Braskem's Q3 2025 Earnings Call: Contradictions Emerge on Resin Demand, U.S. Assets, and Transform Rio Timeline

Guidance:

• Transform Rio: engineering now, completion end‑2028/early‑2029; 220k tpa ethylene; ~BRL 4.2bn capex; ~+$200M EBITDA/year; conditional on funding and a long‑term Petrobras ethane contract.
• 
  PRESIQ: pending Senate/Presidential approval (target Nov/Dec 2025); feedstock rate shift (0.7%→6.25%) could add ~$280–300M EBITDA annually (impact starting 2027 under current timetable).
• Management expects petrochemical spreads to remain below historical levels through the decade with modest recovery after 2029.
• Near‑term resin demand weak; company expects ~3% demand improvement next year (Brazil-driven sanitary construction effects).

Business Commentary:

* Challenging Industry Conditions: - Braskem reported a consolidated recurring EBITDA of $150 million in Q3 2025, 104% higher than the previous quarter. - The company's results were impacted by a prolonged downward cycle in the industry, lower utilization rates at petrochemical plants, and reduced demand for key products like polyethylene and polypropylene.

• Regional Performance and Government Initiatives:
• In Brazil, the utilization rate at petrochemical plants was lower due to scheduled maintenance and optimization strategies, but the company recorded a recurring EBITDA of $205 million, higher than the previous quarter.

• Braskem's performance was supported by government initiatives such as the approval of an antidumping duty for imported products and a bill that aims to extend tax breaks for the chemical industry.

• Green Energy and Transformation Projects:

• The utilization rate of the green ethylene plant was 40%, down from 71% in the previous quarter, due to measures to optimize stock levels.

• Braskem GreenCo was established to focus on developing green products, and the company is exploring the import of LPG for use as a feedstock to increase operational efficiency.

• Financial Position and Liquidity:

• Braskem's cash position at the end of the quarter was approximately $1.3 billion, sufficient to cover debt maturities over the next 27 months.
• The company's leverage ratio was approximately 14.7x, influenced by lower EBITDA over the last 12 months.

Overall Tone: Neutral

• Management repeatedly described a "prolonged downward cycle" and structurally challenging spreads but stressed resilience measures and transformation; reported Q3 recurring EBITDA of $150M, cash ≈$1.3B (total liquidity ≈$2.3B with $1B line) and outlined projects (Transform Rio) and fiscal measures (PRESIQ) to restore competitiveness.

Q&A:

• Question from Vicente (Bradesco): When will you decide on the restructuring/advisers and consider injecting equity now that the Alagoas case seems completed? Also, what drove weak resin volumes this quarter and outlook?
  Response: Diagnostic by external advisers is still in progress; no restructuring or equity decisions have been made yet.

• Question from Gabriel (Citi): Provide Transform Rio timeline, expected EBITDA impact, funding (could Petrobras participate?), and update on PRESIQ timing and company impact.
  Response: Transform Rio engineering underway, completion end‑2028/early‑2029; 220k tpa → ~ $200M/year EBITDA; project requires additional funding and a Petrobras long‑term ethane supply; PRESIQ pending approval could add ~$280–300M EBITDA annually starting 2027.

• Question from Various (Investors): Details on the Alagoas agreement payment schedule and flexibility of amounts/payments?
  Response: Agreement totals BRL1.2bn (BRL139m already paid); remaining balance to be paid over 10 annual, adjusted installments structured to respect Braskem's financial capacity, with most payments scheduled after 2030.

• Question from Gustavo (BTG): In a possible change of control, what is nonnegotiable (green agenda)? What is material re: hibernation in Europe/Asia vs prior scenarios? Normalized EBITDA for Braskem Idesa and timing to reduce consolidated leverage?
  Response: Nonnegotiable is continuation of the transformation program (migration to gas, competitiveness and green agenda); rationalization timing is uncertain; Braskem Idesa will only reduce consolidated leverage via future dividends once operating rates and its capital structure permit.

• Question from Joaquin (Moneda): Has Braskem signed a long‑term ethane supply contract with Petrobras or does that depend on project construction?
  Response: Board approved commercial terms in principle but the ethane supply contract has not yet been signed; only secondary, non‑material conditions remain under negotiation.

• Question from Conrado (J. Safra): What drove the sequential margin improvement in Brazil and is it sustainable?
  Response: Improvement driven by mix shift toward higher‑value sales, prioritizing domestic supply, cost and logistics reductions and inventory optimization; margins rose but remain below historical norms.

• Question from Unnamed (Investors): Any timeline or update on the potential sale of Novonor / IG4 reported in media?
  Response: Braskem is not a party to Novonor's sale process, has no additional information or timeline and only discloses material facts received from the seller.

• Question from Anne (Bank of America): Can you provide more detail on Transforma Alagoas (chlor‑alkali conversion) and implications of the Ode press release?
  Response: Hibernating the chlor‑alkali unit and importing EDC will materially improve PVC competitiveness and enable higher output and greener PVC; the Ode press release was not addressed in detail on the call.

• Question from Various (Investors): Why are you confident spreads will stay below historical levels and how reliable are external consultants' projections?
  Response: Planning uses multi‑scenario, conservative base cases that incorporate large Chinese capacity additions and subdued demand; company expects a prolonged downturn through ~2030 with only modest recovery after 2029, so assumptions err on the cautious side.

Contradiction Point 1

Resin Volumes and Demand Growth

It involves differing explanations for the weak resin volumes and expected demand growth, which are crucial for understanding the company's performance and market conditions.

When will a decision on Braskem's restructuring be made? Is equity injection being considered now that the Alagoas case is completed? What caused the weak resin volumes this quarter? What are the expectations for future quarters? - Vicente (Bradesco)

2025Q3: Resin volumes were weak due to a decrease in demand growth associated with Brazil's GDP. - [Felipe Montoro Jens](CFO)

What are the cash expectations for H2 and potential cash neutrality by year-end? What is the impact of government interventions like REIQ and antidumping measures? - Tasso Sousa Vasconcellos (UBS)

2025Q2: In Brazil, where we have a significant operating rate, our volumes decreased by 11%. - [Felipe Montoro Jens](CFO)

Contradiction Point 2

Strategic Importance of U.S. Assets

It highlights differing perspectives on the strategic value and potential monetization of the U.S. assets, which could impact the company's strategic direction and financial health.

What are the nonnegotiable factors to sustain long-term value in a change of control scenario? Is there significant capacity idleness in Europe and Asia? What is the expected EBITDA capacity for Braskem Idesa with the ethane terminal operational, and when will it reduce consolidated leverage? - Gustavo (BTG)

2025Q3: The U.S. assets are integral to the company's strategy, housing key research facilities. - [Roberto Ramos](CEO)

What is the strategic importance of the U.S. assets and the plan for their monetization? - Vicente Falanga Neto (Bradesco BBI)

2025Q2: The U.S. assets are important, especially the laboratories. Any monetization would not disrupt the transformation plan. - [Felipe Montoro Jens](CFO)

Contradiction Point 3

Volume and Demand Growth Expectations

It involves projections about resin volumes and demand growth, which directly impact production decisions and financial forecasting.

When will the restructuring decision be finalized? Is the company considering equity injections now that the Alagoas case is resolved? What drove the weak resin volumes this quarter? What volume trends should we expect in upcoming quarters? - Vicente (Bradesco)

2025Q3: Resin volumes were weak due to a decrease in demand growth associated with Brazil's GDP. Demand for resins in plastic products is strongly linked to Brazil's GDP, and there was a drop of about 4% from last year. A recovery of about 3% is expected next year. - [Felipe Montoro Jens](CFO)

What are your plans for closing plant capacities and government discussions on benefits like Rake and PreSeq? Is the current low CapEx level sustainable over the next two years? - Tasso Vasconcellos (UBS)

2025Q1: We expect 2025 will be a year of stabilization of our operating performance and structural improvement of our costs. - [Roberto Ramos](CEO)

Contradiction Point 4

Ethane Supply and Infrastructure Investment

It involves the strategic importance of ethane supply and the investment in infrastructure to support it, which directly impacts operational efficiency and profitability.

Are there significant capacity reductions in Europe and Asia? - Gustavo (BTG)

2025Q3: The ethane terminal provides a significant operational advantage, aiming for 90% operating rate. - [Felipe Montoro Jens](CFO)

What are the benefits of adding a new vessel, and what are your plans for fleet expansion? - Henrique Perez (BTG Pactual)

2024Q4: The partnership with the European and Asian unit enhances Braskem's logistics and cost efficiency. The first vessel will be dedicated to ensuring ethane supplies, while a second vessel will be operational later this year. - [Rosana Avolio](CMO)

Contradiction Point 5

Transform Rio Project Timeline and Impact

It involves the timeline and expected impact of the Transform Rio project, which is crucial for strategic planning and investor expectations.

Can you share the investment timeline and expected impact on EBITDA for the Transform Rio project? - Gabriel (Citi)

2025Q3: Transform Rio's engineering phase will last until end of 2028. Additional EBITDA of nearly $200 million per year is expected. - [Felipe Montoro Jens](CFO)

How will Braskem's shift to gas and the Mexico terminal affect operations and results in the coming years? - Pedro Gama (Citi)

2024Q4: We think this could come up in 2025 in terms of discussions and in terms of final approvals. In terms of getting implemented, I would think it probably would be later than that, but we're preparing for it to come into effect. - [Felipe Montoro Jens](CFO)