The year of 2006 was scarred by an adverse scenario for the domestic petrochemical industry. The combination of high oil and naphtha prices associated with the high volatility of these commodities on the international market, as well as the momentary excess of polyethylene capacity in the Brazilian market, had an impact on sector and Braskem profitability throughout most of 2006. In this context and with discipline, the company was able to implement all of its main projects and to evolve consistently in its corporate essentials during the year. The highlight was how it strengthened its growth platform with a focus on value creation.

Braskem reinforced its leadership in the Latin American market of thermoplastic resins it focuses on - polyethylene, polypropylene and PVC - through significant investments in expanding capacity and strategic acquisitions. It also advanced rapidly in the implementation of programs connected to increasing efficiency and operational reliability and improving competitiveness. "The combination of strong growth in the resin market expected for 2007 and gains in productivity and competitiveness resulting from the programs we implemented throughout 2006, prepare Braskem to continue growing and consolidate its leadership with improved profitability," says José Carlos Grubisich, Braskem president.

In 2006, the Brazilian resin market grew 9%, confirming its historical elasticity in relation to the GDP of around 3 times the average over the past ten years. The striking difference in performance during the year, with a second semester better than the first especially in terms of profitability, indicates that the effects of the entry of a new domestic polyethylene competitor have already been absorbed by the market.

Thus, driven by the acquisition of Politeno during the period, Braskem added growth in the domestic market to an increased presence in the international market. It also gave another important step towards consolidating the Brazilian petrochemical sector with gains in competitiveness for the production chain. The total volume of commercialized resins by the company grew 13% compared to 2005.

In line with its internationalization strategy, Braskem expanded its exports 44% in 2006, reaching record earnings of US$ 1.4 billion.

Gross earnings in US dollars, the currency of reference of the petrochemical sector, grew 10% over the previous year, going from US$ 6.3 billion to US$ 6.9 billion. In reais, gross earnings were R$ 15 billion, in line with 2005, reflecting the negative impact of the exchange factor. Net income grew 13% in dollars, totaling US$ 5.4 billion, or R$ 11.7 billion, exceeding last year by R$ 100 million.

The EBITDA reached US$ 758 million, comparable to the US$ 851 million recorded the previous year, mainly reflecting the effects of oil price increases. In reais, the EBITDA was R$ 1.6 billion, 21% less than 2005, also revealing the impacts from exchange appreciation. Annual net profits were R$ 82 million, compared to R$ 680 million in the previous period.

Operating investments in 2006 totaled R$ 719 million, similar to the year before. Part was destined to a new integrated management system whose operations began in 2006 according to the deadline projected in the Braskem Formula program, which also revised all of the company’s business processes. This resulted in their simplification, cost reductions and improved competitiveness.

The Braskem + program, with a focus on operating excellence and improved productivity, provided earnings of R$ 437 million by December 2006, in annualized and recurring bases, 4% more than initially foreseen only for the end of 2007. This anticipated planned results by one year. Management quality permitted an acceleration of the project and the identification of additional earnings opportunities that will allow the company to continue improving performance.

"Capital discipline, reductions in finance costs and prolonging the debt profile are permanent commitments for Braskem’s financial management, and therefore valid even in the company’s accelerated growth phase," says Carlos Fadigas, vice-president for Finance and Investor Relations.

Braskem’s expansion strategy is in line with its vision to position itself among the 10 leading petrochemical companies in the world in market value through a combination of organic growth in the regional market, new access alternatives to competitive raw materials and the search for opportunities connected to internationalization. It is worth mentioning a polypropylene factory under construction by Petroquímica Paulínia affiliated with Petroquisa, which is on time and should begin operations in the beginning of 2008, as well as two initiatives in Venezuela in partnership with Pequiven: a polypropylene plant to begin operations in 2009, and in 2011, an integrated petrochemical complex to produce ethylene and polyethylene, among other products.

As a result of its focus on innovation and technology, in 2006 Braskem launched the first resin produced in the country based on nanotechnology, a grade of polypropylene. It also assumed a leading position in the research of so-called "green polymers", made from renewable raw materials and whose production process is already protected by patents deposited by Braskem. The company has 151 patents detained in Brazil and abroad, 14 of which were obtained in 2006.

Braskem has qualified as a member of the São Paulo Stock Exchange’s Corporate Sustainability Index for the second consecutive year. This is a differentiated portfolio of company shares that stands out for promoting sustainable development, social responsibility and corporate governance.