendedto identify affirmations which, necessarily, involve known and unknown risks.Known risks include uncertainties which include, but are not limited to price andproduct competition, market acceptance of products, the actions of competitors,regulatory approval, currency type and fluctuations, regularity in the sourcing ofraw materials and in operations, among others. This presentation is based onevents up to March 31, 2004 and Braskem is not liable to update the contents inthe light of new information and/or future events.Braskem takes no responsibility for transactions or investment decisions made onthe basis of information contained in this presentation. 2
  • 3. Braskem – 1Q04 Highlights Braskem maintained its market leadership at ~ 40% for PE, PP and PVC resins; Exports amounted to US$ 133 MM; EBITDA reached a record level of R$529 MM in 1Q04, with a Margin over Net Revenues of 25%; Synergies captured totaled R$ 310 MM, or 94% of the estimated total; Scheduled operating shutdown of the Raw Materials Center II (Aromatics II and Oleofins II) at the Basic Petrochemical Unit in Camaçari, with a duration of 35 days; the next scheduled shutdown is to occur in six years’ time; Simultaneous scheduled shutdowns at the Polyolefins, Vinyls and Business Development Units located both in Camaçari and Alagoas states; 3
  • 4. Braskem – 1Q04 Highlights New products launched: Braskem Symbios® (BOPP) and Braskem Flexus®; Capital Expenditures: capacity expansion proceeded for both the production of PVC (+50 kton/year – new capacity available in the 2nd half of 2005) and PP (+100 kton/year; new capacity available in the 2nd half of 2004); Trikem was successfully merged into Braskem: “free-float” reached 36% and paid in Capital R$ 2.2 Billion; Re-profiling of Braskem’s debt concluded: short-term debt on 3/31/04 was reduced to 32% of total gross debt; Cash & Cash Equivalents surpassed R$ 2 billion and the net debt/EBITDA ratio was 3.42; The average price of ARA Naphtha during the period = apprx. US$ 323/ton– about R$ 933/ton (against R$ 1,114/ton in 1Q03); On 4/1/2004 Board of Directors approved a public offer of about R$ 900 MM in new Pref. “A” shares, depending upon market conditions. 4
  • 5. Braskem – Industrial Performance Production - Ton 1Q04 1Q03 Chg Main Products (A) (B) (A)/(B) ETHYLENE 223,271 229,165 (3%) Total Thermoplastics 388,875 382,974 2% PP 113,049 107,532 5% PE 163,635 156,688 4% PVC 94,750 103,844 (9%)Note: Scheduled shutdown for maintenance and inspection at the Camaçari and PVC Alagoas units carried out in 1Q04 5
  • 6. Braskem - Industrial Performance Average Capacity Utilization Main Products 1Q04 1Q03 ETHYLENE 71% 76% Total Thermoplastics 85% 84% PP 94% 94% PE 82% 77% PVC 81% 89%Note: Scheduled shutdown for maintenance and inspection at the Camaçari and PVC Alagoas units carried out in 1Q04 6
  • 7. Braskem – Sales Performance Sales Volume - Tons Main Products 1Q04 1Q03 Chg (A) (B) (A)/(B) ETHYLENE* (1) 212,982 230,251 (7%) Total Thermoplastics 399,165 400,568 0% PP 107,249 111,716 (4%) PE 164,660 164,033 0% PVC 108,811 110,679 (2%) (1) In 1Q04, 105,000 tons (49%) were sold /transferred to Braskem’s Business Units. This amount was 102,000 tons in (45%) in 1Q03. 7* Scheduled shutdown for maintenance and inspection at the Camaçari and PVC Alagoas units carried out in 1Q04
  • 8. Braskem - Exports Exports (US$ Million) -3% 137 133 Exports Market – 1Q04 Europe 20% 1Q03 1Q04 Asia 24% Exports/ Net Revenue North (%) America 21 36% South 18 America 20% 1Q03 1Q04 8
  • 9. Braskem - Income Statement 1Q04 1Q03 Var (R$ Million) (A) (B) (A/B) Net Revenue 2,141 2,292 (7%) Cost of Goods Sold (1,585) (1,823) (13%) Gross Profit 556 469 19% Gross Margin 26% 20% - EBITDA 529 450 18% EBITDA Margin 25% 20% - Equity Income 51 29 76% Operating Income (1) 393 358 10% Operating Margin 18% 16% - Net Financial Result (2) (368) (87) 322% Net Income 10 131 (93%)(1) Before financial income(2) The impact of the net exchange variation on financial income was a negative R$ 75 million in 1Q04, while it was positivein 1Q03 by R$ 193 million. 9
  • 10. Braskem - Net Revenue per BUs R$ Million 1Q04 1Q03 Chg Business Units (A) (B) (A)/(B) Domestic Market 1,758 1,819 (3%) Basic Petrochemical 688 777 (12%) Polyolefins 575 594 (3%) Vynils 383 329 16% Business Dev. 113 119 (5%) Exports 383 473 (19%) Total Net Revenue 2,141 2,292 (7%)Note: Scheduled shutdown for maintenance and inspection at the Camaçari and PVC Alagoas units carried out in 1Q04 10
  • 11. Braskem – Cost of Goods Sold Naphtha price COGS 1Q04 (R$/t) R$ 1,585 Million 1,114 - 16% 1,300 933 1,100 900 Other 700 Variable Costs Others 18.5% 500 Services 1.2% 300 1Q03 1Q04 2.6%Depreciation 5.0% Wages & Benefits 3.0% Materials Naphtha 1.1% 65.1% Electric energy 3.6% 11
  • 12. Braskem – Changes in EBITDA (R$ Million) 187 (19) 529 450 0 (90) Other Operat. Rev./Exp. Sales Volume Reduction Fixed and of Prices Variable Costs 1Q03 1Q04 12
  • 13. Braskem – Evolution of EBITDA and Operating Income(1) EBITDA EBITDA (R$ Million) (US$ Million) +18% +41% 529 183 450 129 1Q03 1Q04 1Q03 1Q04 Operating income (1) (R$ Million) +10% 393 358 1Q03 1Q04 13(1) Before financial income
  • 14. Braskem - Steady EBITDA Growth EBITDA EVOLUTION EBITDA EVOLUTION (R$ million) (US$ million) 529 183 461 159 461 450 157 405 136 1291Q03 2Q03 3Q03 4Q03 1Q04 1Q03 2Q03 3Q03 4Q03 1Q04 14
  • 15. Braskem – Competitive EBITDA Margin EBITDA Margin Petrochemicals (%) Industry Average (*) 25 20 18 14 12 11 1Q03 4Q03 1Q04 * Average EBITDA margins from the following companies : Dow, DuPont, Solvay, Lyondell, Nova Chemicals and Georgia Gulf based on public earnings data from 1Q04 and 4Q03. In 1Q03 includes Basf, Eastman and Reliance in addition to those already mentioned, except Nova Chemicals. 15Source: Thomson Financial Investor Relations
  • 16. Braskem – Participation in Subsidiaries and Affiliated Companies (R$ Thousand) Participation in Related CO´s 1Q04 1Q03 Equity Income from Subsidiaries (694) 69 Equity Income from Affiliates 52,089 29,125 . Copesul 38,727 13,964 . Politeno 8,316 10,666 . Petroflex 4,099 4,554 . Other 946 (59) Foreign Exchange Variation (1,111) 8,210 Other 845 47,716 SubTotal (before amortizations) 51,129 85,121 Amortization of Goodwill (38,186) (65,160) TOTAL 12,943 19,961 16
  • 17. Braskem – Consolidation of Depreciation and Amortization (R$ Thousand) Depreciations and Amortizations 1Q04 1Q03 1. Depreciation/Amortization (COGS) 78,499 68,749 2. Amortization of Deffered Assets and Depreciation of non Operational Assets (Expenses) 70,515 43,796 3. Amortization of Goodwill (Participation in Related CO`s) 38,186 65,160 TOTAL (1 + 2 + 3) 187,200 177,706 17
  • 18. Braskem - Financial Income and FX Rate Effects R$ Million 1Q04 1Q03Financial Expenses (414) (36) Interest/Monetary Restatement/Vendor (284) (286) FX Rate Variation (77) 277 CPMF / IOF / IR (18) (24) Others* (35) (3)Financial Revenues 46 (51) Interest 43 33 FX Rate Variation 2 (84) Others 1 0Net Financial (368) (87)Income Rate Variation Net FX (75) 193Fin. Income before Exchange Rate Variation (293) (280)* Includes updating of tax provisions, financial expenses with suppliers, mark-to-market and hedgeposition and others. 18
  • 19. Braskem – Reduction of Financial Leverage with Improving Liquidity Levels Net Debt/EBITDA (LTM*) Cash, investments and Mkt. Sec. (R$ million) -3% + 92% 2,079 3.52 3.42 1,085 Dec 2003 Mar 2004 Dec 2003 Mar 2004 19* LTM – last twelve months.
  • 20. Braskem – Debt Amortization ScheduleProfile Compatible with Cash Generation and Cash Balance/Investments/Mkt.Sec. (in R$ million) Gross Debt: 8,430 Subordinated debentures, with principal and Net Debt: 6,351 interest due in July, 2007, fully subscribed by the controlling shareholder. 29.1% 27.2% 780 16.6% 9.5% 8.9% 8.6% 2,079 2,455 1,397 752 1,515 802 729 Mar/04 Mar/04 to 2005 2006 2007 2008 2014 Cash, Banks Dec/04 MKTBLE Securities 20
  • 21. Braskem — Management of the Exchange Rate Risk Hedge PolicyBreakdown of Gross Debt by Index (Mar/04) FINANCING LINKED FINANCING NOT CDIIGP-M TJLP TO EXPORTS LINKED TO EXPORTS 18% 14% 2% Trade Finance 18% 100 100 60% 60% 75 % 60 % 0 0 66% Level of hedging protection. US$ POSITION ON 03/31/04 1. 75 % Financing Not Linked 1. Hedge/Investments Hedge to Exports USD 327 MM USD 256 MM 2. 60% Financing Linked 2. Export credits to Exports USD 148 MM USD 150 MM Total : US$ 475 MM Total : US$ 406 MM Overhedge : USD 69 MM 21
  • 22. Braskem – 1Q04 Performance Gross Revenues (R$ million) EBITDA (R$ million) -4% +18% 2,886 2,758 529 450 Net Income (R$ million) 1Q03 1Q04 1Q03 1Q04 D = -R$ 121 131 Evolution of Cash, Banks 10 and Markt. Securities (R$ million) Net Debt / EBITDA (LTM*) + 92% 2,079 -3% 1Q03 1Q04 1,085 3.52 3.42 Mar 2004 Dec 2003 Mar 2004 Dec 2003 22* LTM – last 12 months.
  • 23. Braskem – Synergies Captured 94% of the goal already reached! Synergies * (R$ Million) Goal = 330 310 (2004) 285 260 240 208 Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 23* Gains on recurring and annualized bases
  • 24. Petrochemical Cyle: Utilization Rate in the U.S. Data from CMAI from April 20, 2004 Main Products 2003 2004* 2005* PP 92% 94% 96% HDPE 81% 86% 88% LDPE 89% 91% 93% LLDPE 81% 87% 90% PVC 87% 91% 94% * Estimated 24Source: Chemical Market Associates Inc. (―CMAI‖)
  • 25. Petrochemical Cycle : Evolution of International Prices (Naphtha vs LDPE) Evolution of LDPE/ Naphtha Prices 100 = January 03, 2003160 LD P E140 139 N a pht ha120 118100 80 60 Jan-03 Feb-03 Jun-03 Feb-04 Mar-03 Jul-03 Sep-03 Jan-04 Oct-03 Mar-04 Apr-03 Nov-03 Dec-03 Apr-04 May-03 Aug-03 Naphtha LDPE 25Source: Bloomberg, updated to 04/30/2004
  • 26. Petrochemical Cycle : Evolution of International Prices PVC 893$900 HDPE 840 PP$800 840$700$600$500 Jan-03 Feb-03 M ar-03 A pr-03 M ay-03 Jun-03 A ug-03 Sep-03 Oct-03 No v-03 Dec-03 Jan-04 Feb-04 A pr-04 HDPE - US$ PP - US$ PVC - US$ 26Source: Bloomberg e CMAI, updated to 04/30/2004Prices in US$/ton
  • 27. Petrochemical Cycle: Evolution of Margins Profitability of the U.S. Petrochemical Industry Cash Cost Margin 450 400 350 7 YEARS 10 YEARS 9 YEARS1982 Index = 100 300 250 200 150 100 50 0 1975 1980 1985 1990 1995 2000 2005 2010 Actual Forecast 27 Source: Nexant – Chem Systems
  • 28. Braskem - Value Creation Opportunities Leader in the Latin American thermoplastics market; Integrated operations allowing capture of synergies and competitive costs; Consolidated businesses and superior margins; Expansion of PVC (+50 kton/year) and PP (+100 kton/year) production capacities being implemented; Programs in the areas of Innovation and Technology, Business Competitiveness and Supply Chain Management, focused on the creation of value; Adoption of 100% tag along rights for all shareholders; Potential of growth in sales volumes and profitability in the upcoming years. A Brazilian world-class petrochemical company! 28
  • 29. Presentation of 1Q04 Results Visit our website: www.braskem.com.br