2. Disclaimer – Forward-Looking Statements
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 comprise, 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 October 09, 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.
2
4. Braskem: Strategic Drivers
Regional Strategic Positioning: “Braskem
Market is a leading company in the
Leadership Latin-American thermoplastic
(Scale)
resins market, with up-stream
competitive integration with its
key raw materials (ethylene and
proplylene)”.
Cost Technological
Competitiveness Autonomy
(Low Cost Producer) (“Fast Follower”)
4
5. Leadership in the thermoplastics segments in Latin America (1)
Polyethylene PVC Polypropylene
Dow Braskem
27% 31% Braskem
Basell
Solvay 39%
Braskem (JV´s)
49% 51% 44%
Politeno
Outros
12% Cuyo
12% 6%
Ipiranga
Ipiranga
18%
11%
(1) Source : Braskem 2002
5
6. Braskem : Production Scale
Main Players in the region:
3,200 kt/year* Ethylene
Polyethylenes
Polypropylene
PVC
Polystyrene
PET
1,500
810
595
515
340
185
Braskem DOW BASF IPIRANGA SOLVAY SUZANO PEREZ
Including Polibrasil COMPANC
* Does not include 1.8 million tons of other chemical and petrochemical products produced by Braskem
6
Source: Braskem, 2002
8. Braskem Technology & Innovation Center
Main objective: To develop opportunities and solutions for
Braskem’s clients;
156 professionals involved in research activities;
R$ 300 million invested, comprising 6 pilot
plants and 11 laboratories;
Annual investments of R$ 30 million in R&D;
Partnership with universities and research centers;
In 2002, assistance provided to 188 clients for 550 new product
development requests.
Initiatives undertaken in recent years have allowed Braskem to file 100
different patents, 16 for products, 39 for processes, 26 for catalysis and 19
for equipment/automation.
8
9. Braskem – Petrochemical Value Chain
Basic
Final
Inputs Raw Intermediates
Products
Materials
Ethylene Polyethylene
Naphtha
Propylene Polypropylene
Gas Oil
Xylenes PVC
Natural Gas
Benzene PET
Condensate
Butadiene Caprolactam
Caustic Soda
9
11. Braskem: a Very Attractive Market for its Core Business
Overall Market Consumption for
Thermoplastics (PE, PP and PVC) 6%
3,500
8% CAGR* 3,200
3,102
3,014
3,000 2,829
2,653
2,529
2,500
2,276
2,135
Thousands of tons
2,000 1,811
1,596
1,500 1,313 1,419
1,274
1,000
500
0
90 91 92 93 94 95 96 97 98 99 00 01 02
* Cumulative Average Growth Rate
11
Source: Abiquim, 2002
12. Braskem: Products with High Elasticity as Compared to the Local GDP
Annual Growth Rates – Brazil
% (1990 through 2002)
15
Brazilian thermoplastics
consumption growth
exceeds GDP growth by 3.7 11.7
times
10
7.7
6.5 6.1
PP
5
TP
(thermoplastics) PEs PVC
2.1
GDP
0
1990 - 2002
12
Source: Abiquim, 2002
13. Braskem: Ownership / Corporate Structure after 07/31/2003
PREVI PETROQUISA ODEBRECHT NORQUISA MARIANI PETROS MARKET(1)
2.9% 3.4% 7.8% 11.1% 43.2% 43.3% 29.5% 12.0% 3.4% 3.5% 2.9% 1.1% 10.2% 25.6%
29.5% 29.5% 100.0% 56.3% 92.9% 51.6% 35.0% 33.5%
POLIALDEN
% Voting Stake % Total Stake
13
(1) Includes Nissho Iwai’s 4.2% voting stake, corresponding to a 1.6% total stake.
14. Braskem – 1H03 Earnings Highlights
Net Revenues (R$ million) EBITDA (R$ million)
+54%
+65% 855
4,447
2,697 554
1H02 1H03 1H02 1H03
Net Profit (R$ million)
468
Net Debt (R$ million) 1H02 Net Debt/EBITDA (LTM*)
(R$ 1,109) 468
R$ 948 (32%)
6,815 1H03 5.10
6,365 4.11
5,706
3.49
(480)
Dec 2002 Mar 2003 Jun 2003 Dec 2002 Mar 2003 Jun 2003
14
* Last twelve months; excluding extraordinay items in 4Q02.
16. Overview – Global Petrochemical Industry (1st Half 2003)
Raw materials prices remained at high levels;
Iraq War;
SARS epidemic in Asia:
. Temporary slowdown in the international polymers market, due to a
20% reduction in imports by China;
. Drop in inventory levels – higher order book backlog;
. An expectation for a recovery in imports by China in August-
September 2003, which could place upward pressure on prices in Asia.
16
Source: Nexant – Chem Systems
17. Overview – Global Petrochemical Industry (1st Half 2003)
However, 2003 brought good news too...
The Iraq War ended without significant damage to oil fields;
Raw materials prices showed a downward trend;
The end of the SARS epidemic could signify a recovery in demand in
Asia, particularly in China. Prices could rise in the region;
Expectation of gradual recovery among the world’s leading economies;
Limited capacity expansion among producers.
17
Source: Nexant – Chem Systems
21. Braskem – Export Sales
US$ MM
+38%
+32% 317 Export Markets 1H03 (%)
230
Europe
181 28
137
Asia
20
North America
2Q02 2Q03 1H02 1H03 31 Latin America
Africa
18
3
21
23. 1H03 Earnings
Accounting Criteria
• The following companies are part of Braskem and are fully consolidated in the financial
statements: Braskem; Trikem and Polialden. (OPP Química and Nitrocarbono merged
into Braskem on March 31, 2003)
• 1H02 earnings are presented on a pro-forma basis, and financial data from the
companies that form Braskem is provided as if they had been part of the corporate
structure since the january, 1st., 2002.
• Proportional consolidation effects are eliminated as per Rule CVM 247 for the stakes
held in Politeno and Copesul, which are represented via the equity accounting method.
CORPORATE LAW AS PER CVM RULE 247
2002 2003
Jan - May June - Dec Jan - June
Assets Consolidated Copene, Copene,
into Braskem Copene,
Polialden, Polialden,
Propett, Politeno,
as per CVM 247 Polialden,
Politeno, Trikem
Propett and Copesul,
Copesul,
Politeno
Nitrocarbono, * OPP and
OPP and Trikem Nitrocarbono
23
* Merged into Braskem on March 31, 2003
25. Braskem – Cost of Goods Sold – (1H03)
COGS 1H03
Other variable
costs R$ 3,558 million
Other 19.6%
Third-party 1.6%
services
1.3%
Depreciation
3.7%
Personnel
1.8%
Chem. Prods
0.7% Naphtha
68.8%
Electricity
2.6%
25
26. SG&A (1) and Fixed Costs
(as a % of Net Revenues)
Fixed
SG&A (1)
Costs
10.9
7.9
5.9
4.0
1H02 1H03 1H02 1H03
26
(1) Does not include depreciation/amortization
28. Braskem – Steady EBITDA Growth
EBITDA EBITDA margin
(R$ million) Petrochemical Peers (%)
Braskem
Extraordinary items
Industry Average (*)
1,195 21
19
12 11
780*
450
405
367
315
415
2T02 3T02 4T02 1T03 2T03 1H02 1H03
(*) Average EBITDA margin of Dow, DuPont, Solvay, Lyondell, Eastman, Nova Chemicals and
Georgia Gulf based on public earnings data from 1H03.
28
Source: Thomson Financial and Braskem
29. Braskem – Net Debt Reduction
Priority: Use of cash surpluses for debt reduction
Reduction Factors
Net Debt (R$ million)
Sound Cash Flow in the first half of 2003
(R$879 million)
( R$ 1,109) Efficient working capital management;
Synergy gains from the integration
process: R$ 240 million on an annual
6,815 and recurring basis
6,365
5,706
Net Debt / EBITDA ratio *:
12/31/2002: 5.10
Dec 02 Mar 03 Jun 03 03/31/2003: 4.11
06/30/2003: 3.49
(*) LTM/ w/o extraordinary items
29
30. Braskem – Consolidated Debt (Jun/03)
Gross Debt - % (US$)
Breakdown by Indexation
73
TJLP
66 17% CDI
Net Debt as of IGP-M 9%
6/30/03: R$ 5.7 Bi 6% Other
2%
Sep/02 Jun/03
Amortization Schedule
(Gross Debt - %) Trade Finance
~31%
23.3
29.1 66%
22.4 US$
17.2
Initiatives Underway:
8.1 • MTN (USD 500 MM);
• Trade Finance Programs
2003 • International/ Domestic Structured Financing;
2004 2005 2006 2007
Jul03 –Dec03 • Increased Working Capital Lines.
Short-term portion includes:
• R$ 1,120 million in trade finance lines
• ~ R$ 559 million in working capital to finance the
company’s operations 30
31. Braskem - Hedging Policy
ADOPT POLICIES AIMING AT THE REDUCTION OF THE IMPACTS OF THE EXCHANGE
RATE VOLATILITY OVER FINANCIAL ASSETS/LIABILITIES, THUS PROTECTING US$
DENOMINATED CASH OBLIGATIONS FOR THE COMING 12 MONTHS
100 100
80 80
60 TRADE FINANCE 60 NON-TRADE
FACILITIES. FINANCE
40 60% 40 75 % FACILITIES.
60 %
20 20
0 0
31
32. Braskem – US$ Exposure (Jun/03)
Hedging Policy
Balance as of 06/30/2003
Minimum Standars
Non-Trade Finance
1. Hedge/Investiments
Hedge Facilities
USD 404 MM
75%
USD 362 MM USD 272 MM
2. Exports Credits
USD 152 MM Trade Finance Facilites
60%
USD 316 MM USD 190 MM
(1 + 2) = USD 556 MM
USD 462 MM
20 % Overhedge
32
34. Petrochemical Industry: Positive outlook
Despite unexpected issues such as SARS, 2003 is expected to be a
transition period to a new level of profitability;
Sector recovery should begin to accelerate in 2004; higher profitability;
Peak profitability (“fly-up”) is expected in 2005;
The outlook for 2006 and 2007 is positive given the limited amount of
capacity coming on line;
A downturn is expected in 2008; however, it should be softer than past
cycles (depending on investment levels);
The main future profitability driver will come from changes as a result
of: Consolidation + Low energy prices + Lower investment levels
The next cycle in the petrochemical industry could be the best in 25 years!
34
Source: Nexant – Chem Systems
35. Braskem – Share Price Performance 2003
380
BAK
345
BRKM5
300 300
220
Ibovespa
140 140
100
60
jan-03 feb-03 mar-03 apr-03 may-03 jun-03 jul-03 aug-03 sept-03
LATIBEX listing approved by the Board of Directors (Oct. 03)
35
Last Update: 09/25/2003
36. Braskem : An Excellent Investment Opportunity
Leading thermoplastics producer in Latin America;
Integrated operations enable synergies to be captured;
Consolidated businesses and superior margins, with adjustment of capital
structure already under way;
OPP and Nitrocarbono merger completed and negotiations with common
shareholders of Trikem and Polialden;
Already a Bovespa Level 1 Company; will qualify for Level 2 within 2 years;
Offering 100% tag-along rights for all shareholders;
High potential for shareholder value creation;
Listed on LATIBEX on October 8, 2003.
A world-class Brazilian petrochemical company !
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