Q1 2025 Braskem SA Earnings Call
G E O began to put our betting there's domains being the average of converting to divert us Gabe welcome to brass comes first quarter 2025 results conference call.
With us here today.
Roberto Ramos: We have Mr. Roberto Ramos Braskem CEO, Mr. Felipe <unk>, CFO and MS Rosano volume Investor Relations strategic planning and corporate market intelligence director.
Roberto Ramos: We'd like to inform you that this event is being recorded.
Speaker Change: The presentation will be held in Portuguese with simultaneous translation into English all participants can choose which language to listen to and see the presentation in using the show captions and view options buttons, respectively.
Speaker Change: Now I will provide these same instructions in English.
Speaker Change: Yes.
Speaker Change: Tennessee, a translation into English.
Speaker Change: Participants can choose which language to listen to and see the presentation using the show captions and appeal options that SUNS has proactively.
Speaker Change: After risking remarks, there will be a question and answer session at the time further instructions will be given.
Speaker Change: I thought that because any thoughts on divesting. After <unk> presentation, we will begin a Q&A session at that time further instructions will be given.
Speaker Change: The audio of this event will be available on the Investor Relations website. After its conclusion we.
Speaker Change: We remind you that participants will be able to submit questions for braskem, which will be answered after the end of the conference by the IR Department.
Speaker Change: Before proceeding we'd like to clarify that any statements that may be made during this conference call regarding brass chems business prospects projections operational and financial goals constitute beliefs and assumptions of the company's management as well as information currently available to.
Speaker Change: Braskem.
Speaker Change: Future considerations are not a guarantee of performance and involve risks uncertainties and assumptions as they refer to future events and therefore depend on circumstances that may or may not occur.
Speaker Change: Investors and analysts should understand that general conditions industry conditions and other operational factors may affect the brass comes future results and may lead to results that differ materially from those expressed in such future conditions.
Speaker Change: Now I'd like to turn the conference over to MS. Rosano volume Investor Relations strategic planning and corporate market intelligence director.
Okay.
Mr. Vallejo: Mr. Vallejo, you may begin your presentation.
Speaker Change: Oh, you know what did you see fit.
Speaker Change: Ladies and gentlemen, we would like to thank you all for participating in Brascan earnings conference call for the first quarter of 2025.
Speaker Change: According to the agenda on slide number three we will begin.
Speaker Change: Where the company's main highlights for the period, which can be found on slide number four.
Speaker Change: In the first quarter of 'twenty 'twenty five the operations of breast cancer petrochemical plants presented a better performance than in the last quarter of 'twenty 'twenty four.
Speaker Change: All segments showed a higher utilization rate in the period why all of the high level of operational safety was maintained.
Speaker Change: Voting in an average global accident frequency rate of point 92 events.
Speaker Change: Median hours worked in line with the best market references.
Speaker Change: In parallel the company presented that consolidated recurring EBITDA of $224 million, 121% higher than compared with the fourth quarter of 2024. In addition, the net profit attributable to shareholders was.
Speaker Change: $113 million contributing to those results, where the greater spreads of B and chemicals and the international market and the greater sales of chemicals in the foreign market and of P. P and the United States and Europe segment.
Speaker Change: Regarding that the Companys profile remained quite elongated with an average term of around nine years with more than 68% of the corporate debt maturing from 2030.
Speaker Change: In addition, brackins cash position ended the first quarter of 'twenty 'twenty five at $2 billion sufficient to cover debt maturities over the next 33 months without considering the available international revolving credit line.
Speaker Change: $1 billion maturing in December 'twenty 'twenty six.
Speaker Change: Moving onto the next slide.
Speaker Change: And the next slides I will present, the performance of each of the company's segments, starting with Brazil.
Speaker Change: The petrochemical plants in the Brazil segment showed an increased average utilization rates compare to the fourth quarter of 'twenty 'twenty four by four percentage points with emphasis on the inventory management is carried out at the gas based plant in Rio de Janeiro.
Speaker Change: In anticipation of the scheduled shutdown of this plant does it take place in the third quarter of 2025.
Speaker Change: In terms of sales.
Speaker Change: Volumes sold on the domestic market remains in line with the previous quarter impacted by the increased E. N. P. P sales offset by the decreased PVC sales.
Speaker Change: Regarding the quarter's results. This segment recurring EBITDA was $199 million, an increase of 101% in the previous quarter. The result was mainly positively impacted by the segments increased contribution margin mainly due to the high.
Speaker Change: <unk> spreads of D and main chemicals on the international market and by reducing fixed costs and other expenses in the period moving on to the next slide.
Speaker Change: In the first quarter of 2025 Green ethylene operations increased when compared to the last quarter of 'twenty 'twenty four resulting in an increase of 10 percentage points and the plant utilization rates there.
Speaker Change: The normalization of operations after the unscheduled shutdown of the Rio Grande did a soup plants in the previous quarter contributed to this result.
Speaker Change: Hand, Green polyethylene sales were impacted by the decreased demand due to the Chinese new year.
Speaker Change: In addition to the operational performance two important milestones were celebrated in the company's renewable segment.
Speaker Change: First the green ethylene capacity into Q4.
Was revised to 270000 tons a year since industrial fastest proved the production of 15000 tons a year more than the forecast and the expansion projects completed in 'twenty two 'twenty three.
Addition, we celebrated 15 years off and Green bio based portfolio, which includes a variety of solutions produced from our new dual source sugarcane, which has the property of capturing C. O. Two from the atmosphere. This solutions play a significant role in facilitating our.
Speaker Change: Customers' sustainability journey without the need to invest in new technologies.
Speaker Change: These achievements bring fours are in leadership position in Biopolymers and are in line with our sustainability strategy and goals.
Speaker Change: Moving on to the next slide.
Speaker Change: The performance of the United States and Europe segment was better than in the first quarter of 'twenty 'twenty four with regard to the utilization rate and an increase of 13 percentage points was the result of the normalization of the plants in Europe after maintenance shutdowns in the previous quarter.
Speaker Change: And the adjustment of production in the United States to meet higher demand.
Speaker Change: This is the volume of <unk> sold was 11% higher than in the previous quarter.
Speaker Change: In this scenario the segment to recurring EBITDA was $20 million, mainly as a result of increased sales volume and the revenue obtained from the sales of logistics wagon in the United States.
Speaker Change: Let's move onto the next slide to discuss the Mexico segment.
Speaker Change: Regarding its operation the increased supply of ethane.
Speaker Change: Mainly through the fast track solution resulted in an increase in the utilization rate of two percentage points in the quarter on the other hand, the inventory management in anticipation of the general maintenance shutdown of the petrochemical complex that will occur in the second quarter of 2025.
Speaker Change: Related to the volume of polyethylene, so being 5% lower this.
Speaker Change: Despite the decreased sales volume the higher spreads of ethane baseball, yet ilene and lower fixed costs and expenses.
Speaker Change: Does that link back to the segment and in the quarter with a recurring EBITDA of $37 million, 6% higher than the result of the fourth quarter of 20000 2024 moving on to the next slide.
Speaker Change: With great celebration breast can you dataset inaugurated the ethane import terminal in Mexico last week to do this subsidiary vitamin all chemical where the Mexico joint venture between basketball and adds value. The terminal has the capacity to receive and store 54.
Speaker Change: <unk> thousand tons, and transport 80000 barrels of ethane per day guarantee the necessary feedstock and brascan full operational capacity in the region in line with his go raskin through its subsidiary, they're asking trading and shipping B D. N. S has still if they're interested.
Speaker Change: <unk> vessels dedicated to operation in Mexico, contributing to a reduction in logistics of course lower C. O two emissions around 40% and then the industry average and the full supply of feedstock. The terminal also supports brascan eat taser in its long term growth strategy and sharing.
Speaker Change: At diversified supply of feedstock to enable future expansion of up to 25% of the current capacity now let's move on to the next slide please moving on to the next chapter I will discuss the Companys consolidated results.
Speaker Change: Regarding the company's consolidated abbey that the quarter's results it was 121% higher than that of the fourth quarter of 24 with an improvement in the margin of four percentage points.
Speaker Change: <unk> mentioned previously the higher polyethylene and chemical spreads on the international markets as a result of the lower supply of resins in the American market and the volatility in feedstock costs, a reflection of the geopolitical uncertainties had a positive impact on air.
Speaker Change: EBITDA they increased the volume of sales in Brazil. It knocks export of the main chemicals in the United States and Europe NPP contributed to the result. In addition, the actions implemented with a focus on the company's financial preservation had a positive impact on the quarter and will be detailed in the last chapter.
<unk> of the presentation moving on to the next slide.
Speaker Change: At the end of the first quarter of 'twenty 'twenty five the company had an operating cash consumption of approximately 936 million barrels explained mainly by the negative variation in working capital due mainly to the management of feedstock and finished product inventories.
Speaker Change: As a result of a scheduled shutdowns in the period recurring cash consumption of 2.4 billion Reals was mainly impacted by the half yearly interest men payments on the company's debt securities, which are concentrated in the first and third quarters of the year, considering alagoas disbursements, which were.
Speaker Change: 65% lower than the previous quarter. The company had a cash consumption of around $2 7 billion Reals.
Speaker Change: Let's move on to the next slide.
Speaker Change: Braskem and then the first quarter of the year, maintaining an endless gated profile of its S. Breast came if theres a corporate debt with an average term of around nine years and 68% of the debt concentrated as of 2030.
Speaker Change: The company continually analyzes the marketing search of more the most competitive opportunities for maintains its debt profile considering the company's level of liquidity the available cash of $2 billion is sufficient to cover its obligations for the next 33 months.
Speaker Change: Okay.
Speaker Change: So I wanted to mention the credit line available India.
Speaker Change: Okay.
Speaker Change: In conclusion, the corporate leverage stood at seven point 92 times at the end of the first quarter of 2025 moving on to slide.
Speaker Change: Our client.
Speaker Change: Update from Alagoas.
Okay.
Speaker Change: By the end of March 20th 25, all work fronts in Marseille has progressed according to plan.
Speaker Change: The reelection campaign.
Speaker Change: Okay.
Speaker Change: Execution of the residents of relocation program reached 99, 9% considering that the entire risk area defined by the civil defense in 2022 was cleared.
Speaker Change: Regarding the proposals related to the financial compensation, then re location support program more than 90, 990% of the estimated proposals have a red bee submitted of which around the 9% to nine 5% have already been accepted and around 99, 2%.
Speaker Change: Have a read it being paid on the salt cavity closure and monitoring front as announced in 'twenty 'twenty. Four provision has been made for actions if necessary to ensure that the 35 gas with these reached a maintenance free state in the long term suitable for the definite.
Closure of the field.
Speaker Change: This action is for the indefinite closure should they be necessary are scheduled to begin in 2027 with execution over several years or even decades.
Speaker Change: Of the 35 cavities 18 will be fueled primarily with solid material six of which have already been completed. In addition, 11 cavities that remain in the sort of layer and are suitable for crystallization are in the group are recommended.
Speaker Change: Commendation, sorry for the long term ceiling with solid material considered by the company. Following a technical note issued by a specialist consultancy. The other six cavities were felt naturally with five already confirmed and one in the process of being confirmed.
Speaker Change: In relation to the financial provision the total provision for the Alagoas event was around 17.6 being a real of which about 12.8 billion reals have already been disbursed and approximately 431 million reais have been recorded in other obligations paid.
Speaker Change: Abel.
Speaker Change: In addition around $637 million rails was recorded as a realization of the adjustment to present value as a result, the total total provision balance at the end of the first quarter of 2022 was 5.1 billion reals, 90% lower than the <unk>.
Speaker Change: Balance at the end of the fourth quarter of 'twenty 'twenty four.
Speaker Change: Following our agenda, let's move on to Slide 16. This concludes an overview of the results for the first quarter 'twenty 'twenty five and we will now present the outlook for the next quarter.
Speaker Change: The company's operating scenario will be mixed in the second quarter with the expectation of greater use of Brazil's petrochemical plants in anticipation of the planned maintenance shut down in Rio de Janeiro scheduled to begin in the third quarter of the year on the other hand, the segments in the United States.
Speaker Change: Europe is expected to remain stable due to a balance between increased production in the United States and lower production in Europe impacted by decreased feedstock supply Mexico for its part will begin a general maintenance shut down for each complex scheduled to last 45 days lower.
Speaker Change: Production in Mexico should affect the sales in the region, while the expectation for the other segments is for increased volumes sold in the period.
Speaker Change: As for international spreads the second quarter of the year will continue to be challenging due the prolonged.
Speaker Change: Prolonged shut down international markets and possible impacts.
Speaker Change: The new tariff scenario, the expectation of lower enough to prices could cause it to positively influence the resin spreads in Brazil, leading to an increase in the next quarter.
Speaker Change: The other hand with the current increase in ethane prices guest base.
Speaker Change: Gasoline spreads it could be negatively impacted while polypropylene market remains challenging maintaining the levels seen in the first quarter.
Speaker Change: Moving onto the.
Speaker Change: Next slide given the growth scenario of a geopolitical and tariff uncertainties important competitive advantages will position braskem just face possible impact firstly, the companys prioritize serving the domestic market, where there is still a large portion of the man to be reached Additionally.
Speaker Change: The geographic diversification and the scale of its production given give birth and leadership in the regions where it operates.
Speaker Change: Really the company is a pioneer and a leader in the production of Biopolymers solutions that are not affected by the traditional petrochemicals scenario, which provides greater resilience during the periods of down cycle there.
Speaker Change: The combination of these competitive advantages will be fundamental for braskem to navigate the uncertainties of the current scenario, let's move on to the next slide.
Speaker Change: Next we'll explore the strategic direction of the company and its main initiatives.
Speaker Change: Regarding the company's strategic direction breast skin is focused on two main pillars of action resilience and financial health and transformation.
Speaker Change: On the resilience and the financial health round, the focus will be on the tactical initiatives that mitigated the impact of the petrochemical downturn with a focus of maximizing cash generation on the transformation front, we will implement actions to sustain the current the business while continuing.
Speaker Change: To focus on building the breast skin of the future.
Speaker Change: To this end, we are reevaluating and prioritizing our assets and investments in order to optimize capital allocation and generate additional cash flow.
Speaker Change: These actions are essential for creating value to our shareholders for their purpose to each of the business and they are fundamental to the recovery of the Brazilian chemical and petrochemical industry now lets move onto the next slide faced.
Speaker Change: Faced with the prolonged downturn in the petrochemical industry Brascan has implemented initiatives on the three main fronts seeking to increase the company's value capture and resilience.
Speaker Change: Yes, the continuous reduction of Capex for operational and strategic investments was carried out reaching the lowest capex in history with expectation of 2025.
Speaker Change: As additional levers the prioritization of projects and devaluation of assets continue to be part of the Companys Gulf, which will use the funds approved through the <unk>.
Speaker Change: I E I too in this domain to us to carry out projects to expand the installed capacity and better low measures to reduce fixed and variable costs are continually being implemented such as initiatives in the areas of logistics and supplies, including the renegotiation of feedstock contract.
Speaker Change: In conclusion Raskin can see theirs is essential to continue supporting institutional initiatives and defending the Brazilian chemical industry to this end the company, who will support initiatives such as maintaining the import tax expanding they special regime for the chemical industry among others.
Speaker Change: Which will support Brazil's quest for competitive equality in relation to other economies. Combining these three main fronts. The expected value capture per year will be between 5007 thousand million dollars now lets move on to the final slide.
In this context and considering the current assets three priorities were defined for Braskem transformation. Firstly the company is focused on the continuous optimization of its naphtha based ethics.
Speaker Change: <unk> is the utilization rates of the most competitive production lines, while evaluating the hibernation of the least competitive production lines at the global level at the same time, we are seeking to make the expansion of our guests. These assets viable. This includes the brake investor interest to increase.
Speaker Change: The capacity of the rehab neuro petrochemical complex and unlocking the supply of ethane to the complex in Mexico in order to guarantee full coverage of its feedstocks needs and enable an increase in the plant capacity in the future.
Speaker Change: These two achievements exemplify it while the company tends to achieve in its other assets, increasing the flexibility of feedstock and ensuring the operational stability of its plants with a goal of increasing the competitiveness of its assets Lastly in line with our go of expand.
Speaker Change: <unk> bio product production to 1 million tons by 2030, we are implementing initiatives to selectively migrate to green production considering the current initiatives in the last quarter. We had a review of the ethylene capacity and in the short term, we will have important advances such as the X.
Speaker Change: Spectation of a final investment decision for our breast can see them on future Green ethylene plant in Thailand for the second half of 'twenty or 'twenty, five and sustained here, our JV with churches.
Speaker Change: In 2026. These partnerships are examples of alternative investment models that we will actively seek to implement our priority project combining the efforts of the three priorities. The company is seeking to generate value of $600 million bike when he.
Speaker Change: Dirty in EBITDA growth.
Speaker Change: Finally, we conclude the presentation of brass kinds of results for the first quarter of 2025. Thank you very much for your attention and will soon start the Q&A session.
Speaker Change: Got it.
Speaker Change: Ladies and gentlemen, we are now going to begin the Q&A session.
Speaker Change: Just a question please click on the raise hand, but then.
Send your question using the Q&A window for new remove your question.
Speaker Change: In the lower hand.
Speaker Change: Our first question comes from Bill <unk> with Citi.
Speaker Change: Proceed sir.
Speaker Change: Good morning.
Speaker Change: Good morning, everyone.
Speaker Change: Thanks for taking my questions I've got two of them.
Speaker Change: And our final question.
Speaker Change: Rosanna actually talked about this extensively but I'd like to get more of your opinion about what's going on with regard to the tariff war.
Speaker Change: A new chapter now over the weekend and this morning, we have a new agreement between China and the U S.
Speaker Change: So looking at the whole puzzle and a macro view.
Speaker Change: Okay.
Speaker Change: Since the company has so many different geographies, where it operates and we could say four continents I'd like two or three continents I'd like to hear your opinion on these new advances these new developments and now what changes with this weekend's news in terms of spread.
Speaker Change: <unk> productivity and everything else, we can think about in terms of Brazil, and the impact of the context of import tariffs.
Speaker Change: And my other question.
Speaker Change: On the topic of the last slide, where you mentioned $600 million and capturing value through different initiatives, especially.
Speaker Change: Especially with the change to now focusing on gas.
Speaker Change: More details about that what is the total capex for that plan could you give us a timeline as well how much do you forecast that we will be capturing especially in terms of keep kpis as well that would be very interesting. Thanks. Those are my questions.
Speaker Change: Okay.
Rosano: Hey, Rosano do you want to take this one.
Speaker Change: No.
Speaker Change: When you thought they should have been so good morning, everyone. Thank you very much for the question Gabrielle in relation to the tariff War, yes, you're right. When you say that we had some updates on the weekend, but so far we even imagine that we could see the polypropylene spreads.
Speaker Change: Reporting portal increases considering the main feedstock for the production.
Speaker Change: 25% of propylene production in China comes from feedstock that comes from the United States and so we would imagine that cash cost would increase and the prices. Therefore of probably propylene would also increase.
Speaker Change: There's also the ethane part that part of the the fits all comes from the United States.
Speaker Change: And that could also have some left over so I would just say that we will refer to the if they need the United States that would favor the company somehow. These is one of the beauties of the diversification that we have at our company not at the geographical level, but also in relation to product portfolio that was all.
Speaker Change: So concerned all sectors, which are connected to the GDP the global level that what would be an impact on the global activities.
The GDP of the United States and China combined is nearly 40% of the global GDP. So since we have there's a retreat.
Speaker Change: We were talking about the tariffs.
Speaker Change: Tariffs of 145% of being reduced to 30 and 10%. So we have this uncertainties in terms of impact and economic growth and considering all the discussions that we have been observing considering the market and the likelihood of a recession.
Speaker Change: So this all becomes less uncertain considering the plastic a demand of course has a is very.
Speaker Change: Very linked it to the right.
Speaker Change: Increase in the global GDP, So combined with the earnings result, and there's.
Speaker Change: Update so.
Speaker Change: When we saw all of this new we see all of those favorable impact and in relation to our main differentiator. This is not only a matter of geographic diversification, but especially the leadership that we have.
Speaker Change: You can see that as the world Nowadays tends to be less globalized and more divided into economic blocks for sure. If you are a leader where we operate.
Speaker Change: In the.
The main focus of the company in Brazil has always been meeting the domestic market and this is a strength for the company without any doubt. So we're not only talking about this but it's a diversification and when combined with the leadership that we have especially in the United States and Mexico and in Brazil, and also in via <unk>.
Speaker Change: Eric is really in relation to your second question about the $600 million has a potential value creation as I presented.
My talk so there is a flexible ization of guest based activities. We cannot forget that in 2017, we had a project and we have a center of operations in Bahia in the North East in Brazil, and we have an option.
Speaker Change: I can.
Speaker Change: Yeah, I can produce return of our NAFTA. So we have this resilience. So we are going after this resilience there too.
Speaker Change: Prove their flexibility by year in the.
Speaker Change: South of Brazil, We also have opportunities with Argentina, propane and even the expansion of Rio de Janeiro, which is a project that has been in our pipeline for a while with the heart that the days of Petrobras, which will make it become a reality, but when you ask about capex when we're talking about.
Speaker Change: Especially about Brazil, we are going to maximize the use of resources by using the haking fishermen.
Speaker Change: Hakan vis germane to US is the fiscal credit of one 5% in the Companys revenue and this is condition too.
Speaker Change: Project of caps increase so at the end of the day in terms of cash flow. This would then have an impact because there we have on the other hand, an increase in revenue in relation to the growth of the green portfolio Gabriel I'm going to mention what what was the expansion.
Speaker Change: That we had recently we had we used to have a capacity so far off 200000.
Speaker Change: We increased to 260 tons and considering all the expertise and the operational efficiency of the operating teams will be able to run that plant at a higher capacity.
Speaker Change: Namely 200, then 70 tons and.
Speaker Change: If we're saying that if I can say, they're all the projects that we have Thailand, or maybe a project that we want to build in the future because we want to have this biochemical it industry for the future and Brazil will have a special way of looking at the company's transformation.
Speaker Change: So, let's think about 1 million times as our goal we had about 300000 and Gordon ethane about 500 times. So that we would amount to 800000 tons you using the expansion that was related to the project that we had in this.
Speaker Change: South of Brazil, Thank you Dale.
Gabriel: Just to add Gabriel.
Speaker Change: Because what <unk> said is very on point, but just to add we have mentioned this last time, we were here talking about strategic guidance and results or the end of 2024.
Gabriel: No.
Gabriel: And with our our directives, specifically fly up to Green and looking at what we have in real granted full and the expansion of other types as well.
Gabriel: For feedstock from sugarcane, both in Brazil, and Thailand, as well as in the United States All of these points together.
Gabriel: Can create a company, let's call it Green co.
Gabriel: Where we will.
Gabriel: Perform all of this expansion of the petrochemical.
Gabriel: Initiatives from Braskem that we will be called Braskem green in the future. This is being aligned with a number of different investors that are interested in this capacity and the funding for that chance for your question. In addition to what Regina just said.
Gabriel: Would also come from capital inputs inflows.
Gabriel: From investors.
Gabriel: That go not just to the company, but also to the project in Thailand in the U S and in Brazil, as well and also lastly.
Gabriel: Other funding sources that would that we would use under the same structure as we did when we created.
Gabriel: The <unk>.
Gabriel: Project in Mexico using.
Speaker Change: Ah Ah nonrecourse funding, so that we could use it without having too much of an impact on the company's leverage.
Speaker Change: Alright, Thank you Felipe in Resona.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Cashew Vasconcelos with UBS you May proceed Sir.
Cashew Vasconcelos: Hi, good afternoon, Thanks for taking my questions I have.
Speaker Change: Actually I have one follow up and another question about Capex.
Speaker Change: So I'd like to touch on the comments about the downer and low cycles.
Speaker Change: And initiatives to mitigate those effects and reduce cash burn we know that some units operate at lower margins and some even potentially in the negative and we know that <unk> already mentioned this but I'd like to go back and better understand how you view that.
Speaker Change: Central to close certain capacity is and what the order of preference would be and what regions and maybe what products and at the same time, how have your discussions been going with the government to try to claim back some benefits from the past such as rail and also the pricing benefit and maybe.
Delaying or even reducing the export tariffs that was something you achieved a few months ago and also my next question to follow up on the Capex you mentioned the graph showing the drop in capex over the past few years.
Speaker Change: Like to understand if that level of Capex that you are looking at 425 is it sustainable for 2006.
Speaker Change: And also for 2027 in the event that this down scenario persists over these two years.
Speaker Change: And what.
Speaker Change: What about catch up catching up.
Speaker Change: During these years.
Speaker Change: Thank you.
Speaker Change: Alright, tussle I'll begin with that one.
Speaker Change: Yes.
Speaker Change: The fact that we are running our centers and.
Speaker Change: Five four P.
Speaker Change: E P P and PVC at reduced capacities allows us to expand.
Speaker Change: Expand and prolong these sites.
Speaker Change: Usually.
Speaker Change: They would run for five years at 90% capacity today, they're running at 70% capacity. This means that we have less wear and tear on the machines and so we can extend up to eight years is what we've seen in Brazil.
Speaker Change: The Mexico plant is coming up to nine years now running nonstop without any maintenance downtime.
Speaker Change: Well spacing out the downtime.
Speaker Change: How's us to naturally have a lower capex.
It's a consequence thereof.
Speaker Change: Thank you.
Speaker Change: So we're being very objective as to how we are.
Speaker Change: Titrate production when we look at our capital budgets are projects over the year.
Speaker Change: We rank these projects by a number of different methods.
Speaker Change: Methods, firstly by tier by by V. P L.
Speaker Change: Good morning.
Speaker Change: Here at <unk>, we have an indicator that we created.
Speaker Change: No one's ever written about that it's V. P. L over VPI, so a present value.
Speaker Change: Over the investment value.
Speaker Change: These investments pay cut a number of years to come to fruition, maybe two or three years, but there is an aspect that's important which is materiality.
Speaker Change: Sorry.
Speaker Change: So in a situation, where we sacrificed cash such as we are now.
Speaker Change: It's only natural for you to direct your investments to those that produce not necessarily the highest year, but rather the greatest contribution in cash generation instant generation. So it is a concept.
Speaker Change: I'll refer to as materiality that links projects to the company as a bit of capacity or to the company's assets.
Speaker Change: In other words, we really are she is going to perform.
Speaker Change: Engage in some projects that may have good results, but that don't necessarily increase our cash generation and consequently don't necessarily improve the company's situation overall.
Speaker Change: This we need to look at whether this is structural or specific and at the time. It is currently specific.
Speaker Change: This will occur until we recover a healthier cash situation.
Speaker Change: So I would not perpetuate $400 million of Capex over the next few coming years, because we're certainly going to see different thing I'm not talking about new structural projects, but normal project, we will continue to invest in the future and it's going to be at higher.
Speaker Change: <unk> at higher volumes, but $400 million is a healthy amount for us to invest and direct to projects that have the greatest capacity of having the biggest impact on our results.
Speaker Change: No.
Speaker Change: With regard to the tariffs.
Speaker Change: Our view has always been that these tariffs.
Speaker Change: Fights.
Speaker Change: These oh.
Speaker Change: And <unk>.
Speaker Change: May.
Speaker Change: Lead to.
Speaker Change: At some point the different parties being involved they are in.
Speaker Change: We always knew that some kind of an agreement would be reached and what we saw this past weekend.
Speaker Change: Certainly meets that.
Speaker Change: Okay.
Speaker Change: The several days that we've seen.
Speaker Change: The demand that we've seen.
Speaker Change: The tariff fight has oh, we could say that it's.
Speaker Change: Can be described as a sort of give and take and are.
Speaker Change: Our knowledge, we know we are confident that neither the us nor China wants to see.
Speaker Change: Both of those economies plummeting and in the Trump won what we saw is that the U S and China did reach an agreement so.
Speaker Change: Sure.
Speaker Change: What we're mostly concerned about is China.
Speaker Change: Imposing tariffs on ethane coming from the U S and vice versa.
Speaker Change: China imports 18 million tons of ethane from the U S per year. It is not yet self sufficient in CE. It also imports from the U S.
Speaker Change: And if.
Speaker Change: Yes.
Speaker Change: But per chance looks like it needed to retaliate and impose a 125% tariffs on that imported ethane.
Speaker Change: And then B E production in China would be severely armed.
Speaker Change: Now the Chinese government did not impose that 125% tariff.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: So.
Speaker Change: After a.
Speaker Change: Small initial hiccup.
Speaker Change: A pause to wait and see what happens we see that now that industry is resuming exuberant Li.
Speaker Change: Now with regard to polypropylene.
Speaker Change: Chinese government did not announce that it would not impose the 125% tariffs.
Speaker Change: Now I imagine that given this weekend's discussions things are going to progress.
Speaker Change: Such that these tariffs.
Speaker Change: Tariffs will not occur because we know that China imports roughly 100 million.
Speaker Change: Tons of CPE per year and certainly.
Speaker Change: It hasn't.
Speaker Change: A surplus of DP and it exports that too many countries, including here in Brazil.
Speaker Change: And so therefore after these.
Speaker Change: After this.
Speaker Change: Fencing fight between the countries.
Speaker Change: We believe that the effect on the Competitivity of the different actors is going to.
Speaker Change: Existing in the different margins, so someone who's competitive may become less competitive and someone who is not currently competitive may come to be a little bit more components I think the major players who feel the impacts are going to be the European installations, the European sites because.
Speaker Change: They will need to coexist with a.
Speaker Change: A structural.
Speaker Change: Change.
Speaker Change: And specifically a marked increase in the cost of energy in Europe and this is structural it is not specific.
Speaker Change: I think the biggest losers in all of this after.
Speaker Change: After the end of the day after things have.
Speaker Change: Settle down is going to be Europe.
Speaker Change: And not Brazil, not China and not the U S. I think I was able to answer broadly.
Speaker Change: Just to follow up what about the.
Speaker Change: Closing of capacity.
Speaker Change: In Europe would that be a priority for you over the closure in Brazil or the U S.
Speaker Change: Well, we don't have any plans to increase capacity in Europe, but rather we will keep our business there always striving for the best feedstocks and best material.
Speaker Change: I'll answer your other question too on that note.
Speaker Change: Before we think about closing capacity.
Speaker Change: We will always first tried to alter the mix of feedstock that's structural.
Speaker Change: This holds for the case of the replacements of substitution that we're doing in Brazil that Rosanna mentioned, replacing NAFTA.
Speaker Change: With ethane.
Speaker Change: So we're working at 10% 10% levels in by where.
Speaker Change: Experimenting with up to 30%.
Speaker Change: In the south one of our plants can process propane. So we will seek out propane, whether that's from Brazil or imported from Argentina through like all of those parcels.
Speaker Change: From the former Coca School organization, but it's also possible we were not ruling out.
Speaker Change: The seeking of feedstock from by year, but we may reduce the use of NAFTA in Bahia and start consuming ethanol.
Speaker Change: We can build a dehydration plant and by year. So that we can work with that feedstock. So.
Speaker Change: Closing a plant is always Alaska sooner, we're always going to start thinking about different alternative feedstock. That's always what we want we don't want to change our installed capacity. Instead, we will first try to make investments that will allow us to either replace feedstock or have to source.
Speaker Change: As a feedstock.
Speaker Change: For instance, today given the comparative advantage.
Speaker Change: It's beneficial to us.
Speaker Change: But in the future, let's say that given the electrification process of the different modes of transportation, we reduce the use of gasoline. This may cause a surplus of gasoline, which is the cousin of naphtha, so that could lead to a drop in naphtha prices and so.
Speaker Change: That could mean that naphtha will be more competitive in the future than it is today.
And if our sites Ken.
Speaker Change: Have a different breadth of options to choose from.
Speaker Change: Then that will allow us to capitalize on the use of possibilities.
Speaker Change: So above all creating flexibility and to switching our feedstocks.
Speaker Change: Our certainly our priorities in order to bring more flexibility to our asset.
And the last case scenario is always going to be closing down a site that cannot become more competitive through options one and two.
Speaker Change: Thank you that's very clear.
Speaker Change: Okay.
Speaker Change: No.
Speaker Change: Jos Luis kind of value bit Dizzy proof of her Luis sponge purchasing it.
Speaker Change: Yeah.
Speaker Change: Hello, Beth Felipe Hi, Roberto I, Philippe Arizona, good to talk to all of you.
Speaker Change: Thanks for taking my questions I have two questions as well.
Speaker Change: Useful.
Speaker Change: First I know, we've discussed spreads extensively and competitivity as well.
Speaker Change: But I'd like to get your take over the past.
Speaker Change: A few years.
Speaker Change: About the fact that Braskem when we look at the cost curve in the industry Braskem has lost competitivity.
Speaker Change: Due to several reasons, including our goes.
Speaker Change: Also combined with the downward cycle.
Speaker Change: <unk>.
Speaker Change: This is partially.
Speaker Change: It's a complicated the company's efforts.
Speaker Change: Maybe also with the introduction of other players in Asia that are gas basis. So.
Speaker Change: So could you please add a little bit more context to what you've already said and then with regard to the company's position in the global cost curves.
Speaker Change: So how do you believe that braskem today.
Speaker Change: Vince itself overall.
Speaker Change: And the second question was with regard to leverage.
Speaker Change: I believe the company has done great work over the past few years to extend the debt profile.
Speaker Change: Braskem does have a leverage problem, but it does not have a liquidity problem.
Speaker Change: But we start to see this delay and the cycle's Oh.
Speaker Change: Version as a potential liquidity problems. So there is a short term.
Speaker Change: Cash.
Speaker Change: Situation, but theres also a standby issue that could be very relevant for 2027.
Speaker Change: So I wonder if the standby has some kind of a.
Cover, let's say if it goes past a certain level.
Speaker Change: <unk> it.
Speaker Change: That funding will not be available how do you see that liquidity status for the company.
Speaker Change: Bruce.
Speaker Change: Hi, Luis.
Speaker Change: Good afternoon.
Speaker Change: This is deliberate.
Speaker Change: I'll take your second question first with regard to leverage.
Speaker Change: And I'll leave the Competitivity matter to Roberto you can highlight all of the work that has been done in that regard and positioning the company.
Speaker Change: And it really touches on everything we've been saying about the transformation plan.
Speaker Change: <unk> aims to transform breast cam and make it increasingly more competitive.
Speaker Change: So with regard to leverage.
Speaker Change: Your assessment is correct.
Speaker Change: When you say that the company currently has a high level of leverage.
Speaker Change: Largely as a result of things that occurred in the past and debt that we took on in order to meet our different obligations.
Speaker Change: That's also why wouldn't you think about.
Speaker Change: That activity and the transformation plan, we effectively create value for the company so that <unk>.
Speaker Change: Braskem can meet every one of its obligations.
Speaker Change: I would say that we have shorter term measures.
Speaker Change: Given that all of this capex owns transformations they.
Speaker Change: They all take some more time to really materialize and for that economic value to be converted into financial value.
Speaker Change: So we have been working on our Competitivity as Roberto explained in a lot of detail in the Brazilian industry.
Speaker Change: Yeah.
Speaker Change: Every improvement that we perceive and that we received so import tariffs antidumping rake investments.
Speaker Change: And in the future.
Speaker Change: I mean this is a an agenda that has started with privet, but.
Speaker Change: In all our terms this brings a lot of.
Speaker Change: Our freedom to our company's cash flow.
Speaker Change: Now this line of credit is available.
Speaker Change: Available to the company it can be.
Speaker Change: Drawn so to speak we did mega withdrawal during the pandemic.
Speaker Change: Yeah.
Speaker Change: So we know that often there's.
Speaker Change: Some kind of condition.
Speaker Change: Condition tied to these incentive but at different critical moments, we did use these possibilities and fix the problems and life goes on.
Speaker Change: Okay.
Speaker Change: So.
Speaker Change: With regard to Competitivity and how we intend to leverage the company well initially by expanding our EBITDA.
Speaker Change: So that we can effectively reduce leverage and meet our obligations.
Speaker Change: Yeah.
Speaker Change: We.
Speaker Change: Persist in our strategy over the past few years.
Speaker Change: I'm, referring to liability management.
Speaker Change: And when we see opportunities and when we see that the market offers price and liquidity.
Speaker Change: And we work on liability management to keep postponing.
Speaker Change: Postponing the coming to terms of these different instruments to the longer term to the medium and long term.
Speaker Change: And at that point, we also do some kind of non material.
Speaker Change: Collection fundraising.
Speaker Change: With so that we can.
Speaker Change: Capitalize on these opportunities so using cash to capture value and not necessarily to pay previous steps and thereby expand the company.
Roberto Ramos: Roberto do you want to talk about Competitivity.
Yeah.
Roberto Ramos: Thank you Philippe thinking Louise for the question.
Roberto Ramos: All of that.
Roberto Ramos: That's all I'm talking about competitiveness today.
Roberto Ramos: And going back to what happened in the past few years.
Roberto Ramos: First I'm going to talk about the ethane global cost curve.
Roberto Ramos: The we have production in Argentina, and Brazil, and Mexico, our position needs to be very competitive.
Speaker Change: And we had this allocated low cycle and what's changed it was the oversupply that came especially from the United States and the America petrochemical basis as Roberto mentioned is more competitive when compared to Brazil.
Speaker Change: Brazil has the potential of increasing the competitiveness considering their availability and if anything in Brazil, but so far the base of the fifth.
Speaker Change: Feedstock in the United States, it's more competitive and this wave with combined with an oversupply of wave that came from China, which is related to the.
Speaker Change: Two it from in terms of direction, it's more focused on meeting the internal demand or even related to the creation of.
Speaker Change: Jobs and increase the GDP was important to mention that because when I talk about the capacity curve in the United States I think that yes. These were crash pressured, but when I talk about the China capacity. Because this is what's likely to continue up to 2030. This has knock with any.
Speaker Change: Pressure on the company's curve and let's look at our asset base, we have four assets.
Speaker Change: One of them is is it potentially focused on NAFTA in the south.
Speaker Change: The real polymers in Rio de Janeiro, especially propane and even some Paolo a D. C region, we have a combination between NAFTA and the U R. L that brings in the competitiveness and by here that I mentioned previously it has a flexible is Asia and we have options to use either ethane.
Speaker Change: Our NAFTA.
Speaker Change: As part of our production of ethane, so what am I, saying those details are individually because.
Speaker Change: At the end of the day, our decision is sales and production is the combined aspects of the Brazilian reality when I look at the cash costs in Brazil in a combined way of course, we may see some pressure because of the United States, but we are in the third or fourth quartile in the consolidated result.
Speaker Change: We're not very happy with all the result, as Roberto said. This is why it is so important to have a new initiatives such as the flexible inflation because we are going to have an option so I'm going to use.
Speaker Change: NAFTA win us more competitiveness, we hats.
Speaker Change: One off situations when a petrochemical has okay chemical has some more advantages. So we have this well they tend to correct that and we're going to be looking at that but we believe that it's going NAFTA is going to continue to be more competitive in the long run.
Speaker Change: But regardless of whether we're right or because how does a company made it made the right decision. We have this balance in terms of NAFTA.
Speaker Change: Can you hear me Oh.
Speaker Change: Oh I'm sorry, yes, yes, just go ahead.
Speaker Change: Okay. So let's go back as I was saying is the following regardless of what the future will bring in terms of as stability or instability in future demand, we have to find a better balance with.
Speaker Change: With the flexibility and that has translated into resiliency in our results and this will bring some more resilience when we generate EBITDA for the company and from the viewpoint of the necessary resources for this transformation to materialize, especially in Brazil, we aren't going to have more leverage with us.
Speaker Change: Programs that we have things has device the chemical and petrochemical industries in Brazil.
Speaker Change: Purpose is to reduce this competitive gap compared to the other economies because he's going to add to our sector dynamics. It's global it's not limited to Brazil. So its very important to preserve this competitiveness in the Brazilian.
Speaker Change: Industry.
Speaker Change: Excellent. Thank you let.
Speaker Change: Let me just add my two cents to what.
Rosanna and Philippe suddenly.
Speaker Change: Please go ahead.
Speaker Change: It's true that our crackers are distributed among the cash cost curve, the Mexico crackers in the first quartile.
Speaker Change: It's a process.
Speaker Change: One of our most modern installations.
Speaker Change: Installations with 100% ethane and now that the terminal was inaugurated last week, we're now going to receive enough ethane to fill our plants at lower cost than we had been paying in our fast track projects.
Speaker Change: To compensate for the fact that Pemex had never sent us the volume of gas that we had contracted from them. The real project is in the second quartile, but the expansion of the real.
Speaker Change: <unk> is going to reduce the cost per produced ton.
Speaker Change: In other words by adding two new furnaces, we are going to increase to 700000 tons. A year. We're also going to gain competitivity in the current 560000 tons a year in the existing furnaces.
Speaker Change: Of course, the more your production the lower your production cost per ton.
Speaker Change: Now the crackers that are naphtha base in Rio granted full and by you.
Speaker Change: For those.
Speaker Change: We will seek to replace the feedstock.
Speaker Change: We were discussing for example in Rio Grande do Sul, we are negotiating with Petrobras.
Speaker Change: Start running the real cracker with 100% ethane because today as you know it's 50%.
Speaker Change: Ethane, 50% propane.
Speaker Change: And when we do that we not only improve our cost per ton in Rio de Janeiro.
Speaker Change: But we also make more feedstock available for Rio Grande the food. So that we can replace the feedstock there and so we gain we it's a win win we win in Rio de Janeiro.
Speaker Change: And we went and bought telegraphy.
Speaker Change: Because we will now be able to process propane and not naphtha there.
Speaker Change: And in by year, where I'm closer to the fourth quartile far from the curve, we will increase the ethane participation. In addition to naphtha. So that we can bring those crackers back to the third part though.
Speaker Change: And if need be we'll replace our feedstocks. So we will stop cracking naphtha.
Speaker Change: We will start to D.
Speaker Change: The hydrating ethanol to produce athene.
Speaker Change: And from there Green polyethylene.
Speaker Change: In other words.
Speaker Change: All of the blades are spinning.
Speaker Change: And we're trying to attack the ones that have started slowing down.
Speaker Change: Now with regard to liability management as Felipe mentioned, we must remember that brass Cam had an effect.
Speaker Change: Fox and extraordinary geological event that caught us right at a downward cycle.
Speaker Change: And I'm, referring to the costs pertaining to stabilizing the salt.
Cavities in myself.
Speaker Change: And when we compare braskem and our competitors. They didn't have a 3 billion dollar bill to bank, which we're paying.
Speaker Change: And.
Speaker Change: In terms of our bottom line. This is a liability that does not yet have a corresponding asset.
Speaker Change: And that's also something we're studying.
Speaker Change: So braskem situation was heavily impacted because of the fact that we had a rise in the obligations liabilities to pay but.
Speaker Change: The Bill was only really shown us very recently.
Speaker Change: Thank you. Thank you all of you.
Speaker Change: Yeah.
Speaker Change: Our next question comes from what he Omega with something that you May proceed sir.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Hi, good afternoon, everyone.
Speaker Change: I have a few questions.
Speaker Change: That's helpful.
Speaker Change: I'd like to see.
Speaker Change: For the Brazilian situation, a little bit and try to understand.
Speaker Change: With regard to the import tariffs how you have seen the impact of those tariffs here in Brazil, we know that imports are still high but I think that in your release.
Speaker Change: Got you.
Speaker Change: We're able to to claim a little bit of market share. So could you talk a little bit about that please.
And also touch on Mexico as well however, the recent spread pricing changes impacted the cost of products, especially especially Brazilian and Mexican P E.
Speaker Change: And another question about the import terminal in Mexico could you. Please help us understand that.
Speaker Change: The pricing structure for feedstocks.
Speaker Change: You bring them from the U S.
Speaker Change: Could you.
Speaker Change: Rodrigo.
Speaker Change: Hello.
Speaker Change: That's cool.
Speaker Change: Hello.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Russell Crowe.
Speaker Change: So it doesn't pay his pointed up Humira man.
Speaker Change: Is it no veto.
Speaker Change: I don't know if she can hear you.
Speaker Change: Let me send that message to him.
Speaker Change: To check if he can hear what you're saying.
Speaker Change: Did you mean not towards a chemical separately and put the final coupons.
Speaker Change: Is it like 10.
Speaker Change: Yes, Q2 weight bear with me, while I check this out.
Speaker Change: It's always going to have an HMO price control Ooh ooh, whether you're gonna QC connect some of them make it go.
Speaker Change: Let's wait for everybody to reconnect. The Meanwhile, let's move onto the next question. Please.
Speaker Change: Our next question comes from hedges condos with XD English matters.
Speaker Change: You May proceed sir.
Speaker Change: So.
Speaker Change: Hi, everyone.
Speaker Change: Good afternoon, Roberto Felipe and Rosanna, Thanks for Phase I.
Speaker Change: I have a quick question and then another one.
Speaker Change: With regard to the petrochemical cycle and spreads.
Speaker Change: I I'd like to flip the question around and asked me the other way around I imagine that you have.
Speaker Change: Lots of thought into this.
Speaker Change: What would be the level that.
Speaker Change: The required level of spreads for different grades, let's say different financial comfort levels.
Speaker Change: Let's say are there any targets for net debt a bit.
Speaker Change: What would that spread needs to be or what level of spreads would we need to have in order to pay all of our debt and have neutral cash after paying alagoas.
And I'll leave the open question for you to answer in the most convenient way after your analysis.
Speaker Change: But above all.
Speaker Change: I mean, instead of trying to predict what the petrochemical cycle is going to be I'd like to know what it needs to be.
Speaker Change: And the other question I would like to understand the dynamics between present and rake I was reading the official terms rake as part of present, but present.
Adds some additional benefits, but theres a limitation of yearly limitation.
Speaker Change: But I don't fully understand how that is distributed between the different players in the industry.
Speaker Change: So could you just explain a little bit about the importance of rake and prism and also your forecast or a timeline.
Speaker Change: And do we have an expectation of forecast for financial impact and a third question there was a.
Speaker Change: A significant burn of inventory was that due to a reversal in Q.
Speaker Change: Q4 can we expect some of that to come back in the next quarter.
Speaker Change: <unk> do you want to take that one.
Speaker Change: Sure.
Speaker Change: I'm Gonna change the order a little bit first I'm going to talk about the inventories and then we move onto a more conceptual level and talking about the agenda for the protection of the chemical industry in Brazil in relation to inventory levels. There was a confirmed show 1 million Reals.
Speaker Change: Finished products, which are the inventory in transit.
Speaker Change: And for this quarter as an example, 50% of the pit.
Speaker Change: Dotcoms imported in through a breast cancer aiding ship.
Speaker Change: But let me focus on the finished product we increase this inventory level a little bit since we were going to have any portend a plant stoppages in the petrochemical Rio de Janeiro, and I'm also going to link to what Rebecca answers in previous question.
Speaker Change: <unk> the importance of this asset to Brazil, because it's the most competitive assets for the company.
Speaker Change: And by the way. This effect can also be observed in the cash flow in Mexico, which is also very competitive asset because we are going to have the first two planned this stoppage it's for the polymers in.
Speaker Change: And also in Mexico, and these were the main effects you can see in relation to the inventory consumption that you ask it in relation to presume inhaled.
Speaker Change: At the end of the day, we are.
Speaker Change: Yeah.
Speaker Change: Participants of this agenda, it's an agenda that has been led by the key which the Brazilian association of Brazilian chemical industry, and it's important to understand the context that the chemical industry in Brazil is going through if you look at the operation attack a rate of the industry is far from.
Speaker Change: Probably one of the lowest level in the history.
Speaker Change: Due to competitive is or Brazil cost or maybe competition come from different regions.
I may mention the situation of the like the industry as a whole so hakan precinct.
Speaker Change: Are there to bring this competitiveness of the Brazilian chemical industry are chemical sector to answer more broadly is totally global globalized. It there's no dynamics for the Brazilian market. There is rather a global dynamics that is seen.
Speaker Change: On the call.
Speaker Change: The point of view of our cost and we see what does the president is being applicable. So these are Franz that had been led by IV King for a while.
Speaker Change: N brasco and the Brazilian chemical industry would account for I don't know.
Speaker Change: Exact number but it accounts for 11% of the industrial.
Speaker Change: Share in Brazil, and it's very it's factoring and Hague and present, who would meet the needs of this gap Inc. Competitiveness in Brazil Hank.
Speaker Change: <unk> is a special regime of the Brazilian industry.
Speaker Change: Aimco industry.
Speaker Change: It's related to the purchase of the feedstock of both in Brazil or from abroad. So when that we're purchasing.
Speaker Change: When the products are being.
Purchase we have a more broader way to look at that and we have it is affected in the bridge of costs. When we compare to the other elements Hakan was created in 2013 the rates at a time when it was created a west one point when teach at the time.
Speaker Change: And.
Speaker Change: This was related to cost in Brazil, and there was a threat from the American producer such as shale gas.
Speaker Change: It would have to look at the original swisher closures, such as Brazil, and the Hague in 2000 1930.
Speaker Change: Estimated the reduction in time, because we could have conditions to make investments in Brazil, and we have a feedstock.
Speaker Change: In a competitive manner available in Brazil. So those arguments are even valid today.
Speaker Change: And Ah this more depreciated when I say that the shale gas is no longer a threat, but it's a reality.
Roberto Ramos: Roberto mentioned before.
Roberto Ramos: Considering the exports from the United States So chose.
Roberto Ramos: <unk> is addressed and the east coast sees taxes no longer exist. After the tax reform. So what we have is an expansion of this rake tax to eight to 25.
Roberto Ramos: When it was first created and as of 'twenty 'twenty seven their lease the concept of a credit that a financial credit since we no longer have physical things, Texas, It's a way to ensure the competitiveness all of the chemical and petrochemical and in Brazil.
That for in the past few years for a different reasons reasons, maybe the competition from China or other factors.
Roberto Ramos: <unk>.
Roberto Ramos: To ensure the competitiveness of the Brazilian chemical industry, which is S. J.
Roberto Ramos: <unk> is a sector, which is very important to districts over Brazil. When you talk about the spreads the cycles.
What I can say is the following breast Kim S part.
Roberto Ramos: The sector that involved the cycles that has the foundation of global dynamics at play. So dynamics is global it is not only personnel it's totally global.
Roberto Ramos: And we define our leverage ratio levels, our indebtedness levels, considering what would be the average for the cycle. So this is what I'm going to go see their in relation to your question, let's say net debt of the company ex that.
Roberto Ramos: Baskin Endesa, so when I talk about credit I am referring to.
Roberto Ramos: Basking Xa days at eight was $6 six in new frequency. There. This cycle the historical cycles that normal would be $2 $5 billion and assuming that today as I referenced we have a net debt EBITDA of 2.5 times, if they if we consider 2 billion and a half of <unk>.
Roberto Ramos: EBITDA, which would be the low range in our historical levels it would be <unk>.
Roberto Ramos: 6.2 dollars so our net debt is.
Roberto Ramos: Nowadays, it's completely aligned with what would be us a normalized cycle.
Roberto Ramos: So answering your question when do you believe that is normal levels will be reached so this is a major question.
Roberto Ramos: When we can see that that no rationalization important of the industry. Because this is something we cannot control of.
Roberto Ramos: Of course, we haven't observed exempted major companies at a global level announcing a hibernation and closures of.
Roberto Ramos: Lance, but considering the increased level of demand with a less intensive when you consider the historical levels. We see that this cycle resumption will take about three and four years.
Roberto Ramos: Again, considering not considering any important rationalization way of looking at that when I look at our regular normal resulting considering the low levels I will take as a reference 2019, which was the first year, where we have a low cycle.
Roberto Ramos: And the business of agreeing businesses the business proposal off the green aspect was not very clear. So the result was much lower today's the contribution is much very important nowadays and after 2019.
Roberto Ramos: We started a new.
Roberto Ramos: Plant at the United States. So this amount that would be considered to be normal would be close to $2 billion and that would reach them cash breakeven level.
Roberto Ramos: Which would be something number for the lower cycle and a lower leverage ratio between three and three five times.
Roberto Ramos: Perfect for Us and I. Thank you.
Roberto Ramos: Oh My bad.
Speaker Change: Our next question comes from could they grow Meda with Santander you May proceed sir.
Roberto Ramos: Yeah.
Speaker Change: Well, what our go forward rollover key afternoon.
Everyone once again.
Well restart because I don't know if I was able to get my question across.
My first question is.
Speaker Change: Oh.
Speaker Change: With views of the import tariffs in Brazil over the past few months have you seen any impact on market share I would like to hear your take on that and also I'd like to understand how shipping prices have impacted the status of Mexican products here in Brazil and in Mexico.
And my second question is about the.
Speaker Change: Import terminal our export terminal in Mexico could.
Speaker Change: Could you tell us a little bit about how.
Speaker Change: That has impacted your feedstocks is there any mid to long term.
Speaker Change: Forecast contracts and the volumes.
Speaker Change: Be very good to understand how that project is coming along.
Speaker Change: Sure I'll begin.
Speaker Change: Rodrigo and then Rosanna you can come in talking about the import tariffs because overall, yes, we have but we already do see an impact, but we can give more detail.
Speaker Change: With regard to Mexico.
Our transformation plan.
Speaker Change: We've been performing as we've also been.
Speaker Change: Discussing.
An internal project to purchase the use of the vessels through a leasing contracts to carryout ethane and also in the future naphtha contract in Mexico. The first vessel arrived in February of 25, and the second vessel is scheduled to arrive in Q.
Speaker Change: Two of 25, so that answers precisely your question that's the backdrop to this program.
Speaker Change: Called the fees of the future.
Speaker Change: Good morning.
Speaker Change: This has been approved by the administration board or.
Speaker Change: Little bit more than a year ago.
Speaker Change: Forecasting that they use spreads would be increasingly higher as a result of the lower availability of vessels of that category around the world.
Speaker Change: So we are well positioned there we have started reaping the rewards.
Speaker Change: By reducing the amount that we pay of course, we still pay a little bit because we don't have all of the necessary shipping capacity, but we have improved that it is improving and it's going to have a significant impact.
Speaker Change: With regard to your second question and the strategy to purchase ethane from the U S.
Speaker Change: As you know one of the companies.
Speaker Change: And our group is brass scam trading and shipping Bdnf's located in the Netherlands, and they have a a trade desk focused specifically on the operations. So that includes spot and short term contracts and also mid and long term contracts.
All of that is held within that sell that that houses our knowledge that we call VITAS. They are contracted by Braskem Edessa to manage the purchase of feedstock in the best possible way and the most optimized way and.
Speaker Change: Combining a short medium and long term portfolio.
Speaker Change: ROE could you tell us a little bit about import tariffs.
Speaker Change: Yes of course.
Speaker Change: A reminder, in relation to.
Speaker Change: Mexico. The operations have started it really is a very important investment that will ensure operational.
Speaker Change: Availability and enforce more than we need so at the end of the transformation, we are going to evaluate a possible expansion at the right moment.
Speaker Change: I'll give you a reminder, we have a planned maintenance shut down.
Speaker Change: As I mentioned before the first one since we started the project. So about 40 or 45 minutes is going to stop for a while and they have been building the inventory, but when we talk about running at 100% and these would happen after 'twenty 'twenty six only no question the relationship trait.
Speaker Change: Right.
For different reasons, we saw along their time in the past few years, we saw on logistics disruption than most of them come from the Red Sea conflict that was supporting.
Speaker Change: <unk>.
Speaker Change: <unk>, Brazil, you Asia.
Speaker Change: I don't know.
Speaker Change: More than normal levels, what we haven't been observed in the past few months and we also heard some news of AR.
Speaker Change: Profitable twos are in the region.
Speaker Change: On the part of United States. So we have been observing the normal a situation in relation to those spreads.
Speaker Change: How did he goes at aimed towards parity that relation that had this positive effect.
Speaker Change: Because without a doubt if our client is importing the freight would be paid and we have been observing there's normal levels being materialized.
Speaker Change: That had droughts and positive as a result last year in terms of market share of course, we have been observing this.
Speaker Change: And my answer is considering that we were expecting what would be the market share of the company considering a commercial strategy that we have adopted and we meant but.
Speaker Change: As a reminder, that our focus is to me to the Brazilian market the domestic market. When we talk about the Brazilian production. This is a major focus of the company at all times. This is the natural choice for the company, but what when I compare that goes that we had.
Speaker Change: Observed that the market share it was a bit higher that wind had for the year, it's difficult to say if the effect of it as a market share because there are uncertainties that are different demands many variables FX variations, but we can say that we have been very successful, especially because.
Speaker Change: In fact, we went to be the clients a natural choice and the commercial team has been working very hard on this to meet our Brazilian clients the best possible way.
Speaker Change: Okay.
Speaker Change: Great. Thank you Rosanna thanks, everyone.
Speaker Change: No.
Speaker Change: Our next question comes from no matter.
Speaker Change: Operator.
Speaker Change: Please let me just but in for a moment, because I want to add something to transfer Rodrigo.
Speaker Change: I'd like to suggest that all of you when you think about our.
Speaker Change: Sleep.
Speaker Change: Two gas and fly up to Green strategy.
Speaker Change: Well, it's a feedstock replacement strategy will replace NAFTA with gas initially and then.
Speaker Change: We'll replace gas now.
Speaker Change: Massa with ethanol and then in the future. It will also replace gas with ethanol.
Speaker Change: In other words.
Speaker Change: Braskem is not interested in expanding its naphtha processing capacity in theory, if someone were to offer us more naphtha to build another battery of crackers naphtha based cracking who would say thank you, but no. Thank you. Our first primary focus is.
Speaker Change: On increasing our gas processing, whether that's replacing naphtha with gas or creating additional gas capacity.
Speaker Change: Rosanna mentioned, our Mexico terminal is going to allow us to store 88000.
Speaker Change: Barrels.
Speaker Change: Per day.
Speaker Change: Of liquid ethane.
Speaker Change: And our.
Speaker Change: Processing capacity for our full plant is 66000 barrels a day. So that means we have a surplus of 14000 barrels a day to store liquid ethane. This would allow us to bring the Mexico plant to over a million tons, a year a million and 60.
Speaker Change: If we were to cap everything out 100%.
Speaker Change: Certainly this would lead us to where we would need to build another polyethylene plant in that hypothesis and in Rio we.
Speaker Change: Also have a lot of production and storage. So our first focus is on increasing gas proportionately reducing NAFTA.
Speaker Change: And.
In the future.
Speaker Change: Which for me is the future of Raskin is to progressively convert away.
Speaker Change: From ethanol because it's a chemical.
Speaker Change: No longer petrochemical, but just chemical feedstock that will give way to the industry of the future.
Mark: Our next question comes from Mark <unk> with Bank of America. You May proceed Sir.
Speaker Change: Got it.
Mark: Uh huh.
Rich Bradshaw: Rich Bradshaw first point J D. A roof garko muscle to me fly thanks for taking my question.
Rich Bradshaw: Many of them have been answered already.
Rich Bradshaw: So I guess I have a few mostly focusing on the U S and Europe.
We saw a negative margin and one of the explanation for that was the drop in polypropylene.
Rich Bradshaw: Yeah.
Rich Bradshaw: And in this quarter the price of <unk>.
Rich Bradshaw: Propylene.
Rose and we also saw a relatively low margin compared to other quarters.
Speaker Change: So I'm wondering could you give us a little bit of context about the effect during the quarter.
Speaker Change: Because it would be very interesting for us to better understand the effects of the dynamics of polypropylene on the results in this segment. Thank you.
Speaker Change: Yes.
Speaker Change: Oh sure.
Speaker Change: Do you want to start and I'll add on.
Speaker Change: No.
Speaker Change: Xena.
Speaker Change: Okay.
Speaker Change: A.
Speaker Change: They'll come up at home to thank you for the question you're right. When you say that we came from $10 million and this semester was 20000 million honors. We has some nonrecurring effect, but to your question relation to propane will be answered looking at the United States.
Speaker Change: Cause it to me the materiality because they cant production capacity is higher in the United States and the propane dynamics has a positive or negative effect that this is what I'm going to explain it.
Speaker Change: The United States, we are the largest producer of polypropylene and therefore, we are the major purchases of propane and as a result, we have long term agreements in many agreements and we have many agreements whose source of feedstock.
Speaker Change: Is different from the refining of from a petrochemical complex or from a propane de hydro Gen Nader.
Speaker Change: And the flexibility, which is one of the major differentiator differentiators that we have we have a.
Speaker Change: Virtually integration it seems we have different choices, we have and level of our integration. So this is what I referred to as virtual integration when the propane price increases which is the main feedstock of polypropylene I have more more flexibility when I purchased feedstock considering all this half <expletive>.
Speaker Change: And that's caused for polymerization and everything else why do not we do not see this effect too much into the propane increased because along with the quarter. We had some planned shutdowns and some unplanned shutdowns from our some of our suppliers. So this flexibilisation wasn't limited if we.
Speaker Change: You can see there those planned and unplanned shutdowns that we had along the border.
Speaker Change: So at the end of today.
Speaker Change: When whenever propane increases.
Speaker Change: We expect to have a more positive results considering the.
Speaker Change: The difference that we have in the United States with associated with the Flexibilisation all of our supply and sources of feedstock as well.
Speaker Change: Yes.
Speaker Change: I'd just like to add.
Speaker Change: Unfortunately.
Speaker Change: <unk> be sources of propylene are essentially.
Speaker Change: Refineries from naphtha cracking or from Dehydrogenating propane.
Speaker Change: The major growth.
Speaker Change: The supply.
Speaker Change: Of propylene in the U S came from new propane dehydrogenation plants.
Speaker Change: Actually the plant that we built and la <unk> was to consume feedstock coming in from D hydrogenation units.
Speaker Change: Yes.
Speaker Change: Do you use these plants are difficult to run.
Speaker Change: There are people, who can run them very well.
Speaker Change: And other people, who really have a hard time.
Speaker Change: So you've got an offer of propylene that is very variable due to the effectiveness of the dehydrogenation plants.
Speaker Change: When it comes to using the propylene.
Speaker Change: We use it to create polypropylene.
Speaker Change: We also use it for the Acrolith.
Speaker Change: But the whole Acrolith Shane.
Speaker Change: And you can also use it to alkylate.
Speaker Change: Sure.
Different products.
Speaker Change: So if you reduce the use of gasoline in the U S youre going to have less.
Speaker Change: Less feedstock less propylene because you will use that feedstock to produce the the gas.
Speaker Change: As a result, you'll have a drop in the price of propylene in the U S and more competitivity in propylene production, there and we have our assets there and we will always.
Speaker Change: Value and prioritize our assets.
Speaker Change: And so we have a very large.
Speaker Change: Propylene plant in the U S and I'm confident that there we can increase the production of polypropylene.
Speaker Change: Recently, we took upon ourselves the challenge of increasing our production capacity.
Speaker Change: Which may even surpass the installed capacity, because there's always a little bit of headroom.
Speaker Change: Or any of these plants.
Our challenge is going to be on demand.
Speaker Change: Do you have sufficient demand for us to increase production, which is always the case and in instruments like ours. The more you increase production capacity and production itself.
Speaker Change: The lower costs.
We will have because indirect costs are better absorbed and so you'll become more competitive and more profitable.
Speaker Change: Thank you that's very clear thank you.
Speaker Change: And this will mean to us.
Speaker Change: And now the Q&A session company to leverage gain briskin videoconference has come to an end.
Speaker Change: We would like to thank.
Speaker Change: Everyone and have a good afternoon everyone.
Speaker Change: Okay.
Speaker Change: Hmm.