presentation targeting roadshow
TRANSCRIPT
Meeting with InvestorsMeeting with Investors
May 2007May 2007
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Forward-looking StatementsForward-looking Statements
This presentation contains forward-looking statements. Such statements are not statements of historical facts, and reflect the beliefs and expectations of Braskem’s management. The words “anticipates”, “wishes”, “expects”, “estimates”, “intends”, “forecasts”, “plans”, “predicts”, “projects”, “targets” and similar words are intended to identify these statements. Although Braskem believes that expectations and assumptions reflected in the forward-looking statements are reasonable based on information currently available to Braskem’s management, Braskem cannot guarantee future results or events.
Forward-looking statements included in this presentation speak only as of the date they are made (March 31, 2007), and the Company does not undertake any obligation to update them in light of new information or future developments.
Braskem shall not be responsible for any transaction or investment decisions that are taken based on information included in this presentation.
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Our Vision Our Vision
2012
2002
To rank amongst theTo rank amongst the TOP 10 global TOP 10 global petrochemical petrochemical
companies in market companies in market capitalizationcapitalization
To becomeTo becomeLatin AmericaLatin America’’s leaders leaderin thermoplastic resinsin thermoplastic resins
2006
2007
PolitenoPoliteno
Ipiranga /Ipiranga /CopesulCopesul
TurnaroundTurnaround
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Strategic Drivers Opportunities for Growth with Value Creation Strategic Drivers Opportunities for Growth with Value Creation
• Politeno acquisition
• Acquisition of the Petrochemical assets of the Ipiranga Group (Ipiranga and Copesul)
• Debottleneckings in PE and PVC
• New PP plant in Camaçari
• Start-up of overseas commercial operations and distribution network
• Investment opportunities in the Americas
• Petroquímica Paulínia
• Projects in Venezuela:
•PP plant
•Jose Olefins Complex – 1st and 2nd generation
• Capacity increases in isoprene and paraxylene
• Conversion of MTBE to ETBE
• Hydrocarbon resins
• Green polymers
Organic Growth
Selective GrowthEnhancement of the Brazilian Production
Chains
Internationalization
Value Creation
5
SolidBusiness Model
Ipiranga Acquisition
Compelling Market Outlook
Upcoming Opportunities
for Value Creation
A Unique Investment OpportunityA Unique Investment Opportunity
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A Unique Investment OpportunityA Unique Investment Opportunity
Compelling Market Outlook
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Brazil: a growing and dynamic market for thermoplastic resins With high historical growth rates… Brazil: a growing and dynamic market for thermoplastic resins With high historical growth rates…
Overall Market Consumption for Polyethylene, Polypropylene and PVC
* Compound Annual Growth Rate
Thousands of tons
Source: Brazilian Chemical Industry Association - Abiquim
1,596
2,135
2,5292,829
3,0143,064
3,4403,741
1993 1995 1997 1999 2001 2003 2005 2006
7%CAGR *
9%
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Brazil: a growing and dynamic market for thermoplastic resins …and strong elasticity to the GDP growth Brazil: a growing and dynamic market for thermoplastic resins …and strong elasticity to the GDP growth
Source: Braskem and Abiquim
2.9
Elasticity: 2.4x GDP growth
PVCPVC
5.7 6.1
PolyethylenePolyethylene
9.1
PolypropylenePolypropylene
6.8
ResinsResins
Annual Growth Rates Annual Growth Rates –– Brazil (1994 through 2006)Brazil (1994 through 2006) %%
GDPGDP
9Source: Braskem. Figures do not consider the effects of the acquisition of Ipiranga.
2002
415
2003
617
2004
710
2005
959
2006
1,382
Gross RevenueGross Revenue US$ millionUS$ million ExportsExports US$ millionUS$ million
2002
3,013
2003
3,688
2004
4,900
2005
6,252
2006
6,893
23%CAGR 35%
CAGR
Brazil: a growing and dynamic market for thermoplastic resins Braskem: Solid and consistent growth Brazil: a growing and dynamic market for thermoplastic resins Braskem: Solid and consistent growth
10Source: Braskem
Outlook for 2007:
– Sustained global economic growth
– In Brazil:• Gradual reduction in interest
rates• Increase in investments in
infrastructure• Growth in domestic demand
coupled with higher expected GDP growth
• Increase in available income
Braskem: consumption-driven player with a strong customer basis Differentiated position to benefit from the growth of the Brazilian market
Braskem: consumption-driven player with a strong customer basis Differentiated position to benefit from the growth of the Brazilian market
Market segmentation for Braskem’s resins in 2006
* Includes personal hygiene, infrastructure, electronics and others
PACKAGING FOR FOOD
24%
CONSUMER GOODS (NON-DURABLE)
17%
CONSTRUCTION
17%
OTHERS *
20%
RETAIL8%
AGRICULTURE
8%
COSMETICS AND PHARMACEUTICALS
3%
% of Revenue% of Revenue
3%AUTOMOTIVE
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Brazil: a growing and dynamic market for thermoplastic resins Solid demand growth for thermoplastic resins
Brazil: a growing and dynamic market for thermoplastic resins Solid demand growth for thermoplastic resins
Demand growth approximately 1.2 million tons for the next 4 years
3.74.0 4.2 4.5
4.8
Source: Braskem and LCA consultancy
Domestic sales + imports
mn ton
315 264 282 303
Growth 2007-2010 (k ton)Market growth (k ton)
20102009200820072006
1
2
3
4
5
7.2% CAGR
391 391
530530
243243
PE
PP
PVC
0
100
200
300
2010200920082007
+ 8 %
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A Unique Investment OpportunityA Unique Investment Opportunity
SolidBusiness Model
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33rdrd generationgenerationExtractionExtraction 11stst generationgeneration 22ndnd generationgeneration11stst generationgeneration 22ndnd generationgenerationExtraction 3rd generation
COMPETITIVE INTEGRATION
Value AddedValue Added
CompetitivenessCompetitiveness
Braskem: Solid business model based on competitive integration in the Value Chain Braskem: Solid business model based on competitive integration in the Value Chain
#1 Petrochemical #1 Petrochemical Company in Latin Company in Latin
AmericaAmerica
MarketMarketLeadershipLeadership
Integration with Scale
Integration with Scale
Cost Cost CompetitivenessCompetitiveness
Know-HowKnow-How
Technological Technological AutonomyAutonomy
NaphthaNaphtha
CondensateCondensate
Thermoplastic resins Plastic ConvertersRaw materials Basic petrochemicals
Level of integration reaches 80% for ethylene and 85% for propylene
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Braskem: Cost Competitiveness Leading producer in the region with scale surpassing all other players
Braskem: Cost Competitiveness Leading producer in the region with scale surpassing all other players
More than 10 million tons of petrochemical and chemical products in 2007, 5.6 million of which ethylene and resins
Source: CMAI and Braskem 2007
Ethylene
PVC
PE
PP
685
Suzano
000 t / ano
Braskem
1,8151,815
760
515515
5,570
2,4802,480
Production CapacityProduction Capacity 000 tons / year000 tons / year
700
Dow
700700
700700
1,400
Rio Polímeros
520520
1,060
540540 561
Solvay
476476
Triunfo
160620
Unipar / PQU
500500
120120
8585
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Braskem: Market leadership in Brazil Number 1 petrochemical company in the region Braskem: Market leadership in Brazil Number 1 petrochemical company in the region
OTHERS
IMPORTS
PPPP %%
8%
51% 41%41%
12%
46% 42%42%53%53%
7%
40%
PVCPVC %% PE + PP + PVCPE + PP + PVC %%
47%
16%
37%37%
PEPE %%
Source: Braskem / Brazilian Chemical Industry Association – Mar 07; Braskem´s market share before acquisition of Ipiranga
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Spreads over Asian prices Spreads over Asian prices PVC: International and BraskemPVC: International and Braskem
PP: International and Braskem PP: International and Braskem PE: International and BraskemPE: International and Braskem
Braskem: Strong pricing power Spreads over international prices above 30% Braskem: Strong pricing power Spreads over international prices above 30%
Base 100Base 100
%%March 2007March 2007
Source: CMAI / Braskem
PPPP
PEPE + 32%
+ 33%
PVCPVC + 38%
167%
126% 127%
100%
jan/0
5fev
/05
mar/0
5ab
r/05
mai/05
jun/0
5jul
/05
ago/
05se
t/05
out/0
5no
v/05
dez/0
5jan
/06
fev/0
6mar
/06
abr/0
6mai/
06jun
/06
jul/0
6ag
o/06
set/0
6ou
t/06
nov/
06de
z/06
jan/0
7fev
/07
mar/0
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PEAD - Braskem (MI) Base 100
PEAD - Ásia (CMAI) Base 100
126%
100%
168%
142%
jan/0
5fev
/05
mar/0
5ab
r/05
mai/05
jun/0
5jul
/05
ago/
05se
t/05
out/0
5no
v/05
dez/0
5jan
/06
fev/0
6mar
/06
abr/0
6mai/
06jun
/06
jul/0
6ag
o/06
set/0
6ou
t/06
nov/0
6de
z/06
jan/0
7fev
/07
mar/0
7
PP - Ásia (CMAI) Base 100
PP - Braskem (MI) Base 100
101%
100%
140%152%
jan/0
5fev
/05
mar/0
5ab
r/05
mai/05
jun/0
5jul
/05
ago/
05se
t/05
out/0
5no
v/05
dez/0
5jan
/06
fev/0
6mar
/06
abr/0
6mai/
06jun
/06
jul/0
6ag
o/06
set/0
6ou
t/06
nov/
06de
z/06
jan/0
7fev
/07
mar/0
7
PVC - Ásia (CMAI) Base 100
PVC - Braskem (MI) Base 100
Base 100Base 100
Base 100Base 100
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Braskem: Innovation and Technology as key drivers for Value Creation Braskem: Innovation and Technology as key drivers for Value Creation
Over US$ 160 million in R&D assets
171 researchers
8 pilot plants
151 patent registrations filed
Extended knowledge network with Universities
20% of sales come from new products launched over the last 3 years
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Braskem: Innovation and Technology New frontiers of development Braskem: Innovation and Technology New frontiers of development
Green Polymer– Manufacture of resins based on renewable sources of raw
material (sugar cane)
– Technology to convert ethanol into ethylene already in place
– Biopolymer: biodegradable green polymer
Nanotechnology– 1st Brazilian petrochemical company to file a patent
– 4 patents already filed
– 1st product launched in November 2006: new PP grade
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A Unique Investment OpportunityA Unique Investment Opportunity
Ipiranga Acquisition
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A new step in the restructuring of the Brazilian Petrochemical Industry A new step in the restructuring of the Brazilian Petrochemical Industry
5 plants5 plants730 730 ktkt of resinsof resins
Leadership in HDPELeadership in HDPE40% Market Share40% Market Share
ProductionProduction1.2 1.2 mnmn tons of Ethylenetons of Ethylene
2nd largest cracker2nd largest crackerin in LatamLatam
MarchMarch 19th, 200719th, 2007
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Gross RevenueGross Revenue
US$ 6.9 bn
Net RevenueNet Revenue
US$ 5.4 bn
EBITDAEBITDA
US$ 760 mn
Debt / EquityDebt / Equity
59 / 41
AssetsAssets
US$ 7.5 bn
Net Debt / Net Debt / EbitdaEbitda
2.7 x
Braskem: Acquisition of Ipiranga Group´s Petrochemical Business Largest petrochemical player in Latin America
Braskem: Acquisition of Ipiranga Group´s Petrochemical Business Largest petrochemical player in Latin America
Note: 2006 Figures consolidating Ipiranga and Copesul are unaudited and proforma
US$ 9.9 bn US$ 7.8 bn US$ 1.4 bn
53 / 47 US$ 10.3 bn2.6 x
22Source: Citigroup, JP Morgan and Bear Stearns
15% 15% DiscountDiscount
Comparable Comparable Companies Average: Companies Average:
5.755.75
Dow Nova Chemicals
Lyondell Chemical
Huntsman Georgia Gulf Braskem2007*
4.9
EV/EBITDA EV/EBITDA
* Analysts’ average for 2007
6.5
5.0
6.06.06.0
Acquired Assets Acquired Assets + Debt+ Debt
US$ US$ 2,415 2,415 mnmn
AcquisitionAcquisition EBITDA EBITDA (Ipiranga (Ipiranga + 55% of Copesul)+ 55% of Copesul)
US$ US$ 390 390 mnmn
Transaction multiple of 6.2 x before synergies
Braskem: Acquisition of Ipiranga Group´s Petrochemical Business Financial leverage practically intact after the acquisition Braskem: Acquisition of Ipiranga Group´s Petrochemical Business Financial leverage practically intact after the acquisition
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Improved profitability and EBITDA with potential increase in cash flow
Expansion of product portfolio, consolidating our leading position in all respective segments, mainly HDPE
Client base expansion and supply of value-added services based on Innovation & Technology structure
Full integration between 1st and 2nd generation, leading to improved competitiveness
Increased operational flexibility
Improvement of supply chain management
– Increased flexibility with naphtha supply
Strengthening of the partnership with Petrobras
Braskem: Acquisition of Ipiranga Group´s Petrochemical Business Strengthening of our competitive advantages unlocks potential synergies
Braskem: Acquisition of Ipiranga Group´s Petrochemical Business Strengthening of our competitive advantages unlocks potential synergies
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OTHERS
IMPORTS
PPPP %%
PVCPVC %% PE + PP + PVCPE + PP + PVC %%
PEPE %%
42%42%
41%41%
53%53%
37%37%
Source: Braskem/Abiquim 2006
More than 50% of market share in all resins
33%
15%
52%52%
9%
39%52%52%
30%
53%53%17%
30%
53%53%17%
Braskem: Acquisition of Ipiranga Group´s Petrochemical Business Strengthened market leadership Braskem: Acquisition of Ipiranga Group´s Petrochemical Business Strengthened market leadership
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Braskem: Acquisition of Ipiranga Group´s Petrochemical Business Synergies: Experienced management team with proven implementation capacity
Braskem: Acquisition of Ipiranga Group´s Petrochemical Business Synergies: Experienced management team with proven implementation capacity
Commercial– Complementary product portfolio, especially HDPE– Integration of client base – Optimization of export contracts
Industrial– Operational flexibility– Shared maintenance services
Fiscal and tax optimization
Supply chain– Scale gains in procurement– Optimization of logistics
Competitive management model with potential to improve quality and productivity through the exchange of best practices
Possibility of new DBN’s in the Southern Complex
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AMORTIZATION SCHEDULE03/31/2007 - (R$ million)
Gross debt: 5,800Gross debt: 5,800
Net debt: 4,205Net debt: 4,205
Average term: 17 years
26%
8%6%
2007 20092008 2010
8%9%
2013/2014
2017/2018
2015/2016
6%
12%
2011/2012
12%
Perpetuals
13%1,162*1,162*
718718724724543543675675
462462366366449449372372
Source: Braskem
331331
03/31/07Cash and cash equivalents
1,596
812
784
Invested in US$
Invested in R$
Dec 06 Mar 07
2.722.51
Net Debt / EBITDA (LTM)
*Subordinated debentures fully subscribed by the controlling shareholder with payment of interest and principal in July 2007.
**Unaudited pro-forma figure for 2006 considering the acquisition of Ipiranga
-8%
Ratings of BraskemRatings of BraskemOutlook from Stable to PositiveOutlook from Stable to Positive
““Fitch expects the company to be able to increase Fitch expects the company to be able to increase significantly free cash flow generation, which significantly free cash flow generation, which
would allow a significant improvement in credit would allow a significant improvement in credit metrics needed for metrics needed for BraskemBraskem´́ss rating to migrate to rating to migrate to
an Investment Grade category.an Investment Grade category.””Pro-
forma**
2.63““BB+BB+””
Braskem: Solid Financial Structure Adequate indebtedness profile with financial leverage practically intact after the acquisition
Braskem: Solid Financial Structure Adequate indebtedness profile with financial leverage practically intact after the acquisition
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A Unique Investment OpportunityA Unique Investment Opportunity
Upcoming Opportunities
for Value Creation
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Braskem: Opportunities for Value Creation Resin production capacity growth in Brazil … Braskem: Opportunities for Value Creation Resin production capacity growth in Brazil …
Source: Braskem (2006)
PaulíniaPaulínia
BahiaBahia
AlagoasAlagoas
PVC +150 k ton / year
PE +100 k ton / year
PP Bahia +300 k ton / year
Petroquímica Paulínia: PP Plant– JV with Petrobras– Total investment of R$ 734 million– Production capacity
• +350 k ton / year
– Location• Paulínia, State of São Paulo
– Start-up in 2Q08
Projects being considered for future implementation:– DBN
– Greenfield
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Braskem: Opportunities for Value Creation …combined with investments in the lowest feedstock cost country in the region…
Braskem: Opportunities for Value Creation …combined with investments in the lowest feedstock cost country in the region…
PDA’s signed
Cornerstone laid on 04/16/07
JVs to be created by the end of 07
Two projects in the Jose Complex:– 50/50 Braskem and Pequiven– Capital structure: 30% equity, 70% debt– Project finance non-recourse – multilaterals, ECAs
and development banks
PP Plant*– Production capacity of 450 kton / year– Investments of US$ 370 million– Start-up in 2009– Propylene at competitive prices
Jose Olefins Complex*– 1.3 million tons of ethylene– 1.1 million tons of PE– Total investment of US$ 2.5 billion – Start-up in 2011– Natural gas at competitive prices
* To be presented to the Board
Venezuela
30Source: Braskem
Polyethylene Polypropylene PVC
PaulPaulííniania350350
Braskem Current 2008 2009 2010 2011 2012
VenezuelaVenezuela450450
CamaCamaççariari150150100100
VenezuelaVenezuela1,1001,100
5.5 million
(1) JV with Petrobras(2) JV with Pequiven
(2)
(2)
CamaCamaççariari300300
1,815
760
515515
3.1million
665
1,860
3,015
(1)
Braskem: Opportunities for Value Creation …will result in an 80% production capacity increase for
thermoplastic resins...
Braskem: Opportunities for Value Creation …will result in an 80% production capacity increase for
thermoplastic resins...
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Braskem: Opportunities for Value Creation …within a lower production cost structure derived from access to diversified sources of raw materials on a competitive basis
Braskem: Opportunities for Value Creation …within a lower production cost structure derived from access to diversified sources of raw materials on a competitive basis
Source: Braskem
Naphtha Feedstock from Refinery Natural Gas
100%100%
Camaçari - BA
Triunfo - RS
Camaçari - BA
Triunfo - RSPaulínia - SP
Venezuela
9%9%
57%57%34%34%
20062006 20122012
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100% tag-along rights for all shareholders
Part of BOVESPA’s Corporate Sustainability Index - ISE
BOVESPA Level 1 Company with commitment to migrate to Level 2
SOX early adopter - June 2006
Four of eleven Board members are independent
Existing committees– Ethics Committee– Enhanced Fiscal Council– Finance & Investment– People & Organization– Strategy & Communication
Code of Conduct: sets values, principles and practices governing corporate behavior
Long-term incentive plan tied to stock performance
All plants ISO 14000 certified: excellence in HSE
Braskem: Opportunities for Value Creation Commitment to Sustainability and high standards
of Corporate Governance
Braskem: Opportunities for Value Creation Commitment to Sustainability and high standards
of Corporate Governance
Braskem environment project in Alagoas / Brazil
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Regional market leader in the production of PE, PP and PVC: organic growth and consolidation
Greenfield projects in the region to guarantee access to competitive raw materials: selective growth
Strong growth potential in the next 5 years:– Total production capacity will increase from 6 to 10 million tons– Production of resins will increase from 3.1 to 5.5 million tons
Solid financial structure coupled with capital discipline
Innovation and technology as key drivers for value creation
Access to competitive sources of renewable raw materials
Consolidation of the partnership model with Petrobras
100% tag-along for all shareholders and best corporate governance practices
Social and environmental responsibilitySocial and environmental responsibility
Braskem: Growth with Value CreationBraskem: Growth with Value Creation
Meeting with InvestorsMeeting with Investors
May 2007May 2007