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Presentation 9M03 Earnings
November 11, 2003
José Carlos GrubisichPaul Altit
2
This presentation includes forward looking statements. Such information is not merely based on historical fact but also reflects management’s objectives and expectations. The words "anticipate", “wish", "expect", “foresee", “intend", "plan", "predict", “forecast", “aim" and similar words, written and/or spoken, are intended to identify affirmations which, necessarily, involve known and unknown risks.
Known risks include uncertainties which include, but are not limited to price and product competition, market acceptance of products, the actions of competitors, regulatory approval, currency type and fluctuations, regularity in the sourcing of raw materials and in operations, among others. This presentation is based on events up to September 30, 2003 and Braskem is not liable to update the contents in the light of new information and/or future events.
Braskem takes no responsibility for transactions or investment decisions made on the basis of information contained in this presentation.
Disclaimer – Forward-Looking Statements
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Braskem – 9M03 Earnings HighlightsEBITDA (R$ million)
Net Debt/EBITDA (LTM*)
Net Revenues (R$ million)
+43%
* Last twelve months: without extraordinary items in 4Q02.
6,649+36%
921
1,315
9M02 9M03
4,894
5.1
3.5
Mar 2003 Jun 2003
Net Income (R$ million)
468
R$ 2,247
(1,836)
9M02
9M03
Dec 2002
4.1
411
Sep 2003
3.6
9M02 9M03
2,837
(1,841)
Sep 2003
Impact of Concluded Funding and in Progress
Sep 2003Adjusted
996
Adjusted Short-Term Debt**
(R$MM)
** Adjusted Proforma Short Term Debt ignores any effects of foreign exchange, fiscal, operating as well as other uncertainties that may occur. Ongoing operations may not take place or have their volumes reduced.
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Average Capacity Utilization (%)
Braskem – Operating Performance
9M03Main Products
ETHYLENE
Total Thermoplastics
PP
PE
PVC
96%
80%
84%
83%
86%
9M02
89%
74%
82%
80%
79%
1H03
93%
75%
79%
81%
79%
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Braskem – Sales Performance
ETHYLENE*
PP
PE
PVC
Total Thermoplastics
288,395 278,828 3% 766,841
433,319 411,787 5% 1,159,983
116,083 114,113 322,698
185,004 190,330 491,629
115,863 93,727 306,407
Main Products 3Q03 (A)
3Q02(B)
Chg% (A)/(B)
9M03
708,833
1,143,603
307,489
494,217
297,691
9M02
Sales Volume - Ton
2%
(3%)
24%
(C)/(D)
8%
1%
5%
(1%)
3%
(C) (D)
* Of the total for the quarter, 138,000 tons (48%) were sold/transferred to Braskem’s Business Units. Year to date (9M03) this amount was 351,000 tons (46%).
Chg%
6
Braskem – Export Sales
175178
3Q02 3Q03
+2%
(US$ MM)
Export Markets (in %)
9M03
North America40%
Europe 19%
Asia19%
South America19%Africa
3%
405
495
9M02 9M03
+22%
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Simplified structure accelerating the capture of synergies
* Annualized, recurring gains
Goal =330
Sep/02 Dec/02 Jun/03
5375
240
Synergies*(R$ million)
Sep/03
260
80% of Goal already reached !
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Braskem – Income Statement
Operating Profit (1)
Net Revenue
Cost of Goods Sold
Gross Profit
EBITDA
EBITDA Margin (%)
Net Financial Result
Profit (Loss) fiscal year
Earnings per share
9M03
6,649
(5,285)
1,364
1,315
19.8%
940
(216)
411
119.03
4,894
(3,987)
907
921
18.8%
816
(2,913)
(1,836)
9M02*
(540.3)
2,197
(1,760)
437
367
255
(1,672)
(1,356)
3Q02*
(399.0)
16.7%20.9%
2,203
(1,728)
3Q03
475
461
304
(386)
(58)
(16.8)
-
(2%)
9%
26%
19%
(77%)
(96%)
Chg %
-
(A/B)
25.1%
37%
33%
51%
43%
5.3%
15%
(93%)
-
* Pro-forma financial statement
Chg %(C/D)
-
(A) (B) (C) (D)
(1) Before Financial Result
(R$ Million )
Consistent Growth in Operating Profit Margins
Gross Margin (%) 20.5% 18.5%19.9%21.6% 8.4% 10.7%
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SG&A (1) and Fixed Cash Cost (as % of Net Revenue)
(1) Excluding Depreciation/Amortization
9M02 9M03
8.3%
9.8%
4.2%
5.9%
SG&A (1)Fixed Cash Cost
9M02 9M03
Focus on Managing the Competitiveness of Costs and Expenses
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9M02
921
1,315
Prices
1,744 (1,317)
Fixed &Var. Costs
(62)
OtherOperating
Revs./Exps.
Braskem - EBITDA Change (R$ million)
29
SalesVolume
9M03
Naphtha: (R$ 1.15 billion)
Fuel Oil: (R$ 109 MM)
Natural Gas: (R$ 23 MM)
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Braskem – Steady EBITDA Growth
Source: Thomson Financial Investor Relations and Braskem
(*) Average EBITDA margin for the following companies: Dow, DuPont, Solvay, Lyondell, Nova Chemicals and Georgia Gulf based on public earnings data from 9M03. 9M02 includes Eastman and BASF in addition to those already mentioned.
EBITDA marginPetrochemical Peers (%)
Braskem
Industry Average (*)
9M02 9M03
EBITDA(R$ million)
20
11
19
Extraordinary Items
14
315367
780*
415
1,195
450
405
2Q02 3Q02 4Q02 1Q03 2Q03 3Q03
461
12
Braskem – Financial Management of Working Capital
G.O.C.
+
Competitive Funding in the
Financial
Market
Liquidity
CushionR$ 662 MM
(Cash, Finan. Aplic, Securities)
Reduction in cost of finance lines from
banks and suppliers
GreaterFlexibilityoperational,financial and
strategic.&
Reduction in AverageFinancial
Cost
++
Focus on Liquidity and Reduction of Capital Costs
13
R$1.2 Bi via 4-year debenture issue.
Braskem – Program for Refinancing and Funding of ~US$1.0 Billion
US$386 MM via MTN (3 tranches issued);
US$100 MM via pre-payment of exports;
US$50 MM via a trade finance line for naphtha imports.
Concluded
09/30/2003Gross Debt: R$ 6.8 BiNet Debt: R$ 6.2 Bi
Improved Results = Competitive Funding Opportunities
R$200 MM via structuring of Receivable Fund;
In progress
18
316
20
34
2004 2005 2006 20072003Oct03-Dec03
Adjusted Amortization Schedule*(Gross Debt - %)
Adjusted Short-Term Debt*(R$MM)
9
2008
1,731
996
Sep/03Adjusted
(Net Value)
542
Sep/03Tax Credit
Balanceused
Sep/03EBITDA
UDM
662
Sep/03Cash balance/Fin . Inv./Sec.
* Adjusted ST pro forma debt disregards any effect of FX, fiscal, or operating nature, as well as further uncertainties that may occur. Operations in progress may not take place or have their volumes reduced.
14
IGP-M5%
TJLP16%
CDI11% Other
1%
Braskem – Exchange Risk Management
HedgeNon-export linked
Finance Lines
$ 555 MM
Export linked Finance Lines
$ 310 MM
1. Hedge/Investments $ 472 MM
2. Export relatedcredits $ 138 MM
Position on 09/30/2003
(1 + 2) = USD 610 MM
Trade Finance ~28%
69%
Breakdown of Gross Debt by Index (Sep/03)
0
100
FINANCE LINES LINKED TO EXPORTS.
60%
60 %
0
100
FINANCE LINES NOT LINKED TO EXPORTS
60%
75 %
Hedge Policy
Level of hedge protection contracted.
75%
60%
USD 416 MM
USD 186 MM
USD 602MM
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Updated to: 11/07/2003
Braskem – Share Price Performance in 2003
398
166
465
60
140
220
300
380
460
Jan-03Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03
100
BAK
BRKM5
Ibovespa
16
The scenario looks promising for Braskem
Source: Nexant – Chem Systems + Braskem
Braskem: Major growth potential in sales volumes, revenues and margins.
The outlook is for higher thermoplastic resin prices on the international front, with improved margins;
As confirmed by Chem Systems, the fly-up for the petrochemical sector is expected for 2005;
On the international front, there is also the outlook for a gradual reduction in oil and Naphtha prices in the next few years, providing the basis for a consistent improvement in margins;
Domestically, the outlook is for GDP growth - as of 2004. This factor associated with the high degree of elasticity for thermoplastic resins in Brazil, indicate improved sales volumes to the domestic market.
Should the above outlook become a reality, Braskem can be expected to report improved sales volumes, revenues and returns - as of 2004, onwards…
17
Braskem – an excellent investment opportunity
Leader in the Latin American thermoplastics market.
Integrated operations permitting capture of synergies.
Consolidated businesses and superior margins.
Incorporation of OPP and Nitrocarbono concluded and negotions with common shareholders of Trikem and Polialden in progress.
Adherance to Bovespa’s corporate governance Level 1 and adhesion to Level 2 (in 2 years).
Stock split with a view to increased liquidity
Adoption of 100% tag along rights for all shareholders.
Listed on Latibex in October (“ticker symbol” XBRK).
Strong future growth potential in volumes and returns.
A world class Brazilian petrochemical company !
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