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Oil, gas & petrochemicals conference

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Oil, gas & petrochemicals conference

  1. 1. Oil & Petrochemicals ConferenceJosé Marcos Treiger Luiz Henrique Valverde IRO IR Manager October 2005
  2. 2. Disclaimer Forward looking statementsThe material that follows is a presentation of general background information about BRASKEM as of the date of this presentation. Itis information in summary form and does not purport to be complete. It is not intended to be relied upon as advice to potentialinvestors. This presentation is strictly confidential and may not be disclosed to any other person. No representation or warranty,express or implied, is made concerning, and no reliance should be placed on the accuracy, fairness, or completeness of theinformation presented herein.This presentation contains statements that are forward-looking within the meaning of Section 27A of the Securities Act of 1933 andSection 21E of the Securities Exchange Act of 1934. Such forward-looking statements are only predictions and are not guaranteesof future performance. Potential investors are cautioned that any such forward-looking statements are and will be, as the case maybe, subject to many risks, uncertainties and factors relating to the operations and business environment of Braskem and itssubsidiaries that may cause the actual results of these companies to be materially different from any future results expressed orimplied in such forward-looking statements.Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to,the risks and uncertainties set forth in a prospectus that may be obtained from the underwriters. Although Braskem believes thatthe expectations and assumptions reflected in the forward-looking statements are reasonable, based on information currentlyavailable to Braskem’s management, Braskem cannot and does not guarantee future results or events. Braskem expressly disclaimsa duty to update any of the forward-looking statement.Securities may not be offered or sold in the United States unless they are registered or exempt from registration under theSecurities Act of 1933. Any public offering of securities to be made in the United States will be made by means of a prospectus thatmay be obtained from the underwriters. Such prospectus will contain detailed information about BRASKEM and its business andfinancial results, as well as its financial statements. This presentation does not constitute an offer, or invitation, or solicitation of an offer, to subscribe for or purchase any securities. Neither this presentation nor anything contained herein shall form the basis of any contract or commitment whatsoever. 2
  3. 3. A more ambitious strategic goal To rank amongst the TOP 10 global petrochemical To become companies Latin America’s leader in thermoplastic resins 3
  4. 4. Strong platform for growth A new approach to the Brazilian petrochemical sectorOil exploration 1st Generation 2nd Generation 3rd Generation Naphtha and Condensate Competitiveness INTEGRATION New dynamics in the value chain 4
  5. 5. Strong platform for growthR$ 350 million per year in recurring synergies already captured R$ million 350 330 310 (2004) 285 260 240 208 Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 Dec/04 Target 5
  6. 6. Strong platform for growth Largest production scale in the region: cost competitiveness 5.8 million tons in total annual capacity of petrochemical and chemical products 3,255 Thousand tons / year 525 PVC 580 PP PE Ethylene 870 1,438 1,135 610 1,060 670 540 630 625 561 1,280 350 150 130 828 520 520 500 476 85 Braskem Dow Copesul1 Rio Polímeros2 Ipiranga Unipar Suzano Solvay Politeno11. Braskem’s affiliates: a) Braskem jointly controls Copesul with the Ipiranga Group b) Braskem owns 33.9% of Politeno´s total capital2. Jointly owned by Suzano, Unipar, Petroquisa e BNDESSource: CMAI and Braskem – 2005 (year-end capacities) (year- 6
  7. 7. Strong platform for growth Leading market shares in Brazil - 2004 Polyethylene (PE) PVC 29% 57% 55% 29% 16% 14% Polypropylene (PP) Ethylene* 40% 43% 51% 57% 9% BRASKEM IMPORTS OTHERS(*) Based on production capacitySource: Braskem and ABIQUIM - 2004 7
  8. 8. Strong platform for growth Consistent operational performance: ~US$ 1 Bi EBITDA last 12 months EBITDA – LTM* R$ million 2,708 2,663 2,459 Gross Revenue– LTM* 2,066 2,349 R$ million 1,856 15,866 15,581 14,342 13,654 12,006 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 11,156 EBITDA – LTM* US$ million 975 947 872 794 701 635 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 *LTM – last twelve monthsSource: Braskem 8
  9. 9. Strong platform for growth Solid financial and capital structure Net Debt/EBITDA 5.1 Net Debt Evolution 3.5 US$ million 1.5 1.1 2,166 1,929 2002 2003 2004 1H05 1,452 1,221 Debt/ Equity 57% 54% 80% 78% 2002 2003 2004 1H05 43% 46% 20% 22% 2002 2003 2004 1H05Source: Braskem 9
  10. 10. Strong platform for growth High Standards of Corporate Governance A Level 1 Company in BOVESPA since February 13th, 2003 Commitment to move up to BOVESPA’s Level 2, in 2005 100% tag-along rights - in case of transfer of control - for all shareholders and all classes of shares Code of Conduct: sets values, principles and practices governing corporate behavior Pre-established corporate policies: – Trading of securities – Financial management – Insurance and Guarantees – Health, Safety and Environment Compliance with SOx by Dec 2005 10
  11. 11. Strong platform for growth…...new steps in the value creation process New Integrated Management System A World-Class Company Strong platform for growth • Best practices R$ 350 million per year in recurring synergies, already captured R$ million • Simplification 310 350 330 • Integration • SOx Compliance 285 (2004) 260 240 New Level of 208 Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 Dec/04 Target 5 Competitiveness Technology and Innovation Synergies Braskem Business System 11
  12. 12. New steps in the value creation process Braskem Technology and Innovation Center Innovation Projects Focus on value creation for customers – Product customization – New applications – Client services Premium pricing and Potential customer loyalty Value RANPV* (US$ million)(*) NPV@risk calculated for a 5-year period at a discount rate of 11% 12
  13. 13. New steps in the value creation process R$ 420 million in productivity gains planned for 2007 R$ 192 million accomplished by 1H05 R$ million/year 420 + 37% 360 192 170 140 Target Achieved Target Target Target 1H05 1H05 2005 2006 2007 Annualized and recurring basis Investments: R$ 334 million IRR: 79% 13
  14. 14. New steps in the value creation process ERP Project: a new integrated management system encompassing all business processes Investment of R$ 130 million Implementation until January 2007 NPV of R$ 260 million 14
  15. 15. Ethylene production capacity expansions in Asia and in the Middle East Even with the forecasted expansion, capacity utilization levels shall remain high (above 90%) in the next years (2005-2007). Saudi Arabia Others – Middle East Total 2005-2007 = 300 thousand tons Region total = ZERO 3850 2500 3600 1000 850 1000 World 300 Ethylene 0 0 Capacity in 0 0 0 2005 2006 2007 2008 2009 2010 2005 2005 2006 2007 2008 2009 2010 117 million Iran ? ton/year Asia – India, China* and Taiwan 6000 Total 2005-2007 = 3,970 thousand tons (?) Total 2005 - 2007 = 3,600 thousand tons 3100 1620 1350 2000 1000 1000 1600 850 900 0 0 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010? = Capacity additions in Iran have been systematically postponedSource: Deutsche Bank and CMAI – information updated until June/05 (in 000 ton/year) * Not including potential projects in China 15
  16. 16. Global Supply and Demand Balance Supply Demand Relevant Ethylene capacity growth should be Global GDP growth at approximately 4% per concentrated in Asia and in the Middle East from year, from 2005 to 2008; 2008 to 2010; Increase in global demand for main thermoplastic Delays in the addition of new Ethylene capacities products (PE/PP/PVC); should make the cycle last longer; Gradual inventory reduction expected by 2007; Global capacity utilization rates above 90%. China should remain as a net petrochemical importer until the end of the decade M2 Prices and Margins Expectation of higher margins for petrochemicals through 2007; Raw material prices (oil and naphtha) continue to have the highest impact on margins; Margins should maintain their high levels.Source: CMAI / Braskem 16
  17. 17. Slide 16M2 Not sure MZ-Consult; 9/8/2005
  18. 18. Strategic drivers for the future Internationalization Organic Growth Value creation Enhancement of the Selective Aromatics Chain Growth 17
  19. 19. Organic Growth Brazil: a growing and dynamic market for thermoplastic resins… Overall Market Consumption (Polyethylene, Polypropylene and PVC) Elasticity: 3.0x Ton (000) GDP growth 3,419 3,107 2,293 8.0% CAGR* 1,601 1993 1996 2000 2004* Compounded Annual Growth RateSource: The Brazilian Association of Chemical and Derivative Products (ABIQUIM) and BraskemSource: 18
  20. 20. Organic Growth …and strong potential for growth Per-Capita Thermoplastics Consumption – 2004 kg / person Brazil 45.2 China Europe 32.0 USA 21.3 22.8 20.4 14.2 9.8 5.9 7.5 5.6 3.7 5.4 PVC Polypropylene PolyethyleneSource: Chemical Market Associates, Inc. (CMAI) and Braskem / 2004Source: Associates, 19
  21. 21. Shareholder Structure * PREVI PETROQUISA NORQUISA ODEBRECHT PETROS Free-Float 2.5% 2.6% 10.0% 8.4% 25.4% 9.1% 48.6% 31.7% 2.4% 1.5% 11.0% 46.5% 29.5% 29.5% 100% 63.7% 35.0% 33.9% POLIALDEN % Voting Capital - % Total Capital* June 30, 2005. 20
  22. 22. Organic Growth Industry Consolidation: Petroquisa Option Potential for important synergies and impact on Braskem’s future cash flow Recent amendment establishes new terms and conditions – Option to increase Petroquisa’s voting capital in Braskem from 10% to 30%, through capitalization of petrochemical assets – List of assets to be disclosed by Petroquisa no later than September 29, 2005 – All assets will be valued based upon respective discounted cash flow (DCF method) – Option deadline: December 31, 2005 21
  23. 23. Selective Growth Paulínia Project: becoming the #1 Venezuela Polypropylene player in the region Joint Venture with Petroquisa: – 60% Braskem – 40% Petrobras 350Kt PP annual production capacity Brazil / US$ 240 mm investment Bolivia Polymer – Grade Propylene supplied by Paulínia Petrobras Start up – end 2007 / beginning 2008 New greenfield capacities based on competitive raw materials with high rates of return PP: Venezuela: 400 kt in partnership with Pequiven* PE: Brazil-Bolivia complex: 600 kt (2009) ** To be presented to Braskem´s Board of Directors 22
  24. 24. Enhancement of the Aromatics Chain Opportunities for Value Creation from aromatics, fuels and by-products Paraxylene capacity increase, combined with a potential downstream integration to produce PTA Start ETBE production - as an alternative to MTBE Isoprene debottlenecking Butadiene profitability enhancement 23
  25. 25. Internationalization Product and Process Technology Agreement with Basell for the development of processes and products related to the spherilene (PE) technology Technology licensing for Petroquímica Paulínia Development of new products and services – 10% of 2004 revenues from sales of new products developed in the previous 2 years A pioneer in nanocomposite research in Latin America: – Focus on cost reduction and performance improvement for thermoplastic resins 24
  26. 26. Internationalization Strategic presence in international markets Evolution of exports Destination of exports – 1H05 US$ million Row ~1 Bi * 2% Asia 14% 710 617 South North America America 41% 301 509 18% 1H05 Europe 25% 2002 2003 2004 2005* Annualizing 1H05 exports 25
  27. 27. Strategy to grow with value creationExpand production and sales Strengthen market leadership inoutside of South America, Brazil through consolidation in thecapturing value and creating a local market, capturing synergiesgrowth platform for the future Internationalization Organic Growth Value creation Enhancement of the Selective Aromatics Chain GrowthLeverage aromatics production Consolidate market position inchain by broadening its portfolio key products in Latin Americaof products and services in the and guarantee competitivelocal market sources of raw material 26
  28. 28. A unique investment opportunity Market leadership in the region Consistent operational performance Solid financial structure Ongoing competitive improvements: and ERP Structural market growth opportunities in the region Consolidation in the Brazilian Petrochemical Industry: an opportunity for value creation Greenfield projects in the region based upon access to competitive raw materials Technology autonomy to pursue internationalization High Standards of Corporate Governance 27
  29. 29. Oil & Petrochemicals ConferenceJosé Marcos Treiger Luiz Henrique Valverde IRO IR Manager October 2005

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