Presentation 2 q10 results

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Presentation 2 q10 results

  1. 1. Meeting with Investors2Q10 ResultsBernardo Gradin CEOMarcela Drehmer CFO
  2. 2. Forward-looking StatementsThis presentation contains forward-looking statements. These statements are nothistorical facts and are based on management’s objectives and estimates. Thewords "anticipate", "believe", "expect", "estimate", "intend", "plan", "project","aim" and similar words indicate forward-looking statements. Although we believethey are based on reasonable assumptions, these statements are based on theinformation currently available to management and are subject to a number ofrisks and uncertainties.The forward-looking statements in this presentation are valid only on the datethey are made (June 30, 2010) and the Company does not assume any obligationto update them in light of new information or future developments.Braskem is not responsible for any transaction or investment decision takenbased on the information in this presentation. 2
  3. 3. Agenda 2Q10 Results Growth with Value Creation 3
  4. 4. Agenda 2Q10 Results Growth with Value Creation 4
  5. 5. Scenario By the end of 2Q10, resins and basic petrochemical prices (in general) reversed their upward trend: Slight slowdown in Asian demand (reduction in government economic stimulus measures); Uncertainty regarding economic recovery in developed countries; Decline in raw material prices; Decrease in resins international prices by the end of April reflected in lower prices in the Brazilian market in June. Focus in profitability led to a temporary increase in Company’s resins inventory. Key factors in the 2nd half of 2010: Weakening of Asian market, combined with new capacity startups in Asia and the Middle East Real strengthening of world economy versus reduction in government stimulus measures Mitigating factors in the 2nd half of 2010: Scheduled shutdowns at U.S. refineries and hurricane season could affect production in 3Q10 Inventories building in 3rd generation operations In Brazil, demand for thermoplastic resins is expected to grow by 10% per year, following GDP growth and led by the PVC market Resins imports increased in June, reaching 30% of the PE market. This share should return to historical levels during the 2nd half of the yearSource: Braskem / CMAI 5
  6. 6. Highlights Recurring declines in Net Debt/EBITDA (LTM*): 2009 – 3.46x, 1Q10 – 3.12x and 2Q10 – 2.84x Consolidated pro-forma EBITDA (LTM) of R$ 3.8 billion with EBITDA margin of 15.5% Quattor increases cracker operating rates to 83% in 2Q10, with better stability of raw material supply. EBITDA reaches R$ 214 million, for EBITDA margin of 15.0%, up significantly from 8.8% in 1Q10 Reduction on PP operating rates due temporary decrease on exports competitiveness Brazilian team managing Braskem America assets Green ethylene plant in commissioning and pre-operational phase to supply global markets beginning September 2010 Merger by Braskem of stock in Quattor Participações S.A. on June 18 (on schedule), making it a wholly owned subsidiary of Braskem Funding of around R$ 1 billion, of which US$ 350 million was in 10-year bonds at 6.875% yield, the lowest ever obtained by Braskem Synergies from acquisitions estimated at R$ 400 million in annual and recurring EBITDA as of 2012, beyond R$ 340 million in net present value of financial synergiesSource: Braskem * LTM: last 12 months 6
  7. 7. Increase in Quattor capacity operating rate positively impacted 2Q10 Braskem consolidated operating rate % Ethylene Polyethylene Polypropylene PVC 92%* 89% 95% 98% 87% 84% 81%* 76% 83% 83% 79% 81% 2Q09 1Q10 2Q10 2Q09 1Q10 2Q10 2Q09 1Q10 2Q10 2Q09 1Q10 2Q10 Quattor better performance: 12 pp growth in ethylene operating rate – 83% in 2Q10 versus 71% in 1Q10 15 pp growth in PE operating rate – 76% in 2Q10 versus 61% in 1Q10 Crackers and 2nd generation plants, in general, show recovery of operating level in 2Q10 Scheduled shutdown in Camaçari affected PVC operating rate in 2Q10Source: Braskem * 2009 data does not include the 200 kton expansion in Quattor 7
  8. 8. Demand stability in 2Q10 reflects sectors good performanceApparent Consumption (Kton) +10% 4,720 4,173 4,291 4,048 1H10 2007 2008 2009 2010e Food Retail Hygiene and Cleaning Agribusiness Domestic demand performance Consumer Goods by sector: Construction Relevant Automotive Moderate Electric and Electronic Low / RetractionSource: Abiquim, Braskem estimates, Tendência Report, IBGE, Anfavea 8
  9. 9. Historical Prices PE prices evolution (100 basis) PP prices evolution ( 100 basis) 130 140 130 120 120 110 110 100 100 90 90 80 80 Jun-09 09 Jun-10 10 aug/09 aug/10 dec/09 apr/09 feb/10 apr/10 oct/09 Jun-09 09 Jun-10 10 aug/09 aug/10 dec/09 apr/09 feb/10 apr/10 oct/09 International Market Brazilian Market International Market Brazilian Market Resins prices show signs of recovery in the international market Recovery expected already in AugustSource: CMAI 9
  10. 10. Domestic Market Performance Share of Imported Resins Origin of Imports 2Q10 (PE, PP and PVC) Latin America 25% 26% 25% 25% (others) 1% 19% 20% Others 13% Europe 12% North America Asia 28% 10% 1Q09 2Q09 3Q09 4Q09 1Q10 1Q10 Mexico 1% Colombia Argentina 19% 16% Imports followed domestic market growth Import Duties = 0% Local offer is not sufficient to meet supply PVC demand Americas represent 65% of importsSource: Braskem 10
  11. 11. Strong cash generation and competitive margins R$ million 2Q10 1Q10 2Q09 Change Change Key Indicators (A) (B) (C) (A)/(B) (A)/(C) Strong cash generation Net Revenue 6,539 6,272 4,996 4% 31% mainly due to the EBITDA 1,042 909 735 15% 42% improvement on Quattor operational performance EBITDA Margin 15.9% 14.5% 14.7% 1.4 p.p. 1.2 p.p. Productivity gains already reflecting on 2nd quarter 2Q10 1Q10 2Q09 Change Change result Financial Result (A) (B) (C) (A)/(B) (A)/(C) Focus on capturing Net Financial Result (575) (880) 1,379 -35% -142% synergies Foreign Exchange (FX) and Monetary Variation (MV) (216) (374) 1,666 -42% -113% Financial Result excluding FX and MV (359) (506) (287) -29% 25% Significant improvement Interest Expenses / Revenues Net (165) (129) (153) 28% 8% on results after financial crisis Tax Assets and Liabilities (40) (287) (30) -86% 34% Others (155) (90) (105) 71% 47%Source: Braskem 11
  12. 12. EBITDA Trends – 1Q10 vs. 2Q10 The better domestic prices through May, following the R$ million international market, offset the higher raw material prices in 2Q10 FX Impact on 26 Costs FX Impact -38 on Revenue 213 (5) 1,042 (12) (20) (43) 909 EBITDA Contribution Volume FX Fixed Costs + Others EBITDA 1Q10 Margin SG&A 2Q10Source: Braskem 12
  13. 13. EBITDA Trends– 1H09 vs. 1H10 Better resins performance in the international market, R$ million partially offset by the US dollar depreciation, led to a 51% EBITDA growth FX Impact on 1,653 Costs FX Impact on Revenue -2,474 1,362 10 1,951 (821) 297 (190) 1,293 EBITDA Volume Contribution FX Fixed Costs + Others EBITDA 1H09 Margin SG&A 1H10 ‘Others’ includes R$36 million of non recurring revenue from the 1H09 andSource: Braskem R$27 million of non recurring expenses in 1H10 13
  14. 14. Leverage falls below 3x for the first time since the acquisition Anticipation of debt payment in the amount of R$4.1 billion Gross Debt (million of R$) Gross Debt (million of US$) Average Term (in years) 17,233 9,676 8.20 24% -17% 14,384 7,984 6.60 -17% Mar 10 Jun 10 Mar 10 Jun 10 Mar 10 Jun 10 Net Debt/ EBITDA Net Debt/ EBITDA (million of R$) (million of US$) -9% -12% 3.12x* 3.23x 2.84x 2,84x Mar 10 Jun 10 Mar 10 Jun 10 * After capital increase of R$3.74 billion and payments related to the acquisition of Quattor (R$700 million) and Sunoco Chemicals (R$630 million)Source: Braskem 14
  15. 15. Comfortable cash position covers approximately 2 years of debt amortizations Amortization Schedule* R$ million (06/30/10) 64% of debt pegged to USD 25% 3,475 1,197 16% 3,642 13% 12% 12% 9% 9% 2,346 1,889 2,278 1,731 1,631 4% 1,315 1,299 584 06/30/10 2010 2011 2012 2013 2014/ 2016/ 2018/ 2020 Cash 2015 2017 2019 onwards Invested in R$ Invested in US$Source: Braskem * Does not include transaction costs 15
  16. 16. Investments in 2010 amount to R$1.6 bi Investments R$ million 1,617 56 Braskem America 35 Venezuela 360 Quattor 621 Quantiq 10 7 72 Mexico 119 254 Green PE 7 192 Equipment Replacement 251 52 Capacity Increase / PVC Alagoas 317 Maintenance 63 8 61 Productivity New Projects 101 Industrial Assets 21 208 Others 44 Projects with Petrobras 1H10 2010eSource: Braskem 16
  17. 17. Quattor synergies of R$ 400 million in EBITDA as of 2012 R$ million 43 79 400 Investment of R$ 350 million required to capture all 279 synergies Financial synergy NPV estimated in R$ 340 million Industrial Logistics Supply EBITDA Synergies Production mix Maximization of Joint management Seizing the cracker gains from product of feedstock streams distribution purchases (domestic and Renegotiation of Optimization of export markets) third-party inventories Optimization of agreements (a) modes 17Source: Braskem Recurring
  18. 18. Agenda 2Q10 Results Growth with Value Creation 18
  19. 19. Strategic Direction “BECOME THE GLOBAL SUSTAINABLE CHEMICALLEADER, INNOVATING FOR BETTER SERVE THE PEOPLE”.
  20. 20. Outlook on the global petrochemical industry Ethylene: Operating rate 1H10 000 ton Industry at 1H201020,000 90 89 89 Producers already responded to the 84 86 86 84 83 82 81 demand slowdown in 2Q10 by15,000 79 77 reducing the operating rates10,000 Competitive cost base allows the US 5,000 to operate at higher rates than other regions 0 Braskem back to operate at a rate Europe N. America Asia M. East World Braskem above world average in 2Q10 Capacity 2Q Operating rate 2Q10 (%) Operating rate 1Q10 (%) Global Scenario Ethylene: Supply and Demand Balance New capacity additions can lead to 000 ton the closing down of non competitive200,000 88.4 90.5 assets on a permanent basis, 87.0 83.8 83.1 especially in Europe and US150,000 80.4 Global economic outlook volatility100,000 versus petrochemicals demand 50,000 Expectation of improvement in the industry profitability as of 2H11 0 2009 2010e 2011e 2012e 2013e 2014e Capacity Demand Operating Rate 2010e (%)Source: CMAI 20
  21. 21. 2010 Ethylene capacity additions Additional Effective Region Company Start up Capacity 2010 Capacity 2010* Middle East Morvarid PC 334 2Q10 208 New players are located in Middle East RLOC 975 2Q10 / 3Q10 650 Middle East (38%) and Asia Middle East Kayan 300 4Q10 300 (59%) Middle East Petro-Rabigh 325 1Q10 325 Middle East SHARQ 1,100 2Q10 800 Feedstock matrix of the Middle East Yansab 433 1Q10 108 new capacities:51% Middle East Borouge 700 3Q10 650 naphtha and 49% gas Asia Baotou Shenhua 100 3Q10 100 Asia CNOOC & Shell PC 150 2Q10 150 Delays already reduced in Asia Dushanzi PC 667 2009 667 18% the start up of new capacity for the year Asia Fujian Ref & Chem 533 2009 533 Asia Panjin Ethylene 450 2Q10 305 A demand growth of 4.5 Asia Secco 150 2009 150 million tons of ethylene is Asia Shenyang Paraffin 87 2009 87 expected in 2010, up by 4% Asia SINOPEC/SABIC Tianjin PC 1,000 1Q10 / 3Q10 750 compared to 2009 Asia ZRCC 750 2Q10 750 Asia JX Nippon Oil & Energy Corp. 220 3Q10 220 Delays and learning curve Asia LG Chem 75 2009 75 from the commissioned Asia YNCC 33 2009 33 plants shall positively Asia Shell Chemical 667 2Q10 667 impact the 2010 Asia MOC 675 2Q10 675 supply/demand balance Asia PTT Polyethylene 917 3Q10 500 Others 275 275 TOTAL 10,916 8,978 -18%Source: CMAI / Parpinelli / Braskem Analysis 21 * Estimated data. Does not consider the plants operating rates and possible additional delays.
  22. 22. Expansion with increased competitiveness BRAZIL PVC Expansion Operational start-up : 1st half 2012 Expansion of 200 ktony in PVC capacity in Alagoas Investments of US$470 million Expected NPV ~US$450 million Disbursements already in 2Q10 Support for Brazil’s infrastructure projects Comperj and Suape Braskem participation in Suape Project (textile New Projects complex) and Comperj (1st and 2nd Generation) Industrial Assets under analysis. Projects with PetrobrasSource: Braskem 22
  23. 23. Expansion with increased competitiveness LATIN AMERICA Mexico: Ethylene XXI Project Operational start-up: early 2015 JV between Braskem (65%) and the Mexican group IDESA (35%) for the purchase of ethane from PEMEX Integrated project: 1 Mty of ethane and 1 Mty of PE Investment estimated at up to US$2.5 billion over 5 years (project finance) Financial Advisor hired: Sumitomo Bank Structuring of the participation of ECAs and MLAs1 New Projects Industrial Assets Projects with PetrobrasSource: Braskem 1 Export Credit Agencie (ECA) and Multilateral Agencie (MLA) 23
  24. 24. Final comments Capture of synergies with focus on generating results Leverage reduction: financial health and liquidity Support for the sustainability of the Brazilian petrochemical and plastic chains – launched the National Pact of Chemical industry and ongoing National pact of the Plastic industry Expansion of green PE project with focus on renewable feedstock Projects in Latin America: competitive raw materials Sustainable Growth 24
  25. 25. Meeting with Investors2Q10 ResultsBernardo Gradin CEOMarcela Drehmer CFO

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