The article provides an overview of the Q4 2023 earnings call for Braskem S.A. (BAK) and highlights the impact of the imbalance between global supply and demand in the chemical and petrochemical industry on the company’s profitability. Despite recording a loss of approximately $935 million in 2023, Braskem demonstrated resilience through the implementation of various initiatives that positively affected its recurring EBITDA and cash generation. The company ended the year with a robust liquidity position of $3.6 billion in cash and maintained a long-term debt profile with an average maturity of 12 years. Operational and strategic highlights included improvements in accident frequency rates and an expansion in green ethylene production capacity. While the Brazil segment experienced a lower utilization rate and sales volume due to prioritization of higher value-added sales, the United States and Europe segment recorded a decrease in sales volume. However, the Mexico segment saw an 18% increase in utilization rate and an uptick in sales volume, attributed to higher ethane supply. Despite the challenges faced, Braskem’s recurring EBITDA for Q4 2023 increased by 13% compared to the previous quarter, while the recurring cash consumption was approximately BRL1.9 billion, mainly due to the downturn in the industry.

Resilience Initiatives

Implementation of resilience initiatives in 2023

Braskem S.A. implemented a number of resilience initiatives in 2023 in order to strengthen its operations and financial performance. These initiatives were aimed at mitigating the impact of the imbalance between global supply and demand in the chemical and petrochemical industry, which had negatively influenced the company’s profitability. By implementing these initiatives, Braskem was able to improve its EBITDA and cash generation, leading to a more resilient business.

Positive impact on EBITDA and cash generation

The resilience initiatives implemented by Braskem in 2023 had a positive impact on the company’s EBITDA and cash generation. Despite the challenging market conditions, Braskem was able to achieve a recurring EBITDA of $211 million in Q4 2023 and $743 million for the full year. This represents a significant improvement compared to previous periods and demonstrates the effectiveness of the resilience initiatives.

Operational and Strategic Highlights

Improvements in accident frequency rates

One of the operational highlights for Braskem in 2023 was the improvements in accident frequency rates. The company made significant efforts to enhance safety measures and promote a culture of safety across its operations. As a result, Braskem was able to achieve a reduction in accident frequency rates, ensuring the well-being of its employees and maintaining the integrity of its operations.

Expansion in green ethylene production capacity

Braskem also achieved a strategic highlight in 2023 with the expansion of its green ethylene production capacity. Green ethylene, produced from renewable sources such as sugarcane, is a more sustainable alternative to traditional ethylene production methods. By expanding its green ethylene production capacity, Braskem was able to meet the growing demand for sustainable products and contribute to a more environmentally friendly industry.

Brazil Segment Performance

Utilization rate in Q4 2023

In Q4 2023, the utilization rate of Braskem’s Brazil segment was 66%. This indicates the efficiency at which the segment’s production capacity was being utilized during the period. While the utilization rate was not at its highest, it is important to note that the Brazil segment faced some challenges during the quarter, including the impact of ethanol supply restrictions on green ethylene production.

Impact on resins sales volume

Despite the challenges faced by the Brazil segment, Braskem was still able to achieve a respectable sales volume of resins during Q4 2023. However, the sales volume was lower compared to previous periods due to the prioritization of higher value-added sales. This strategic decision by Braskem demonstrates the segment’s focus on maximizing profitability and creating value for its customers.

Impact of Ethanol Supply Restrictions

Impact on green ethylene production

One of the factors that influenced the performance of Braskem’s Brazil segment in Q4 2023 was the impact of ethanol supply restrictions on green ethylene production. Ethanol is a key raw material used in the production of green ethylene, and any restrictions in its supply can have a direct impact on Braskem’s production capacity. Despite these challenges, Braskem was able to effectively manage its green ethylene production and mitigate the impact on its overall operations.

United States and Europe Segment Performance

Utilization rate in Q4 2023

The utilization rate of Braskem’s United States and Europe segment in Q4 2023 was 82%. This indicates a high level of efficiency in utilizing the segment’s production capacity during the period. However, it is important to note that the segment faced some challenges, including a decrease in sales volume.

Decrease in sales volume

Despite the high utilization rate of the United States and Europe segment, Braskem experienced a decrease in sales volume during Q4 2023. This decrease can be attributed to the challenging market conditions and the impact of global supply and demand imbalances. Despite this decrease, Braskem remains committed to improving its sales performance and capturing opportunities for growth in the future.

Mexico Segment Performance

Utilization rate increase in Q4 2023

Braskem’s Mexico segment saw a significant increase in utilization rate during Q4 2023. The utilization rate increased by 18%, indicating the effectiveness of the segment’s operational and strategic initiatives. This increase in utilization rate demonstrates the segment’s ability to maximize its production capacity and meet the growing demand for its products.

Increase in sales volume

The increase in utilization rate of Braskem’s Mexico segment also resulted in an increase in sales volume during Q4 2023. This increase reflects the segment’s successful efforts in capturing market opportunities and expanding its customer base. Braskem’s Mexico segment has positioned itself well in the market and is expected to continue its positive sales performance in the future.

Financial Highlights

Recurring EBITDA for Q4 2023

Braskem achieved a recurring EBITDA of $211 million in Q4 2023. This represents a significant increase compared to the previous quarter and demonstrates the positive impact of the resilience initiatives implemented by the company. The strong financial performance in Q4 2023 reflects Braskem’s ability to adapt to challenging market conditions and deliver value to its shareholders.

Recurring cash consumption

Despite the positive financial performance in terms of EBITDA, Braskem experienced recurring cash consumption of approximately BRL1.9 billion in Q4 2023. This can be attributed to the industry downturn and the challenges faced by the company in the global market. However, Braskem maintains a robust liquidity position and is well-positioned to navigate through these challenges and generate positive cash flow in the future.

Conclusion

In conclusion, Braskem S.A. has demonstrated its resilience in the face of challenging market conditions by implementing a series of resilience initiatives in 2023. These initiatives have had a positive impact on the company’s EBITDA and cash generation, ensuring its sustainability and profitability. Despite the challenges faced in various segments, Braskem has remained committed to its operational and strategic objectives, achieving improvements in accident frequency rates and expanding its capacity in green ethylene production. With a robust liquidity position and a long-term debt profile, Braskem is well-positioned to continue delivering value to its shareholders and capturing opportunities for growth in the chemical and petrochemical industry.