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Itau annual brazil conference

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Itau annual brazil conference

  1. 1. Itaú Annual Brazil Conference May 2009
  2. 2. Forward-looking StatementsThis presentation contains forward-looking statements. Such statements are notstatements of historical facts, and reflect the beliefs and expectations ofBraskem’s management. The words “anticipates”, “wishes”, “expects”,“estimates”, “intends”, “forecasts”, “plans”, “predicts”, “projects”, “targets”and similar words are intended to identify these statements. Although Braskembelieves that expectations and assumptions reflected in the forward-lookingstatements are reasonable based on information currently available to Braskem’smanagement, Braskem cannot guarantee future results or events.Forward-looking statements included in this presentation speak only as of thedate they were made (March 31, 2009), and the Company does not undertake anyobligation to update them in light of new information or future developments.Braskem shall not be responsible for any transaction or investment decisions thatare taken based on information included in this presentation. 2
  3. 3. Agenda The Company & 1Q09 Financials Petrochemical Industry Key Differentiators 3 3
  4. 4. Braskem in a snapshot Leading petrochemical company in Latin America Third largest resins producer in the Americas Diversified portfolio of petrochemical products, with focus on PE, PP and PVC 18 facilities plants in Brazil and annual production capacity of 11 million tons of chemical and petrochemical products Key financials, 2008 Gross revenue = US$ 12.8 billion Net revenue = US$ 10.0 billion (78% in Brazil) Ebitda = US$ 1.3 billion Assets = US$ 9.7 billion Listed at Bovespa, NYSE and LATIBEX 4
  5. 5. Ownership Structure – Leveragingrelationship with Petrobras % Voting Capital % Total Capital ODEBRECHT GROUP PETROBRAS BNDESPAR OTHERS 62.3% 38.3% 31.0% 25.3% 0.0% 5.1% 6.7% 31.3%Leveraging relationship with Petrobras: NOC alliance • Potential for operational synergies with refineries and partnership with Petrobras R&D Center • Alliance to strengthen Brazil’s petrochemical value chain – Consolidation around 2 large competitors (Braskem & Quattor) – Access to competitive raw materials – Improved value chain competitiveness • Corporate governance standards: Shareholders’ agreement 5
  6. 6. Enhanced competitivenessthrough value chain integration Industrial integration Oil/Gas-refineries Basic petchem Resins Converters Naphtha/Gas PE/PP/PVC Resins Market Share 51% 2008 Source: Braskem / Abiquim 6
  7. 7. Track record of strong and consistentorganic growth and acquisitions Rank amongst the 10 Become the largest largest petrochemical thermoplastic resins companies in the world producer in Latin measured by EV* America Triunfo Paulinia IPQ / CPS Politeno 2009 2012 Polialden 2007 2008 2006 Trikem 2002 5,901 5,551Braskem’s Ethylene andresins capacity (kt) 22% CAGR 3,621 Acquisitions 3,045 3,145 3,2251,200 Organic growth2000 2002 2004 2005 2006 2007 2008 * Enterprise Value 7
  8. 8. Applied Innovation and technology tostrengthen value chain competitiveness Structured resource base to support client needs • Focus on product and application development Over US$ 160 million in R&D assets – 18% of resin sales derive from products 200 researchers developed in the last three years – Focus on clients’ end 8 pilot plants users • Targeted initiatives for 219 patents filed breakthrough technology Partnership with universities and R&D centers in – Nanotechnology and intelligent packaging Brazil and abroad – Renewables 8Source: Braskem 8
  9. 9. Growth combined withimproved competitiveness Green PE: − Cornerstone laid for its green ethylene plant in 04/22/09 − Investments of R$488 million and start-up expected for the end of 2010 − Competitive product with oil at US$45/bbl − 60% of the volume with long-term commercial agreements nearing completion − Financing package with BNDES approved in 05/ May Venezuela: Polipropileno del Sur (Propilsur) - Negotiations with BNDES Exim for Brazilian equipment and services related to the project - Due Diligence expected for the coming months - Project Finance expected for 2H09 - Investment final approval expected for 2H09 Polietilenos de America (Polimerica) − Ongoing licensing agreements with technology suppliers 9
  10. 10. Global Scenario. US producers (gas base) more competitive and local market remains weak. Supply problems at the Asian market. Prices in Asia expected to drop in 2H09 due to Middle East and India supply. Global ethylene capacity: . 6 MMt starting operations – 80% in the Middle East . 7 MMt stopped or iddle – USA and Europe (excludes Asia) . 4 MMt delayed – Middle East and Asia. Consumption of non-durable goods in Brazil shows resilience when compared to2008. Brazilian industries with best performances in the period: Packages, HomeAppliances, Consumption Goods, Personal Hygiene and Cleaning. Industries still presenting poor performance: Agribusiness, Automotive,Construction 10
  11. 11. 1Q09 Achievements. New Naphtha Agreement: - agreement under confidentiality clause regarding disclosure of price formula - clause assuring adjustment to ARA quality standard - price formula to weaken volatility and improve predictability - foreseen discount and premium over ARA reference - ~60% of volume from Braskem - 5 years, renewable for other 5 years. Maintenance of financial discipline: cash of R$ 3 billion. Resumption of full capacity in March (95% ethylene). Doubled exports when compared to 4Q08. Inventories average cost leveled with production costs in March. Productivity program leads to a reduction of R$ 78 million in SG&A in the quarter. Reduced disbursement with investments 49% lower vis a vis 1Q08 11
  12. 12. Braskem sales by industry: growing non- durable goods % PE Sales 20O8 % PE Sales 1QO9 CLEANING MATERIAL OTHERS CLEANING MATERIAL AND HYGIENE 18% RETAIL 16% 6% AND HYGIENE 15% OTHERS 12% 8% AGRICULTURE AGRICULTURE RETAIL 13% 6% 52% 2% CONSUMER GOODS 7% CONSUMER GOODS 36%37% 8% FOOD CONSTRUCTION 4% CONSTRUCTION 24% 4% PACKAGING 2% CHEMICALS AND FOOD PACKAGING 4% CHEMICALS AND AGROCHEMICALS 3% AGROCHEMICALS 3% AUTOMOTIVE 9% AUTOMOTIVE COSMETICS AND PHARMACEUTICALS HYGIENE, COSMETICS AND PHARMACEUTICALS % PP Sales 20O8 % PP Sales 1QO9 CONSUMER GOODS ELECTRIC AND ELECTRIC AND ELECTRONIC ELECTRONIC 17% 7% CONSUMER GOODS 6% 15% CLEANING INDUSTRIAL CLEANING MATERIAL 6% MATERIAL AND 10% AND 15% INDUSTRIAL HYGIENE HYGIENE 8% 9% AUTOMOTIVE47% 55% 5% AGRICULTURE 7% AUTOMOTIVE 4% COSMETICS AND FOOD 31% FOOD 33% 6% AGRICULTURE PHARMACEUTICALS PACKAGING PACKAGING 12% 3% COSMETICS AND OTHERS 6% PHARMACEUTICALSSource: Braskem OTHERS 12
  13. 13. March performance shows trends for theupcoming quarter Resins Sales Volume in the Domestic 2Q09 Trend in the Domestic Market Market Volume Price Revenue Cost PP PE PVCOct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09Source: Braskem 13
  14. 14. EBITDAReduced resins prices overcome the positive impactfrom lower raw material pricesR$ milhões FX impact 60 on revenue FX impact (44) on costs 26 23 86 97 1,175 565 458 (1,514) Raw Taxes 4Q08 Materials Volume FX SG&A Price 1Q09 (PIS / Cofins)Soure: Braskem 14
  15. 15. Short-term debt well managed and long-term debt well distributed with an average term of 11 years R$ Million (03/31/09) Gross Debt: 12,151 Net Debt / Ebitda (x) R$ Net Debt / Ebitda (x) US$ Net Debt: 9,181 Average Term: 10.5 years 4.00 3.73 3.31 2.89 72% of the debt are pegged to the USD +7,2% +15% Cash and Equivalents 2,970 Dec08 Mar09 Dec08 Mar08 1,814 14% 13% 13% PFICO 12% 12% 10% 11% 726 9% 1,570 1,457 1,448 6% 1,628 1,156 1,346 1,225 1,158 943 710 03/31/09 2009 2010 2011 2012 2013 2014 / 2016 / 2018 / 2020 2015 2017 2019 onwards In R$ Value related to the loan granted by a Petrobras subsidiary for the delisting of Copesul, In US$ due in October 2009Source: Braskem 15
  16. 16. Agenda The Company & 1Q09 Financials Petrochemical Industry Key Differentiators 16 16
  17. 17. Petrochemical Cycle: Good naphtha X resins spreads even with lower ethylene utilization rate Global ethylene supply-demand and operating rate, Points of concern Mton/y. % 146 143 • US/EU slowdown 140 130 134 • Incentives to sustain supply buildup 130 118 123 – China: import substitution 114 114 – Middle East own agenda • Credit availability 87% • Change on petrochemicals ownership 86% 84% 83% 82% Supply & Demand Balance Potential positive factors 2008 2009 2010 2011 2012 • Frequent delays in new capacities CMAI Utilization Rate Feb/09 1 2 3 Supply Demand 5 • Supply-demand geographical imbalance Spread PEAD/Naphtha X Ethylene Utilization Rate leads to logistics barriers 91 91 • Increased economic importance of 702 717 emerging countries with relevant 751 750 84 83 domestic consumption 638 562 77 528 • China: raw materials less competitive • Opportunities from assets on sale 474 • 7MMton of capacities temporarilyJan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 shutdown Spread PEAD/Naphtha US$/ton Utilization Rate % Utilization Rate 2009e % Source: CMAI 17
  18. 18. 5% of the world ethylene capacityshutdown or idle Dow (USA) - Dec/08: 522 kton cracker New capacity addition (kton): - Jan/09: 390 kton cracker - Feb/09: 102 kton of LDPE and 998 kton cracker Westlake (USA) - Dec/08: 544 kton cracker Lyondell Basell (USA/Europe) 4,203 - Feb/09: 544 kton cracker in USA; 185 kton of LDPE, UK, and 110 kton of LDPE, France 1,145 Basf (Europe) - Mar/09: 240 kton cracker, Germany 452 Sabic (Europe) - Feb/09: 865 kton cracker, UK 1,825 ExxonMobil (USA) - Sep/08: 826 kton cracker Formosa Plastics (USA) 4,890 - Nov/08: 680 kton cracker 3,533 DuPont (USA) - Sep/08: 680 kton cracker Flint Hill Resources (USA) - Jan/09: 348 kton cracker Chevron Philips (USA) 2009 2010 - Nov/08: 295 kton cracker Eastman Chemical (USA) Middle East Asia Ex-China China - Nov/08: 141 kton cracker Source: Chemsweek’s Business Daily / HSBC / CMAI 18
  19. 19. Resins demand grows even in economicslowdown periods PE Demand X World GDP6.0% 80,000 70,0005.0% 60,0004.0% 50,0003.0% 40,000 30,0002.0% 20,0001.0% 10,0000.0% 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 World GDP Growth Economic Slowdown PE DemandSource: CMAI / IMF 19
  20. 20. Agenda The Company & 2008 Financials Petrochemical Industry Key Differentiators 20 20
  21. 21. Brazil: A stable economy Structural changes have prepared the country to the current environment Economic policy based on inflation target, fiscal responsibility and floating exchange rate GDP growth and inflation % % GDP interest Competitive, diversified and open economy 7 7 6 6 Liquid financial system 5 5 Mature democracy 4 4 3 3 Broad and consumerist domestic market 2 2 1 1 Greater competitiveness of Brazilian multinationals 0 0 2007 2008 2009 2010 Focus on improving social conditions (health, education, -1 -1 GDP Inflation income distribution) Sovereign debt in a record low, rated investment grade (S&P, Fitch)Source: Tendências Consulting - Bradesco and Santander Perspectives 21
  22. 22. Brazil: dynamic market with still low per capita consumption• PE, PP and PVC per capita consumption (Kg per person) 81 71 55 Brazil 5.2% CAGR* 21.9 22.7 18.7 20.2 15.4 16.6 16.1 17.8 17.5 18.0 14.5 16.2 13.611.1 12.51994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 USA Europe Japan PE PP PVC 22Source: CMAI *Compound annual growth rate 22
  23. 23. In Brazil, companies are exposed to a dynamic market with resilient growth…• Domestic demand for resins • USA Demand for resins (Kton) 5.4% CAGR -1.2% 3% CAGR 10% 4,172 9% 4,048 3,694 1% 3,435 3,377 25,904 25,020 -3% 856 982 24,749 2,880 24,212 -12% 749 749 23,276 692 21,341 6,081 5,907 1,228 1,218 5,421 5,563 1,114 1,114 990 4,328 6,350 6,287 6,153 5,922 1,964 1,972 1,833 1,695 1,833 12,318 12,826 12,638 11,091 2001 2004 2005 2006 2007 2008 2001 2004 2005 2006 2007 2008 PVC PP PESource: Abiquim – domestic sales + imports Source: NAD - CMAI 23
  24. 24. … and a high level of consolidation • Number of Producers • 2 Top producers share 100% 100% 11 93% 13 9 42% 52% 3 30% 2 2 PP PE PVC PP PE PVC BRAZIL USA 24Source: Braskem / CMAI 24
  25. 25. Braskem is prepared to seize the opportunities offered by this environment n re atio e c C valu w ith Expand access to w G ro attractive markets BStrengthen current position Assure regional low-cost raw A material and energy supplies • Expansion of Green-PE Increase and and renewable protect core Latin • M&As American business • Global Alliances • Gas crackers in Latin America• Operational and commercial excellence • Brazilian sugar cane ethanol• Relationship with Petrobras• Value-chain virtual integration – Refineries and raw materials – Logistics and services – Innovation and technology• Enhancement of aromatics and crackers’ products• Regional leadership 25
  26. 26. Short Term Focus Clients’ proximity Focus on financial health and liquidity Productivity Program: cost reduction Defend Brazilian petrochemical and plastic chain against imported products Identification of synergies with Petrobras Construction of the Green PE plant Analysis of opportunities arising from crisis: selective acquisitions Greater operational and financial strength 26
  27. 27. Itaú Annual Brazil Conference May 2009
  28. 28. Appendix I 28
  29. 29. Resins Capacity in the Americas Capacity of resins in Latin America, kt 3,600 Brazilian assets 1,895 692 682 521 438 Braskem*Quattor** Dow Mexichem Solvay Ecopetrol Capacity of resins in Americas, kt 5,774 PVC 64 PP 615 PE 4,646 3,600 2.949 1,833 515 1,110 1,210 2,161 5,095 2,813 2,040 761 1,235 1,975 978 926 Dow Lyondell Braskem Formosa Ineos Shintech Source: CMAI Basell 2 9 * Includes Petroquimica Triunfo s plant ´ **JV between Unipar (60%) and Petrobras (40%). The production is segregated between 1,020 kt in PE and 875 kt in PP 29
  30. 30. Income statement Change Change ChangeMain Economic 1Q09 4Q08 1Q08 2008 2007Indicators (A) (B) % % (D) (E) % ( C) (A)/(B) (A)/( C) (D)/(E)Net Revenue 3,155 4,132 4,401 (24) (28) 17,960 18,788 (4)EBITDA 458 565 601 (19) (24) 2,418 3,250 (26) EBITDA Margin 14.5% 13.7% 13.7% 0.8 p.p. 0.8 p.p. 13.5% 17.3% -3.8 p.p.Net Financial Result (209) (2,243) (219) - (5) (3,685) (367) 903Net Income / Loss 10 (2,140) 80 - (88) (2,492) 642 - 30
  31. 31. Revenues breakdown 31
  32. 32. CoGs Breakdown 32
  33. 33. Plants operating at full capacity in March Utilization Rate % ETHYLENE PE PP PVC 97% 104% 95% 95% 89% 73% 73% 74% 76% 69% 70% 64% 1Q08 4Q08 1Q09 1Q08 4Q08 1Q09 1Q08 4Q08 1Q09 1Q08 4Q08 1Q09 Resins Production Kt Monthly Utilization Rate - Ethylene Kt 704 611 95% 599 78% 47% +2% 1Q08 4Q08 1Q09 Jan Feb MarSource: Braskem 33
  34. 34. Outstanding Bonds & Outstanding Ratings Coupon Yield * Outstanding Bonds Maturity (% p.a.) (% p.a.) US$250 MM Jan/2014 11.750 7.5 US$250 MM Jun/2015 9.375 7.6 US$275 MM Jan/2017 8.000 8.1 US$500 MM Jun/2018 7.250 8.0 US$150 MM Perpetual 9.750 11.1 US$200 MM Perpetual 9.000 11.7 * As of May, 15th Corporate Credit Rating – Global Scale Agency Rating Outlook Fitch Ratings BB+ Stable S&P BB+ Stable Moody’s Ba1 StableSource: Braskem / Bloomberg 34
  35. 35. Covenants RATIO Net Debt / Ebitda (x) Net Debt / EBITDA US$ R$ 4.00 < 4.5X 3.31 Mar09 Mar09 Facility Amount Currency Type 2010 and 2011 Debentures R$800 MM R$ Incurrence* 2014 Medium Term Notes US$250 MM R$ Incurrence* Nippon Export and US$80 MM US$ Maintenance Investment Insurance EPP (Export Pre-Payment) US$725 MM US$ Maintenance * The company is prevented from issuing any new debt for the period if it overcomes the 4.5x Net debt / Ebitda ratio.Source: Braskem 35
  36. 36. Focus on priority investment projects R$ million 2,279 Investments in Equity Stake 885 (Ipiranga Group/Politeno) Capacity increases / 195 Petroquímica Paulínia 909 238 Equipment Replacement Health, Safety and Environment 172 Capacity increases / Green PE 161 91 Technology Equipment Replacement 213 202 Productivity Health, Safety and Environment 203 14 Technology 407 Maintenance 74 Productivity 55 Information System 233 Maintenance / Others 45 Quality / Others 2008 2009eSource: Braskem 36

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