Combining a relevant strategic agenda with a strong operating performance let Braskem finish 2008 more prepared to face challenges due to international economic situation and the moment in petrochemical cycle. The conclusion of this sector’s consolidation process in Southern Brazil, incorporating Ipiranga Petroquímica and Copesul, was the highest point in this strategic agenda, providing more chain integration, synergy collection and strengthening of market leadership. This movement contributed to sustain good operating results, highlighted by net income of R$ 18 billion and R$ 2.4 billion EBITDA, together with reinforcement of company’s liquidity, which finished the year with R$ 3 billion in cash.

Despite an operating profit (before financial results) of R$1.1 billion, a 32% exchange rate variation in 2008 had an expressive accounting impacted on net result of the company. With almost 100% of income, directly or indirectly, linked to dollar rate variation, and almost 85% of its costs also connected to this currency, the Company keeps most of its indebtedness also in dollar. Today, 74% of its debt is in dollar. The 32% exchange rate variation had an impact on financial result of R$2.6 billion during the year. Thus, Braskem’s net result was R$ 2.5 billion negative in 2008.

It is important to say that exchange rate variation effect has no direct impact on the company’s cash at short term. This value represents the exchange rate variation effect, especially on indebtedness of the Company and will be spent when debt dues, with an average term of 11 years and do not show future income also readjusted based on dollar. Accounting rule considers that Braskem should have to fully pay its debt on the last day of December and not during the next 11 years. At average term, relative dollar appreciation increases competitiveness in the Brazilian petrochemical chain.

Thermoplastic resin demand in the Brazilian market had been marked by two different moments in 2008. During the first nine months of the year, demand had a 9% growth, in line with historic elasticity with GDP. However, during the last quarter, demand had been affect by a strong movement of unstocking petrochemical productive chain due to unexpected credit restriction. This movement represented a 6% fall of domestic demand during the last quarter, moderating growth in the year at 3%. 

As widely publicized, Braskem reduced production levels during the forth quarter, reaching 55% of the capacity installed during the last month of the year to adapt to stock adjustments in chain and to sustain a strong cash position. This was one of the factors that influenced the 4% fall in company’s resin production during 2008. This reduction also shows the effects of turnarounds during the first half of the year in basic petrochemical and resin units, due to lower volume of available raw material.

In this context, Braskem’s PP and PVC sales had a 7% growth against the year before, stimulated by good performance presented by some economic sectors during the first half of 2008, such as automotive, construction and agricultural business. Domestic PE sales presented a 3% reduction. In the sector of thermoplastic resin, volume sold domestically had a 2% growth in 2008, if compared with 2007.

Braskem’s gross income was R$ 23 billion in 2008, compared with R$ 23.8 billion in 2007, with a 3% reduction. Gross income, in dollar, was US$12.8 billion, with a 4% increase against US$ 12.3 billion in 2007.
In this way, Braskem’s net income was R$ 18 billion in 2008, with a 4% reduction, compared with R$ 18.8 billion in 2007. Net income, in dollar, reached US$10 billion, with a 3% increase against US$ 2007. Net income with exports was stable at US$ 2.2 billion (22% of total net income).

Braskem’s consolidated EBITDA in 2008 reached R$ 2.4 billion against R$3.3 billion in 2007. Such reduction is explained by combination of 5.5% average valorization of Real, with negative impact of R$339 million, with the highest cost of naphtha, with a R$739 million impact, and lower volumes of basic petrochemicals and resins sold. When converted into dollars, annual EBITDA was US$ 1.3 billion in 2008 and presented a 20% reduction against the year before. EBIDA margin in 2008 was 13.5%, compared to a 17.3% margin in 2007.

Aligned with its commitment with capital discipline and ROI over its capital costs, Braskem had stable investments in 2008 totalizing R$ 1.4 billion (not including capitalized interest nor R$ 638 million spent to purchase petrochemical assets from Grupo Ipiranga), similar to value invested in 2007. Out of this amount, R$ 161 million had been sent to Health, Security and Environment programs, supporting improvements of performance index of the company in such areas since its creation, distinguishing a 3.5% reduction of power consumption in 2008.

It is important to say that investment in polypropylene unit in the city of Paulínia, which consumed R$ 136 million in 2008. this plant started operating test phase in the beginning of 2T08, and had been finished in September, 2008. As Petroquímica Ipiranga and Copesul, Petroquímica Paulínia had been incorporated to the company during the second half of the year as a result of the Shareholders’ Agreement signed with Petrobras, which then holds 31% of total capital of Braskem, making stronger the strategic partnership between the companies.

In December, Council of Administration approved an investment of R$ 488 million in accomplishment of a unit of green ethene in the state of Rio Grande do Sul, making possible to have a 200,000 ton. production/year of polyethylene using 100% of renewable raw material starting in 2011. As part of its commitment with sustainability and strategy to invest and green polymer development, Braskem was also successful when certifying, in 2008, the first totally vegetal polypropylene, produced at experimental basis. The company also kept its position in composing Corporate Sustainability Index - CSI of São Paulo Stock Exchange.

"Braskem believed in market recovery and also in world petrochemical development, what have been confirmed with our growing projects, also supported by financial discipline", says Bernardo Gradin, President of Braskem. "We have make efforts to take advantage of this international economical crisis moment to create conditions to provide a competitiveness jump for the whole plastic and petrochemical productive chain in Brazil", added Gradin.