Brazilian polyolefin supplier Braskem (São Paulo; www.braskem.com/home-en) said it widened its net loss last year to BRL 4.58 bn (EUR 838 mn) from a loss of BRL 336 mn the year earlier. Lower sales volumes and weaker demand depressed revenues by 27% to BRL 70.57 bn. 

The bottom line was also burdened by huge provisions booked for the resettlement of villagers affected by a geological event at the domestic salt-mining activities in Alagoas.

Braskem’s recurring core operating result (EBITDA) dropped 65% to BRL 3.74 bn, dragged down by the profit reduction at its Brazil segment, which contributes more than half of revenues to the group.

Although the selling, general and administrative expenditures (SGA) have been whittled down, the profit margin of the segment – covering the home market Brazil and South America – declined 4 percentage points to 5%. Revenues eased 28% to BRL 49.51 bn, while recurring EBITDA collapsed 64% to BRL 2.23 bn.

According to Braskem, resin volume sales shrank 5% to 3.34 mn t, while the average selling price depreciated 23%. Exports also have not helped at all: the total volume sold abroad declined 3% to 800,000 t.

Results at the sub-segment Renewables were also a drag, impacted by a scheduled maintenance shutdown and the conclusion of the ramp-up process of a green ethylene unit expansion project. As a result, the utilisation rate of I’m Green ethylene receded to 69% from 95%, while unit sales dipped 13% to 155,000 t. Revenue moderated by 40% to USD 505 mn (EUR 465 mn).

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Propylene demand at the segment USA and Europe sank 6% in North America alone to 7.6 mn t, while in Europe it was trimmed 4% to 11.21 mn t. In terms of sales volume, the segment had a 1% bounce to 2.11 mn t. However, a quarter was knocked off from revenue to BRL 17.50 bn and recurring EBITDA crumbled 56% to BRL 1.35 bn, yielding a margin slippage of five percentage points. 

Although the company’s Mexico segment managed to lift sales volume by 5% to 803,000 t, both revenue and recurring EBITDA were pruned, respectively, by nearly a quarter to BRL 4.45 bn and by 53% to BRL 505 mn, yielding a margin decline of seven percentage points to 11%. Profitability was also affected by the fact that unlike the segments Brazil and USA/Europe, whose SGA were cropped, those in Mexico ballooned 11%.

Ahead of Braskem’s results publication, US credit rating agency S&P Global Ratings (previously Standard & Poor’s, New York, New York; www.spglobal.com) downgraded Braskem’s corporate credit rating in February, with a stable outlook.

S&P noted that after the difficult petrochemical industry conditions in 2023, it believed that the rebound in petrochemical spreads will take longer than previously expected. Because of these, it said it expected weaker profitability and higher leverage for Braskem until 2025. 

The S&P action follows that of compatriot Fitch Ratings’ (New York, New York; www.fitchratings.com) downgrade, reflecting what Fitch said was the increase in environmental risks and new claims of about USD 200 mn associated with the possible collapse of a salt mine related to the geological event in Alagoas. Fitch said the risks could potentially result in additional reparation costs and monetary fines.

Braskem CFO Pedro Freitas told analysts during the results conference in March that fellow Brazilian company shareholder Petrobras (Rio de Janeiro; www.petrobras.com) has exercised due diligence on the company and that he considered the process as already “materially” completed last year, although there could still be “one or two questions left over”. 

Freitas also said there are two ongoing parallel due diligence processes being conducted, one of them by Abu Dhabi National Oil Company (Adnoc, Abu Dhabi, UAE; www.adnoc.ae).