Braskem posts Q3-09 profits on domestic demand recovery and weaker feedstock costs

04-Nov-09

Latin America’s largest petrochemicals producer-Braskem SA has posted a profit for Q3-09 on recovering domestic demand and falling feedstock costs. In the quarter, net income rose to 645 mln reais (US$365 mln) vs net loss of 819 mln reais in Q3-08; and EBITDA at 838 mln reais, exceeded analysts’ expectations. A five-year supply accord signed with Petroleo Brasileiro SA in May has helped Braskem reduce its naphtha as compared to year ago values. As domestic demand mounted, the Brazilian major hiked capacity. Near 100% utilization by the company of capacity to produce basic petrochemicals as well as resins has also helped in keeping margins favourable. Production capacity climbed from 70% in Q2-09 and 50% at the beginning of the year. Domestic sales were impacted by seasonal factors in Brazil in the quarter- increased demand for packaging from the toy sector, a recovery in construction sector and a boost to agricultural and automotive sectors. The company benefited from higher domestic sales as prices are 30% higher domestically than internationally. Robust recovery in Brazil reduced resin exports by over 15% from Q2 levels. In the global markets, prices have been very volatile - rising from June, falling in September on seasonal demand factors in Asia and lower naphtha prices, and continuing to be unclear in Q4. Additionally, new capacities that have come on stream in China and the Middle east will cause a supply glut and pressure profitability.