Braskem Q1 Earnings Call Highlights

Key Points

• Braskem’s Q1 recurring EBITDA jumped 76% sequentially to $192 million, led by a strong rebound in Brazil, while the U.S./Europe business improved and Mexico weakened sharply due to lower ethane supply and reduced utilization.
• Cash preservation and capital structure are top priorities as the company reported about $603 million in operating cash consumption and ended the quarter with $1.1 billion in cash, but still faced high leverage of 16.81x and ongoing stakeholder discussions about restructuring options.
• Management sees volatile petrochemical markets ahead amid geopolitical tensions that have lifted oil and feedstock costs, though consultants expect a Q2 spread recovery before conditions normalize later in the year if the conflict eases.

Braskem NYSE: BAK reported a sharp sequential improvement in first-quarter 2026 recurring EBITDA, while management said cash preservation and capital-structure discussions remain central priorities amid a volatile petrochemical market and elevated leverage.

Rosana Avolio, Braskem’s director of investor relations, strategic planning and corporate market intelligence, said consolidated recurring EBITDA totaled $192 million in the quarter, up 76% from the fourth quarter of 2025. The company also reported operating cash consumption of approximately $603 million for the period.

Avolio said utilization improved in Brazil and in the U.S. and Europe, but fell significantly in Mexico. Braskem’s global accident frequency rate was 0.18 events per 1 million hours worked, which she said was the company’s best first-quarter safety result in 10 years.

Brazil Drives EBITDA Improvement

In Brazil, Braskem’s petrochemical complexes operated at an average utilization rate 10 percentage points higher than in the prior quarter. Avolio attributed the improvement mainly to the normalization of operations at the Bahia petrochemical plant after scheduled maintenance, inventory buildup ahead of scheduled maintenance at the Rio Grande do Sul complex, and higher feedstock supply to the São Paulo petrochemical complex.

Brazil resin sales rose 5% from the prior quarter, supported by higher polyethylene and PVC sales. Chemical sales volume also increased 5%, with higher availability of products including gasoline, toluene and benzene.

The Brazil segment posted recurring EBITDA of $241 million, up 69% sequentially. Avolio said the improvement was mainly due to a higher contribution margin, including a $32 million positive impact from PIS/COFINS credits on feedstock purchases. The appreciation of the Brazilian real against the U.S. dollar reduced recurring EBITDA by about $10 million.

Braskem’s green ethylene utilization rate declined 3 percentage points from the fourth quarter of 2025. Avolio said green polyethylene sales were affected by lower demand during the Chinese New Year period. She also noted that Braskem expects products in its I’m green bio-based portfolio to become the first to receive Brazil’s Selo Verde certification, with completion expected in the second half of the year.

U.S. and Europe Improve, Mexico Weakens

In the U.S. and Europe segment, utilization rose 8 percentage points from the fourth quarter, reflecting normalization after maintenance shutdowns in Europe and increased production in the United States. Sales volume increased 3%, mainly due to higher U.S. sales volume. The segment reported recurring EBITDA of $21 million, supported by higher polypropylene spreads in the U.S. and Europe.

Mexico remained under pressure. Avolio said the polyethylene plant utilization rate was 55%, down 30 percentage points from the previous quarter. She cited lower imported ethane through the terminal, which averaged 17,800 barrels per day compared with 29,400 barrels per day in the fourth quarter of 2025, in line with Braskem Idesa’s liquidity needs. Ethane supply from PEMEX also declined to 14,800 barrels per day from 15,900 barrels per day.

Mexico polyethylene sales fell 37% due to lower product availability. The segment reported negative recurring EBITDA of $15 million, mainly reflecting lower sales volume and lower other revenues.

Cash, Debt and Capital Structure in Focus

Avolio said Braskem ended the first quarter with a cash position of $1.1 billion, including a standby facility maturing in December 2026. Adjusted net debt, excluding Braskem Idesa, was $8.5 billion at the end of March. The company’s weighted average cost of debt was foreign exchange variation plus 6.34%, and corporate leverage stood at 16.81 times.

In the question-and-answer session, management said Braskem’s leverage targets depend on the petrochemical cycle. In lower cycles, the company said it views leverage of roughly 4.5 times as acceptable, while in higher cycles leverage could decline to 3 times or 2.5 times.

Asked about alternatives for reorganizing Braskem’s capital structure, management said “nothing is off the table” and that no specific measure has been approved by governance bodies. The company pointed to ongoing discussions with stakeholders and noted changes involving Petrobras, Novonor and IG4, including Petrobras representatives joining Braskem’s board.

Management also said renegotiation of the $1 billion standby facility is part of broader capital-structure discussions, rather than a separate effort focused only on that liability.

Working Capital Pressure and Liquidity Measures

Braskem reported operating cash consumption of BRL 3.2 billion, mainly due to negative working-capital changes. Avolio cited reduced availability of certain payment arrangements with financial institutions and suppliers, as well as inventory replenishment after optimization in the fourth quarter of 2025. Including Alagoas disbursements, cash consumption was approximately BRL 5.0 billion.

During the Q&A, Avolio said first-quarter cash was affected by seasonal inventory formation, reduced exposure with suppliers and financial institutions, and receivables dynamics tied to lower sales in the previous quarter. She said the company is making weekly decisions on production and sales while seeking to preserve liquidity.

Management said Braskem is working to reduce accounts receivable, negotiate higher credit limits and longer payment terms with feedstock suppliers, anticipate receivables through programs with financial institutions, and monetize certain non-liquid assets where possible.

CEO Roberto Ramos said greater liquidity would allow Braskem to operate at higher rates. He said utilization is currently around 70%, but the company could operate above 90% if it had more working capital. He also said Mexico utilization could potentially triple from current levels if resources were available to purchase feedstocks and sustain working-capital needs.

Management Sees Petrochemical Volatility From Geopolitical Risk

Avolio said the geopolitical environment has remained uncertain since Braskem’s prior investor call. According to the company’s presentation, attacks involving the U.S., Israel and Iran, followed by Iran’s closure of the Strait of Hormuz, affected global energy and petrochemical markets. She said Brent had risen more than 50% since the start of the war at the end of February, while naphtha followed oil volatility and pressured petrochemical costs.

Braskem said external consultancies expect a material improvement in petrochemical spreads during the second quarter of 2026 across the company’s three segments, driven by a global supply shock related to the conflict. From the third quarter, spreads are expected to normalize, assuming lower feedstock costs and greater supply availability. Avolio emphasized that the projections assume the conflict ends during May and that outcomes remain uncertain.

Ramos said it is difficult to assess the full extent of damage to crackers, polyethylene and polypropylene plants, and gas fields in the conflict region. He said feedstock stress could lead to higher prices and suggested that nominal spreads may need to remain elevated if feedstock costs stay higher for an extended period.

Braskem also provided an update on the Alagoas geological event. Avolio said the resident relocation program was 99.9% executed at the end of March, with 99.6% of compensation proposals accepted and paid. Total provisions for the Alagoas event were about BRL 18.1 billion, of which BRL 14.4 billion had been disbursed, with a remaining provision balance of BRL 3.4 billion.

For 2026, Braskem said its priorities include reorganizing its capital structure, preserving liquidity through its resilience plan, advancing competitiveness initiatives, expanding sustainable product opportunities and complying with agreements related to the Alagoas event.

About Braskem NYSE: BAK

Braskem NYSE: BAK is a leading integrated petrochemical company based in São Paulo, Brazil, and holds the distinction of being the largest thermoplastic resins producer in Latin America. The company operates across the entire value chain, from feedstock sourcing and polymer production to distribution and recycling. Braskem's comprehensive approach to petrochemical manufacturing enables it to serve a diverse set of end markets with a broad portfolio of products.

Braskem's core product lines include polypropylene, polyethylene and polyvinyl chloride (PVC), which are used in industries such as packaging, automotive, construction and electrical & electronics.

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