Braskem S.a. · BMFBOVESPA:BRKM3
Braskem — QUARTERLY INFORMATION (ITR) AT JUNE 30, 2019
75 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. Statement of financial position at June 30, 2019 All amounts in thousands of reais Continued
Slide 2: Statement of profit or loss
The notes are an integral part of the financial statements. Statement of profit or loss at June 30, 2019 All amounts in thousands of reais, except earnings or loss per share
Slide 3: Statement of profit or loss
The notes are an integral part of the financial statements. Statement of profit or loss 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 at June 30, 2019 All amounts in thousands of reais, except earnings or loss per share
Slide 5: Statement of comprehensive income (continued)
The notes are an integral part of the financial statements. Statement of comprehensive income at June 30, 2019 All amounts in thousands of reais, except earnings or loss per share continued
Slide 6: 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 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, unless if stated otherwise. (b) Functional currency other than the Brazilian real Certain subsidiaries have a different functional currency from th
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 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 13: 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 burdensome lease agreements that required adjustment at the right-of-use ass
Slide 14: Cash and financial investments
(i) On June 30, 2019, it includes cash of R$659,279 and cash equivalents of R$385,514 (R$963,357 on December 31, 2018) of the subsidiary Braskem Idesa, available for its exclusive use. 4 Financial investments The information on financial investments was presented in the 2018 annual financial stateme
Slide 15: Financial investments and 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 16: Expected credit loss
The following table shows the Company’s expected credit loss:
Slide 17: Inventories
6 Inventories The information on inventories was presented in the 2018 annual financial statements of the Company, in Note 8.
Slide 18: 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 19: Related parties balance sheet
Balance sheet Assets Current Trade accounts receivable Inventories Dividends and interest on capital Total assets Liabilities Current Trade payables Payable notes Other payables Total liabilities Transactions Sales of products Purchases of raw materials, finished goods services and utilities Financi
Slide 20: Related parties balance sheet
Balance sheet Assets Current Cash and equivalents Financial investments Trade accounts receivable Inventories Dividends and in Related parties on capital Loan agreements Other iv ables parties Loan agreements Total assets Liabilities Current Trade payables A ceounts payab! Advance to emport Other pa
Slide 21: 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 22: 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 23: Federal supervenience and Investments
(a) Federal supervenience 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 longer period b
Slide 24: Changes in investments – Parent Company
(b) Changes in investments – Parent Company
Slide 25: Equity accounting results
(c) Equity accounting results
Slide 26: 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 statements of the subsidiary in which it holds non-controlling interest with material effects on the Company’s consolidated statements.
Slide 27: Consolidation of Braskem Idesa notes
(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 28: Statement of profit or loss
Statement of profit or loss Net revenue Cost of products sold Income (expenses) Selling and distribution, (Loss) reversals for impairment of trade accounts receivable General and administrative Research and development Results from equity investments Other income (expenses), net Financial results Fi
Slide 29: 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 30: Capitalized charges and PP&E impairment analysis
Capitalized charges in the six-month period ended June 30, 2019 were R$90,680 (R$75,071 on June 30, 2018). Property, plant and equipment impairment analysis With the suspension of operations informed in Note 1 (c), Braskem conducted the Vinyls segment impairment test, represented by the assets of th
Slide 31: Impairment testing and right-of-use assets
Except for the impairment test performed in the Vinyls segment (Note 10), there were no other significant events or circumstances in the other CGUs and/or operating segments, in the period ended June 30, 2019 that indicated the need for updating the impairment testing of intangible assets with indef
Slide 32: Right-of-use assets
(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 33: 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 34: Payment schedule
(b) Payment schedule The maturity profile of amounts maturing in the long-term is as follows:
Slide 35: Guarantees
(c) Guarantees Braskem gave collateral for part of its borrowings as follows:
Slide 36: 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 37: Braskem Idesa project finance and 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 38: Debentures
16 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 39: Payment schedule
(a) Payment schedule The maturity profile of the long-term debentures is as follows:
Slide 40: Guarantees
(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 41: Financial instruments
(i) This amount does not affect the cash of the Company. 18 Financial instruments The information related to financial instruments was presented in the 2087 financial statements of the Company, in Note 19. 18.1 Non-derivative financial instruments and leniency agreement (Note 22.3) – consolidated
Slide 42: Derivative financial instruments
18.2 Derivative financial instruments 18.2.1 Changes
Slide 43: 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 44: 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 45: Changes in hedge financial instruments
The following table provides the changes in in financial instruments designated for this hedge in the period.
Slide 46: Expected hedge realizations
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 47: Exchange variation and income tax in OCI
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 48: Project Finance liabilities hedge
(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 49: Changes in hedge instruments
The following table shows the changes in financial instruments designated for these hedge operations in the period:
Slide 50: 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 51: Exchange variation recognized by Braskem Idesa
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 52: Exchange variation and income tax in OCI
The changes in foreign exchange variation and Income Tax and Social Contribution under item “Other comprehensive income (expenses)” are as follows:
Slide 53: Credit quality of financial assets
18.4 Credit quality of financial assets (a) Trade accounts receivable On June 30, 2019 and December 31 , 2018, the Company’s trade accounts receivable has the following credit ratings:
Slide 54: 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 55: 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 56: 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 57: 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 58: Income tax and social contribution
20 Income tax (“IR”) and social contribution (“CSLL”) 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 59: Deferred income tax and social contribution
(i) Includes values of the effect of gifts, thincapitalisation, Reintegra, investment subsidy, fines (including arising from Note 22.3) and others. (b) Breakdown of deferred income tax and social contribution (b.i) According to tax collection records
Slide 60: Offset of deferred taxes
(b.ii) Offset for the purpose of presentation in the balance sheet (consolidated)
Slide 61: Deferred tax assets and liabilities by subsidiary
Assets Braskem SA. Braskem Argentina Braskem Alemanha Braskem Chile Braskem Idesa Braskem México Servigos Cetrel DAC Liabilities Braskem SA Braskem America Braskem Chile Braskem Idesa Cetrel DAC Jun2019 Headquarters TRandCsL (Country) Tax calculation Compesation Balance Brazil 2191,719 (2,142,910) 4
Slide 62: Realization of deferred taxes; sundry provisions
(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 63: Contingencies
22 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 64: 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 65: Tax claims
(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 66: 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 ILP Program settlement. (b) Equity valuation adjustments – shareholders’ equity
Slide 67: Equity valuation adjustments
On December 31, 2018 Additional indexation Realization by depreciation or write-off assets Income tax and social contribution, Deemed cost of jointly-controlled investment Realization by depreciation or write-off assets Income tax and social contribution Fair value adjustments Accounts receivable Fo
Slide 68: 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 69: Basic and diluted earnings per share
Basic and diluted Jun/2019 Jun/2018 Profit for the period attributed to Company's shareholders 1.491.476 1.600.844 Distribution of priority dividends attributable to: Preferred shares class "A" 208.453 208.450 Preferred shares class "B" 303 303 208.756 208.753 Distribution of 6% of unit price of com
Slide 70: Shares outstanding and weighted average
Amount at beginning of period Incentive long term plan payments with treasury shares Amount at the end of the period Amount at beginning of period Conversion of preferred shares class "B" to" A" Amount at the end of the period Jun/2019 Preferred shares Class "A" Outstanding Weighted shares average 3
Slide 71: Other net income (expenses)
27 Other net income (expenses)
Slide 72: Contractual penalty and financial results
(i) The contractual penalty for failing to supply feedstock to the subsidiary Braskem Idesa is R$197,331 (R$97,816 in 2018). 28 Financial results
Slide 73: Expenses by nature and function
29 Expenses by nature and function
Slide 74: Segment information
30 Segment information The information by segment was presented in the 2018 annual financial statements, in Note 32.
Slide 75: 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
Braskem — QUARTERLY INFORMATION (ITR) AT JUNE 30, 2019 on 6ix