Braskem S.a. · BMFBOVESPA:BRKM3
Braskem — Presentation (October 2019)
78 slides from Braskem's investor presentation, Oct 22, 2019
Slide 1: Balance sheet at June 30, 2019
The notes are an integral part of the financial statements. Balance sheet at June 30, 2019 All amounts in thousands of reais Continued
Slide 2: Statement of income, three and six months ended June 30, 2019
The notes are an integral part of the financial statements. Statement of income for the periods of three months and six months ended at June 30, 2019 All amounts in thousands of reais, except earnings or loss per share
Slide 3: Statement of income, three and six months ended June 30, 2019
The notes are an integral part of the financial statements. Statement of income for the periods of three months and six months ended at June 30, 2019 All amounts in thousands of reais, except earnings or loss per share
Slide 4: Statement of comprehensive income
The notes are an integral part of the financial statements. Statement of comprehensive income for the periods of three months and six months ended at June 30, 2019 All amounts in thousands of reais, except earnings or loss per share
Slide 5: Statement of comprehensive income
The notes are an integral part of the financial statements. Statement of comprehensive income for the periods of three months and six months ended at June 30, 2019 All amounts in thousands of reais, except earnings or loss per share
Slide 6: Statement of changes in shareholder's equity
The notes are an integral part of the financial statements. Statement of changes in shareholder’s equity All amounts in thousands of reais
Slide 7: Statement of cash flows
The notes are an integral part of the financial statements. Statement of cash flows at June 30, 2019 All amounts in thousands of reais
Slide 8: Statement of value added
The notes are an integral part of the financial statements. Statement of value added at June 30, 2019 All amounts in thousands of reais
Slide 9: 1. Operations
The notes are an integral part of the financial statements. 1. Operations Braskem S.A. (hereinafter “Parent Company”) is a public corporation headquartered in Camaçari, Bahia (“BA”), which jointly with its subsidiaries (hereinafter “Braskem” or “Company”) is controlled by Odebrecht S.A. (“Odebrecht”
Slide 10: 2.2 Foreign and functional currency
2.2 Foreign and functional currency (a) Functional and presentation currency The functional and presentation currency of the Parent Company is the real. (b) Functional currency other than the Brazilian real Certain subsidiaries have a different functional currency from that of the Parent Company, as
Slide 11: Exchange variation effects
(c) Exchange variation effects The effects from exchange variation on transactions of the Company result mainly from the variation in the rates of the following currencies:
Slide 12: 2.3 Changes in accounting policies
2.3 Changes in accounting policies (a) IFRS 16 / CPC 06 (R2) – Leases For the transition, the Company used the modified retrospective approach, i.e., it applied the requirements of the lease standard to all existing agreements on the initial adoption date, i.e. January 1, 2019. Therefore, the inform
Slide 13: IFRS 16 right-of-use assets and practical expedients
Right-of-use assets were measured by the same value of the lease liabilities, adjusted for any amount of early payments and provisions for lease payments related to the agreement recognized on January 1, 2019. There were no onerous lease agreements that required adjustment at the right-of-use asset
Slide 14: Balance sheet
Balance sheet Assets Cunent assets Non cument assets Deferred incon taxand social contribution Other current assets Total assets Liabilities and shareholders’ equity Current liabilities Non current abilities Defemred incon taxand social contribution Other non cument assets Shareholders’ equity Accun
Slide 15: Statement of profit for the period
Statement of profit for the period Consolidated TQz019 292019 ‘YID2019 Published Adjustment Restated _ Published _ Adjustment Restated _ Published Adjustment Restated Profit (loss) before income tax and social contribution 1,192,290 1,192,290 C: 1,116,340 1,116,340 Coment and deferred income tax and
Slide 16: Cash and cash equivalents
3 Cash and cash equivalents The information on cash and cash equivalents was presented in the 2018 annual financial statements of the Company, in Note 5.
Slide 17: Cash held by Braskem Idesa; financial investments
(i) On June 30, 2019, cash includes R$659,279 and cash equivalents R$385,514 (R$963,357 on December 31, 2018) held by subsidiary Braskem Idesa, which cannot be used by other Group entities. 4 Financial investments The information on financial investments was presented in the 2018 annual financial st
Slide 18: Financial investments; trade accounts receivable
(i) Refers to Brazilian floating-rate government bonds (“LFTs”) issued by the Brazilian federal government and floating-rate bonds (“LFs”) issued by financial institutions. These bonds have original maturity above three months, immediate liquidity on the secondary market and Management expects them
Slide 19: Expected credit loss
The following table shows the Company’s expected credit loss:
Slide 20: Inventories
See further details on stages of the table above in Note 7(i) of the 2018 annual financial statements. 6 Inventories The information on inventories was presented in the 2018 annual financial statements of the Company, in Note 8.
Slide 21: Related parties
7 Related parties The information concerning related parties was presented in the 2018 annual financial statements of the Company, in Note 9. (a) Consolidated
Slide 22: Consolidated related party balances
Consolidated Balances at June 30, 2019 Balances at December 31, 2018 Associates companies, Joinlly-controlledinvestnent and Related companies Associates companies, Jointy-controlled investment and Related companies Balance sheet ‘Odebrecht and ‘Odebrecht and Assets Cament Trade accounts receivable I
Slide 23: Related party balances
Balance sheet aesete Curent ‘Cash and equivalents Financial mvertment: ‘Trade accounts receivable Inventories Dividends and interest on capital elated parties Loan agreements Omer receivable: ‘Non-cunent ‘alated partes Loan agreements Total arsets “Liabilities Curent ‘Trade payables Accounts payable
Slide 24: Agreements with related companies
(c) Agreements executed and/or renewed with related companies In the period ended June 30, 2019, the Company engaged in the following transactions with related parties: (i) Sales of gasoline to Refinaria de Petróleo Riograndense S.A. (“RPR”) are made based on monthly negotiations. Sales in the perio
Slide 25: Taxes recoverable
8 Taxes recoverable The information on taxes recoverable was presented in the 2018 annual financial statements of the Company, in Note 10.
Slide 26: Recovery of Federal Tax Credits
(a) Recovery of Federal Tax Credits During this half-year period, the courts issued final and unappealable decisions on the lawsuit brought by Braskem S.A. and on lawsuits brought by its subsidiaries that order the exclusion of ICMS tax from the calculation base of PIS/COFINS taxes and that the long
Slide 27: Changes in investments – Parent Company
(b) Changes in investments – Parent Company
Slide 28: Results from equity investments
(c) Results from equity investments
Slide 29: Impacts on consolidation of Braskem Idesa
(d) Impacts on consolidation of Braskem Idesa In compliance with IFRS 12 and CPC 45, the Company is presenting the financial information of the subsidiary in which there is interest held by non-controlling shareholder with material effects in the Company’s consolidated statements.
Slide 30: Consolidation of Braskem Idesa
(i) Consolidation of Braskem Idesa with its direct subsidiary Braskem Idesa Serviços. (ii) Loan from Braskem Holanda as part of shareholders’ contribution to Braskem Idesa’s project. (iii) Adjustment corresponding to the capitalization of a portion of financial charges of the loan mentioned above. (
Slide 31: Statement of profit or loss
Statement of profit or loss Consolidated Braskem Exconsolidated BraskemIdesa___Braskem Iéesa consolidated Himinations Consolidated Jun/2019 _Jun/2018 _ Juw/2019 _‘Juw/2018 _Jun/2019 _Jun/2018 _‘Jun/2019-__—‘Sun/2018 Restated Restated ‘Net revenue 043,272 28,268,098 1,837,174 1,795,884 190) 24) 26,31
Slide 32: Property, plant and equipment
10 Property, plant and equipment The information on property, plant and equipment was presented in the Company’s 2018 annual financial statements, in Note 12.
Slide 33: Capitalized charges and impairment analysis
Capitalized charges in the six-month period ended June 30, 2019 was R$90,680 in Consolidated and R$34,382 in Parent company (for the period ended June 30, 2018 was R$75,071 in Consolidated and R$39,797 in the Parent company). Property, plant and equipment impairment analysis With the suspension of o
Slide 34: Amortization; right-of-use assets
The amortization in the six-month period ended June 30, 2019 was R$29,668 in Consolidated and R$21,935 in the Parent company (for the period ended June 30, 2018 was R$45,224 in Consolidated and R$22,947 in the Parent company). 12 Right-of-use assets The Company leases various offices, freight cars,
Slide 35: Right-of-use assets depreciation and additions
(i) Includes the balances of agreements classified as of December 31, 2018 as financial leases that previously were recognized as “Property, plant and equipment,” in the amounts of R$97,995 in the consolidated and R$2,303 in the Parent Company. The depreciation, additions and write-offs related to r
Slide 36: Trade payables and borrowings
(i) Considers R$6.2 billion (2018 - R$5.6 billion) in raw material purchases due in up to 360 days for which the Company provides letters of credit issued by financial institutions that indicate the suppliers as beneficiaries. 14 Borrowings The information on borrowings was presented in the 2018 ann
Slide 37: Payment schedule
(b) Payment schedule The maturity profile of amounts maturing in the long-term is as follows:
Slide 38: Guarantees
(c) Guarantees Braskem gave collateral for part of its borrowings as follows:
Slide 39: Braskem Idesa borrowings
15 Braskem Idesa borrowings The information on Braskem Idesa borrowings was presented in the 2018 annual financial statements in Note 16.
Slide 40: Project Finance and covenant breach
In keeping with the Company’s Financial Policy, the investment in the petrochemical complex Braskem Idesa was financed under a Project Finance structure, in which the construction loan must be repaid using exclusively the cash generated by Braskem Idesa, with limited guarantees pledged by shareholde
Slide 41: Payment schedule
(a) Payment schedule The maturity profile of the long-term debentures is as follows:
Slide 42: Guarantees; reconciliation of borrowings
(b) Guarantees The issuers entered into agreements for the fiduciary assignment of receivables, with the maintenance of restricted accounts, to cover debt service for up to three months of the installments due, in accordance with the assignment agreements. 17 Reconciliation of changes in borrowings
Slide 43: Financial instruments
18 Financial instruments The information related to financial instruments was presented in the 2018 financial statements of the Company, in Note 19. 18.1 Non-derivative financial instruments and leniency agreement (Note 22.3) – consolidated
Slide 44: 18.2 Derivative financial instruments
18.2 Derivative financial instruments 18.2.1 Changes
Slide 45: Operations designated for hedge accounting
(a) Operations designated for hedge accounting (a.i) U.S. dollar Call and Put Options On June 30, 2019, Braskem held a total notional amount of put options of US$2.2 billion, with an average strike price of 3.48 R$/US$. Simultaneously, the Company also held a total notional amount of call options of
Slide 46: Swaps and export hedge accounting
Braskem Idesa contracted swap operations to offset part of the variation in Libor arising from the borrowings mentioned in Note 15. The hedge operation shares the same guarantees as the Project Finance. 18.3 Non-derivative liabilities designated for export hedge accounting (a.i) Future exports in U.
Slide 47: Changes in hedge instruments
The following table provides the changes in in financial instruments designated for this hedge in the period.
Slide 48: Maturities of designated financial liabilities
On June 30, 2019, the maturities of financial liabilities designated, within the scope of the consolidated balance sheet, were as follows:
Slide 49: Expected realization of hedged exports
The realizations expected for the subsequent quarters of fiscal year 2019 will occur through payments of financial instruments in conformity with the exports made, with the exchange variation recorded in “Other comprehensive income” reclassified to the financial result. For all quarters of the year,
Slide 50: Foreign exchange variation in other comprehensive income
The changes in foreign exchange variation and Income Tax and Social Contribution under item “Other comprehensive income (expenses)” of this hedge are as follows:
Slide 51: Project Finance liabilities for future sales
(a.ii) Liabilities related to the Project Finance of future sales in U.S. dollar On June 30, 2019, sales designated and not yet realized are as follows:
Slide 52: Changes in hedge instruments
The following table shows the changes in financial instruments designated for these hedge operations in the period:
Slide 53: Discontinued hedge accounting balance
The following table provides the balance of discontinued hedge accounting amount, in the six-month period ended June 30, 2019 (US$11.210), which is recorded in Braskem Idesa’s shareholders’ equity under item “Other comprehensive income (expenses)” and will be transferred to financial income (expense
Slide 54: Exchange variation in Braskem Idesa financial results
The following table provides the balances of exchange variation recognized in Braskem Idesa’s financial income (expenses) due to the realization of sales designated for this hedge over the course of the six-month period ended June 30, 2019:
Slide 55: Changes in other comprehensive income
The changes in foreign exchange variation and Income Tax and Social Contribution under item “Other comprehensive income (expenses)” are as follows:
Slide 56: 18.4 Credit quality of financial assets
18.4 Credit quality of financial assets (a) Trade accounts receivable Virtually none of Braskem’s clients have risk ratings assigned by credit rating agencies. For this reason, Braskem developed its own credit rating system for all accounts receivable from clients in Brazil and abroad. On June 30, 2
Slide 57: Default indicators
(i) Most clients in this group are inactive and the respective accounts are in the process of collection actions in the courts. Clients in this group that are still active buy from Braskem and pay in advance. Default indicators
Slide 58: Default calculation; other financial assets
This calculation considers the amount of trade receivables overdue more than 5 days for the domestic market and 30 days for the international market, divided by consolidated gross revenue in the last 12 months. (b) Other financial assets In order to determine the credit ratings of counterparties in
Slide 59: 18.5 Sensitivity analysis
(i) Investments approved by the Management of the Company, as permitted by the financial policy. 18.5 Sensitivity analysis Financial instruments, including derivatives, may be subject to changes in their fair value as a result of the variation in commodity prices, foreign exchange rates, interest ra
Slide 60: Taxes payable
19 Taxes payable The information related to taxes payable was presented in the Company’s 2018 annual financial statements, in Note 20.
Slide 61: Income tax and social contribution
20 Income tax (“IR”) and social contribution (“CSL”) The information related to income tax and social contribution was presented in the Company’s 2018 annual financial statements, in Note 21. (a) Reconciliation of the effects of income tax and social contribution on profit or loss
Slide 62: Breakdown of deferred income tax and social contribution
(b) Breakdown of deferred income tax and social contribution (b.i) Deferred taxes per nature
Slide 63: Offset for presentation in the balance sheet
(b.ii) Offset for the purpose of presentation in the balance sheet (consolidated)
Slide 64: Deferred tax assets and liabilities by entity
Assets Braskem S.A Braskem Argentina Braskem Alemanha Braskem Chile Braskem Idesa Braskem México Servigos Cetrel DAC Liabilities Braskem S.A Braskem America Braskem Chile Braskem Idesa Cetrel DAC Jun/2019 Headquarters IRand CSL (Country) Tax calculation Compesation Balance Restated Brazil 1,712,380
Slide 65: Realization of deferred income tax
(c) Realization of deferred income tax and social contribution In the period ended June 30, 2019, there were no material events or circumstances that indicate any compromise of the realization of these deferred taxes. 21 Sundry provisions The information on sundry provisions was presented in the 201
Slide 66: Contingencies
22 Contingencies 22.1 Claims with probable loss and contingent liabilities arising from business combinations The description of the main contingent liabilities of the Company was presented in the 2018 annual financial statements, in Note 23.1.
Slide 67: 22.2 Claims with possible losses
22.2 Claims with possible losses The description of the main claims with possible losses are presented in the financial statements for fiscal year 2018, in Note 23.2.
Slide 68: Tax contingencies
(a) Tax Income Tax (IR) and Social Contribution (CSL) – Unlimited offsetting In December 2009, December 2013 and March 2017, the Company received a tax deficiency notice claiming that the methodology used to offset tax losses and tax loss carryforwards with Income Tax and Social Contribution tax cre
Slide 69: Shareholders' equity and treasury shares
(i) American Depositary Receipts traded on the New York Stock Exchange (USA). In this period, 8,159 treasury shares were delivered to members that left the Company as part of the Long-term incentive plan (“ILP Plan”) Program settlement. (b) Other comprehensive income
Slide 70: All amounts in thousands, unless otherwise stated Continued
All amounts in thousands, unless otherwise stated Continued
Slide 71: Earnings per share
25 Earnings per share The table below shows the reconciliation of profit or loss for the period adjusted for the amounts used to calculate basic and diluted earnings per share.
Slide 72: Basic and diluted earnings per share
Basic and diluted Jun/2019 Jun/2018 Restated Profit for the period attributed to Company's shareholders 1,012,137 1.600.844 Distribution of priority dividends attributable to: Preferred shares clas z 208.453 208.450 Preferred shares class "B" 303 303 208.756 208,753 Distribution of 6% of unit price
Slide 73: Outstanding preferred shares
Tun/2019 Preferred shares Class "A" Outstanding Weighted shares average Amount at beginning of period 343,814,914 343,814,914 Incentive long term plan payments with treasury shares 8,159 2,289 Amount at the end of the period 823,073 Tun/2018 Preferred shares Class "A" Class "B" Outstanding Weighted
Slide 74: Other income and other expenses
27 Other income and other expenses
Slide 75: Contractual penalty; financial results
The contractual penalty from a supplier for failing to supply feedstock to the subsidiary Braskem Idesa is R$197,331 (R$97,816 in 2018). 28 Financial results
Slide 76: Expenses by nature and function
29 Expenses by nature and function
Slide 77: Segment information
30 Segment information The information by segment was presented in the 2018 annual financial statements, in Note 32.
Slide 78: Subsequent events
(i) Includes the amount of R$1,850,965 related to PIS and COFINS tax credits – exclusion of ICMS from the calculation base (Note 8(a)). 31 Subsequent events (a) As per the notice dated July 25, 2019, Braskem was informed of the Public-Interest Civil Action filed against it by the Labor Public Prosec