Braskem’s Q1 2025 Earnings Call: Growth Amid Challenges

Braskem Sa ((BAK)) has held its Q1 earnings call. Read on for the main highlights of the call.

Braskem’s recent earnings call for Q1 2025 painted a picture of both optimism and caution. The company reported improved operational performance and substantial EBITDA growth, driven by strategic initiatives such as the launch of an ethane import terminal in Mexico and an increase in green ethylene capacity. However, challenges persist, particularly with high corporate leverage, negative impacts on working capital, and ongoing difficulties in the US and European polypropylene (PP) segments amid a prolonged petrochemical downturn.

Improved Operational Performance

Braskem’s petrochemical plants demonstrated a notable improvement in operational performance during Q1 2025, with a higher utilization rate compared to Q4 2024. The global accident frequency rate was recorded at 0.92, aligning with top market standards, which underscores the company’s commitment to maintaining high safety standards.

Significant EBITDA Growth

The company achieved a remarkable 121% increase in consolidated recurring EBITDA from the previous quarter, reaching $224 million. This growth was fueled by higher spreads of polyethylene (PE) and chemicals in the international market, alongside increased sales of polypropylene (PP) in the US and Europe.

Strong Cash Position

Braskem ended Q1 2025 with a robust cash position of $2 billion, which is sufficient to cover debt maturities for the next 33 months. This excludes a $1 billion revolving credit line available until December 2026, providing the company with a solid financial cushion.

Green Ethylene Capacity Increase

The company revised its green ethylene capacity at Triunfo to 270,000 tons per year, surpassing previous forecasts. This increase was attributed to successful industrial tests, highlighting Braskem’s commitment to sustainable growth.

Launch of Ethane Import Terminal in Mexico

Braskem Idesa inaugurated an ethane import terminal in Mexico, capable of receiving and storing 54,000 tons and transporting 80,000 barrels of ethane per day. This development enhances the company’s operational capabilities in the region.

High Corporate Leverage

Despite the positive developments, Braskem faces significant challenges with corporate leverage standing at 7.92 times at the end of Q1 2025. This indicates a pressing need for effective debt management strategies.

Negative Working Capital Impact

The company experienced an operating cash consumption of approximately BRL 936 million, primarily due to negative variations in working capital. This was driven by inventory management amid scheduled shutdowns, posing a challenge to cash flow management.

Challenges in Europe and US PP Segment

Braskem’s US and Europe segments faced difficulties due to low PP margins, exacerbated by both planned and unplanned shutdowns of propylene suppliers. This remains a critical area of concern for the company.

Prolonged Petrochemical Downturn

The company anticipates ongoing challenges in the petrochemical sector, with international market shutdowns and new tariff scenarios affecting resin spreads and overall market conditions. This prolonged downturn continues to impact Braskem’s operations.

Forward-Looking Guidance

Looking ahead, Braskem reported a consolidated recurring EBITDA of $224 million for Q1 2025, marking a significant increase from the previous quarter. The company’s net profit attributable to shareholders was $113 million. In Brazil, the average utilization rate rose by 4 percentage points, leading to a recurring EBITDA of $199 million. The US and Europe saw a 13 percentage point increase in utilization rate, resulting in a recurring EBITDA of $20 million, while Mexico reported a recurring EBITDA of $37 million, up by 6% from the previous quarter. Braskem’s cash position remains strong, with corporate leverage at 7.92 times and a long-term debt profile.

In conclusion, Braskem’s Q1 2025 earnings call reflects a company navigating a complex landscape of growth opportunities and significant challenges. While operational performance and EBITDA growth are promising, the high corporate leverage and difficulties in the US and European markets require strategic attention. The company’s forward-looking guidance suggests cautious optimism as it continues to manage these dynamics.