Lower sales volumes for ethylene & propylene at Braskem

07 Aug '08

5 min read

In 2Q08, selling, general and administrative expenses (SG&A) were R$ 298 million, down R$ 35 million in relation to 2Q07. In the first half of 2008, SG&A expenses were R$ 559 million, contracting by R$ 118 million in relation to 1H07, demonstrating the positive results of this program.

Braskem net income was R$ 383 million in 2Q08, a 36% increase on a year-over-year basis and a 362% sequential increase over 1Q08, driven primarily by the positive impact from foreign exchange variation.

The global macroeconomic scenario continues to be positively influenced by emerging economies, yet the expectation of a slowdown of the U.S. economy, which has been showing signs of slowdown, has increased.

These factors combined are expected to result in global economic growth of approximately 4% in 2008. In this context, Braskem believes that new capacity globally will come on line at a more gradual pace than previously estimated by the market, allowing the spread between resin and naphtha prices to remain high through 2008.

Braskem expects Brazilian GDP to grow by 4.5% in 2008 driven by stronger domestic demand for goods and services as a result of the higher disposable income and the greater availability of credit at longer terms.

Under these assumptions, and in view of the growth observed in 1Q08, the Brazilian market for thermoplastics resins should grow between 10% and 12% in 2008.

Braskem intends to advance in its growth with value creation strategy. Its priorities are the capture of synergies through consolidation of Brazil's petrochemical industry, diversification of the energy matrix through access to competitive raw materials, and innovation, by advancing the project for green polymers made from renewable raw materials as well as other initiatives.

The Company has made important steps in the second quarter towards meeting these objectives and expects to make further progress in the second half of the year.

Among the expansion projects designed to increase competitiveness by gaining access to competitive raw materials are two joint ventures with Pequiven in Venezuela.

The facilities are expected to increase the volumes of polypropylene and polyethylene supplied to the Venezuelan market and provide a competitive platform for the export of these products to North America, Europe and the western coast of South America.

Similarly, the Company signed an agreement with Petrobras and PetroPeru to assess the technical and economic feasibility of installing an integrated project for the production of 700,000 to 1.2 million tons of polyethylene, using as feedstock the natural gas that is rich in ethane available in Peru.

Braskem was the first in the world to produce polyethylene certified as made from 100% renewable raw materials, and the Company is now undertaking a technical feasibility study of the production of green polyethylene at the Southern Petrochemical Complex, with a potential investment estimated at between R$ 450 and R$ 500 million.

The project will have annual production capacity of 200,000 tons and the potential demand for green polyethylene is roughly three times higher than the plant's capacity, suggesting an opportunity to make new investments in the production of polymers made from ethanol.

BRASKEM S.A.

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