By Brazil Stock Guide – Braskem (BRKM5; BAK) is enduring one of the toughest stretches in its history. Executives said the petrochemical downturn — already the longest in decades — has turned out “more prolonged and severe than expected.” During the 3Q25 earnings call, CEO Roberto Ramos and CFO Felipe Jens acknowledged that the company’s assumptions failed to capture the depth of the current slump, forcing a full review of its business plan and capital structure.
Diagnosis Underway
Ramos was blunt: “The outlook and projections for the petrochemical industry have suffered a significant negative impact.” He noted that China’s rapid buildout — with over 40 new crackers planned by 2030 — “will further expand global capacity,” deepening the imbalance between supply and demand. Braskem, he added, hired external advisors “to assess alternatives for a healthier and more sustainable capital structure, given the finding that the downcycle is longer than previously expected.”
Jens confirmed that discussions with stakeholders are ongoing: “The diagnostics are being refined to build a comprehensive solution for reorganizing Braskem’s capital structure.” No path, he said, “is either defined or ruled out.”
Margin Pressure and Weak Spreads
The company’s earnings continue to be squeezed by historically low petrochemical spreads. “Spreads remain at record-low levels due to excess global capacity and weak demand,” said IR head Rosana Avolio. Braskem’s leverage soared to 14.7x EBITDA, exposing how sharply profitability collapsed.
Meanwhile, competition from the U.S., Middle East, and China has eroded the advantage of Braskem’s higher-cost, naphtha-based plants. Ramos admitted that industry rationalization in Europe and Asia “has been slower than projected,” prolonging the global glut.
Resilience Plan in Motion
To counter the downturn, Braskem is executing a Global Resilience and Transformation Plan involving 79 workstreams and over 700 initiatives — from supplier renegotiations and logistics optimization to prioritizing high-value grades. The plan targets $400 million in incremental EBITDA and $500 million in cash generation by 2025.
The company is also shifting its feedstock mix toward gas, deactivating the uncompetitive chlor-alkali unit in Alagoas, advancing the R$4.2 billion Transforma Rio expansion, and importing EDC from the U.S. to lower PVC costs.
Alagoas Settlement and Cash Preservation
Executives detailed the R$1.2 billion settlement with the State of Alagoas over the Maceió geological event. The amount will be paid in ten annual installments, with lighter payments through 2030 to align with Braskem’s limited cash generation. “The agreement was structured considering our financial situation and the current petrochemical cycle,” Jens said. Ramos called it “an important step toward legal and operational stability.”
PRESIC and Government Support
A central topic in the Q&A was the new PRESIC bill, designed to reinstate tax incentives for Brazil’s chemical industry. Ramos said Braskem and Abiquim are lobbying for fast-track approval in the Senate. If enacted, the measure could boost annual EBITDA by $280–300 million from 2026, restoring part of the competitiveness lost after the end of the REIQ regime.
Transforma Rio and Ethane Supply
Jens said the Transforma Rio project — approved by the board in October — will add 220,000 tons of annual ethylene capacity and increase Braskem’s use of natural gas. The long-term ethane supply contract with Petrobras is still under negotiation, though commercial terms are already agreed. Once completed in 2029, the expansion could contribute roughly $200 million per year in EBITDA.
Domestic Margins and Market Defense
Rosana Avolio reported a modest improvement in Brazilian operations, with EBITDA margin rising from 5% to 9%, still “well below historical levels.” The recovery, she said, reflects “cost renegotiations, logistics savings, and a focus on higher-value resins.” She credited the government’s anti-dumping measures on U.S. and Canadian polyethylene and the 20% import tariff for preventing a deeper loss of market share.
Europe’s Slow Rationalization
Ramos observed that Europe’s industry “has closed over 30 refineries in five years” but remains oversupplied in propylene. He warned that without stronger import tariffs or anti-dumping protection, European producers could shut another 12 million tons of ethylene capacity, affecting Braskem’s footprint in the region.
Mexico and Braskem-Idesa Recovery
In Mexico, the start-up of the Ethane Import Terminal (TQPM) in September marked “a turning point,” Avolio said. With capacity for 80,000 barrels per day, the terminal will allow Braskem-Idesa to operate “at full capacity” and eventually resume dividend payments. For now, the unit “does not yet contribute to the consolidated deleveraging,” she added.
Possible Sale of Control
When asked about the potential sale of Novonor’s (formerly Odebrecht) controlling stake, Ramos clarified that management is not involved in the negotiations. “We are not a party to this process,” he said. “Any information we receive from Novonor is immediately disclosed to the market via material facts.” The CEO added that the company has “no knowledge of any imminent decision regarding a transaction” and described Braskem’s role as that of “a front-row spectator, but still a spectator.”
A New Industry Reality
“The up and down cycles will be less pronounced but much longer,” Ramos concluded. He said the petrochemical sector must “cut fixed costs, automate operations, and adopt AI-based systems to respond to market fluctuations.”