February, 07, 2013 - In an especially challenging year marked by a worsening of the international crisis that impacted the global petrochemical industry as well as Brazil's industrial sector, Braskem made important progress in its plans for growth, international expansion and boosting competitiveness, while also focusing on its operational efficiency. In 2012, the Company recorded EBITDA (earnings before interest, tax, depreciation and amortization) of R$4 billion, up 6% from 2011, which was achieved despite the contraction in margins in international markets caused by weak demand for petrochemical products in developed countries, which led exports to be redirected to emerging markets and adversely affected Brazil's industrial sector.

These negative effects were partially offset by certain nonrecurring items that benefitted Braskem results, such as the compensation received due to breach of contract by a third party, the discounts related to the prepayment of taxes under the Refis tax amnesty program and, especially, the sale of non-strategic assets. These factors combined accounted for R$860 million of the total EBITDA generated in the year.

Despite the scenario marked by economic uncertainties, the company maintained its commitment to develop the chemicals and plastic production chain in Brazil and invested R$1.7 billion, which made possible the inaugurations of a new PVC production plant in the state of Alagoas with annual capacity of 200 kton and the expansion of the plant in the state of Rio Grande do Sul producing butadiene, a raw material used by the rubber industry, which added another 100 kton in annual capacity.

The efforts made to boost competitiveness, such as increasing productivity and the greater focus on innovation, enabled Braskem to soften the impacts from the worsening international crisis that weakened demand for products and adversely affected industry profitability. "Through these actions we managed to maintain our strategic course as well as our investment program, given our confidence in the recovery of international petrochemical markets and in the growth of the domestic market over the medium and long terms," said Carlos Fadigas, Braskem's CEO.

The Company posted gross revenue of R$42.1 billion and net revenue of R$35.5 billion in 2012, which represent increases from 2011 of 8% and 9%, respectively. Gross revenue growth was driven by the higher sales volume of resins and basic petrochemicals and the weaker Brazilian real, which offset the lower average prices practiced in international markets.

While Brazilian demand for thermoplastic resins, polyethylene, polypropylene and PVC grew 2% from 2011 to reach a combined total of 5 million tons, Braskem grew by 10% in the same period, with total sales volume of 3.5 million tons. This performance was made possible by the expansion in Braskem's market share to 70%, while the share of imports in the market contracted. Other factors that led to the lower volume of imported products include the weaker Brazilian real, the measures adopted by the government to protect local manufacturers and the expansion in the Company's PVC production in the state of Alagoas.

"The prospects of higher GDP growth in 2013 allow us to project stronger resin demand in the domestic market and it is fundamental that this expansion benefit Brazil's petrochemical and plastics production chain, and not producers overseas. "This should especially impact Brazil's plastic manufacturing industry, which already benefited in 2012 from the reduction in the rate of payroll taxes, but which must continue to recover its competitiveness and its capacity to invest and create jobs," said Fadigas.

On the international front, the gradual yet consistent recovery in the U.S. economy was reflected in the strong growth in the polypropylene volumes sold in the United States by the Company, which expanded its market share by 2% in a market that grew by less than 1% and continues to face margin pressure. In Europe, the stagnant economy kept demand weak, with the Company's sales volume contracting by 1%, while the overall market contracted by 3%, with high feedstock costs affecting the profitability of this operation.

In Mexico, the Ethylene XXI project made significant advances in terms of both its physical construction and its financing solution. The structuring of the US$3.2 billion in project finance was concluded by a pool of international banks, while the engineering works are progressing on schedule, with the startup of the complex, which comprises three polyethylene plants integrated with the production of ethylene from competitive gas-based feedstock, slated for mid-2015.

The depreciation in the Brazilian real against the U.S. dollar of 9% in the period had a negative impact on the financial result of R$1.7 billion, which led Braskem to report a net loss for the year of R$738 million (approximately U$ 370 mi). This result, however, has no immediate impact on the Company's cash position, but rather represents exchange variation accounting impacts, particularly on Braskem's debt, which has an average term of 15 years.

The Company's strategy for 2013 remains based on strengthening the business and increasing its competitiveness while expanding its domestic market share; supporting the development of Brazil's petrochemical and plastics chain by, among other things, structuring and building the Comperj complex in the state of Rio de Janeiro on a competitive basis; continuously pursuing operational efficiency by keeping capacity utilization rates at high levels and reducing fixed costs; creating value through additional capacity in PVC and butadiene; diversifying its feedstock matrix by advancing the Ethylene XXI project in Mexico and signing new feedstock supply contracts in the United States.

As in 2012, Braskem remains committed to sustainable growth and development. "We continue to act proactively to pursue the best opportunities for creating value for our clients, shareholders and society by increasing competitiveness throughout the entire petrochemical and plastics production chain, without losing our focus on financial discipline," said Fadigas. "In this context, the approval by the government of the Special Regime for the Chemical Industry (REIQ) will be of major importance to the industry, making possible lower tax rates on both feedstock and investment that can help the industry overcome the current scenario marked by difficulties," he concluded.

Source: Braskem