Braskem S.a. · BMFBOVESPA:BRKM3
Braskem — BAKITR1Q19 6KA
72 slides from Braskem's investor presentation, Aug 8, 2019
Slide 1: Statement of financial position
The notes are an integral part of the financial statements. Braskem S.A. Statement of financial position at March 31, 2019 All amounts in thousands of reais
Slide 2: Statement of profit or loss
The notes are an integral part of the financial statements. Braskem S.A. Statement of profit or loss at March 31, 2019 All amounts in thousands of reais, except earnings or loss per share
Slide 3: Statement of comprehensive income
The notes are an integral part of the financial statements. Braskem S.A. Statement of comprehensive income at March 31, 2019 All amounts in thousands of reais Continued
Slide 4: Statement of changes in equity
The notes are an integral part of the financial statements. Statement of changes in equity All amounts in thousands of reais
Slide 5: Statement of cash flows
The notes are an integral part of the financial statements. Braskem S.A. Statement of cash flows at March 31, 2019 All amounts in thousands of reais
Slide 6: Statement of value added
The notes are an integral part of the financial statements. Braskem S.A. Statement of value added at March 31, 2019 All amounts in thousands of reais
Slide 7: Notes: Operations and accounting policies
The notes are an integral part of the financial statements. Braskem S.A. Notes to the consolidated and parent company quarterly information at March 31, 2019 All amounts in thousands, unless otherwise stated 1. Operations Braskem S.A. (hereinafter “Parent Company”) is a public corporation headquarte
Slide 8: Foreign and functional currency
2.2 Foreign and functional currency (a) Functional and presentation currency The functional and presentation currency of the Company is the real, unless if stated otherwise. (b) Functional currency other than the Brazilian real Certain subsidiaries have a different functional currency from that of t
Slide 9: Exchange variation effects
Notes to the consolidated and parent company quarterly information at March 31, 2019 All amounts in thousands, unless otherwise stated (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 curr
Slide 10: Changes to the main accounting policies
2.3 Changes to the main 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 commercial lease standard to all existing agreements on the initial adoption date, i.e. January 1, 2019. T
Slide 11: Right-of-use assets measurement
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 burdensome lease agreements that required adjustment at the right-of-use ass
Slide 12: Cash and financial investments
(i) On March 31, 2019, it includes cash of R$1,029,917 (R$963,357 on December 31, 2018) of the subsidiary Braskem Idesa, available for its exclusive use. Notes to the consolidated and parent company quarterly information at March 31, 2019 All amounts in thousands, unless otherwise stated Financial i
Slide 13: Financial investments and trade receivables
(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 14: Expected credit loss
The following table shows the Company’s expected credit loss:
Slide 15: Inventories
Notes to the consolidated and parent company quarterly information at March 31, 2019 All amounts in thousands, unless otherwise stated Inventories The information on inventories was presented in the 2018 annual financial statements of the Company, in Note 8.
Slide 16: Related parties - consolidated
Notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated Related parties The information concerning related parties was presented in the 2018 annual financial statements of the Company, in Note 9. (a) Consolidated
Slide 17: Related parties - Parent Company
Notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated (b) Parent Company
Slide 18: Notes
Notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated
Slide 19: Agreements with related companies
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated (c) Agreements executed and/or renewed with related companies In the period ended March 31, 2019, the Company engaged in the following transactions with relate
Slide 20: Recovery of Federal Tax Credits
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated Recovery of Federal Tax Credits The information on taxes recoverable was presented in the 2018 annual financial statements of the Company, in Note 10.
Slide 21: Recovery of Federal Tax Credits (PIS/COFINS)
(a) Recovery of Federal Tax Credits In February 2019, the courts issued the final and unappealable decisions on the lawsuit filed by Braskem S.A. and on lawsuits filed by its subsidiaries that order the exclusion of ICMS tax from the calculation base of PIS/COFINS taxes and that the longer period be
Slide 22: Changes in investments – Parent Company
(b) Changes in investments – Parent Company
Slide 23: Equity accounting results
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated (c) Equity accounting results
Slide 24: Impacts on consolidation of Braskem Idesa
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated (d) Impacts on consolidation of Braskem Idesa In compliance with IFRS 12 and CPC 45, the Company is presenting the financial statements of the subsidiary in wh
Slide 25: 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 26: Management notes
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated
Slide 27: Property, plant and equipment
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated 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 28: Capitalized charges and intangible assets
Capitalized charges in the three-month period ended March 31, 2019 were R$44,699 (R$33,287 on March 31, 2018). There were no significant events or circumstances in this period that indicate the need for impairment testing on the property, plant and equipment. Intangible assets The information on int
Slide 29: Management notes
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated
Slide 30: Right-of-use assets
There were no significant events or circumstances in the period ended March 31, 2019 that indicated the need for updating the impairment testing of intangible assets with indefinite useful life made in the end of 2018, or that indicated the need to perform an impairment testing of intangible assets
Slide 31: Leasing balances and expenses
(i) Includes financial leasing balances previously 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 and acquisitions related to the right of use of assets, in the three-month period ended March 31, 2019,
Slide 32: Trade payables and borrowings
(i) Considers R$6.1 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. Management notes to the consolidated and parent company quarterly informa
Slide 33: Payment schedule
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated (b) Payment schedule The maturity profile of amounts maturing in the long-term is as follows:
Slide 34: Guarantees
(c) Guarantees Braskem gave collateral for part of its borrowings as follows:
Slide 35: Braskem Idesa borrowings
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated Braskem Idesa borrowings The information on Braskem Idesa borrowings was presented in the 2018 annual financial statements in Note 16.
Slide 36: Project Finance covenants
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 the company itself, with limited guarantees pledged by share
Slide 37: Debentures
Debentures The information related to debentures was presented in the 2018 annual financial statements of the Company, in Note 17. The debentures were issued by the subsidiaries Cetrel and DAC.
Slide 38: Payment schedule
(a) Payment schedule The maturity profile of the long-term debentures is as follows:
Slide 39: Guarantees
(b) Guarantees The issuers entered into agreements for the fiduciary assignment of receivables, with the maintenance of collection accounts in order to meet the debt service equivalent for up to three months of future installments, in accordance with the respective assignment agreements. Management
Slide 40: Financial instruments
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated Financial instruments The information related to financial instruments was presented in the 2018 financial statements of the Company, in Note 19. 18.1 Non-deri
Slide 41: Derivative financial instruments
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated 18.2 Derivative financial instruments 18.2.1 Changes
Slide 42: Operations designated for hedge accounting
(a) Operations designated for hedge accounting (a.i) U.S. dollar Call and Put Options On March 31, 2019, Braskem held a total notional amount of put options of US$2.2 billion, with an average strike price of 3.36 R$/US$. Simultaneously, the Company also held a total notional amount of call options o
Slide 43: Braskem Idesa swaps and export hedge
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 44: Changes in hedge instruments
The following table shows the changes in financial instruments designated for these hedge operations in the period:
Slide 45: Expected realizations of hedge
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” written off to the financial result. For all quarters of the year,
Slide 46: 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 47: Project Finance liabilities hedge of future sales
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated (a.ii) Liabilities related to the Project Finance of future sales in U.S. dollar On March 31, 2019, sales designated and not yet realized are as follows:
Slide 48: Changes in hedge instruments
The following table shows the changes in financial instruments designated for these hedge operations in the period:
Slide 49: Discontinued hedge accounting balance
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated The following table provides the balance of discontinued hedge accounting amount, in the three-month period ended March 31, 2019 (US$11,313), which is recorded
Slide 50: Exchange variation recognized
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 three-month period ended March 31, 2019:
Slide 51: Foreign exchange variation and income tax
The changes in foreign exchange variation and Income Tax and Social Contribution under item “Other comprehensive income (expenses)” are as follows:
Slide 52: Credit quality of financial assets
18.4 Credit quality of financial assets (a) Trade accounts receivable On March 31, 2019 and December 31 , 2018, the Company’s trade accounts receivable has the following credit ratings:
Slide 53: 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. Management notes to the consolidated and parent company quarterly information at March 31,
Slide 54: Other financial assets credit ratings
This calculation considers the amount of trade payables 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 fin
Slide 55: 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 56: Taxes payable
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated Taxes payable The information related to taxes payable was presented in the Company’s 2018 annual financial statements, in Note 20.
Slide 57: Income tax and social contribution
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 58: Breakdown of deferred income tax
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated (b) Breakdown of deferred income tax and social contribution (b.i) According to tax collection records
Slide 59: Offset of deferred taxes
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated (b.ii) Offset for the purpose of presentation in the balance sheet (consolidated)
Slide 60: Realization of deferred taxes and sundry provisions
(c) Realization of deferred income tax and social contribution In the period ended March 31, 2019, there were no material events or circumstances that indicate any compromise of the realization of these deferred taxes. Management notes to the consolidated and parent company quarterly information at
Slide 61: Contingencies
Contingencies 22.1 Claims with probable loss and claims arising from business combinations with possible loss The description of the main contingent liabilities of the Company was presented in the 2018 annual financial statements, in Note 23.1.
Slide 62: Claims with possible losses
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated 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 Not
Slide 63: Leniency Agreement
22.3 Leniency Agreement (a) Global Settlement with authorities In the context of the allegations of undue payments in connection with Operation Car Wash in Brazil, we have engaged experts in internal investigations to conduct an independent investigation into such allegations (“Investigation”) and r
Slide 64: Equity valuation adjustments
(i) American Depositary Receipts traded on the New York Stock Exchange (USA). Braskem S.A. Management notes to the consolidated and parent company quarterly information at March 31, 2019 All amounts in thousands, unless otherwise stated (b) Equity valuation adjustments – shareholders’ equity
Slide 65: Consolidated equity valuation adjustments
Conzoidated ‘Sieibuied to shareholders terest uit valuation adjustment Other comprehensive income Goodtrillin Deemedcort ‘Fair value Defined ‘Foreign sequsition of andadiitional adjustments of | Gain(loss) Foreign benefit currency Total subsidiary under indexation of trade account ominterest, sales
Slide 66: Share weighting
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated Share weighting - 2018
Slide 67: Preferred shares outstanding and weighted average
Amount at beginning of period Conversion of prefered shares class "B" to" A" Amount at the end of the period Mar/2018 Preferred shares Class "A" Class "B" Outstanding Weighted Outstanding Weighted shares average shares average 343,775,864 343,775,864 578,330 578330 39,000 13,867 (78,000) (27,733) 34
Slide 68: Sales revenue
Sales revenue Domestic market Revenue Rebates Foreign market Revenue Rebates Sales and services deductions Taxes Donestic market Foreign market Sales returns Donestic market Foreign market Net sales and services revenue Consolidated Parent company Mar/2019 ‘Mar/2018 Mar/2019 ‘Mar/2018 9,499,160 9,60
Slide 69: Financial results
(i) The contractual penalty for failing to supply feedstock to the subsidiary Braskem Idesa is R$120,818. Braskem S.A. Management notes to the consolidated and parent company quarterly information at March 31, 2019 All amounts in thousands, unless otherwise stated 27 Financial results
Slide 70: Expenses by nature and function
28 Expenses by nature and function
Slide 71: Segment information
Management notes to the consolidated and parent company quarterly information at March 31, All amounts in thousands, unless otherwise stated Segment information The information by segment was presented in the 2018 annual financial statements, in Note 32.
Slide 72: Subsequent events
(i) Includes the amount of R$1,191,140 related to PIS and COFINS credits - exclusion of ICMS from the calculation basis (Note 8 (a)). Subsequent events (a) I In April 2019, the public-interest civil action was filed by the Alagoas State Prosecution Office and the Alagoas State Public Defender’s Offi