BAK

Business Context and Reporting Period

Company: Braskem S.A.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Quarter ended March 31, 2025
Auditor: KPMG Auditores Independentes Ltda. (Reviewed interim financial information)
Overview: Braskem is a leading petrochemical company in Latin America, producing thermoplastic resins (PE, PP, PVC) and basic petrochemicals. Operations span Brazil, the United States, Germany, and Mexico. The company is controlled by Novonor S.A.

Key Financial Metrics (Consolidated)

All amounts in millions of Brazilian Reais (R$), unless otherwise noted.

Material Changes vs. Prior Period

• Profitability Turnaround: The company reported a net profit of R$632 million in Q1 2025, a significant improvement from a net loss of R$1,390 million in Q1 2024. This reversal was primarily driven by a R$2,052 million gain from derivatives and exchange rate variations, compared to a R$1,071 million loss in the prior year.
• Revenue Growth: Net revenue increased by approximately 8.6% year-over-year to R$19.46 billion, driven by higher sales volumes and pricing.
• Cash Flow Deterioration: Operating cash flow turned negative at R$(2,332) million, compared to positive generation of R$965 million in Q1 2024. This was largely due to a R$985 million increase in inventory and a R$468 million outflow related to the Alagoas geological event.
• Debt Reduction: Total borrowings and debentures decreased to R$49.14 billion from R$53.23 billion at year-end 2024, reflecting debt repayments.

Guidance, Outlook, Risks, and Unusual Items

• Geological Event in Alagoas: A significant contingent liability remains regarding the geological event in Maceió, Alagoas. The provision balance stands at R$5,080 million. The company faces ongoing litigation and potential additional costs for cavity closure, environmental remediation, and resident relocation. Management notes that future expenses may significantly differ from current estimates.
• Leniency Agreement: The company has a remaining provision of R$615 million related to the "Operation Car Wash" leniency agreement, with payments scheduled through 2030.
• Investment Strategy: In January 2025, Braskem announced seven new projects to expand production capacity in Bahia, Rio Grande do Sul, and Alagoas. In February 2025, a project to increase ethylene production capacity in Rio de Janeiro was approved.
• Financial Policy: Borrowings are predominantly denominated in US dollars (95%), aligning with the company's financial policy to match operational cash flows. The company maintains a robust hedging program for foreign exchange and commodity risks.
• Subsequent Event: In May 2025, the company inaugurated the TQPM ethanol import terminal in Mexico, securing feedstock needs for Braskem Idesa.

Key Facts for Investor Verification

• Negative Equity: Verify the implications of the consolidated negative shareholders' equity of R$(3,795) million, which has persisted since 2024.
• Alagoas Contingency: Monitor the status of the R$5.08 billion provision and the R$9.55 billion in contingent liabilities related to the Alagoas geological event, as future costs are uncertain.
• Cash Flow Volatility: Assess the sustainability of operations given the shift from positive to negative operating cash flow in Q1 2025, driven by working capital changes.
• Debt Structure: Review the maturity profile of the R$49.14 billion debt, noting that 95% is in US dollars, and the company's ability to service this debt given currency fluctuations.
• Derivative Gains: Understand that the Q1 2025 profit is heavily influenced by non-operating gains from derivatives and exchange rates (R$2.05 billion), which may not be recurring.