SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT
TO RULE 13A-16
OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934
For the month of August, 2021
(Commission File No. 1-14862 )
BRASKEM S.A.
(Exact Name as Specified in its Charter)
N/A
(Translation of registrant's name into English)
Rua Eteno, 1561, Polo Petroquimico de Camacari
Camacari, Bahia - CEP 42810-000 Brazil
(Address of principal executive offices)
Indicate by check mark whether the registrant
files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ___X___ Form 40-F ______
Indicate by check mark if the registrant is
submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(1). _____
Indicate by check mark if the registrant is
submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(7). _____
Indicate by check mark whether the
registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant
to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ______ No ___X___
If "Yes" is marked, indicate below
the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- _____.
|
|
|
CONTENTS
|
|
|
|
|
1
|
2Q21 HIGHLIGHTS
|
4
|
1.1
|
BRASKEM – CONSOLIDATED:
|
4
|
1.2
|
BRASKEM – HIGHLIGHTS BY SEGMENT 2Q21
|
5
|
2
|
OPERATING PERFORMANCE IN 2Q21 BY SEGMENT
|
6
|
2.1
|
BRAZIL
|
6
|
2.2
|
UNITED STATES & EUROPE
|
15
|
2.3
|
MEXICO
|
18
|
3
|
CONSOLIDATED PERFORMANCE 2Q21
|
22
|
A)
|
REVENUE BY REGION
|
22
|
B)
|
CONSOLIDATED COGS
|
23
|
C)
|
OTHER NET REVENUE (EXPENSES)
|
23
|
D)
|
RECURRING OPERATING RESULT
|
24
|
E)
|
NET FINANCIAL RESULT
|
24
|
F)
|
FREE CASH FLOW
|
26
|
G)
|
LIQUIDITY & CAPITAL RESOURCES
|
27
|
H)
|
INVESTMENTS & VALUE CREATION
|
30
|
4
|
2030 & 2050 COMMITMENTS
|
33
|
4.1
|
HEALTH & SAFETY
|
33
|
4.2
|
FINANCIAL & ECONOMIC RESULTS
|
34
|
4.3
|
ELIMINATING PLASTIC WASTE
|
35
|
4.4
|
COMBATING CLIMATE CHANGE
|
35
|
4.5
|
OPERATIONAL ECO-EFFICIENCY
|
36
|
4.6
|
SOCIAL RESPONSIBILITY & HUMAN RIGHTS
|
37
|
4.7
|
SUSTAINABLE INNOVATION
|
37
|
5
|
CAPITAL MARKETS
|
38
|
5.1
|
RATING
|
39
|
5.2
|
BRASKEM MODELING – OUTLOOK 3Q21 vs. 2Q21
|
39
|
5.3
|
INDICATORS
|
40
|
LIST OF ANNEXES:
|
41
|
FORWARD-LOOKING STATEMENTS
This Earnings Release may contain forward-looking
statements. These statements are not historical facts, but are based on the current view and estimates of the Company's management regarding
future economic and other circumstances, industry conditions, financial performance and results, including any potential or projected
impact from the geological event in Alagoas and related legal procedures and from COVID on the Company's business, financial condition
and operating results. The words “foresee”, “believe”, “estimate”, “expect”, “plan”
and other similar expressions, when referring to the Company, are used to identify forward-looking statements. Statements related to the
possible outcome of legal and administrative proceedings, implementation of operational and financing strategies and investment plans,
guidance on future operations, as well as factors or trends that affect the financial condition, liquidity or operating results of the
Company are examples of forward-looking statements. Such statements reflect the current views of the Company's management and are subject
to various risks and uncertainties, many of which are beyond the Company’s control. There is no guarantee that the events, trends
or expected results will actually occur. The statements are based on various assumptions and factors, including general economic and market
conditions, industry conditions and operating factors. Any change in these assumptions or factors, including the projected impact from
the geological event in Alagoas and related legal procedures and the unprecedented impact from COVID on businesses, employees, service
providers, shareholders, investors and other stakeholders of the Company could cause actual results to differ significantly from current
expectations. For a comprehensive description of the risks and other factors that could impact any forward-looking statements in this
document, especially the factors discussed in the sections, see the reports filed with the Brazilian Securities and Exchange Commission
(CVM).
Braskem reports recurring Operating
Result in 2Q21 of US$1,776 million, up 40% on 1Q21
Corporate leverage reaches 1.10x at
the end of the second quarter of 2021
|
1.1
|
BRASKEM – CONSOLIDATED:
|
|
§
|
In 2Q21, the Company’s recurring Operating
Result was US$1,776 million, 40% higher than 1Q21, mainly due to: (i) better international spreads for PE, PVC and main chemicals in Brazil,
for PP in the United States and Europe and for PE in Mexico; and (ii) higher sales volumes of PP in the United States and PE in Mexico.
Compared to the same quarter last year, recurring Operating Result in U.S. dollar increased 530%, due to: (i) better international spreads
for main chemicals in Brazil and resins in all regions; and (ii) higher sales volume of resins and main chemicals in Brazil and PP in
the United States and Europe. In Brazilian real, recurring Operating Result was R$9,400 million, 35% and 522% higher than in 1Q21 and
2Q20, respectively, due to the appreciation of Brazilian real against U.S. dollar.
|
|
§
|
In the quarter, the Company recorded net
profit1 of R$7,424 million, 198% higher than 1Q21, representing R$12.47 per common share and class “A" preferred
share2.
|
|
§
|
The Company’s free cash flow generation
was R$1,554 million and the free cash flow yield was 12.7% in 2Q21.
|
|
§
|
In line with the continuous commitment to
financial health and to regaining investment grade rating, the Company continued to reduce its corporate leverage, measured as the ratio
of net debt to recurring Operating Result3 in U.S. dollar, which ended 2Q21 at 1.10x, a decrease of 39% in relation to 1Q21
(1.80x).
|
|
§
|
In May, the risk rating agency Fitch Ratings
upgraded Braskem’s outlook to positive and reaffirmed its risk rating on the global scale of BB+. Furthermore, in July, the risk
rating agency Moody’s upgraded Braskem’s outlook to stable and reaffirmed its risk rating on the global scale of Ba1.
|
1 Based on net income (loss) attributable to the shareholders
of the Company.
2 For the class “B” preferred shares, the amount
is R$0.61 per share.
3 Excludes the Project Finance in Mexico and based on recurring
Operating Result.
|
§
|
In the quarter, given its strong
cash position and to reduce its gross debt, the Company concluded several operations totaling US$643 million. In the year, the Company
reduced in approximately US$1.7 billion its corporate gross debt, considering the operations performed in July.
|
|
§
|
The Company’s class “A"
preferred shares (BRKM5) registered a price gain of approximately 153% in the 1st semester of the year4.
|
ESG
|
§
|
In line with the UN Sustainable Development
Goals for 2030, Braskem undertook new commitments. The company’s macro goals are structured in seven dimensions: (i) Health and
Safety; (ii) Economic and Financial Results; (iii) Eliminating Plastic Waste; (iv) Combating Climate Change; (v) Operating Eco-efficiency;
(vi) Social Responsibility and Human Rights; and (vii) Sustainable Innovation.
|
|
§
|
In May, the Company launched the Integrated
Report 2020, which was designed to follow the reporting standards of the Global Reporting Initiative (GRI), the International Integrated
Reporting Council (IIRC) and, for the first time, the Sustainability Accounting Standards Board (SASB).
|
|
§
|
Until June, the recordable and lost-time
injury frequency rate stood at 0.86 (events/million hours worked), which is 73.5% below the industry average5, while the
Tier 1 process safety accident rate was 0.08 (events/million hours worked), down 27% from the prior-year period.
|
|
§
|
The Extraordinary Shareholders Meeting held
in July approved the reform and restatement of the Company’s Bylaws to transform the Compliance Committee into the Compliance and
Statutory Audit Committee (CCAE) as part of the ongoing improvements to corporate governance practices of the Company. Creating a CCAE
is a recommendation of the Brazilian Corporate Governance Code that is received by the Securities and Exchange Commission of Brazil (CVM)
in CVM Instruction 480/09. This committee will be formed by independent members, with two external members appointed from a list selected
by a headhunter company.
|
|
1.2
|
BRASKEM – HIGHLIGHTS BY SEGMENT 2Q21
|
BRAZIL
|
§
|
The recurring Operating Result was US$1,127
million (R$5,979 million), 20% and 429% higher than in 1Q21 and 2Q20, respectively, mainly due to the wider spreads in the international
market for PE, PVC and main chemicals. The segment accounted for 62% of the Company’s consolidated recurring Operating Result.
|
|
§
|
On July 15, the President of the Republic
sanctioned and converted into Federal Law 14,183/2021 the text approved by the National Congress that provides for a gradual reduction
in the Special Regime for the Chemical Industry (REIQ) over four years, with it completely extinguished by January 1, 2025.
|
UNITED STATES & EUROPE
|
§
|
The recurring Operating Result was US$492
million (R$2,590 million), 56% and 1,091% higher than in 1Q21 and 2Q20, respectively, reflecting the wider spreads in the international
market for PP in both regions and the higher sales volume in the United States. The segment accounted for 27% of the Company’s consolidated
recurring Operating Result.
|
4 Year-to-date through June 30, 2021.
5
The industry average is 3.25 per million hours worked, according
to the American Chemistry Council. The most recent data refers to 2018.
|
§
|
In the quarter, in line with its strategy
of forging partnerships and close relations with clients and strengthening the petrochemical chain, Braskem reported PP sales volume of
approximately 448,000 tons in the United States, setting a new quarterly record.
|
MEXICO
|
§
|
The recurring Operating Result was US$200
million (R$1,060 million), 113% and 186% higher than in 1Q21 and 2Q20, respectively, due to the higher spreads in the international market
for PE. The segment accounted for 11% of the Company’s consolidated recurring Operating Result. Additionally, compared to 1Q21,
the result is higher due to the increase in PE sales volume.
|
|
§
|
To complement the supply of ethane by Pemex,
Braskem Idesa continued to import ethane from the United States. Currently, Fast Track’s expected capacity in Mexico is approximately
20,000 barrels of ethane per day, and in June 2021 the Company imported 16,500 barrels of ethane per day on average, which represents
around 83% of Fast Track’s current capacity. In 2Q21, Braskem Idesa imported 8,800 barrels of ethane per day on average, due to
the unscheduled shutdown during May at the petrochemical complex in Mexico given a specific instability in power supply to Braskem Idesa.
Moreover, the Company keeps working in the conclusion of capacity expansion of Fast Track 2.0 to 26,000 barrels of ethane per day in the
United States which should be concluded during 3Q21.
|
|
2.
|
OPERATING PERFORMANCE IN 2Q21 BY SEGMENT
|
|
2.1.1
|
PETROCHEMICAL SPREADS
|
|
§
|
PE Spread6:
increase compared to 1Q21 (+23%). The higher PE price in
the United States was due to: (i) healthy demand, explained primarily by the changes in consumer habits caused by COVID that continue
to influence the market, driving, for example, demand for packaging, and inventory rebuilding in the production chain; and (ii) the weaker-than-expected
recovery in PE supply in the United States, following the impacts from the Uri Winter Storm on the U.S. Gulf Coast, which affected producers
with unscheduled shutdowns and feedstock supply constraints. The naphtha price also increased, due to higher oil prices in the international
market in the period driven by expectations of a global economic recovery and optimism on demand for the commodity as physical distancing
measures to combat COVID are gradually suspended in some regions in the world. In
relation to the prior-year quarter, the spread increased 174%, mainly due to the impacts of COVID on demand for petrochemical products
in 2Q20.
|
6 (US PE Price – naphtha ARA price)*82%+(US
PE Price – 50% U.S. ethane price – 50% US propane price)*18%.
|
§
|
PP Spread7:
decrease compared to 1Q21 (-14%). The lower PP price in
Asia was mainly due to: (i) the COVID crisis in India and Southeast Asia, which led PP supply to be redirected to China, oversupplying
the region; and (ii) the increase of imports from the Middle East, increasing the supply in Asia. As mentioned above, the feedstock’s
price was influenced by the dynamics of oil prices in the international market. In relation to the same quarter last year, the spread
increased 14%, mainly due to the impacts of COVID on demand for petrochemical products and resins in 2Q20.
|
|
§
|
PVC Par Spread8:
the par spread in 2Q21 increased 40% in relation to 1Q21,
mainly due to the higher PVC price in Asia due to maintenance shutdowns at local producers, which decreased the region’s supply
in the period.
|
|
§
|
Main Chemicals Spread9:
increase compared to 1Q21 (+34%). The prices of practically
all main basic chemicals increased, influenced by higher oil and naphtha prices in the international market and the impact from Winter
Storm Uri in the United States, which adversely affected the supply of products in the region. Among main chemicals, the highlights were
benzene in the United States, which ended the period up 56%, due to the lower import volumes and healthy demand for the product in the
region, and butadiene in the United States, which ended the period up 27%, reflecting the producers operating problems in the United States
and the maintenance of the healthy demand. In relation to the same quarter last year, the spread of main chemicals increased 120%, mainly
due to supply constraints.
|
|
2.1.2
|
OPERATIONAL OVERVIEW
|
a) Resin demand in the
Brazilian market (PE, PP and PVC): weaker compared to 1Q21 (-7%), mainly due to the normalization
of demand in some sectors, such as construction, packaging, consumer goods and others, but remained at healthy levels. In relation to
the prior-year quarter, demand increased (+34%) due to the economic slowdown in 2Q20 influenced by COVID.
b) Average utilization
rate of petrochemical crackers: reduction in relation to 1Q21 (-6 p.p.), mainly due to the scheduled
general maintenance shutdown carried out over 63 days at the petrochemical complex in ABC, São Paulo. Compared to 2Q20, the utilization
rate increased (+6 p.p.) given the normalization of operations after the need to temporarily reduce production at the petrochemical
crackers in Brazil in 2Q20 due to weaker demand and the destocking trend in the petrochemical and plastics production chains caused by
COVID.
7 PP Asia
Price – Naphtha ARA price.
8 The PVC
Par spread better reflects the profitability of the Vinyls business, which is more profitable compared to the temporary/non-integrated
business model of 2019/20, under which the Company imported EDC and caustic soda to keep serving its clients. Its calculation is PVC Asia
Price - (0.23*3*naphtha ARA price) - (EDC USA price*0.832).
9 Average
price of main base chemicals (Ethylene (20%), Butadiene (10%), Propylene (10%), Cumene (5%), Benzene (20%), Paraxylene (5%), Gasoline
(25%) and Toluene (5%), according to the capacity mix of Braskem’s industrial units in Brazil) - Naphtha ARA price.
c) Resin sales volume:
in the Brazilian market, decreased compared to 1Q21 (-17%), explained by: (i) the normalization
of demand in the region, but remaining at healthy levels; and (ii) the reduction in market share mainly due to the scheduled general maintenance
shutdown of the petrochemical complex in ABC, São Paulo and the increase in imports volume. Compared to 2Q20, sales volume increased
(+10%), mainly due to the normalization of demand in the Brazilian market, which in 2Q20 was affected by the economic slowdown caused
by COVID.
Export volume increased in relation
to 1Q21 (+4%), mainly due to the higher volume of PE available for sale in the international market, given the weaker demand and lower
sales volume in the domestic market. Compared to 2Q20, export volume decreased (-46%), explained by the lower volume of resins available
for export due to the normalization of demand in the Brazilian market, which in 2Q20 was affected by the economic slowdown caused by COVID.
d) Main chemicals sales
volume: in the Brazilian market, sales volume decreased in relation to 1Q21 (-10%), due to the
lower product availability. Compared to 2Q20, sales volume in the Brazilian market increased (+51%), reflecting the higher product availability
and stronger demand.
Export volumes increased in relation
to 1Q21 (+18%), explained by higher export volumes of benzene due to opportunities in the external market. Compared to 2Q20, exports volume
decreased (-37%), due to lower availability explained by the greater allocation of sales in the domestic market.
|
2.1.3
|
SITUATION IN ALAGOAS
|
Average PVC utilization rate:
considering the plants in Alagoas and Bahia, the capacity utilization rate stood at 71%, lower than in 1Q21 (-2 p.p.), mainly due to the
scheduled maintenance shutdown at the PVC plant in Alagoas, which started on June 13 and lasted around four weeks.
PVC sales volume: PVC sales
in the Brazilian market amounted to 106 ktons, lower than in 1Q21 (-19%), due to weaker demand for the product in the country. Compared
to 2Q20, the increase (+8%) is explained by the economic slowdown in 2Q20 due to COVID. The Company imported 37 kt of caustic soda in
2Q21, 5 kt less than in 1Q21.
|
b)
|
Investment in resuming operations
at chlor-alkali and EDC plants
|
To restart its chlor-alkali operations,
the Company completed the implementation of a project to outsource sea salt for use as feedstock in the chlor-alkali plants in Alagoas.
The estimated cost of the project is approximately R$68 million, of which R$64.9 million already had been invested as of 2Q21. In February
2021, after concluding the commissioning process in accordance with the applicable safety standards, the Company announced the resumption
of production of chlor-alkali and dichloroethane.
In 2Q21, the volume of caustic soda
production was approximately 53 kt, accounting for 47% of the capacity utilization rate, considering the plant’s full capacity.
The restarting of operations was planned in phases, initially with two production cell groups, with the start of the third cell group
expected during the fourth quarter of 2021.
|
c)
|
Geological phenomenon - Alagoas
|
Based on its assessment and on that
of its external legal advisors and considering the short- and long-term effects of the technical studies, the existing information and
the best estimate of the expenses with implementing the various measures related to the geological event in Alagoas, on June 30, 2021,
the Company recorded a provision of R$7,669 million, R$4,470 million of which under current liabilities and R$3,199 million under non-current
liabilities. On December 31, 2020, the provision was R$9,176 million, with R$4,350 million under current liabilities and R$4,826 million
under non-current liabilities.
The following table shows the changes
in the provision in the period:
The amounts included in the provision
can be divided into the following action fronts:
|
a.
|
Support for relocating and compensating
the residents and owners of the properties located in the risk protection and monitoring areas, including properties that require special
measures for their relocation, such as hospitals, schools and public equipment.
|
For this action front, a provision
was accrued in the amount of R$4,178 million (R$4,154 million net of the adjustment to fair value), which comprises expenses related to
the relocation actions, such as relocation allowance, rent allowance, household goods transportation and negotiation of individual agreements
for compensation of the residents and third parties affected.
|
b.
|
Actions for closing and monitoring the salt
wells. Based on the findings of sonar and technical studies, Braskem has defined stabilization and monitoring actions for all 35 existing
salt mining wells. For four of them, the recommendation is that they be filled with solid material, a process that should take three years.
For the 31 remaining wells, the actions recommended are: conventional closure using the buffering technique, which consists of pressuring
the cavity and is a method adopted worldwide for cavities post-operation; confirmation of the status of natural filling; and, for certain
wells, monitoring using sonar. The monitoring system implemented by Braskem envisages actions to be developed during and after closure
of the wells, including: (i) sonar monitoring or pressure and temperature measuring in the salt caverns; (ii) subsidence monitoring system;
(iii) monitoring of vibrations using seismographs and microseismographs; and (iv) monitoring by tiltmeter and inclinometer.
|
The Company’s actions are
based on technical studies conducted by outsourced specialists, with the recommendations presented to the competent authorities. The Company
is implementing the actions approved by the ANM.
The plans to close wells have
a certain level of uncertainty, given that they may be updated until the cavities reach stabilization. Continuous monitoring is essential
for confirming the results of the current recommendations. In addition, the conclusion of the studies to confirm the natural filling of
certain cavities and the assessment of the future behavior of the cavities to be monitored using sonar could indicate the need for certain
additional measures to stabilize them.
The total provision for implementing
the measures planned for the 35 wells is R$1,393 million (R$1,383 million net of adjustment to fair value). The amount was calculated
based on existing techniques and the solutions planned for the current conditions of the wells, including expenses with technical studies
and monitoring the wells. The amount of the provision may be changed in the future, in accordance with the results of the monitoring of
the wells, the progress on implementing the plans to close wells, the monitoring of the ongoing measures and other possible natural alterations.
Definition of the measures required
for recovering areas potentially impacted by the geological phenomenon depends on a more concrete diagnosis of the area’s situation
and further discussion between the Company and the competent authorities (including the ANM).
|
c.
|
Social and urbanistic measures, under the
Agreement for Socio-Environmental Reparations signed on December 30, 2020, with the allocation of R$1,580 million to adopting actions
and measures in the vacated areas as well as urban mobility and social compensation actions, with R$300 million allocated to compensation
for social damages and collective pain and suffering, as well as possible contingencies related to actions in the vacated areas and urban
mobility actions. The amount of the provision is R$1,533 million (R$1,474 million net of adjustment to present value).
|
|
d.
|
Additional measures, whose provision amounts
to R$668 million (R$657 million net of adjustment to present value), for expenses with: (i) actions related to the Technical Cooperation
Agreements entered into with the Civil Defense; (ii) hiring of external advisors to support the execution of the relocation actions and
compensation for the families; (iii) infrastructure for assisting residents (Residents Center); (iv) expenses with managing the event
in Alagoas relating to communication, compliance, legal services, etc.; and (v) other matters classified as a present obligation for the
Company, even if not yet formalized.
|
The Company’s provisions are
based on current estimates and assumptions and may be updated in the future due to new facts and circumstances, including: timing changes;
extension and form of execution; effectiveness of action plans, and the conclusion of current and future studies that indicate the recommendations
of experts and other new developments on the topic.
Braskem continues to face and could
still face various lawsuits filed by individuals or legal entities not included in the PCF or that disagree with the individual proposal
of the agreement, as well as potential claims by public utility concessionaires.
The measures related to the mine closure
plans are subject to the analysis and approval by the ANM, monitoring of the results of the measures under implementation as well as changes
related to the dynamic nature of geological events.
The actions to repair, mitigate or
offset potential environmental impacts and damages, as provided for in the Socio-environmental Reparation Agreement, to be financed by
Braskem, will be defined after conclusion of the Environmental Diagnosis by a specialized and independent company. At this time, it is
impossible to predict the outcome of these Environmental Diagnosis studies or their potential implications for additional disbursements
to the costs already provisioned for by the Company.
Furthermore, the Socio-Environmental
Reparation Agreement envisages the potential adherence by other parties, including the Municipal Government of Maceió. To this
end, the Company has been conducting additional analyzes and is currently being negotiated with the Municipal Government of Maceió.
To date, the Company is unable to predict the results and the deadline to the conclusion of any discussions or any of their associated
costs.
Therefore, Braskem cannot eliminate
the possibility of future developments related to the topic or related expenses, and the costs to be incurred by it may differ from its
estimates.
The Company is negotiating with its
insurers the coverage of its insurance policies. The payment of compensation will depend on a technical assessment of the insurance coverage
under these policies, acknowledging the complexity of the matter. As such, no payment of compensation was recognized in the quarterly
information of the Company.
For more information, see note 24 (“Geological
event - Alagoas”) of the Consolidated Financial Statements of June 30, 2021.
|
d)
|
Financial Compensation and Support
for Relocation Program
|
As of July 2021, around 13,800 properties
had been vacated in the areas specified in the Agreement to Compensate Residents, representing 96% of the families. Regarding the bank
account specifically for funding the Financial Compensation and Support for Relocation Program (“PCF”), in the amount of R$1.7
billion, approximately R$1.3 billion already had been disbursed as of end-July. The expenses include mainly financial aid for relocation, rent allowance, compensation
for pain and suffering, damages and attorney fees.
In addition, in connection with the
Agreement for Compensation of Residents, the Company and the DPE, MPF, MPE and DPU agreed to the transfer of R$1 billion to Braskem’s
bank account specifically for funding the PCF, in 10 monthly installments of R$100 million each, starting in January 2021, being held
around the 15th of each month.
|
2.1.3.1
|
FINANCIAL OVERVIEW
|
A) NET REVENUE:
increases in Brazilian real (+9%) and U.S. dollar (+13%) compared to 1Q21, explained by the higher prices
for PE, PVC and main chemicals in the international market.
Compared to 2Q20, the increases in Brazilian
real (+124%) and U.S. dollar (+127%) are explained by the higher price for resins and main chemicals in the international market and by
the higher sales volume of main chemicals.
Sales by sector (%)
Sales by region (% in tons)
B) COST OF GOODS SOLD (COGS):
increases in Brazilian real (+4%) and U.S. dollar (+7%) compared to 1Q21, explained mainly by the higher
prices for the main feedstocks (naphtha and ethane) in the international market, influenced by the higher prices for oil and natural gas.
Compared to 2Q20, the increases in Brazilian
real (+63%) and U.S. dollar (+66%) are mainly explained by the higher prices for the main petrochemical feedstocks (naphtha, ethane and
propane) in the international market, influenced primarily by the higher prices for oil
and natural gas and by the higher sales volume of main chemicals.
In the quarter, COGS was affected by
the PIS/COFINS tax credit on feedstock purchases (REIQ) in the amount of approximately US$66 million (R$350 million) and by the Reintegra
tax credit in the amount of approximately US$0.5 million (R$2.9 million).
On July 15, the President of the Republic
sanctioned the proposed text by the National Congress in the Conversion Law Project no 12/2021, arising from the approved modifications
of Provisional Measure 1,034/2021, that provides for a gradual reduction in Special Regime for the Chemical Industry (REIQ) over four
years, with it extinguished as of January 1, 2025, being it converted into Federal Law 14,183/2021. The gradual reduction of REIQ will
be as the table below:
C) SG&A Expenses:
in U.S. dollar, increases compared to 1Q21 (+10%) and 2Q20 (+4%), mainly due to the higher expenses with
third parties.
D) RECURRING OPERATING RESULT:
accounted for 62% of the Company’s recurring consolidated Operating Result.
|
2.2
|
UNITED STATES & EUROPE
|
|
2.2.1
|
PETROCHEMICAL SPREADS
|
|
§
|
U.S. PP Spread10:
increase compared to 1Q21 (+33%). The PP price in the United
States increased mainly due to: (i) strong demand, driven by the gradual relaxation of physical distancing measures related to COVID due
to the speed of the vaccination campaign; and (ii) the lower-than-expected recovery in PP supply in the region after the impacts from
Winter Storm Uri on the U.S. Gulf Coast. The propylene price in the United States decreased, since the recovery in production affected
by Uri on the region occurred already in late 1Q21. In relation to the same quarter last year, the spread increased 110%, mainly due to
the impacts of COVID on demand for petrochemical products and resins in 2Q20.
|
|
§
|
PP Spread in Europe11:
increase compared to 1Q21 (+64%). The PP price in Europe
increased mainly due to: (i) healthy demand, supported by the demand for consumer goods and packaging; and (ii) the PP shortage in the
region, due to scheduled and unscheduled shutdowns at producers in the region and the lower inflows of imported products. The propylene
price also increased, explained by the shortage caused by scheduled shutdowns at local producers and by the growth in demand, but which
lagged the increase in the PP price. In relation to the prior-year quarter, the spread increased 117%, explained mainly by the impacts
of COVID on demand for petrochemical products and resins in 2Q20.
|
|
2.2.2
|
OPERATIONAL OVERVIEW
|
a) Demand for PP:
in the United States, demand for PP increased in relation to 1Q21 (+16%),
due to the recovery in industrial operations after the impacts from Winter Storm Uri on the region and the
gradual relaxation of physical distancing measures related to COVID. Compared to 2Q20, the increase
(+27%) is explained by the economic slowdown in that quarter due to COVID.
In Europe, the reduction in relation to 1Q21
(-9%) is explained by weaker demand from the automotive industry due to the shortage in electronic chips used to make vehicles and by
the expectations of a normalization in international PP prices in the region as of the second semester. Compared to 2Q20, the increase
(+4%) is explained by the economic slowdown in that quarter due to COVID.
10 U.S. PP – U.S. propylene price
11 EU PP – EU propylene price
b) Average utilization rate
of PP plants: in the United States, the utilization rate increased in relation to 1Q21 (+20 p.p.),
reflecting the normalization of production after the impacts from Winter Storm Uri on the U.S. Gulf Coast in 1Q21. Compared to 2Q20, the
rate increased (+8 p.p.) given the normalization of operations after the need to reduce temporarily production at the PP plants in the
United States in 2Q20, due to weaker demand and the destocking trend in the petrochemical and plastics production chains caused by COVID.
In Europe, the utilization rate increased in
relation to 1Q21 (+3 p.p.) explained by the inventory rebuilding effect and meeting demand in the region. Compared to 2Q20, the utilization
rate increased (+14 p.p.), reflecting the normalization of operations after the weaker demand from the automotive industry in the region
in 2Q20 caused by COVID.
c) PP sales volume: in
the United States, the increase in relation to 1Q21 (+14%) is explained by the higher product availability in the period. Compared to
2Q20, the increase (+26%) is mainly due to the expansion in production capacity after the commercial startup of the new PP plant (Delta)
in the region in September 2020.
In Europe, sales volume remained practically
in line with 1Q21 (-1%). Compared to 2Q20, the increase (+14%) is due to the higher product availability in the period.
A) NET REVENUE:
increases in Brazilian real (21%) and in U.S. dollar (26%) compared to 1Q21 and increases in Brazilian real
(179%) and in U.S. dollar (184%) compared to 2Q20, explained by the higher PP price in the United States and Europe and by the higher
PP sales volume in the United States.
B) COST OF GOODS SOLD (COGS):
increases in U.S. dollar (+16%) and Brazilian real (+11%) compared to 1Q21, due to: (i) the higher sales
volume in the United States; and (ii) the higher propylene price in Europe.
In relation to 2Q20, the increases in U.S.
dollar (+116%) and Brazilian real (+112%) are explained by: (i) the higher propylene price in the United States and Europe; and (ii) the
higher sales volume in the United States and Europe.
C) SG&A Expenses:
in U.S. dollar, in line with 1Q21 (+2%). Compared to 2Q20, expenses increased (+17%), mainly due to the higher
expenses with logistics and storage and with selling.
D) RECURRING OPERATING RESULT:
accounted for 27% of the Company’s recurring consolidated Operating Result.
|
2.3.1.1
|
PETROCHEMICAL SPREADS
|
|
§
|
North America PE Spread12:
increase compared to 1Q21 (+23%). The higher PE price in
the United States was due to: (i) healthy demand, explained basically by the changes in consumer habits, driving, for example, demand
for packaging, and by the inventory rebuilding in the production chain; and (ii) the lower-than-expected recovery in PE supply in the
United States after the impacts from Winter Storm Uri on the U.S. Gulf Coast, where producers were affected by unscheduled shutdowns and
feedstock supply constraints. The ethane price in the international market also increased, but at a lower proportion than the PE price.
In relation to the prior-year quarter, the spread increased 208%, explained mainly by the impacts of COVID on demand for petrochemical
products and resins in 2Q20.
|
|
2.3.2
|
OPERATIONAL OVERVIEW
|
a) PE demand in the
Mexican market: increase in relation to 1Q21 (+5%) due to the recovery in economic activity in
the region, which affected primarily demand from the packaging industry. In relation to the prior-year quarter, demand increased (+13%),
reflecting the economic slowdown in 2Q20 influenced by COVID.
12 U.S. PE –
U.S. ethane price
b) Average utilization rate
of PE plants: the utilization rate was in line compared to 1Q21, explained by the lower imported
ethane supply for production as consequence of the non-scheduled shutdown in May at the petrochemical complex in Mexico due to a specific
instability in power electricity supply at Braskem Idesa, despite the increase in ethane supply by Pemex in the period. Compared to 2Q20,
the utilization rate decreased (-23 p.p.), explained by lower ethane supply by Pemex and imported ethane due to a specific instability
in power electricity supply at Braskem Idesa and the impact of the process of returning to operations after winter storm Uri.
To complement the supply of ethane by Pemex,
Braskem Idesa continued importing ethane from the United States. Currently, Fast Track’s expected capacity in Mexico is approximately
20,000 barrels of ethane per day, and in June 2021 the Company imported 16,500 barrels of ethane per day on average, which represents
around 83% of Fast Track’s current capacity. In 2Q21, Braskem Idesa imported 8,800 barrels of ethane per day on average, impacted
by the unscheduled shutdown in May due to a specific instability in power supply to Braskem Idesa. Moreover, the Company keeps working
in the conclusion of capacity expansion of Fast Track 2.0 to 26,000 barrels of ethane per day in the United States which should be concluded
during 3Q21.
c) PE sales volume: increased
in relation to 1Q21 (+15%) due to the limited product availability for sale in the previous quarter after the interruption of natural
gas supply at the end of 2020 and after the impacts from winter storm Uri on the U.S. Gulf Coast. Compared to 2Q20, sales volume decreased
(-32%) due to the higher product availability in the prior-year quarter.
A) NET REVENUE: increases
in Brazilian real (+45%) and U.S. dollar (+51%) compared to 1Q21 due to the higher PE price in the international market and the higher
sales volume in the period.
Compared to 2Q20, the increases in Brazilian
real (+76%) and U.S. dollar (+79%) are explained by the higher PE price in the international market.
Sales by sector (%)
Sales by region (% in tons)
B) COST OF GOODS SOLD (COGS):
increases in Brazilian real (+13%) and U.S. dollar (+17%) compared to 1Q21 due to the higher sales volume
and the higher ethane price in the international market.
Compared to 2Q20, the increases in Brazilian
real (+3%) and U.S. dollar (+4%) are explained by the higher cost of production inputs due to an increase in ethane and natural gas prices
in the international market, besides the higher volume of imported ethane in the period.
C) SG&A Expenses:
in U.S. dollar, increase in relation to 1Q21 (+4%), mainly due to the effect of Mexican Pesos appreciation
against U.S. dollar in expenses with salary. Compared to 2Q20, the increase (+18%) was due to higher expenses with salary, with third
parties and with profit sharing.
D) RECURRING OPERATING RESULT:
accounted for 11% of the Company’s consolidated recurring Operating Result.
In light of the allegations of undue payments
related to the Ethylene XXI project, which were originally published in the media in Mexico and were included in the testimony by the
former CEO of PEMEX to the Office of the Attorney General of Mexico (“Allegations”), Braskem S.A., together with Braskem Idesa,
in compliance with the standards established by Braskem's Global Compliance System Policy and Braskem Idesa's governance guidelines, approved
the hiring of a U.S. law firm with proven experience in similar cases to conduct an independent internal investigation of the Allegations
(“Investigation”).
The Investigation is ongoing and the Company
is, at the moment, unable to estimate the scheduled date of its conclusion or its outcome and/or possible impacts, if any, on its quarterly
information, and it has not identified, to date, matters that could affect or require
disclosure in the quarterly information. If the Investigation finds evidence to support any of the Allegations, such findings could affect
the Company's business, reputation, financial condition, controls and operating results, as well as the liquidity and price of the securities
issued by it.
|
3.
|
CONSOLIDATED PERFORMANCE 2Q21
|
B) CONSOLIDATED COGS
C) OTHER NET REVENUE (EXPENSES)
In 2Q21, the Company registered revenue of
R$656 million, mainly due to: (i) the effect from the recognition of PIS/COFINS tax credits in the amount of R$473 million; (ii) the effect
of R$68 million from other tax credits; and (iii) the reversal of the provision for payment of damages in Alagoas in the amount of
R$72 million. Compared to 2Q20, the increase is explained basically by the effect from the recognition of the PIS/COFINS tax credit in
2Q21.
In 2Q21, the Company registered an expense
of R$298 million. The increase in expenses in relation to 1Q21 is mainly explained by the expenses with the scheduled general maintenance
shutdown at the plants in ABC, São Paulo. Compared to 2Q20, the reduction is explained by the accounting provision for the expenses
associated with the geological event in Alagoas in 2Q20.
D) RECURRING OPERATING RESULT13
In 2Q21, the Company’s recurring Operating
Result was US$1,776 million, 40% higher than 1Q21, mainly due to: (i) better international spreads for PE, PVC and main chemicals in Brazil,
for PP in the United States and Europe and for PE in Mexico; and (ii) higher sales volumes of PP in the United States and PE in Mexico.
Compared to the same quarter last year, recurring Operating Result in U.S. dollar increased 530%, due to: (i) better international spreads
for main chemicals in Brazil and resins in all regions; and (ii) higher sales volume of resins and main chemicals in Brazil and PP in
the United States and Europe. In Brazilian real, recurring Operating Result was R$9,400 million, 35% and 522% higher than in 1Q21 and
2Q20, respectively, due to the appreciation of Brazilian real against U.S. dollar.
E) NET FINANCIAL RESULT
BRASKEM (ex-BRASKEM IDESA)
Financial expenses: decrease
compared to 1Q21 (-22%) due to (i) the reduction in the balance of gross debt with the prepayments concluded in the period; (ii) the reduction
in expenses with derivatives; and (iii) the impact of the appreciation of the Brazilian real against U.S. dollar on interest expenses.
Compared to 2Q20, the increase (+12%) is explained by the amortization of
transaction costs related to the prepayments concluded in the period.
13 Braskem’s consolidated result is equal to the
sum of the results of Brazil, United States, Europe and Mexico minus the eliminations of revenues and costs related to product transfers
between these regions.
Financial revenue: decrease compared
to 1Q21 (-42%) due to (i) the lower recognition of interest on tax assets related to PIS and COFINS debts calculated in excess in previous
years and (ii) the impact of lower income from derivatives related to feedstock operations. Compared to 2Q20, the increase (+130%) is
explained by the higher recognition of interest on tax related to PIS and COFINS debts calculated in excess in previous years.
Net exchange variation: compared
to 1Q21 and 2Q20, the increase is mainly explained by the appreciation in the Brazilian real against the U.S. dollar on the net exposure
in the amount of US$3,170 million
Transactions in financial instruments
designated as hedge accounting
In the quarter, the Company: registered US$186
million (R$646 million) in exports from a designated flow. The initial designation rate was US$1/R$2.0017, while the average realization
rate was US$1/R$5.4739.
The balance of financial instruments designated
for hedge accounting ended 2Q21 at US$5.3 billion.
Long-Term Currency Hedge Program:
Braskem’s feedstock and products have their
prices denominated or strongly influenced by international commodity prices, which are usually denominated in U.S. dollars. Starting in
2016, Braskem contracted derivative instruments to mitigate part of the exposure of its cash flow denominated in Brazilian real. The main
purpose of the program is to mitigate U.S. dollar call and put option agreements, protecting estimated flows for a 24-month period.
On June 30, 2021, Braskem had a notional value of
outstanding put options of US$2.17 billion, at an average exercise price of R$/US$4.59. At the same time, the Company also had a notional
value of outstanding call options of US$1.5 billion, at an average exercise price of R$/US$6.5. The contracted operations have a maximum
term of 24 months. The mark-to-market (fair value) adjustment of these Zero Cost Collar (“ZCC”) operations was positive R$76
million at the end of the quarter.
As a result of the depreciation of the Brazilian
real in relation to the U.S. dollar during the program, the Company exercised part the calls of the ZCC program. The effect on cash flow
for 2Q21 was R$35 million.
BRASKEM IDESA
Financial expenses: down compared
to 1Q21 (-3%) and 2Q20 (-7%) explained by the impact from the lower interest linked to the Project Finance structure and to the bond issued
by Braskem Idesa in late 2019 due to the reduction in the debt balance and Brazilian real appreciation against the U.S. dollar. This reduction
was partially offset by the higher expenses with derivative instruments associated with the interest rate swap operations under the Project
Finance.
Financial income: reduction in
relation to 1Q21 (-72%), due to the lower income from derivative related to the interest rate swap operation linked to the Project Finance,
which was partially offset by the increase in the profitability of Braskem Idesa's financial investments. Compared to 2Q20, the increase
is explained by the higher income from derivative related to the interest rate swap operation linked to the Project Finance.
Net exchange variation: increases
compared to 1Q21 and 2Q20, due to the appreciation in the Mexican peso against the U.S. dollar on the outstanding balance of the loan
of Braskem Idesa in the amount of US$2,387 million.
F) FREE CASH FLOW
Free cash flow generation in 2Q21 was R$1,554
million, explained mainly by: (i) the strong recurring Operating Result in the quarter; and (ii) the monetization of PIS/COFINS credits
in the approximate amount of R$656 million. These positive impacts were mainly offset by: (i) the negative variation in working capital,
mainly due to the supplier management, the higher sales prices for resins and main chemicals in the international market, and the inventory
rebuilding; and (ii) the increase in IR/CSLL due to the higher recurring Operating Result.
G) LIQUIDITY & CAPITAL RESOURCES
BRASKEM (ex-BRASKEM IDESA)
On June 30, 2021, the average debt term
was around 14 years, with approximately 50% of maturities concentrated after 2030. The weighted average cost of the Company’s debt
was exchange variation plus 5.2%.
The liquidity position of US$3,274 million
is sufficient to cover the payment of all liabilities coming due in the next 78 months, considering the international rotating credit
facility of US$1 billion available through 2023.
In the quarter, given its strong cash position
and to reduce its gross debt, the Company concluded several operations totaling US$643 million, highlighting: (i) the offer to repurchase
bonds coming due in 2023 and 2041, in the aggregate of US$243 million; (ii) prepayment of Commercial Notes of R$508 million (US$103 million);
(iii) prepayment of Export Credit Note of R$400 million (US$81 million); and (iv) prepayment of Export Prepayments of US$100 million.
Additionally, in July, the Company fully redeemed
the 2022 bonds in the amount of US$255 million and concluded the prepayment of the bank loan in the amount of US$110 million. After these
payments, the average debt term turned to around 15 years, with 53% of maturities concentrated after 2030. The weighted average cost of
the Company’s debt was exchange variation plus 5.2%.
BRASKEM IDESA
On June 30, 2021, the average debt term was
around 5 years, with 40% of maturities in 2029 onwards. The weighted average cost of the Company’s debt was exchange variation plus
5.4%.
Braskem Idesa has guarantees typical to Project
Finance structures: debt service reserve account and contingent equity commitment. At the close of June 2021, such guarantees corresponded
to US$194 million and US$208 million, respectively.
H) INVESTMENTS & VALUE CREATION
The Company’s investment plans for
2021 are as follows: (i) US$667 million for operating investments; (ii) US$97 million for strategic investments; and (iii) US$34 million
for operating investments at Braskem Idesa.
Operating Investments
2Q21: the main operating investments were in: (i) the scheduled general maintenance shutdown
at the plants in ABC, São Paulo; (ii) the continued ramp-up in activities at the chlor-alkali
plant in Maceió; (iii) the scheduled maintenance shutdown at the PVC plant in Maceió; and (iv) the preparations for the
scheduled maintenance shutdown at the PVC plant in Bahia.
Strategic Investments
2Q21: expenditures were allocated to the following projects: (i) modernization of the electrical system of the petrochemical complex
in ABC; (ii) construction of a recycling line for high-quality post-consumer resin in Brazil; and (iii)
expansion of biopolymer capacity at the Triunfo Petrochemical Complex.
VALUE CREATION
Transform For Value Program
During the first half of 2021, the Transform
for Value (TFV) Program continued to make progress in mapping new opportunities and in its implementation of the initiatives already mapped,
ending the half-year with initiatives with the potential to capture US$147 million/year14.
As already mentioned, the program focuses on
improvement initiatives with gains expected by end-2023, and which are organized by in stages to facilitate the management and communication
of each initiative’s progress, according to the following concepts:
|
§
|
Stage 1 – Identification: initiatives
in the formatting and/or identification of solutions stage – Recently conceived and/or not yet prioritized for further development,
they do not have a detailed business case
|
|
§
|
Stage 2 – Planning: Initiatives in
the finalization/update stage of the quantification of impacts and execution plan – They have a detailed business case, assessment
of potential capture and implementation schedule
|
|
§
|
Stage 3 – Execution: Initiatives in
the implementation stage - They have the allocation of necessary resources for their implementation, since they have already been prioritized
and approved
|
|
§
|
Stage 4 – Run-rate: Initiatives in
the initial stage of operation, in which there is stabilization of performance and measurement of gains according to previously defined
assumptions
|
|
§
|
Stage 5 – Concluded: Initiatives already
implemented and whose stabilization process has been completed - In some cases they underwent an internal audit to validate the gains
|
The program’s global scope encompasses
not only the actions of the Transformation Office, but also those of the Digital Center, Energy projects, Continuous Industrial Improvement
initiatives and CAPEX projects involving Competitiveness & Productivity (C&P).
Today, in addition to the US$147 million/year
in stages 4 and 5 mentioned above, Braskem envisages a set of improvement initiatives in stages 1, 2 and 3 that could generate over US$293
million/year, bringing the total to approximately US$440 million/year15 by 2023. The company’s previous estimate called
for recurring gains of around US$340 million/year by 2023, but a new set of initiatives effectively increased the potential of our pipeline.
Some of the initiatives coordinated by the
program already have resulted in significant improvements that have streamlined both corporate processes and industrial operations.
One highlight is the Redesign of Forecast-to-Stock
and Order-to-Cash, which involve two of the company’s most important macro-processes. Forecast-to-Stock (FTS) covers aspects ranging
from forecasting demand and production and sales planning to the supply of products in inventory. Meanwhile, Order-to-Cash (OTC) starts
with the receipt of orders from clients and goes on to include order management, order delivery and ultimately payment collections.
The project simplifies processes by reviewing
and implementing a fluid and integrated routine from end to end. The effort makes processes smarter, more flexible and responsive and
provides total visibility and efficient communication among the various areas. Efforts also are made to ensure engagement by the various
planning levels and to increase the visibility of order status in order to consequently increase client satisfaction and maximize Braskem's
profitability.
The project’s main positive impacts to
date include:
14
Considering only initiatives in stage 4 (Run-Rate), when measurements of gains could vary as actions advance, and in stage 5 (Concluded),
after stabilization and/or the internal audit.
15
Considering initiatives in all 5 stages, in accordance with the maturity monitoring methodology for initiatives established under the
Transform for Value Program.
For Forecast-to-Stock:
|
§
|
Reduction in manual labor by
implementing a statistical model for projecting demand
|
|
§
|
Adjustment of safety inventories
to meet demand better and reduce operating costs
|
|
§
|
Greater precision in production
planning by reviewing production frequency, minimizing off-spec generation16 and improving product supply forecasting
|
|
§
|
Reducing negotiations of exceptions,
which improves efficiency in the execution of key steps of the process
|
|
§
|
Clear definition of roles and
responsibilities to increase agility in the decision-making process
|
For Order-to-Cash:
|
§
|
Efficiency gains from automating
the sale order flow
|
|
§
|
Increased agility in identifying
payments and credit limit analyses
|
|
§
|
Better visibility of order
status and more accurate delivery estimates
|
|
§
|
Increased autonomy for clients
by implementing self-service tools
|
|
§
|
Reduction in logistics costs
by implementing optimized distribution networks
|
The project started in the South America operations
where, when fully implemented, the gains should reach US$20-50 million/year17. The regional teams already have been in the
solutions implementation phase since April and, by the end of June 2021, the project was producing gains of around US$18 million/year,
which leaves us confident in reaching the upper limit of the projected gains. In July 2021, we expanded the project to our North America,
Europe and Asia operations, where initial estimates indicate gains on par with those of the South America operations.
Another highlight is the initiative related
to the opportunities identified in the industrial maintenance. The purpose is to address the gaps identified based on international benchmarks
in both maintenance costs and the mechanical availability of some of our key industrial assets. The actions were consolidated under a
project called Reliability Journey, which currently includes six industrial assets in Brazil and already is planning expansions to other
assets in North America.
Reliability Journeys are medium/long-term projects,
since they consider the routine maintenance, investment cycles and general maintenance shutdown of such assets.
By their nature, they are action plans that
should last up to five years, with multidisciplinary initiatives that involve the production, maintenance and process engineering teams,
as well as the senior leadership of each of the industrial complexes involved in the program.
Progress on the actions must generate gains
through the following levers:
|
§
|
In the short/medium term, increase in the mechanical availability
of assets and consequently a reduction in industrial losses, whether due to off-spec production of off-line time
|
|
§
|
In the long term, reduction in maintenance costs resulting
from better planning and prioritization of activities, as well as more efficient monitoring of equipment conditions
|
|
§
|
Strengthening the culture of reliability, focusing on increasing
the perpetuity of assets and improving operational safety
|
|
§
|
Disseminating knowledge and good practices across the various
plants
|
Planning for the Reliability Journeys began
in late 2020, and initial estimates point to gains of approximately US$38 million/year4 by 2023, considering the six assets
currently covered by the program. Currently, the teams already are implementing actions at all assets, and the focus is advancing in the
work plans. During 2022, we should be able to see the results of the initial actions
in increasing mechanical availability and consequently be able to measure gains.
16 Off-spec
refers to products that do not comply with the specifications required for sale as a 100% defect-free product.
17
Expectation of capture when the initiatives reach stage 5 (Concluded), after stabilization and/or internal audit, in accordance with the
maturity monitoring methodology for the initiatives established by the Transform for Value Program.
Capacity Expansion & Energy Efficiency
Projects
Project to expand biopolymers production capacity
in the Triunfo Petrochemical Complex in Rio Grande do Sul
Expansion of current green ethylene production
capacity from 200 kta to 260 kta using feedstock made from sugarcane ethanol that is used to make “I’m GreenTM”
resins, with startup expected for the end of 2022 and investments estimated at US$61 million. The project is aligned with the Company’
goals of reducing its greenhouse gas emissions by 15% by 2030 and of reaching carbon neutrality by 2050, while also reinforcing its position
as the global leader in biopolymers production. As of 2Q21, the Company had disbursed US$2.1 million, representing 7.2% completion of
the investment.
Project to produce high-quality recycled
resin
In partnership with Valoren, a company specializing
in developing and operating technologies for transforming solid waste, Braskem will invest R$67 million in the construction of a recycling
line with capacity to transform some 250 million pieces of packaging into 14 tons of high-quality, post-consumer resin per year. The project
will be installed in Indaiatuba, in the interior of São Paulo state, and is expected to start operations in the fourth quarter
of 2021. As of 2Q21, the Company had disbursed R$19.1 million, representing 38% completion of the investment.
Energy efficiency project for ABC Petrochemical
Complex
In partnership with the German-based company
Siemens, the Company is modernizing its ABC petrochemical complex in São Paulo. With total estimated investment of R$600 million,
considering the disbursements from Braskem and Siemens, the project includes replacing the steam turbines that currently meet the needs
of the complex with high-speed electrical engines developed with state-of-the-art and high-performance technology.
As of 2Q21, the project had reached completion
of approximately 97%. The startup of the new systems is expected for the second quarter of 2021 with the resumption of operations in ABC
after the general maintenance shutdown. With the resumption of operations, the commissioning of energy cogeneration will start, which
falls under the scope of Siemens, Braskem’s partner in this project, with startup slated for the second half of 2021. The project
will provide operational efficiency in terms of energy, water and other materials consumption, reducing costs as a consequence.
|
4.
|
2030 & 2050 COMMITMENTS
|
|
§
|
People Safety: the consolidated overall
reported and lost time injury-frequency rate in the year to 2Q21 was 0.86 event per million hours worked, down 3% from the same quarter
last year. The reduction is due to advances under the human reliability program, which aims to raise awareness on the safety and prevention
of occupational accidents, mainly related to the management of contractors.
|
|
§
|
Process Safety: The TIER 1 rate18
in the year to 2Q21 was 0.08 event per million hours worked, while the Tier 2 rate19 was 0.12 event per million hours worked
in the year to 2Q21, with both representing reductions (-27% and -71%, respectively) in relation to the prior-year quarter due to advances
under the mechanical integrity program.
|
|
4.2
|
FINANCIAL & ECONOMIC RESULTS
|
|
§
|
Integrated Report 2020: Launch of
the Integrated Report 2020, which follows the reporting standards of the Global Reporting Initiative (GRI), the International Integrated
Reporting Council (IIRC) and, for the first time, the Sustainability Accounting Standards Board (SASB).
|
|
§
|
ISO 37001 – Anti-bribery: Receipt
of ISO 37001 certification, an international standard that establishes the rules and standards an Anti-bribery Management System and analyzed
the management and operation of Braskem’s Compliance and Anti-bribery Management System (SGAS) in Brazil related to the production
and sale of chemical and petrochemical products and its respective administrative support services.
|
|
§
|
Audit Committee: The Extraordinary
Shareholders Meeting held in July approved the reform and restatement of the Company’s Bylaws to transform the Compliance Committee
into the Compliance and Statutory Audit Committee (CCAE) as part of the ongoing improvements to corporate governance practices of the
Company. Creating a CCAE is a recommendation of the Brazilian Corporate Governance Code that is incorporated by the Securities and Exchange
Commission of Brazil (CVM) in CVM Instruction 480/09. This committee will be formed by independent members, with two external members
appointed from a list selected by a headhunter company.
|
|
§
|
FTSE4Good Index Series: Braskem will
remain listed in FTSE4Good Index, after being independently assessed according to the FTSE4Good criteria, satisfying the requirements
to become a constituent of the FTSE4Good Index Series. Created by the global index provider FTSE Russell, the FTSE4Good Index Series is
designed to measure the performance of companies demonstrating strong Environmental, Social and Governance (ESG) practices.
|
|
§
|
Board of Directors ESG Oversight: Periodically,
the Board of Directors and its supportive committees, when applicable, evaluate the Company’s advancements in ESG practices, including
the monitoring of the assessment of corporate risks related to the subject. In 2Q21, the main topics discussed were:
|
|
(i)
|
Evolution of initiatives related to the
ESG value agenda along the capital markets, such as the structure and objective of the ESG Day and unification of the 2020 Integrated
Report, both contributions to the Economic and Financial Results dimension
|
|
(ii)
|
Evolution of the mitigation strategy for
the image of plastic risk, such as advances related to sectorial partnerships against plastic waste in the seas and the development of
circular products and applications, contributing to the Plastic Waste Disposal dimension
|
18
Incident with loss of containment of products above the limits established in the American Petroleum
Institute (API) 754 for TIER 1, based on the product released, or any release that causes: fatality or lost-time injury of an employee
or third party, hospital damages or fatality of the external public, financial losses greater than US$100,000, or evacuation of the community.
19
Incident with loss of containment of products above the limits established in the American Petroleum
Institute (API) 754 for TIER 2, based on the product released, or any release that causes: reportable injury of own employee or third
party and financial loss greater than US$2,500.
|
4.3
|
ELIMINATING PLASTIC WASTE
|
|
§
|
Recycling Island in Triunfo, Rio Grande
do Sul: a new structure at the Technology & Innovation Center in Triunfo, Rio Grande do Sul, the Recycling Island will be responsible
for testing the performance of recycled resins and for developing innovative and sustainable products, while also seeking to foster the
development of the recycling chain and associated market.
|
Recycled Sales (I’m green Recycled)
|
§
|
Brazil: increase in sales of recycled
resins compared to 1Q21 (+5%) and 2Q20 (212%), mainly due to the Company’s progress in expanding its portfolio of resins with recycled
content and its positioning as a supplier of post-consumer resins. In the case of chemicals20, sales decreased in relation
to 1Q21 (-3%), due to the unavailability of the product, and increased in relation to 2Q20 (+20%), reflecting the growth in demand after
the impacts from COVID.
|
|
§
|
United States & Europe: reduction
in relation to 1Q21 (-9%), due to the lower availability of raw material. Compared to 2Q20, sales increased in the United States due to
the recovery in industrial production and in demand after the impacts from COVID.
|
|
§
|
Mexico: reduction compared to 1Q21
(-14%), given the higher competitiveness of virgin resin imports, especially from Asia, in Central America and the Caribbean. Compared
to 2Q20, increase due to the expansion in the recycling business in the region.
|
|
4.4
|
COMBATING CLIMATE CHANGE
|
|
§
|
Green PE wax: Braskem has launched
the world’s first polyethylene (PE) wax made from renewable resources, which will be used to make adhesives, cosmetics, paints and
composites used in thermoplastic resin converter processes. The product is made from sugarcane ethanol, has a smaller CO2 footprint,
is recyclable and meets applications in multiple markets.
|
20
The recycled chemicals are not considered under the brand I’m greenTM.
Green PE Sales (I’m green Biobased)
|
·
|
Utilization Rate (Green Ethylene): the
green ethylene plant operated at a capacity utilization of 105%, increasing in comparison with both 1Q21 (+17 p.p.) and 2Q20 (+16 p.p.),
reflecting the growing demand for Green PE.
|
Note that in June, green ethylene
production set another monthly record and, for the first time, a quarterly production record.
|
·
|
Sales and Recurring Operating Result:
sales decreased in relation to 1Q21 (-10%) and 2Q20 (-10%), explained by operational incidents at the polyethylene plants and limited
availability of logistics and transport for exports. The recurring Operating Result in Brazilian real of this segment declined in relation
to 1Q21 (-22%), mainly due to a lower sale. Compared to 2Q20, sales increased (+48%), explained by both higher sales volume and higher
prices, basically reflecting the stronger demand for the product and the recovery in economic activity after the effects from COVID.
|
|
4.5
|
OPERATIONAL ECO-EFFICIENCY
|
ECO-INDICATORS21
In the year to date, the ecoefficiency indicators
of Braskem’s plants were mainly affected by the higher production volume resulting from the restarting of the chlor-alkali plant
in Alagoas state and the startup of the new PP plant in the United States, as well as higher production of the crackers in Bahia and Rio
Grande do Sul. The solid waste generation indicator increased (11%), mainly due to the scheduled shutdown at the petrochemical complex
in ABC, which involves cleaning and maintaining equipment operations that increase solid waste generation. The water and energy consumption
indicators decreased 5% and 7%, respectively, mainly due to the better operating performance of the units in Bahia and Rio Grande do Sul.
21
The data can be revised depending on internal updates.
|
4.6
|
SOCIAL RESPONSIBILITY & HUMAN RIGHTS
|
|
§
|
Sponsorship of Paralympics: Renewal
of the sponsorship agreement with the Brazilian Paralympic Committee (CPB) through April 2022. The continuation of Braskem’s partnership
will support the development of the Brazilian para-athletics team in Brazil and abroad, while supporting high-performance initiation actions
at both the Paralympic Training Center located in São Paulo (SP) and the CPB Reference Centers in other regions of the country.
|
|
§
|
UN WEPs22 Awards 2021:
Recognized, for the second straight time, in the bronze category of the United Nations Women's Empowerment Principles Awards. The awards
encourage and recognize the efforts of companies that promote a culture of gender equality and women empowerment in Brazil. The initiative
is recognized by the United Nations (ONU), through the United Nations Global Compact and United Nations Women, in partnership with its
Brazilian counterparts, the UN Global Compact Network Brazil and UN Women in Brazil.
|
|
§
|
Pro Gender and Race Equality Program:
Recognized with the Seal of the 6th Edition of the Pro Gender and Race Equality Program, granted by the Ministry of Women,
Family & Human Rights (MMFDH), UN Women and the International Labour Organization (ILO), whose purpose is to recognize actions and
initiatives that foster gender and race equality in the workplace. The awards ceremony, which was held in the ministry building in Brasília,
featured the participation of representatives from 63 other companies and institutions that registered for the awards, which were launched
in 2018.
|
|
§
|
Support in the Fight against COVID and
its Impacts: continuous support for COVID impacts, with a focus on humanitarian aid to fight hunger, based on donations that will
total R$15 million by the end of the year. The Company has begun delivering 55 thousand food baskets, 25 thousand cleaning kits and 3
tons of produce, focusing mainly on supporting communities close to Braskem facilities and in the capitals of the states where the Company
is present. In addition, through Braskem volunteer program, more than 1,200 volunteers raised more than R$300,000 in donations to combat
hunger, and Braskem multiplied by 5x the amount donated by Members. This initiative by the volunteers, together with Braskem incentive,
will enable the donation of over 27 thousand basic food baskets.
|
|
4.7
|
SUSTAINABLE INNOVATION
|
22
Women's Empowerment Principles
|
§
|
R&D Portfolio: By the end of
2Q21, the research and development portfolio included 120 projects, with net present value of US$2,360 million and a sustainability index
of 76%. Since the start of the year, five projects have been launched, with combined net present value of US$22 million, notably the launch
of the new high rigidity polypropylene (PP), which objective is serving mainly the European automotive market and allows the production
of lighter automotive parts and with low VOC (volatile organic compounds) for car interiors.
|
On June 30, 2021, Braskem’s stock
was quoted at R$59.55 (BRKM5) and US$23.84 (BAK). The Company’s shares are listed on the Level 1 corporate governance segment of
the B3 – Brasil, Bolsa e Balcão and on the New York Stock Exchange (NYSE) through Level 2 American Depositary Receipts (ADRs).
Each Braskem ADR (BAK) corresponds to two class “A” preferred shares issued by the Company.
In May, the risk rating agency Fitch Ratings
upgraded Braskem’s outlook to positive and reaffirmed its risk rating on the global scale of BB+. Furthermore, in July, the risk
rating agency Moody’s upgraded Braskem’s outlook to stable and reaffirmed its risk rating on the global scale of Ba1. The
upgrades in outlook reflect the Company’s permanent commitment to maintaining its liquidity position and cost discipline to reduce
its corporate leverage and regain its investment grade rating.
Since its last earnings release, the risk-rating
agency Standard & Poor’s (S&P) has kept its rating for Braskem on the global scale at BB+, with a stable outlook.
Braskem reiterates that it maintains a solid
cash position and debt maturity profile concentrated in the long term. Furthermore, in line with its continuous commitment to its financial
health and to regaining its investment grade rating, Braskem continued to reduce its corporate leverage, measured as the ratio of net
debt to recurring Operating Result in U.S. dollar, which ended 2Q21 at 1.10x, down 39% in relation to 1Q21 (1.80x).
|
5.2
|
BRASKEM MODELING – OUTLOOK 3Q21 vs. 2Q21
|
BRAZIL
Growth in total resin sales volume (internal
and external markets), given the expectation on the normalization of the operation at the petrochemical center in ABC, São Paulo
after the scheduled general maintenance shutdown in 2Q21. The Company also will continue to implement the strategy of prioritizing sales
to the Brazilian and South American markets.
In relation to petrochemical spreads, based
on the forecasts of international external consultants, the expectation is for PE-Naphtha spreads to remain at levels above the industry’s
upcycles, due to the delay in the normalization of inventories in the US after supply interruptions, reducing the availability of supply
in the region, and given the expectation of continued solid demand, with local distributors and resellers rebuilding inventories to prepare
for hurricane season in the US region. Furthermore, the expectation is for a narrowing of PP and PVC spreads in relation to 2Q21, due
to the lower demand caused by the advancement of COVID variants in India and Southeast Asia.
UNITED STATES & EUROPE
In the United States, the expectation is for
PP sales volume to remain at current levels, given the stability in product supply after the normalization of PP production in the country
in 2Q21.
In addition, based on forecasts by international
external consultants, PP-Propylene spreads in the United States should remain healthier in 3Q21, supported by continued solid demand and
the expected impact on the supply caused by the hurricane season in the region.
Regarding the Company’s business in
Europe, sales volume should remain in line with 2Q21, due to the stability in product supply, but with lower Europe PP-Propylene spreads,
due to the end of period of scheduled shutdowns at producers in the region and higher imports from Asia.
MEXICO
In the Mexico business, the expectation is
for higher PE sales volume due to the expected increase in product supply with the higher supply of ethane from the United States (Fast
Track).
In relation to spreads, based on the forecasts
of external consultants, the expectation is for U.S. PE-Ethane spreads to remain stable in 3Q21, mainly due to the continued solid demand,
with local distributors and resellers rebuilding inventories to prepare for hurricane season in the US region.
LIST OF ANNEXES:
ANNEX I:
|
Consolidated Income Statement
|
41
|
|
|
|
ANNEX II:
|
Consolidated Recurring Operating Result Calculation
|
41
|
|
|
|
ANNEX III:
|
Consolidated Balance Sheet
|
42
|
|
|
|
ANNEX IV:
|
Consolidated Cash Flow
|
43
|
|
|
|
ANNEX V:
|
Braskem Idesa Income Statement
|
44
|
|
|
|
ANNEX VI:
|
Braskem Idesa Balance Sheet
|
44
|
|
|
|
ANNEX VII:
|
Braskem Idesa Cash Flow
|
45
|
ANNEX I
Consolidated Income Statement
ANNEX II
Consolidated Recurring Operating Result
Calculation
ANNEX III
Consolidated Balance Sheet
ANNEX IV
Consolidated Cash Flow
ANNEX V
Braskem Idesa Income Statement
ANNEX VI
Braskem Idesa Balance Sheet
ANNEX VII
Braskem Idesa Cash Flow
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date: August 4, 2021
|
BRASKEM S.A.
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Pedro van Langendonck Teixeira de Freitas
|
|
|
|
|
|
Name:
|
Pedro van Langendonck Teixeira de Freitas
|
|
|
Title:
|
Chief Financial Officer
|
DISCLAIMER ON FORWARD-LOOKING STATEMENTS
This
report on Form 6-K may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements are statements that are not historical facts, and are based on our management’s current view and estimates
of future economic and other circumstances, industry conditions, company performance and financial results, including any potential
or projected impact of the geological event in Alagoas and related legal proceedings and of COVID-19 on our business, financial
condition and operating results. The words “anticipates,” “believes,” “estimates,” “expects,”
“plans” and similar expressions, as they relate to the company, are intended to identify forward-looking statements.
Statements regarding the potential outcome of legal and administrative proceedings, the implementation of principal operating and
financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting our
financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the
current views of our management and are subject to a number of risks and uncertainties, many of which are outside of the our control.
There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions
and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such
assumptions or factors, including the projected impact of the geological event in Alagoas and related legal proceedings and the
unprecedented impact of COVID-19 pandemic on our business, employees, service providers, stockholders, investors and other stakeholders,
could cause actual results to differ materially from current expectations. Please refer to our annual report on Form 20-F for the
year ended December 31, 2019 filed with the SEC, as well as any subsequent filings made by us pursuant to the Exchange Act, each
of which is available on the SEC’s website (www.sec.gov), for a full discussion of the risks and other factors that may impact
any forward-looking statements in this presentation.
Barkby (PK) (USOTC:BAKBF)
Historical Stock Chart
From May 2024 to Jun 2024
Barkby (PK) (USOTC:BAKBF)
Historical Stock Chart
From Jun 2023 to Jun 2024