Brazil and Mexico

Braskem reports net loss of US$61mn in Q3

Bnamericas Published: Thursday, November 08, 2012
Brazilian petrochemical company Braskem (NYSE: BAK) reported a net loss of 124mn reais (US$61mn) for the third quarter of the year, following a net loss of 1.05bn reais in the same period in 2011. Net revenue decreased 12% to US$4.7bn, due to lower average prices for resins and petrochemicals. Ebitda fell by 19% to US$459mn, as a rise in sale volumes was insufficient to offset lower spreads of thermoplastic resins and basic petrochemicals in the international market, which Braskem said decreased 19% and 18% respectively. Braskem said its net loss was mainly due to a net financial expense of 568mn reais, which was booked because of the effect of the appreciation of the US dollar on Braskem's dollar-denominated debt. Compared to 3Q11 the Brazilian market expanded by 1%, while Braskem's sales were up 11%, reflecting its efforts to increase its domestic market share, which increased by six percentage points to end 3Q12 at 70%. Braskem said that in Brazil demand for polyolefins was 10% higher than in 3Q11 due to seasonal reasons, as in the third quarter the production chain prepares for year-end sales of manufactured products, and also due to economic stimulus measures introduced by the government. Braskem's domestic production of polyolefins increased by 6% year-on-year and domestic sales rose by 10%. Braskem said that its production of polyvinyl chloride (PVC) in Brazil increased 27% from 2Q12, which reflects the startup of its new PVC plant in Alagoas that is now operating at around 80% capacity. PVC sales volumes increased 14%. Butadiene sales rose 31% from 3Q11, due to the startup of the new butadiene plant in Triunfo in southern Brazil. The company's gross debt increased by 2% in the quarter, and its net debt to Ebitda ratio increased from 3.55x to 3.77x in 3Q12, when measured in US dollars, reflecting the fall in Ebitda. Braskem said it had prepaid off 400mn reais of loans in the quarter. In October, Fitch cut the rating outlook for Braskem's debt to negative from stable, on concerns about its high levels of leverage. Braskem said earthmoving works at its US$3bn Ethylene XXI joint venture with Idesa in Mexico had reached 95% physical completion, enabling the start of construction work on various areas of the site. It aims to conclude the structuring of project finance in 2012, and has already begun pre-marketing sales for Mexican clients. The complex is due to start up in 2015.

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