Braskem Cuts Losses by 75% in Q3 2024 Amid Industry Headwinds

Braskem, Latin America’s largest petrochemical company, demonstrated resilience in the third quarter of 2024. The company reduced its losses by 75% compared to the same period in 2023.

Braskem reported a loss of R$593 million ($104 million), down from R$2.418 billion ($424.2 million) the previous year. This improvement came despite ongoing challenges in the global petrochemical sector.

The industry has faced its worst cycle in history over the past two years. Oversupply of basic first-generation products and resins has pressured margins.

New capacity in China and the United States contributed to this market imbalance. Braskem’s recurring EBITDA reached R$2.394 billion ($420 million), a significant jump from R$921 million ($161.6 million) in Q3 2023.

This marked the company’s best operational result in two years. Favorable exchange rates and improved spreads supported this performance.

Net revenue grew by 28% year-over-year to R$21.27 billion ($3.73 billion). The cost of goods sold increased at a slower rate of 18%. This divergence helped boost the company’s gross margin.

Braskem’s Domestic Sales Growth and Operational Recovery

The resumption of operations at Braskem‘s Triunfo petrochemical complex played a key role. The facility had been paralyzed for months due to flooding in Rio Grande do Sul.

This restart enhanced product availability and supported domestic sales growth. Despite lower demand in the Brazilian market, Braskem’s domestic sales increased.

The company attributed this to greater product availability for commercialization. This highlights the importance of operational efficiency in challenging market conditions.

Braskem’s management expects a seasonal decline in spreads during the fourth quarter. However, they anticipate a gradual recovery starting in the first quarter of 2025.

The company remains cautious, not expecting a return to average cycle levels or a high cycle in 2025. The Brazilian chemical industry currently operates at a 64% capacity utilization rate.

This is one of the lowest levels in its history. It reflects the broader challenges facing the sector globally. Braskem’s financial position showed some improvement.

The company‘s dollar-denominated leverage ratio decreased to 5.78 times, considering a hybrid bond. This marks a notable improvement from 12.2 times a year earlier.

The company’s cash flow remains under pressure. Braskem reported recurring cash consumption of R$1.1 billion ($193 million) in the quarter.

In short, this was significantly higher than the R$48 million ($8.4 million) negative cash flow a year earlier.

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