Braskem S.a. · BMFBOVESPA:BRKM3
Braskem — Presentation (November 2019)
72 slides from Braskem's investor presentation, Nov 15, 2019
Slide 1: Balance sheet at September 30, 2019
The notes are an integral part of the interim financial statements. Balance sheet at September 30, 2019 All amounts in thousands of reais Continued
Slide 2: Statement of profit or loss
The notes are an integral part of the interim financial statements. Statement of profit or loss at September 30, 2019 All amounts in thousands of reais, except earnings or loss per share
Slide 3: Statement of profit or loss (continued)
The notes are an integral part of the interim financial statements. Statement of profit or loss at September 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 interim financial statements. Statement of comprehensive income at September 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 interim financial statements. Statement of comprehensive income at September 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 interim 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 interim financial statements. Statement of cash flows at September 30, 2019 All amounts in thousands of reais
Slide 8: Statement of value added
The notes are an integral part of the interim financial statements. Statement of value added at September 30, 2019 All amounts in thousands of reais
Slide 9: 1. Operations and 2. Accounting policies
The notes are an integral part of the interim financial statements. 1. Operations Braskem S.A. (hereinafter “Parent Company” or “Braskem”) is a public corporation headquartered in Camaçari, Bahia (“BA”), which jointly with its subsidiaries (hereinafter “Company”) is controlled by Odebrecht S.A. (“Od
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: 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: Cash and financial investments
(i) On September 30, 2019, cash includes R$567,457 and cash equivalents R$522,647 (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 financi
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 consolidated balances
Consolidated Balances at September 30, 2019 Balances at December 31,2018 ‘Associates companies, Jointly-controlled investment and Related companies Associates companies, Jointly-controlled investment and Related companies ‘Odebrecht and Odebrecht and subsidiaries Petrobras and subsidiaries Petrobras
Slide 20: Related parties balance sheet and transactions
Balance sheet Assets Curent Cash and equivalents Financial iavestments Trade accounts receivable Inventories Related parties Other receivables ‘Non-cusrent Related parties Loan agreements Total assets Liabilities Curent ‘Trade payables Accounts payable to related parties, Advance to export Other pay
Slide 21: Agreements with related companies
(c) Agreements executed and/or renewed with related companies In the period ended September 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
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: Recovery of Federal Tax Credits
(a) Recovery of Federal Tax Credits During the period ended September 30, 2019, 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
Slide 24: Changes in investments – Parent Company
(b) Changes in investments – Parent Company
Slide 25: Results from equity investments
(c) Results from equity investments
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 information of the subsidiary in which there is interest held by non-controlling shareholder with material effects in 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 – Braskem Idesa
Statement of profit orloss Net revenue Cost of products sold Income (expenses) Selling and distribution (Loss) reversals for impaiment of trade accounts receivable General and administrative Research and development Results flomequity investments Other income Other expenses Financial results Financi
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 impairment analysis
Capitalized charges in the nine-month period ended September 30, 2019 was R$140,275 in Consolidated and R$51,966 in Parent company (for the period ended September 30, 2018 was R$125,213 in Consolidated and R$59,821 in the Parent company). Property, plant and equipment impairment analysis With the su
Slide 31: Amortization and right-of-use assets
The amortization in the nine-month period ended September 30, 2019 was R$46,021 in Consolidated and R$33,274 in the Parent company (for the period ended September 30, 2018 was R$60,522 in Consolidated and R$34,156 in the Parent company). 12 Right-of-use assets The Company leases various offices, fre
Slide 32: Right-of-use assets and leases
(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$6.7 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: Borrowings and payment schedule
(i) On April 8, 2019, Braskem S.A. contracted a US$80,383 financing facility with a term of 7 years. To consummate this facility, certain assets of the Company’s plants were transferred to the financial institution. In accordance with IFRS 15 / CPC 48, this transfer is not considered as sale. (b) Pa
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: 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 Braskem Idesa, with limited guarantees pledged by shareholde
Slide 38: Debentures payment schedule
(a) Payment schedule The maturity profile of the long-term debentures is as follows:
Slide 39: Guarantees and 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 40: 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 41: Derivative financial instruments
18.2 Derivative financial instruments 18.2.1 Changes
Slide 42: Hedge accounting operations
(a) Operations designated for hedge accounting (a.i) U.S. dollar Call and Put Options On September 30, 2019, Braskem held a total notional amount of put options of US$2.1 billion, with an average strike price of 3.49 R$/US$. Simultaneously, the Company also held a total notional amount of call optio
Slide 43: 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 44: Changes in hedge financial instruments
The following table provides the changes in in financial instruments designated for this hedge in the period.
Slide 45: Expected hedge realizations
The realizations expected for the subsequent quarter 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 46: Project Finance liabilities for future sales
(a.ii) Liabilities related to the Project Finance of future sales in U.S. dollar On September 30, 2019, sales designated and not yet realized are as follows:
Slide 47: Changes in hedge instruments
The following table shows the changes in financial instruments designated for these hedge operations in the period:
Slide 48: Discontinued hedge accounting balance
The following table provides the balance of discontinued hedge accounting amount, in the nine-month period ended September 30, 2019 (US$11.104), which is recorded in Braskem Idesa’s shareholders’ equity under item “Other comprehensive income (expenses)” and will be transferred to financial income (e
Slide 49: Exchange variation 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 50: Credit quality of financial assets
18.4 Credit quality of financial assets (a) Trade accounts receivable Virtually none of the Company’s clients have risk ratings assigned by credit rating agencies. For this reason, Company developed its own credit rating system for all accounts receivable from clients in Brazil and abroad. On Septem
Slide 51: 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 52: Other financial assets credit ratings
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 53: 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 54: 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 55: 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 56: Breakdown of deferred income tax
(b) Breakdown of deferred income tax and social contribution (b.i) Deferred taxes per nature
Slide 57: Offset of deferred taxes in balance sheet
(b.ii) Offset for the purpose of presentation in the balance sheet (consolidated)
Slide 58: 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 Sep/2019 Headquarters TRand CSL (Country) Tax calculation _Compesation Balance Brazil 2,800,922 (2,092,
Slide 59: Realization of deferred taxes; sundry provisions
(c) Realization of deferred income tax and social contribution In the period ended September 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 th
Slide 60: 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 61: 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 62: Tax claims
(a) Tax (i) PIS, COFINS, IR and CSL: taxation of tax losses and liability reductions in connection with the installment plan under MP 470/09 The Company was assessed for not recording as taxable the amounts of the credits from tax losses and social contribution tax loss carryforwards used to settle
Slide 63: Profit allocation and other comprehensive income
(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) Profit allocation for fiscal year 2018 On October 3, 2019,
Slide 64: All amounts in thousands, unless otherwise stated Continued
All amounts in thousands, unless otherwise stated Continued
Slide 65: 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 66: Basic and diluted earnings per share
Basic and diluted Sep/2019 Sep/2018 Profit for the period attributed to Company's shareholders 124,340 2,945,114 Distribution of priority dividends attributable to: Preferred shares class "A" 124,159 208,450 Preferred shares class "B" 181 303 124,340 208,753 Distribution of 6% of unit price of commo
Slide 67: Outstanding preferred shares
Sep/2019 Preferred shares Class "A Outstanding Weighted shares average Amount at beginning of period 343,814,914 343,814,914 8,159 4.267 Incentive long templan payments with treasury shares Amount at the end of the period Sep/2018 Preferred shares Class "A" Class "B" Outstanding Weighted Outstanding
Slide 68: Other income and other expenses
27 Other income and other expenses
Slide 69: Contractual penalty and financial results
(i) The contractual penalty from a supplier for failing to supply feedstock to the subsidiary Braskem Idesa is R$288,260 (R$145,748 in 2018). 28 Financial results
Slide 70: Expenses by nature and function
29 Expenses by nature and function
Slide 71: Segment information
30 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$1,850,254 related to PIS and COFINS tax credits – exclusion of ICMS from the calculation base (Note 8(a)). 31 Subsequent events (a) As of October 9, 2019, a Waivers & Consent package was approved by the Intercreditor Agent on behalf of the Lenders, thus extending the dat