Braskem Q3 Earnings Call Highlights

Key Points

• Recurring EBITDA fell 63% sequentially to $382 million as petrochemical spreads retreated from unusually high second-quarter levels, outweighing stronger resin sales in Brazil and Mexico.
• Braskem continues non-binding discussions with advisers and interested parties on a consensual capital structure solution. Management is also reviewing its asset strategy, with a business plan expected by year-end.
• Consultants expect modest spread recovery in the fourth quarter, but see Brazil’s spreads remaining below historical averages in 2027 amid global overcapacity and moderate demand. In Alagoas, relocation and compensation efforts were nearly complete, and Braskem reported a BRL 3.2 billion provision.

Braskem NYSE: BAK reported a 63% sequential decline in third-quarter recurring EBITDA to $382 million, as petrochemical spreads retreated from elevated second-quarter levels across its reporting segments.

Rosana Avolio, director of investor relations, strategic planning and global market intelligence, said the decline in contribution margins outweighed the benefit of higher resin sales in Brazil and increased polyethylene sales at Braskem Idesa in Mexico. Higher selling expenses and U.S. feedstock logistics costs also weighed on results.

The company generated $429 million in operating cash during the quarter, helped by a $198 million positive change in working capital. After other effects and spending related to the geological event in Alagoas, Braskem generated approximately $269 million in cash, Avolio said.

Spreads Pressure Segment Results

Avolio said key petrochemical spreads normalized during the third quarter following an atypical second quarter. The U.S. polyethylene spread over ARA naphtha, a reference for Brazil, fell 57% to $334 per ton. The Asian polypropylene spread over ARA naphtha declined 16% to $385 per ton, while the U.S. polyethylene spread over ethane, a reference for Mexico, dropped 35% to $921 per ton.

In Brazil, recurring EBITDA fell 69% from the previous quarter to $267 million. Average resin spreads declined 42% and spreads for key chemicals fell 13%. Those pressures were partly offset by a 12% increase in domestic resin sales and a 37% rise in resin exports.

The U.S. and Europe segment reported recurring EBITDA of $15 million, down 90% sequentially. Avolio attributed the decline primarily to lower contribution margins as average polypropylene spreads fell 14%, as well as one-off U.S. feedstock logistics expenses. Utilization slipped two percentage points to 74%, and polypropylene sales volumes fell 2%.

At Braskem Idesa, polyethylene plant utilization rose 19 percentage points to 62% as the business received more imported ethane and increased supply from Pemex. Polyethylene sales volumes increased 28%, but recurring EBITDA declined by $55 million to $2 million because of the lower polyethylene spread.

Green polyethylene sales fell 19%, which Avolio attributed to reduced customer demand. Green ethylene utilization declined 19 percentage points, mainly because of a scheduled 33-day maintenance shutdown at the Rio Grande do Sul plant that was completed in October.

Capital Structure Discussions Continue

Chief Financial Officer Carlos Brandão said Braskem continues to pursue a consensual capital structure solution with specialized advisers and interested parties. Discussions remain open and non-binding, he said, with the company focused on reaching agreement on essential commercial terms.

“If we cannot reach a consensus within the established terms,” Brandão said, management would take necessary measures to keep stakeholders informed, protect their interests and continue operations and the company’s long-term strategy.

Asked about Braskem Idesa’s utilization, Brandão said the improvement reflected restructuring efforts that began before those at Braskem S.A. He said the company remains focused on an operational agenda intended to support the business’s viability, based on ethane feedstock.

Avolio said Braskem regularly reviews its asset strategy and is discussing a business plan for presentation to management and the board by year-end. She pointed to previous plant hibernations and changes to the PVC business model, but did not announce new closures.

Outlook and Alagoas Update

Consulting firms project a modest recovery in fourth-quarter spreads, driven largely by temporary supply restrictions from scheduled maintenance, Avolio said. They forecast increases of approximately 7% for Brazil’s polyethylene spread, 21% for its polypropylene spread and 8% for Mexico’s polyethylene-ethane spread compared with the third quarter.

For 2027, consultants expect spreads in Brazil to remain below their 2016–2025 historical averages. Avolio said projections point to a continued industry downturn because of global overcapacity, particularly in Asia, and moderate demand.

Regarding the geological event in Alagoas, Avolio said the residents’ relocation program was 99.9% executed at the end of September. Approximately 99.7% of compensation and relocation-support proposals had been accepted, and 99% had been paid.

Braskem reported a total provision balance of BRL 3.2 billion for the event at quarter-end. Avolio said the company would continue fulfilling related agreements while prioritizing liquidity, capital allocation and operational safety.

About Braskem (NYSE:BAK)

Braskem is a Brazilian petrochemical company that produces thermoplastic resins and basic petrochemicals used in packaging, construction, automotive manufacturing, consumer goods and other industries. Its products include polyethylene, polypropylene and polyvinyl chloride, as well as chemical building blocks such as ethylene and propylene. The company also makes bio-based plastics, including polyethylene produced from sugarcane-derived ethanol and marketed under its I'm green brand. These materials are designed to serve applications similar to those of conventional plastics.

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