Business context and reporting period
Braskem S.A. filed this Form 20-F on April 11, 2024, reporting audited IFRS results for the fiscal year ended December 31, 2023, with comparisons to 2022 and 2021. This is an annual report, not a standalone fourth-quarter filing. Braskem produces petrochemicals and plastics across Brazil, the United States, Europe and Mexico; amounts below are in Brazilian reais (R$).
Key financial metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Net revenue | R$70.569bn | R$96.519bn | Down 27% |
| Gross profit / gross margin | R$3.021bn / 4% | R$11.358bn / 12% | Profit down 73% |
| Operating loss before financial results and taxes | R$2.792bn loss | R$4.272bn profit | Margin shifted from 4% to (4%) |
| Net loss | R$4.890bn | R$821m | Loss widened |
| Net cash from (used in) operations | R$2.272bn used | R$8.952bn generated | Down R$11.224bn |
| Cash and financial investments | R$19.161bn | R$14.761bn | Up R$4.400bn |
| Total consolidated borrowings and debentures, including Braskem Idesa | R$53.486bn | R$47.086bn | Up R$6.400bn |
Cash and investments include R$1.562bn held by Braskem Idesa for its exclusive use. Braskem reported R$5.589bn of financial expenses, R$1.678bn of financial income and a positive R$511m net result from derivatives and exchange-rate variations. Income taxes were a R$1.302bn benefit. The filing reports no consolidated EBITDA figure in the supplied text.
Material changes and operating performance
- Revenue and margins weakened amid lower international prices and petrochemical spreads, subdued demand and lower utilization. Weighted reference prices fell 23% for resins and 18% for main chemicals in Brazil; the U.S. and Europe PP reference price fell 33%, and Mexico PE fell 26%.
- Brazil segment revenue fell 28% to R$49.512bn; U.S. and Europe fell 25% to R$17.507bn; Mexico fell 24% to R$4.449bn. Segment gross margins were 3%, 8% and 2%, respectively, versus 9%, 15% and 13% in 2022.
- Capacity utilization in Brazil declined, in part due to weaker demand and scheduled maintenance. Mexico utilization improved to 77% from 73%, but the complex remained constrained by ethane supply. One line at the Marcus Hook U.S. plant was hibernated in September 2023.
- Operating cash flow turned negative, reflecting weaker operating results, R$2.686bn of Alagoas-related payments and R$3.550bn of interest paid. Financing activities generated R$8.873bn, including proceeds from 2031 and 2033 note issues. Investing activities used R$4.525bn.
Outlook, risks and unusual items
- Management described the petrochemical downturn as challenging and expected it to continue into the first half of 2024. Its industry outlook anticipated a modest recovery in spreads through 2024 for several products, but continued pressure on polypropylene due to new capacity; these are expectations, not company earnings guidance.
- Planned 2024 capital expenditure was R$2.219bn excluding Braskem Idesa, plus R$1.270bn for Braskem Idesa, including R$1.016bn associated with the ethane import terminal. The terminal was reported 52% complete at year-end 2023, with completion expected by end-2024 and full capacity in the first half of 2025, subject to delay risk.
- Braskem estimated 2024 cash requirements of R$22.623bn, principally for operations, debt service and interest, and expected to use new financing and refinancing of current debt. It also had an unused US$1bn revolving credit facility maturing in 2026.
- The Alagoas geological event remains a major uncertainty. Cavity 18 collapsed in December 2023; the affected area was released for access in February 2024. The year-end provision was R$5.240bn, and the company cautioned that future claims, technical findings, closure-plan changes and costs could materially alter estimates. The auditor identified this provision and its disclosures as a critical audit matter.
- Possible-loss contingencies disclosed totaled R$38.377bn, including R$26.216bn of tax claims and R$8.971bn of Alagoas civil claims; these are not equivalent to recorded provisions. Several significant Alagoas matters remained under appeal, negotiation or assessment.
- Other notable items included R$1.769bn of other income, mainly insurance-claim settlement and PIS/COFINS tax credits, and R$2.735bn of other expenses, primarily associated with Alagoas. The Brazilian real appreciated 7.2% against the U.S. dollar in 2023. About 90.5% of consolidated indebtedness was foreign-currency-denominated.
- Control could change: Novonor held 38.3% of total shares and 50.1% of voting shares; Petrobras held 36.1% and 47.0%, respectively. ADNOC made a non-binding offer for Novonor’s interest, subject to due diligence, Alagoas liability review and other conditions. The filing does not establish that a transaction will close.
Most important facts for investors to verify
- Review subsequent Alagoas developments, the adequacy and movement of the R$5.240bn provision, and the status of major claims and mine-closure measures.
- Assess the sustainability of liquidity after negative operating cash flow, including 2024 refinancing needs, debt maturities, covenants and Braskem Idesa’s covenant waiver.
- Track ethane supply and terminal construction, permitting, financing, cost and startup progress in Mexico.
- Test the outlook against actual petrochemical spreads, demand and utilization, particularly for polypropylene and Brazil operations.
- Monitor any Novonor/Petrobras ownership or governance changes and related debt change-of-control provisions.
KPMG issued unqualified opinions on the consolidated IFRS financial statements and internal control over financial reporting as of December 31, 2023.