Braskem reports free cash generation of R$2.3 billion

SÃO PAULO, Aug. 7, 2019

HIGHLIGHTS:

Braskem - Consolidated:

• Recurring EBITDA was US$375 million, 12% higher than in 1Q19, explained by (i) better operating performance of PP plants in the United States; (ii) higher sales volume of chemicals in the Brazilian market; and (iii) higher international spreads of chemicals and PP spreads in the United States remaining at high levels. Including non-recurring effects, EBITDA was US$412 million.
• Net income came to R$129 million, down 91% and 76% from 1Q19 and 2Q18, respectively, corresponding to R$0.16 per common share and class "A" preferred share.
• Free cash generation was R$2.3 billion, growing R$2.2 billion from 1Q19. Compared to 2Q18, free cash generation decreased 31%.
• Financial leverage measured by the ratio of net debt to EBITDA in U.S. dollar stood at 2.16x.
• The recordable and lost-time injury frequency rate (CAF + SAF), considering both Team Members and Partners per million hours worked, stood at 1.76 in 2Q19, which is 44% below the industry average.
• The New York Stock Exchange (NYSE) scheduled for October 17, 2019 the hearing related to the appeal filed by Braskem against the NYSE's decision to suspend trading and commence delisting of the American Depositary Shares (ADS) of the Company after failing to file its 20-F Form for fiscal year 2017.
• In view of the request for court-supervised reorganization filed by Odebrecht S.A. and other companies of the Odebrecht Group (ODB), including the Company's direct parent company, OSP Investimentos S.A., Braskem was informed by ODB that there has been no change its ownership structure, since all common and preferred shares issued by the Company continue to be held by OSP Investimentos S.A. through fiduciary sale to certain creditors of ODB. Braskem has no relevant amounts receivable from ODB and its court-supervised reorganization does not trigger the early maturity of any of its liabilities.

Brazil:

• Demand for resins in the Brazilian market (PE, PP and PVC) was 1.3 million tons, down 7% from the prior quarter, when it was influenced by the inventory rebuilding trend in the converters chain. Compared to the second quarter of last year, resins demand rose 1%, since that period was affected by logistics constraints caused by the truck drivers' strike.
• The crackers operated at a capacity utilization rate of 89%, up 1 p.p. from 1Q19, which is explained by the increased supply of feedstock to the cracker in Rio de Janeiro, which offset the lower utilization rate of the cracker in Bahia resulting from the shutdown of the Chlor-Alkali and dichloroethane plants in Alagoas. Compared to 2Q18, capacity utilization fell by 1 p.p.
• Despite the market's contraction in the period, the Company's market share increased 3 p.p. driven by its sales volume of 843 kton. Compared to 2Q18, Braskem's sales volume in the Brazilian market expanded 3%. Sales of key chemicals in the Brazilian market amounted to 782 kton, up 13% from 1Q19, reflecting the stronger demand for ethylene and benzene to produce styrene and its derivatives. Compared to 2Q18, sales volume also grew, by 13%.
• In 2Q19, the Company exported 356 kton of resins, in line with 1Q19. Compared to 2Q18, resin exports increased 11%, since exports in that period were affected by the lower supply of products for export due to the truck drivers' strike. Exports of key chemicals amounted to 146 kton, down 25% from 1Q19, mainly due to the prioritization of supply to the Brazilian market. Compared to 2Q18, exports advanced 62%, which also benefitted from the higher supply of ethylene.
• In the quarter, the units in Brazil and exports posted recurring EBITDA of US$154 million (R$604 million), accounting for 44% of the Company's consolidated EBITDA.

United States and Europe:

• Demand for domestic PP in the U.S. market increased compared to 1Q19 and to 2Q18, driven by lower resin prices that encouraged converters to build inventories. In Europe, the contraction in demand is mainly explained by the economic slowdown and by the summer, when demand is seasonally weaker.
• The plants operated at a capacity utilization rate of 92%, increasing 2 p.p. and 8 p.p. from 1Q19 and 2Q18, respectively, supported mainly by the good performance of the U.S. units. In Europe, given the operational problems affecting the propylene supplier and the consequent shortage of feedstock for the Schkopau unit, its scheduled maintenance shutdown was brought forward to 2Q19, which adversely affected the utilization rate of Europe's plants in the quarter.
• Construction of the new PP plant in the United States reached 65.5% completion at end-June, with total investment of US$485 million to date.
• In the quarter, the units in the United States and Europe posted EBITDA of US$107 million (R$414 million), with the segment accounting for 31% of the Company's consolidated EBITDA.

Mexico:

• Mexican demand for PE stood at 510 kton, up 1% from 1Q19. Compared to 2Q18, demand contracted 19%, explained by the slowdown of the Mexican economy, which is suffering from weaker investor confidence due to the threat of new import tariffs in the United States, high interest rates and slowing industrial production.
• The PE plants operated at a capacity utilization rate of 72%, down 7 p.p. from 1Q19, reflecting the low supply of ethane, and stable in relation to 2Q18.
• In the quarter, the Mexico unit posted EBITDA of US$88 million (R$343 million), with the segment accounting for 25% of the Company's consolidated EBITDA.

Braskem has spontaneously restated on the date hereof, its 1Q19 results.