Earnings Call: Q1 2021

May 6, 2021

Good afternoon, ladies and gentlemen, and thank you. At this time, we would like to welcome everyone to Braskem's First Quarter of 2021 Earnings Conference Call. Today with us, we have Roberto Simoes, CEO of Braskem Pedro Freitas, Vice President of Finance, Procurement and Corporate Affairs and Rosanna Volho, Investor Relations Director. We would like to inform you that this event is being recorded, and all participants will be in listen only mode during the company's presentation. After Braskem's remarks are completed, there will be a question and answer section. At this time, further instructions will be given. We have simultaneous webcasts that may be accessed through Braskem's IR website at www.basking slashri.com.br and MZiQ platform, where the slide presentation is available for download. Please feel free to flip through the slide during the conference call. There will be a replay facility for this call on the website. We remind you that questions, which will be answered during the Q and A session, may be posted in advance on the website. Before proceeding, let me mention that forward looking statements are being made under the Safe Harbor of Securities Litigation Reform Act of 1996. Forward looking statements are based on the beliefs and assumptions of Braskem Management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Braskem and could cause results to differ materially from those expressed in such forward looking statements. Now I'll turn the conference over to Rosanna Avoglio, Investor Relations Director. Ms. Avoglio, you may begin your conference. Good morning, all. We would like to thank you for joining Braskem on this conference call. Today, we will present Q1 2021 results. Please, let's move to Slide number 3, in which we'll talk about the petrochemical context in 2021. In the Q1 of 2021, petrochemical supply was impacted by the severe winter storm in the U. S. Gulf Coast, which led to the unplanned production closures affecting resin suppliers. Additionally, demand continues strong for all resins. Because of this context, international market reference were impacted and PE and PP spreads reached the highest level since 2017, positively impacting the profitability of petrochemical companies in general. In the case of PE E NAFTA base, for instance, spreads in the Q1 of 2021 were 103% higher than last year average. In the case of PE gas base, which is a spread that impacts brass king business in Mexico and in the petrochemical cracker in Rio de Janeiro, depreciation was also significant and its price increased 93 percent compared to the average in 2020. Regarding the PP propylene spreads in the United States, its price grew 49% compared to 2020 average. Moving to Slide number 4, we will comment about Brastink consolidated Q1 of 2021 highlights. In the Q1 of 2021, the company's recurring operating result was $1266,000,000 52% higher than Q4 2020, explained mainly by the better spreads for PE, PP and main chemicals in Brazil, for PP in the U. S. And Europe and for PE in Mexico, and also explained by the higher PP sales volumes in Europe. Compared to Q1 of 2020, recurring operating results in U. S. Dollars advanced 3 41% due to the better spreads for resins and main chemicals in Brazil, for PP in the United States and Europe and for P in Mexico and also due to the higher sales volume of PP in the United States and Europe and of main chemicals in Brazil. Moving to the next slide. On Slide number 5, we will present the main highlights of Brazil's operations. In the Q1 of 2021, the utilization rate of our petrochemical crackers was 3 percentage points lower than Q4 2020, mainly due to the impact of the pit stop in Rio Grande do Sul. In the Brazilian market, resin sales decreased in relation to the Q4 2020 due to the weaker but still healthy demand in Brazilian market and also due to the lower product supply in the period. The reduction in exports is explained by the focus of the company on serving the Brazilian market. Given that, Brazil's recurring operating result was $943,000,000 39 percent higher than Q4 2020, representing 70% of the company's consolidated segment's recurring operating results. This increase in EBITDA is mainly explained by better PPP and main chemicals spread in the international market. Moving to the next slide. In this slide, we'll talk about the feedstock profile in Brazil. In line with the company's strategy to diversify its suppliers, the Brazil segment continued to purchase NAFTA via supplier agreements with international suppliers. In the Q1 of 2021, net import accounted for around 70% of the total net consumption in the quarter. It's worth mentioning that Bradskin obtained longest payment term on net purchase with foreign suppliers impacting positively its cash generation. In the next slide, we will provide an update on geological event in Alagoz. In this slide, we will talk about the provisions regarding the geological event in Alagoz. In the chart on the left of the slide, we present the balance of provisions. In the Q1 of 2021, the balance of provisions related to the geological event in Alagolos was around BRL 8,500,000,000 and during the quarter, Braskem reversed provisions in the amount of BRL139 1,000,000. In the right chart of the slide, we presented disbursement schedule. Of the BRL8.5 billion, around 50% was recorded under current liabilities and 50% under no current liabilities. Important to mention that the company cannot predict with certainty future developments in respect of this matter or its related expenses. And the costs incurred by the company may be different than the currently estimated or provision. Moving to the next slide. In this slide, we'll talk about the financial compensation and support for relocation program. In the Q1 of 2021, Braskem continued to make progress on its relocation and financial compensation of families in the district affected in Maceo. The numbers of families relocated increased 25%, reaching around 11,500 families. Additionally, the number of financial compensation proposals submitted by the company increased 58%. Regarding payments made in the scope of the financial compensation and support allocation program, around BRL700 1,000,000 had already been disbursed as of Q1 2021. Moving to the next slide. In the United States, the average utilization rate of our PP plants decreased in relation to 4th quarter 2020, explained by the impacts from winter storm Yuri in the U. S. Gulf Coast. In Europe, utilization rate increased in relation to Q4 2020, explained by the scheduled maintenance shutdown in the last quarter of the prior year. In the United States, considering the sales of our new PP plant delta only in the Q1 of 2021, sales increased in relation to Q4 2020 and also in relation to Q1 2020, mainly to the increase in production capacity after the commercial start up of the new PP plant in the region in September 2020. In Europe, sales increased in relation to Q4 2020 and also in relation to the Q1 2020 due to the higher supply of the product in the period. In the next slide, we will talk about an important highlight in the United States. During the Q1 of 2021, Braske made the first international shipment from new global Sport Hub facility. The new hub offers packaging, warehousing and export shipment services to support broadening 6 PP plants in the United States. Additionally, the facility has the capacity to support export shipments of up to 204 KT annually to broadband clients worldwide. The new logistics and distribution facility in the port region of South Carolina significantly increased Braskem export capacity in the United States. Due to the current moment in the PP market in North America, Braskem is prioritizing sales in the U. S. Market. However, over time, the new hub will enable Broskine to leverage the production of its assets on the U. S. Gulf Coast, Pennsylvania and West Virginia to better serve the needs of its international clients. In the next slide, we will talk about the main highlights of Mexican's operations. In Mexico, the average capacity utilization rate of our PE plants increased in relation to the Q4 2020 due to the production base on experimental business model implemented in January February following the unilateral interruption of natural gas transport service by Cenagay in early December 2020. In early March, after executing a natural gas transportation service agreement with Cenagais, transportation service were reestablished. Pea sales in Mexico decreased by 27% when compared to Q4 2020 due to the lower availability of products in inventory. Mexico's recurring operating result was $94,000,000 49% lower than Q4 2020, representing 7% of the company's consolidated segment's EBITDA. In the next slide, we will talk about Fast Track solution in Mexico. In this slide, we will talk about the expansion of ethane imports from U. S. To Braskecanideza. In December 2020, Braskecanideza concluded expansion of its fast track operation, which currently has expected Itane import capacity of 20,000 barrels per day. In the Q1 of 2021, to complement the supply of Itane by Pemex, Braske Nideza imported a daily average of 13,100 barrels of ethane from the United States, which represented around 66% of FasTrack's current capacity. Additionally, the volume of import ethane accounted for around 30% of bradkin total ethane supply in the quarter. Moving to the next slide. In the Q1 of 2021, we had a positive free cash flow generation of BRL1766 1,000,000, mainly explained by the recurring operating results in the quarter, the monetization of PISCOFINS credits in the approximate amount of BRL761 million and also explained by the lower volume of operating and strategic investments. These positive impacts are mainly opposed by the negative working capital change due to the impact from higher prices for resins and main chemicals in the international market affecting accounts receivable and also from higher nettle prices on the finished product cost and inventory. Moving to the next slide. In the end of March, the average debt term was around 14 years with most debt maturing the long term. Also, considering its cash balance, the company has sufficient liquidity to cover debt maturities in the next 79 months. During the quarter, because of the company's strong cash position and to reduce its gross debt, Braskem announced the total redemption of the 7.375 perpetual bonds at face value in the amount of $500,000,000 Let's move to the next slide, which will talk about corporate leverage. In line with its continuous commitment to financial healthy and with the objective to be reassigned as an investment grade company, Braskem continue to reduce its corporate leverage. The leverage ratio, measured as the ratio of net debt to recurring operating results in U. S. Dollars ended Q1 2021 at 1.8 times, down 39% from Q4 2020, which was 2.94 times. Additionally, the company net debt decreased approximately $1,000,000,000 compared to Q1 2020. Moving to the next slide, we will start talking about our ESG highlights. The EZF Renewables started up its wind complex, which is going to supply renewable energy to Brodskin. The power supply is secured by a 20 year purchase agreement signed in 2018. This partnership is estimated to result in the avoidance of 280,000 tons of Tier 2 and is one of the 4 power purchase agreements signed by the company as of 2021. The wind complex is located by EMEA and its construction complies with the key guiding principles of sustainable development. This project is part of our carbon neutrality strategy, is one of the agreements which put Braskins near to the mark of 1,500,000 tons of CO2 emissions avoided through long term renewable power purchase agreements. Let's move to the next slide. Other important initiative related to climate change is the 1st collaboration between Trafigura and Braskem on the 1st naphtha shipment in the world to offset carbon emission. Trafigura supplies important naphtha to Braskem Petrochemical Complex located in Brazil. In collaboration with the company, the first shipment was made with offsets and reductions of the carbon emissions associated with the feedstock, which includes extraction, refining and transportation process. The calculation was made by Carfigura and the results were obtained from offset projects based on the nature located in Indonesia and reductions based on energy gained by cargo vessels. All of that data is assured by verified carbon standard. This project is one step forward on the work to offset scope 3 CO2 emission in which the company's contribution strategy is under development. Moving to the next slide. Other important achievement is related to our commitment to eliminate the plaskey waste through recycling initiatives. Braske is the 1st Brazilian company to receive the ISTC plus an international certification for the production of resins and chemicals from circular feedstocks, such as pyrolysis oil. The pyrolysis oil is a product of chemical recycling that breaks down the post consumption thermoplastic resin molecules using heat. The certification is based in the mass concept, which ensures that the input amount of raw material is formed into an equivalent amount of final product in the certified plants. The certified plants are the ABC Petrochemical Complex at Sao Paulo State and Triufu Petrochemical Complex at Rio Grande do Sul State. This control enables the sustainability of fuel color products to be duly credit and recognized. Moving to the next slide. The COVID pandemic has affected people's lives, especially with regard to the basic necessities. In this sense, the company allocated BRL 50,000,000 in 2021 to combat hunger and it has started to distribute 48,000 food staple boxes, 25,000 hygiene kits and 3 tons of vegetables to the surrounding communities in several states of Brazil. Also through its employee volunteer program, Braskem will donate 3 food staple for each box donated by its employees. These actions are related to our social responsibility values, which aim to assimilate and support the local development of the surrounding communities of our operations. These important moments cause for solidarity, joining forces and helping people's lives in need across Brazil to minimize pandemic's impact. COVID pandemic has affected people's lives, especially with regards to the basic necessities. In this sense, the company allocated BRL 50,000,000 to combat hunger and it has started to distribute 48,000 food staple boxes, 25,000 hide in kids and 3 tons of vegetables to the surrounding communities in several states of Brazil. Also, to its employees' volunteer program, Bratzkin will donate 3 food staples for each box donated by its employees. These actions are related to our social responsibility values, which aim to assimilate and support the local development of the surrounding communities of our operations. This important moment calls for solidarity, joining forces and helping people in need across Brazil to minimize pandemics impact. Let's move to the next slide. Brasil was certified by the Brazilian Federal Revenue Service as an authorized economic operator in the compliance category. This is an international recognition for the adoption of practices and management process that minimize risks events existing in import operations and for the voluntarily comply with the compliance, reliability and security criteria applicable to the global logistics chain as well as tax and customers' obligations. This recognition strengthens relation with international partners and offer benefits such as reducing import time and costs. With this credential, Bratke expand its international footprint and reinforce Image as an increasingly competitive, responsible and compliant company. In the next slide, we'll talk about petrochemical scenario in 2021. According to the most recent projections by external consulting firms, the expectations for healthier PE and PVC spreads in 2021. In the case of PE, in the Q2 of 2021, it is expected more profitable PE naphtha and PE TANIS spread since then seen in the last quarters. In the case of PBC, after the return of our chlor alkali plant, the spread part better reflect the profitability of vinyls, which is also more profitable than previous quarters. Let's move to the next slide, which will talk about the scenario for PP. Similar to P and PVC, external consulting firms are projecting healthy PP spreads in 2021 in the United States and also in Europe. In the case of PP, the main highlight is regarding spreads in the United States, where projections point for a 25% increase in PP Propylene U. S. Spread compared to recent years. Moving to the next slide. In this slide, we will present the short term outlook focusing on the dynamics in the Q2 of 2021 compared to the Q1 of 2021. In the case of Brazil, ethane production should be in line with higher production in Rio Grande do Sul after the pit stop in Q1 of 2021 and also with the scheduled shutdown at the Sao Paulo Complex in April May. Regarding sales, total resin sales should be in line and the company expects to continue strategy to prioritize sales to Brazilian and South America market. Additionally, it is expected healthy spreads for PE and PVC. In the United States, higher PP production and sales is expected with expectations to normalize production at all plants following the impact from weather events in the Q1 of 2021. Additionally, it is expected a healthier PP propylene spread in the U. S. Due to the continued strong demand and gradual recovery in PP supply. Finally, for Bratkani Desa, PE production sales should be higher due to the return of gas transportation service and the expectation of higher ethane supply through fast track solution, generation a higher product availability. Regarding spreads, in line with what we presented for the other regions, PE chain spreads in the U. S. Should be healthier. Moving to the next slide. To conclude the presentation, we will recap the main objectives of the company for 2021. For this year, the company developed 6 main objectives in its strategy: continue with the advances related to the geological event in Alagolos find a constructive way to solve the ethane shortage in Mexico ensure the company's continued financial healthy risk management and disciplined capital allocation strengthen broadening image and recognition with team members, clients, suppliers, investors and society increase effectiveness innovation and speed up digital transformation and finally, advancing the implementation of our ESG commitments. Lastly, but not least, safety in our operations are perpetual and non negotiable value in our strategy. That concludes today's presentation. Thank you for your attention. Let's move to the question and answer session. Thank you. The floor is now open for questions. You. Our first question comes from Ben Isaacson from Scotiabank. Mr. Isaacson, you may proceed. Thank you very much and good afternoon everyone. Congratulations on the great quarter and thank you for the comprehensive review. My first question is on spreads and how do you see spreads playing out over the next few quarters? And do you see any lingering impact from the Texas freeze in Q2 as it relates to Braskem? Hi, Ben. This is Peter Frisas. Good afternoon, everyone. Thank you for attending our call. We do see some lingering impacts from the freeze in Q2, Ben. If you look at spreads in the U. S. For polypropylene, for example, they are still high compared to the historical norm. If you look at the presentation on Slide 22, you can see exactly that. I mean, it's still an increase of about $2.30 to $2.40 per ton in the polypropylene spread in the U. S. And that is still, I would say, offshoot of the cream. So we do see an improvement in terms of spreads in the U. S. In the next quarter or in this quarter, right, in the second quarter. If you look more towards the end of the year, I'll pick an example here of the TE and AFS spread. It falls from $1100 per tonne to $700 per tonne, so about 50%. No, it's about 30% drop in the P and after spread. So we do see this drop, but to give you an example, I mean, dollars 7.20 per tonne in the P and after spread is similar to the 2017 spread, which was in 2018, what had was a historical record of the company in results. So we see spreads coming down, but in the second half of the year, but coming down to a level that is still very good. And more specifically in the U. S, we do see a very strong still second quarter in terms of spreads. And then second half of the year, probably a little bit lower, but still on very good levels. Just one more question on the spreads before I get to the leverage. So how would you rank PE, PP and PBC in terms of how tight those markets are, whether you look at inventories, I guess, in terms of how long it will take for inventory levels to get back to normal? All of them are pretty tight, Ben. If I were to guess, I would guess that it's different per region, okay? So I would say that in Brazil, we already see some inventories getting back to normal or closer to normal, maybe not yet as normal. It usually takes about 2, 3 months for inventories to normalize, but the lingering effect of the freeze in Texas means that it's taking longer for those inventories to be normalized. So we're still at lower inventory levels in the value chain compared to the, I'd say, the 5 year average, I mean, still very low inventory levels. If I were to get, I would say that probably PBC is a bit tighter globally, especially because we have not seen a lot of new investments in PBC globally. And then PEPP seems to be like they are on a similar position. But we think that PE is going to structurally, I mean, you have more of the capacity, right? So to the back end of the year, we think that PE should become softer compared to PE. But again, as I said, it's clear on very good levels. Great. And then just my last question. Your leverage has improved a lot. I don't have the number in front of me, but I believe it's sub 2%, if I'm not mistaken. And what does that mean One point yes, so what does that mean in terms of timing to and get to investment grade? And then what do you do once you're there? I mean, do you want to keep your balance sheet at that level? Or are you trying to build up some firepower to do some acquisitions? Are you thinking about your balance sheet as you move towards investment grade? Ben, we like to have our leverage below 2.5, right? So that's what's in our dividend policy. We would like to go back to paying dividends to our shareholders. So we're looking at that possibility in the future as leverage comes down, but always following our dividend policy, which is I mean, we have to look at current leverage plus the forecasted leverage for the next 2 years. And that number needs to be below 2.5 for us to be able to pay dividends except dividends, right? In Brazil, we have the minimum dividend, which is mandatory, but to pay any excess dividends, that's what we would like to do, I mean, retain the capability of paying dividends. So this year, we don't have that capability. I mean, we had a loss last year, so we cannot pay dividends. What we are really looking at today is, first, second half of last year was pretty bad, right? Middle of COVID, curtaining production. So we anticipate that the second half second quarter of this year is going to be better than the second quarter of last year. So we see leverage coming further down in the Q2. So we keep getting this type of question, right? What we're going to do with all this money and how does that play out into the investment grade? We've been talking to the rating agencies and showing them that our situation is much better than it was 1 year ago when they took the investment when they lost investment grade, right? So just to explore this a little bit further on the rating agency side, last year, they told us, look, there are 3 factors that are that were more relevant in their decision. One was the moment in the cycle with overcapacity, potential overcapacity, and I mean, 2019 was very low results, right? And leverage was pretty high as well. 2nd point was Alagruz and the uncertainties around that. And third point was COVID and uncertainties around COVID. So right now, what we have is a much better financial situation, much lower leverage, below 2, as you mentioned, at 1.8, percent. Forecast for even lower leverage in the coming quarters. We see Malagru as in a different light today, much lower uncertainty with the settlement that we had in December. And COVID. I mean, in the end, you saw the results of the past three quarters since the second half of last year. We've been doing pretty well despite of COVID. So in all, the arguments that the rating agencies brought us in last July, they're agencies brought us in last July, they are no longer on the table. And actually, what we have on the table is a much more favorable situation. So our goal now is to recover the investment rate. We've been talking to them. And let's see how they decide, right, if they're in the same. But we've been emphasizing those points with them. And then on what to do with the cash, right? And what we are doing is we are retiring gross debt. So we are paying back debt. We did that with the perpetual bond, dollars 500,000,000 on March. As the expected cash flow materializes over the coming months and quarters, we expect to keep retiring gross debt as we cannot pay dividends. We don't have substantial growth projects or new investments in the company. So in the end, that's what we are looking at for this year. For next year, if we have a net profit and a basis, then we also anticipate paying some dividends, of course, within the metrics that I mentioned in our dividend policy. That's very helpful. Thank you so much. Appreciate your time. Our next question comes from Christian Audi from Santander. Mr. Christian, you may proceed. Thank you. Hello, Roberto, Pedro, Rosanna. First of all, congratulations on these results, record and really amazing across the board. So congratulations to the whole team. I wanted to focus on 3 questions. The operation is going so well, but I wanted to touch on the topics that are a little beyond operational to get your latest views. More specifically, number 1, you've done a lot on the alagoz front, and you've been very transparent with the market. But if you could comment on these recent developments in terms of is there really anything new there or not that would be helpful? 2nd, again, you've been working very hard as well on Mexico. Could you give us an update on how the negotiations are going? And if from a timing point of view, you believe that by the Q4 this could be resolved? Or do we just not have visibility to be able to talk about timing for them for these negotiations to be concluded? And then the third and final one is, if you have had any discussion of that and Pedro with Petrobras from the point of view of their potential sale of their stake on Braskem, because it is something that can create noise, generate potential overhangs, which obviously is not helpful to your stock? Thank you. Hi, Christian. Thank you for your questions. On Alagua, I mean, Rodana showed the substantial improvement we did in relocating people and submitting proposals to them and also in getting acceptance on the proposals at 99.6% in the Q1 of proposals accepted and also in actually making the disbursements, right? So we had, I would say, very substantial improvements or advances in Anagulha in that regard. And also, I mean, we are learning, right? You saw that we had a reversion of very, I would say, it's a large number, BRL 139 1,000,000 reversion in the provision, which comes out of learning and out of improving the operation so that we reduce the cost of or I would call it kind of cost of overhead in managing the situation there. So that was those were substantial expenses. We didn't have yesterday a piece of news that came out in Brazil around some, I would say, loans by a community in Alagua. And what they said was that they were more isolated because kind of the neighborhood is being relocated and a portion of that is not in the relocation program. So they're saying, look, I mean, we had clients in our businesses that were across the street. They are no longer there, that sort of thing, right? Kind of more on the social impacts of relocating people and looking at the people that are remaining in their original homes. The concept of the settlement that we had back in December was we will relocate people that are at risk. You can see Alagroa as a huge risk mitigation effort, right? I mean, it's really getting people out of a potentially risky situation. And that area that was the reason for this piece of news is not in a risky situation. I mean, when we look at the criticality and even local authorities agree that and they've done this publicly, agree that it's not a critical area for risk. It's more of a social impact. And then I'd like to remind everybody that the other settlement that we had was on the social and urbanistic environmental aspects of the case, and there is about BRL 1,600,000,000 already in the position to be invested or according to projects to mitigate the social impacts of the situation in Alaguest. So we believe that once the if the city wants to allocate a portion of that BRL 1,600,000,000 to that part of the community, we would be fine with that. It's important that the city needs to still adhere to the settlement so that we can start implementing the actions. So that's something that we're still working on with the city. But once that is done, we will be able to allocate part of those resources to that community. So that's our view on how this should be seen and addressed in the future. So that's the Alagua aspect. On Mexico, I'll be very brief. I mean, negotiations are still ongoing. I think everybody knows the underlying issue is the lack of ethane in the country. We've been putting a lot of effort in increasing the supply of imported ethane. So our capacity to import right now is at about 20,000 barrels per day of ethane, and we are expanding that capacity to 26,000 barrels per day in the coming, I would say, month or so. So and then Pemex has been supplying at 30,000, 35,000 barrels per day. So if you look at those numbers, the potential maximum capacity right now would be or in the near future would be at about 55,000 to 60,000 barrels per day. And so that's about 80, 85 percent of capacity utilization. Going back to the negotiation, again, it's ongoing. Terms still need to be aligned and get to a final agreement. The timing is really, as you said, end of the year. And we have no control on time, right? The negotiation can be shorter, can be longer. But right now, the outlook is for the end of the year to finalize this. And finally, on Petrobras, there was some rumor in the market last Friday. And what we got from all of that was that Petrobras made a public statement last Friday saying that, first, one thing that they have been telling everybody, their equity in Braskem is not a core asset for them. So it's part of their divestment plan. But they also said last Friday that they don't have any definition or decision about the sale model. So we don't have any other information about this. I mean, it's their decision, but we don't have any news that they are really moving on selling their stake. So we know it's part of their divestment program. We don't have any information about any short term decisions right now. Very clear, Pedro. And just a follow-up on Allied GOS. The recent news implies in any way that you would need to do anything beyond all the work that you've already done in provisioning for these events? Or no, that would be a development that's part of the monies you've put aside that you've provisioned to deal with the situation? The short the first answer, Christian, is that we believe the provision is adequate and correct given the settlement and all the knowledge that we have at this moment. Of course, it is a situation that may evolve, so we may see changes. There is no way for us to control that. But right now and even in light of the piece of news yesterday, we believe that the provision is adequate, and we don't intend to change that. All right. Thank you very much, Jose. Our next question comes from Guilherme Levy from Morgan Stanley. Mr. Guilherme, you may proceed. Hi, good afternoon and thanks for taking my questions. My first question is actually a follow-up from the last one on Alagolos. I just wanted to put in other way the question. How easy it is for the civil defense or the municipality or any other public entity to like go and reopen the agreements that were already signed. I just wanted to understand to what level the agreements already signed are written in stone or they can still be modified? And the next one, last quarter, we saw a material impact of working capital and cash generation. I just wanted to get your view on what should we expect into the next quarters and for the full year? Thank you. Hi, Guilherme. On your different way of framing the question around Dalla Guo, we settled the 2 settlements back in December. They had first. The map that was a part of that settlement was the December map, and there is no provision for that to be changed automatically, okay? So that's the basis for the risky area. And those 2 civil actions were extinguished in December. So of course, the a new action could be proposed against the company. But right now, I mean, the civil actions were extinguished. They don't exist anymore. And the basis for the settlement and our obligation relates to the map that was published back in December. And even a new map would not change that basis. The second point I would bring is the concept and reinforce the concept that I just mentioned around what is behind those 2 settlements, right? 1 is behind risk, okay? So if the risk to people that in the settlements has led to relocation. So we would need to ascertain that there was risk in a different area for us to start even potentially start a discussion around improving that area in the relocation program. So that's the first point. And as I said, we don't have any indication, and we have substantially upgraded the monitoring, the geological monitoring of the area. We don't have any indication of risk there. And we even have local authorities, again, saying that it's not a matter of criticality or risk in that region. It's a social impact. So that's the first concept, okay? Relocation is linked to risk in our mines, and the settlement was done in a specific map back in December around that on the relocation. On the other part of the settlement, the concept with social remediation, right, which links to what we're seeing potentially in that zone because I mean we only heard of all of this through the news, okay? We don't have any official positioning by anybody. So that's how we are addressing it. So if it's a social impact, we have funds that are targeted for projects yet to be defined around social remediation. So that's where this is coming, at least in our perspective, that's where it's coming from, and it would be taken care of in that way. So again, to be more direct in your answer, how easy it is to reopen? There is no reopening. They were extinguished. Of course, a new one could be proposed, and then it would be a new discussion, but our concept is relocation is linked to risk, and we don't have an indication of predicting that so, okay? On the second point around working capital, we had an increase in prices, right, in the Q1. So that leads to higher inventory costs, of course, higher payables, which helps in working capital, but also higher accounts receivables. So the net effect in working capital with higher prices is the consumption of cash. In the next quarters, we should see still some increase in inventories. I mean, we've been running as well, as I said, the whole supply chain has been running at lower than average inventory. But also, we anticipate a drop in some product prices or a decrease, right? Not a drop, drop maybe too strong, but a decrease in product prices. So that's the net effect of that, I think I mean, it's I think it could be a positive effect or neutral. I don't see a bigger cash consumption going forward because of that. We also have a lot of taxes to monetize yet. So we have BRL 1,400,000,000 of the typical fees tax to monetize that are already booked in our balance sheet and about BRL800 1,000,000 in cases that were not final in the courts yet. But so those are also positive effects that could come through the year. Perfect. Very clear. Thank you. Our next question comes from Annie Nilney from Bank of America. Mr. Annie, you may proceed. Thank you. Congratulations. Fantastic quarter. I'm happy to see that last year was tough at times. So I have a some of my questions have been answered, but just two questions. One, just to understand the main drivers of your purchase from NAFTA, whether it's imported or from the local market Petrobras. It sounds like prices are roughly equal, but you get better financing terms internationally. So that obviously will help your working capital and cash flow and so forth, or maybe there are pricing differentials that you discussed? And then the second is just on the comment that you made regarding what some of the items the rating agencies were looking for. 1 was the place in the cycle and talking about potential new capacity and overcapacity in the industry coming online. Maybe you could talk about where we are now with China supply or from other locations, although I think China was then the big worry, a number of the agencies and what you see there right now? Thank you. Hi, Ann. Nice talking to you. About this time, we would be in Miami, right, in the Bank of America. So the imported naphtha, it does help our working capital. We can extend naphtha payments with international suppliers up to a year. So that's part of our cash management policy. And we've been increasing the imports of NAFTA. Last year, we had about 55% coming from Petrobras and 45% imported. The Q1 of this year, it was already 70% imported and 30% Brazilian NAFTA. And we think that the balance will remain that way for the remainder of the year, so 70% imported naphtha, 30% Petrobras naphtha. With the new feedstock contracts that we signed last year with Petrobras, The volume of the contracts with Petrobras was reduced, and we've been keeping that kind of that ratio in the Q1. And I think going forward, that's going to be the norm. So we keep, I would say, benefiting from that in working capital. Of course, in the Q1, we had the kind of increasing prices and lower inventories. But over time, that's going to normalize, and we should see some benefit in cash flow and working capital coming from this strategy. In terms of China supply, we believe our assumption is that it's going to come to the market. The point or the question is when, right? We think that some of it will come this year and some of it will come next year. I believe IHS is probably a little bit more bullish than us. They are anticipating less capacity coming on this year and a bit more next year. So if you look at the balance of new capacity, we tend to be more conservative. We are preparing for, I would say, a bit longer market. Still this year, they are saying it's more for next year, but we do see the capacity in China coming online. About 4,500,000 tons of polyethylene, That's our assumption. And I think the other aspect a couple of other aspects for us just to point that out. I mean last year, we were short about 15% of the new capacity that were supposed to come online. 15% did not come online last year in polyethylene. So we are seeing some of that coming online this year. The other aspect that is interesting, I mean, the forecast that IHS has for global demand, again, polyethylene is about 5%, about 6% for polypropylene. The historical average for polyethylene has been globally has been at around 3%. So 5% is 2% higher, right? The same applies to PPP, historical average at around 4% this year 6%. So even with more new capacity coming online, we also are going to see a bit more demand. So the I'll say the downturn in the cycle, the industry view and our view is that it's not going to be substantial. And that's why we've been saying, look, our view is that the Q2 is still going to be very strong. We're still having very high spreads, some disruption in value chain in supply chain, sorry. And then we see second half of the year softer but still at good levels in terms of gross margins. We tend to be more conservative than the average of the industry. So we could be our internal view, we could have a surprise to the upside. Okay. And just a quick follow-up on the supply agreement that you have with Petrobras and the difference between imported in Brazil, are prices roughly equal between the 2? They are. A couple of relevant points there. If you look at just the raw price of NAFTA, what we buy outside Brazil is cheaper, okay? If we include logistics, the landed cost in Brazil depends on where we are buying. In some places, it's higher imported naphtha. In some places, imported naphtha could be still cheaper. So it depends on the supplier, the ship, etcetera, right? So then it's more matched, more evenly matched, landed in Brazil. But the benefit that we have with an important naphtha is that we can choose the quality of naphtha. So if we need naphtha that is more aromatic, that will produce more benzene, toluene and etcetera, we buy that. If we need an asset that is more paraffinic that goes more towards the olefins, ethylene, propylene, butadiene, then we buy that. So in the international markets, you have more flexibility around the quality of the product and then I mean that helps us, I would say, have a higher value composition of product in our sales. So it does not change the cost itself, but it could add generate, I would say, a portfolio of sales that is higher value added for us when we import. Okay. Thanks, and good luck for the rest of the year. Talk soon. Thank you, Ben. Our next question comes from Matt Mathias Rinsfeld from Banco BSBB. Mr. Matheus, you may proceed. Hi, it's Matheus Rynsfeld from UBS. Thank you for taking my questions. My first question is, there have been some news of specific players interest in some assets of Broskiin, not in the company as a whole. But we were thinking here what are the potential losses from thinking Broskiin assets as separate units instead of nationwide companies? I mean, are there any significant losses in synergy, either operationally or in terms of taxes that will make this make less sense in a way? And that's my first question. For my second question, just a follow-up on Mexico. What are are there any advancements in thinking of the long term supply for a long term solution for the ethane supply? That's it. Thank you. Hi, Matias. Thank you for your questions. So on the first one, I mean, it's the sale process is not a process that we are driving or participating in other than by supplying information, right? When we look at having said that, we saw the same news that I think everybody had said of this idea of breaking Brazil up. So we've been putting some thought around that to see if there are any opportunities or ideas that could increase the value for all of our current shareholders. And some of the thoughts around your question, In terms of synergy, I think that the Brazilian operation, the integrated operation that we have today is highly synergistic. So breaking up Brazil, I think, would bring very significant dis synergies to the business. So that's the first consideration that I would make. It's an integrated production planning, integrated inventory planning, integrated commercial planning, integrated feedstock procurement planning. So everything is integrated. It's a single overhead, so there are lots of economies of scale as well. So I would say that Brazil is highly synergistic within Brazil. The synergy across region, and I tend to think of our regions as South America as one region, U. S, Mexico and Europe, right? So that's how I tend to think of our regions. There is, I would say, more substantial synergy commercially between Brazil and Europe because, I would say, after South America, the largest export hub for us is Europe. So there are commercial synergies in there. And also our feedstock trading desk is in the Netherlands. So if you're thinking about the PP plants in Europe, I would say much fewer synergies. But if you're thinking about Europe as a whole, then you have commercial synergy, especially because of the Dutch operation. And then the other area where I see some synergy across the different businesses is in the industrial area. I mean, we do internal benchmarking. We do I mean, we have every single improvement that one team in one plant identifies is then spread out to the other plants. So you have a lot of cross fertilization in industrial areas, which, I mean, is another way of gathering synergies, right? I don't think that's very substantial, but anyway, it's another area of synergy. And then the third one is you asked about taxes. I mean, there could be tax implications of a breakup like that, but it will depend a lot on the format, right? And we don't have, I would say, a very in-depth analysis of this. I mean, it's more kind of a feeling and knowing the numbers and the cost of acquisition of the assets in the U. S. And Europe, for example. So there could be a substantial tax burden or not depending a lot on the structure of how such a deal could be done. But having said that, I mean, we are not at this moment, I mean, doing that, right? So we're not working on that. There is no ask for us to do that. The shareholders have not decided to do that as far as we know. So far, it's more curiosity. I mean, we hear the news. We look at it. We discuss a little bit to see what potential mutations could be. But in the end at the end of the day, I think that anything that maximizes the value for the shareholders is what we should be looking at, right? So this is kind of the where we are coming from. Is there anything in these rumors that could lead to some value unlocking for shareholders? If so, okay, let me explain that. If not, then okay, we're not going there. But as far as we understand, the sale of Braskem is an integrated sale of the whole company, okay? That's how we understand it at this point. And on the update on Mexico, do you have any updates on the I'm sorry, sorry. Yes. So we are working on a terminal, right, on the project of a terminal to import ethane into Mexico. So that's part of the development that we are having. And that also is part of the discussions with Fenics, right? So it's still a project in development. We don't have any final decision or even, I would say, the format of that is still being discussed, right? The conceptual approach to the terminal is still something that we are narrowing down to one solution, but we don't have that yet defined. The other aspect of supply of ethane to Mexico is the fast track, right? We are as I mentioned a bit earlier, we are increasing the fast track to by about 30% to improve and bring more imports to into Mexico in the short term. It's the second extension already. And just to bring out another aspect you guys. I mean, given the expanded spread in the Q1 of the year, which I mean, we all know they were very high, EBITDA margin in the Q1 was around 40%, with the operation running at about 60%, right? So again, very, very positive results from Mexico in the Q1. So that shows it's really very good asset that we have there. And when it gets 100% supply, we will, of course, see even better. Yes. Thank you and congratulations, the result. Our next question comes from Regis Cardoso from Credit Suisse. Mr. Regis, you may proceed. Hi, guys. Good afternoon. Thanks, Pedro, Rosanna, I have a few follow ups. I mean, it's been a while I don't participate in the conference call. So if you could maybe expand a little bit some of the topics you've already discussed in this call, in particular, in relation to the cash flow dynamics. It appears that I mean you had a lower free cash flow than would otherwise expect from the very strong operating results. I know you already commented about inventories. If you could also comment on the tax credits you've already received, how much there is still to monetize going ahead? It seems it's a very high pay. And then it appears that the liabilities in our goals might as well be part of that working capital dynamics. So just to follow-up on the cash flow dynamics to understand whether the operating results are translating to cash flow dynamics. The other follow-up is regarding Alagoulas and what I will call sort of a new normal after the moment of crisis where you had the actual risk to people. But I understand there is a social impact to having such a big area in the city empty. And I imagine there will be I mean, there will be to be plans around revitalizing that area and other social implications. So I wanted to get your sense, and I believe there is no certain answer at this point, but I wanted to get your views on what happened after this and what will be Droskem's role, let's say, in revitalizing that area? And then maybe last one of the follow ups is regarding the sale. If you could maybe just comment if the management team is involved in any way in that process for strategic partner, data rooms, etcetera. And then finally, I mean, maybe the only new topic is around ESG and the role of plastics, in particular, if you see any angle for Braskem in the many discussions we see taking place right now around green refineries, hydrogen plants and so on. So those follow ups and then just that new one. Thanks. Okay. Jesus, thank you for all the questions. On cash flow, besides working capital that we already covered, as you mentioned, in January, we also had a substantial interest payments, which are half yearly, right, for the bonds. So and with the FX depreciation, when you look at the numbers in reais, those numbers are a bit higher, right? In dollars, they are not, but in reais, they are. The other aspect still of cash flow, we spent about BRL 500, a little bit more than that in Alaglore, which also takes away some of the free cash flow of the company. And finally, even though we have a separate bank account for that, so some of that is coming from this bank account, but we are putting the full amount in our free cash flow calculation here. And the other aspect is around the tax credit that you asked. We have monetized BRL 6.60 million in the first quarter. We still have about BRL 1,400,000,000 to monetize and plus BRL 800,000,000 yet to be provisioned because they are not yet final decisions by the courts. So it's still, I would say, we still have some runway in terms of monetizing credit. As I said, working capital impact should be lower in the coming quarters if prices don't give us any surprise and the interest payments are half yearly. So that should give you a view on the rest of the year. Then because of the increased results, our tax payments have been a bit above what we would expect with our results, right? With higher results, we're paying a little bit more income tax, but that again is not that material. As you saw in the chart there, it's about BRL 300 million in the quarter. Switching over to Alagua and the question around the space there. I mean, it's still categorized as a rickety area, right? So nobody should be there. We do have people in the area to work on the backfilling of the wells, so filling some of the wells with sand. So we do have operators in the area. We do monitor the risk. And as I said, we have substantially increased the monitoring and the instruments, the sensors in the area to make sure that nobody is in an unsafe situation. But we don't have any plans today around working with that in the future. It's the area so far still a risky area and nobody should be doing anything in there until there is stability and there is, I mean, kind of the stability of their mine is really a certain, and that's going to take a few years. On the sale, we have put together a data room for Novo Nord for them to work on the sale. Of course, taking care of our confidentiality, anti trust or any competition competitive issues, but that has been the extent of our involvement so far. We do believe that in the future, we will be a bit more involved, especially as it goes into a stage where management presentations are required or even when a contract is being discussed. So we do believe that in the future, we should be more involved. But right now, the extent has been to kind of prepare data to put in the data. And finally, around ESG, thank you very much for this question. I think this is an area where Braskem is really improving on an already very good basis that we had. I mean, we've been working on ESG and CEMO development for more than a decade now. And we do have some numbers to show around our historical reduction in emissions around some of the work we've been doing around recycling and other aspects of the business that are very favorable. Just to give an example of the recognition we get from there, Braskem is a AAA company and the carbon disclosure project for water efficiency, for energy efficiency and also for the work with our suppliers. So it is an area we have been investing for a few years now. And looking at the future and as you asked about the role of plastics, I mean plastics are a very good solution for mankind, right? And so we see that there is an issue with plastics around the post consumption disposal of plastics and how we work on that. We see that as a business opportunity, and we are we have set up for now for 2, 3 years recycling business teams to develop opportunities around recycling. It is a different business model compared to what we have at Braskem so far. I mean, if you look at the petrochemical world, it is a few very high scale, very large factories that are producing a lot of volume. So it's very few, very large scale investments, right? And with recycling, it's going to be many low scale projects. And developing that is a challenge. Last year, we sold 10,000 tons of recycled polymer. Our goal public goal for 2025 is to sell 300,000 tons. So it's multiplying by 30, three-zero, the quantity or the amount of recycled plastics we sold last year. It is a substantial challenge, and we are organizing ourselves to address that. And we see that as a business opportunity. The other area that we are also evolving a lot is around renewable chemicals. We have announced in January the expansion of our green fully ethylene business. We are going to increase the size of that plant by 30%. It's a $60,000,000 investment that will come online in the second half of next year. So it's going to increase our footprint in that the renewables business substantially. It's a very again, very, very exciting development. And we do see a lot of market potential for this. So we are looking even for ways to accelerate the expansion of that business, looking at how we can fund that in different ways so that it doesn't hurt or doesn't change our credit metrics. But in the same time, we are able to accept new sources of funds to be able to accelerate the capture of that value. So that's another area that we've been looking at very closely. We have also R and D developments around renewables, one that is public is green energy. We are not in the energy business today, but with this development, green energy could be a breakthrough that could even be depending on how the technology goes, it's still in demonstration scale in terms of the technology. But if it progresses well and then goes into industrial scale, could be a very sizable market for us to get into in the future. Again, also investing and developing our footprint in renewable chemicals, which is another way of mitigating the carbon footprint of the company. Now I'll turn it over for the company's closing remarks. So I'd like to thank everyone for joining us in this call, and I just wanted to end with a couple of remarks. First, as you all noticed, it was a very strong Q1, driven not only by an international scenario, but also by the ability of Braskem's team members and the teams around the world to really operate very efficiently and to capture all the opportunities that the market put out there for us. So in this scenario, we closed the quarter with a very positive cash flow generation and the leverage of 1.8 turns, which is a very important reduction from what we had in the last quarter. I mean, in 3 months, we reduced our leverage by more than one turn of EBITDA. Also important to comment that we reduced our gross debt by about $700,000,000 in this 3 month period, which shows our commitment to keep reducing our gross debt going forward. We keep very committed to our financial liquidity and also to get that investment grade from the rating agency. The second point I'd like to emphasize is that we are very confident that in the Q2, we will also have a very good industry dynamic and that our operations will run well. We will continue to we expect to continue to have a good financial performance given the scenario and also the way that we've been running the business. We will keep deleveraging Braskem, which is one of the main priorities for us this year. So I'd like to thank all of you for your participation and look to talking with you both when we release our Q2 results in but also just to remind everyone, we are holding an ESG Day in May 17. So about a couple of 10 days from now, 11 days from now, we are having an ESG Day where we're going to disclose some of our achievements and also some new commitments around sustainable development for the company. So thank you all very much. Thank you. This concludes today's Braskem earnings conference call. You may disconnect your lines at this time.