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 March 31, 2004 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 – 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
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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.
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* 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
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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 positive
in 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
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.
15
Source: 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
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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
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18. Braskem - Financial Income and FX Rate Effects
R$ Million 1Q04 1Q03
Financial 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 0
Net Financial (368) (87)
Income Rate Variation
Net FX (75) 193
Fin. Income before Exchange Rate Variation (293) (280)
* Includes updating of tax provisions, financial expenses with suppliers, mark-to-market and hedge
position and others.
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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
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* LTM – last twelve months.
20. Braskem – Debt Amortization Schedule
Profile 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
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21. Braskem — Management of the Exchange Rate Risk
Hedge Policy
Breakdown of Gross Debt by Index (Mar/04)
FINANCING LINKED FINANCING NOT
CDI
IGP-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
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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
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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
24
Source: Chemical Market Associates Inc. (―CMAI‖)
25. Petrochemical Cycle : Evolution of International Prices
(Naphtha vs LDPE)
Evolution of LDPE/ Naphtha Prices
100 = January 03, 2003
160
LD P E
140
139
N a pht ha
120
118
100
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
25
Source: 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$
26
Source: Bloomberg e CMAI, updated to 04/30/2004
Prices 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 YEARS
1982 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!
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