Good afternoon and welcome to Unipar's Second Quarter 2025 Earnings Conference Call. Today we are joined by Rodrigo Carnaval, CEO, Alexandre Gerusalmi, CFO and Director of Investor Relations, and the IR team. Please note that this event is being recorded and simultaneously translated. The translation is available by clicking on the interpretation button. For those listening to the conference call in English, you can mute the original audio. The presentation is available for download on the platform and on the company's website at ri.unipar.com. After the presentation, we will begin the question and answer session when further instructions will be provided. Before proceeding, we would like to clarify that any statements that may be made during the conference regarding Unipar's business prospects, projections, and operational and financial goals constitute the beliefs and assumptions of the company's management and are based on information currently available to the company.
Forward-looking statements are no guarantees of performance as they involve risks, uncertainties, and assumptions, and they refer to future events and therefore depend on circumstances that may or may not occur. Investors and analysts should understand that overall conditions, industry conditions, and other operating factors may impact Unipar's future results. I would now like to turn the floor over to Gerusalmi, who will begin the presentation.
Hello, everyone. Welcome to our quarterly earnings call for the second quarter 2025. Please note that the presentation is already available on our IR website, and the figures presented here are adjusted to exclude the effects of IAS 29 accounting rules referring to hyperinflationary economies like Argentina. On slide 4, we continue with difficult challenges, with a highlight for the petrochemical cycle that remains down with very tight margins.
The PVC reference price fell 5% in the quarter, while the price of ethylene, which is the main input for PVC, rose 5%, further compressing margins. We also continue to face pressure from imported PVC, which has remained at historically high volumes for many months. This pressure will be partially mitigated in the coming months with a decision taken by the Brazilian government through Camex to increase the anti-dumping on PVC imported from the U.S. to 43.7%. Another challenge worth mentioning was the high level of curtailment defined by ONS, which reached 22% in the quarter of the total energy cell produced by Unipar Brazil. On the other hand, Unipar has demonstrated a resilient business model with a sale portfolio mainly composed of chemical products in relation to vinyl products and a focus on the local markets of Brazil and Argentina.
The company has captured significant gains in fixed cost reduction through initiatives implemented since last year. Our plant in Camaçari is now in full capacity in the second quarter, and we have proactively improved our debt profile by extending maturities and reducing average costs. As a result, our recurring EBITDA reached BRL 306 million in the quarter, more than double that of the second quarter of 2024, with a 23% margin versus 13% in the same quarter last year. We achieved a net profit of BRL 232 million in the quarter, 161% higher than the second quarter of 2024. We generated operating cash flow of BRL 526 million in the quarter, vis-à-vis BRL 158 million in the second quarter of 2024. In terms of debt profile and liquidity management, we ended June with BRL 1.8 billion in cash, which allows us to cover 39 months of debt amortization.
Our average debt maturity was 62 months, with 70% of our debt maturing after 2029. We ended the quarter with an average of 0.76 times. Our operating cash flow generation and comfortable debt profile allowed us to approve yesterday a new dividend distribution of BRL 400 million that will be paid in the month of August. In terms of operational performance, on slide 5, our consolidated capacity utilization rate reached 80% in the quarter, with a recovery of production in Argentina after the effects of the weather event in the first quarter and the new plant in Camaçari operating at full capacity. Energy is one of our main inputs, and it reached a cell production rate of 54% in line with the previous quarter. This percentage of self-consumed energy could have reached 76% had it not been for the curtailment effect established by ONS that reached 22% in the quarter.
In June, however, we already saw a recovery, and the level of self-produced energy in Brazil reached 61%. Going on to slide 6, we have the evolution of our net revenue, which in the second quarter was 4% lower than in the first quarter of 2025, mainly due to the 3% exchange rate appreciation in Brazil and slightly lower sales quarter on quarter. Unipar's cash generation is pegged to the U.S. dollar. When we compare the first half of the year to the same period last year, there is a 17% increase in 2025 due to a recovery in soda prices and an increase in the sales volume of chemicals, especially chlorinated products. Unipar remains focused on the production and sale of chlorinated products, as this is a segment where we have a competitive advantage in terms of scale and proximity in the consumer markets.
On screen seven, the comparison between COGS shows that the values for the second and first quarters of 2025 remain practically in line. Despite the fact that in the second quarter we had an increase in the price of ethylene and appreciation of the euro, we also had the negative effect of self-generated energy performance caused by the curtailment established by ONS. We had a greater volume of chlorinated products and soda produced from our new unit in Camaçari. In the second quarter, we still had the Argentine inflation, which has been declining month after month but remains high, and we also have the Argentine peso exchange rate, which continues strong. Despite these challenges, our performance of aligned COGS was possible because of fixed cost reduction initiatives at Unipar.
We have captured relevant gains in reduction, mainly in Argentina, and because of the operational excellence at all of our plants, with positive effects in our technical coefficients. Going on to slide eight, our recurring EBITDA for the second quarter of 2025 was BRL 306 million, more than double that of the second quarter of 2024, positively impacted by a higher sale of volumes of chlorinated products, higher international soda prices, the positive effect of a slightly weaker Brazilian real in this quarter vis-à-vis the previous year, and despite a lower PVC sales volume impacted by pressure from imports and the reduction in the international price of PVC. When we add the positive effect of the conclusion in April of an arbitration process, EBITDA reached BRL 402 million in the second quarter, with a margin of 31%.
In the comparison of the second quarter 2025 with the first quarter, our recurring EBITDA was somewhat lower, especially because of a slightly lower sales volume in the second quarter and the negative effect of the depreciation of the real. On slide nine, we reached BRL 232 million for net income, totaling BRL 382 million for the first half of the year. This performance reaffirms the resilience of our profitability despite the external challenges we face. Based on the results, we feel comfortable distributing an additional BRL 400 million of dividends now in August without jeopardizing our financial health. Reminding you that in addition to dividends, we have repurchased shares in the market as a way to remunerate shareholders. Our buyback totaled BRL 53 million in the first half of the year.
Regarding cash balance, as you see on slide 10, we reached a balance of BRL 1.752 billion at the end of June, sufficient to cover 39 months of debt amortization. Our operating cash generation reached BRL 526 million in the quarter, with sales concentrated in the local markets of Brazil and Argentina. Unipar, in fact, exports little to other countries besides these two. We had a CapEx of BRL 237 million in the quarter, of which BRL 208 million referred to our technological modernization project in Cubatão, and our net debt funding in the quarter was BRL 394 million, mainly composed of disbursements from financing from the BNDES and a structure involving the German ECA, Euler Hermes.
On slide 11, talking about our debt profile, we ended the quarter with BRL 1 billion in net debt, leverage of 0.76x , and an average debt term of 62 months, with 70% of the debt maturing in 2029 or later. 75% of our debt consists of debentures, and practically all the rest is allocated to development banks and financing via ECA. In July, we completed a liability management transaction that combined a new debenture issue worth BRL 900 million with a redemption of old debentures, which had shorter terms and higher costs. As a result, we were able to further improve our debt profile, as shown on the pro forma chart on the screen. Our average pro forma debt maturity after the issuance of debentures increased to 75 months, and the percentage of debt maturing from 2029 onwards increased to 91%.
Now, this new debenture issue had seven and ten-year series, making it, in fact, the largest and longest-term issue in our history. I'll now hand the floor over to Carnaval, who will comment a little on our strategic projects. Thank you all.
Good afternoon, everyone. Thank you, Alexandre, for presenting the results. I would also like to thank everyone for attending this conference. As highlighted, the second quarter remained challenging for the chemical industry, but Unipar maintains its focus on execution efficiency and delivering resilient results. From the strategic standpoint, we made progress on fronts that support our future competitiveness. The investments are aligned with a long-term vision, with CapEx guided by ESG best practices and a focus on operational efficiency and production flexibility.
I would like to highlight the successful ramp-up of the Camaçari unit, which expands our regional presence and our ability to serve essential sectors such as sanitation and agribusiness. In Cubatão, the technological modernization project is on schedule, with completion expected in the fourth quarter. This project represents a significant advance in our decarbonization journey and competitiveness. Additionally, we made strategic investments geared to efficiency and the flexibility of our business model. We have an increase of 15% in our chlorine soda production capacity in Santo André. All of these projects are linked to a clear long-term agenda focused on competitiveness, sustainability, and value creation. Operational excellence and responsible management continue to be the pillars of our business. The global scenario remains volatile, marked by industry downturn, inflationary pressures, and the growth of protectionist practices.
In this context, it is essential that Brazilian industry, in partnership with the authorities, continue to strengthen trade defense mechanisms and advance public policies to foster competitiveness. BRASIC is a concrete example of an initiative with great transformative potential for the sector. Unipar moves forward with a committed team, robust assets, and a clear and consistent strategy. Thank you very much. I will now give the floor over to Raquel, who will lead our question and answer session.
Thank you, Carnaval. We will now go on to the question and answer session. Should you wish to pose a question, click on the raise hand icon. If your question has been answered, you can click on lower hand. Please wait while we pull for questions. Our first question is from Rodrigo Almeida from Santander. You may proceed, Rodrigo.
Thank you, Raquel. Good afternoon and congratulations to the Unipar team.
We have three topics to explore with you. I'll begin with the first one relating to Cubatão. What should we expect in terms of volumes for the second half of the year? Because of the technology you're using, what is it that we should think about in terms of volume for the second half of the year? Which will be the CapEx disbursement for Cubatão? While you do have the disbursements or the funding from BNDES to help you through the semester as well. My second topic refers to price. We've already spoken about the anti-dumping policies for PVC. We have also seen some discussion regarding caustic soda. I believe it was last week that Camex proposed an increase of the rates for caustic soda. If you could speak about these price hikes for caustic soda and what Camex has decided.
Third of all, if we could discuss the news regarding Braskem, I think it's important to comment on this, which is the price of the asset. We have spoken about this on other occasions. It would be very good to hear from you again here. Thank you.
Hello, Rodrigo. Good afternoon. This is Gerusalmi, and thank you for the questions. I'm going to begin with the CapEx, and Carnaval will clarify the other questions. The CapEx for Cubatão, up to present, we have used 70% of the project's total CapEx. As you mentioned, we have been using the funding from the BNDES and the full funding from ECA Hermes.
In terms of next CapEx expenses vis-à-vis what we should still disburse from the BNDES this year, we will have an amount from the BNDES that goes beyond what we still have to spend on the project because the funding of the BNDES comes as a reimbursement of what we have already spent. We're not concerned with liquidity until the end of the year. I'll give the floor to Carnaval to answer the other questions.
Hello, Rodrigo. To speak about volumes of our project in Cubatão, the company has been restructured with a supply plan. Now, the impacts considering the interconnection of the project will not be very representative, especially in the fourth quarter, which is the moment of connection regarding the price.
We had the approval of the anti-dumping policy, but there's a large inventory in the chain at present, which means that it is very difficult to transfer the anti-dumping effects, and the price of PVC internationally has been dropping. There is a positive aspect, the anti-dumping policy, but a negative aspect, which is the speed of implementation of anti-dumping, which is quite reduced and given the market conditions. You spoke about acquisitions. At the end of the day, the answer is always the same. We're a company to always be healthy, structured to seek out opportunities, and we're constantly seeking out different opportunities that may appear.
Thank you, Carnaval.
Our next question comes from Regis Cardoso from XP. You may proceed.
Good afternoon, Raquel, Carnaval, and Alexandre. Thank you for taking the time to insist on the topic of the USA.
I don't know if the specific deal that you launched a material fact, but because of the moment, is there any synergy with Propeline? I'm sorry, he says, with low cycles for this commodity, it's very difficult to be able to close a deal unless the seller, of course, really wants to get rid of the assets. There's a dispersion of value, and it's also very difficult to leverage this with third-party capital if you don't have EBITDA. I wanted to pose this question. It's a conceptual question, but perhaps we can see how to interpret this type of opportunity for the company.
Hello, Regis. Good afternoon. Thank you for the question. This is Gerusalmi. We have just published a material fact through which we clarified that we signed a confidentiality agreement with Braskem. It's what Carnaval has commented. We have been speaking about this for years.
The company is ever more prepared to grow. This growth can happen abroad, of course, but what we do very carefully and very cautiously is to judiciously and selectively analyze everything, not to put our business model at risk. It is a very resilient model. You spoke about leverage, about the cost of assets, the business, the market, which would be the impact on leverage, and allocating capital in the company is an activity carried out with a great deal of caution. Therefore, when we began speaking about this mission of growing, if no business has appeared, it's not due to a lack of analysis. It's because the right opportunity at the right conditions has not appeared.
We prefer not to do business, and the material fact is simply one more initiative in this direction to verify if there are opportunities or not, as other opportunities that we assess in the market.
Thank you. Now, if you allow me, a follow-up on this question and another one that Rodrigo touched upon in the topic of M&A. I think that preference, therefore, would be for lower stakes or for assets that will fit into the company balance and not significant transactions that would require raising capital. At least this is my interpretation, and please correct me if I am wrong. This shows your preference for assets. Another topic refers to the anti-dumping tariff. If you have identified what would be second best, there's a limitation in the price transfer because, or perhaps there are other means of importing, a triangular import process.
Are there foreign players that would capture the gains from this anti-dumping? Thank you.
Now, regarding the M&A topic, I would say that it's still very premature to consider which is the company's intention. If it is for larger businesses or smaller businesses, this will vary case by case. The company will not deleverage excessively in an irresponsible fashion, and we're not going to set off for a growth if we don't have full capacity to integrate and make the most of the assets. It's still premature to speak about size and type of acquisition precisely because there is nothing concrete regarding any asset. What I can say is to convey tranquility. We're very cautious in capital allocation, and nobody here is prone to excessively leveraging the company because of a growth strategy. Carnaval will speak about your other topic about the anti-dumping and the aggressors.
The main aggressor for PVC at present is the pent-up demand with a high interest rate. This inhibits projects and halts demand. I think this is the main aggressor. We could imagine the other players in the market, and in the international market, because of the tariff, we're convinced that the prices, freight, and flows are rather uncertain at this moment. At this moment, we need to foster demand. Once the demand exists, we will see the impact of new sources and more or less competitive freight. Thank you for the question.
Please hold while we pull for questions. We have a question from Leticia from Itaú about the impacts of the tariff and which are the impacts on Unipar because of the Trump tariffs and if there are any exports to the USA with indirect impacts.
Secondly, which is the expectation of improvement in chemical spreads and an improvement in demand in the sector?
Leticia, thank you for the question. Unipar does not export to the USA , which means that the tariff issue will have minor impact, but we have to observe the impact in the chain of clients. There's a report that the industry, the footwear industry in Rio Grande do Sul, has been impacted because of this. So far, the impact has been incipient, but we're going to monitor what will happen. Now, the sector is undergoing a great deal of uncertainty. The spreads are being compressed at the end of the day, which means that we have to be stringent, have cautious management, and have the utmost control to be able to navigate through the coming periods. This is the context of the industry at present.
Thank you, Carnaval.
We have another question from Regis Cardoso from XP. You may proceed, sir.
Thank you, Raquel. If you allow me one more follow-up to the question on Cubatão, which is the ramp-up process for the plant. I understand that the interconnection will be in the fourth quarter. How is this going to appear in the results for 2026?
Thank you. Regis, our connection and the ramp-up, we have three technologies that exist: the membrane, diaphragm, and mercury. What will be substituted is the diaphragm, and mercury diaphragm will be operating continuously. It's a minor intervention. Cubatão will not stop for any length of time, and we're preparing strategic inventory for the feed in the fourth quarter because of seasonality. Chlorinated products also have a reduction in demand, and we have to make sure that any downtime will not impact the company, the planning, and our sales background.
There is an increase of demand for these products at the end of the year. In the first quarter of 2026, everything should be normalized precisely. Thank you.
Thank you.
We have a question in writing from Reinaldo. Good afternoon. I would like to better understand the decrease in the rate of utilization of electrolysis. If this is due to downtime or another reason in the plant.
Thank you, Reinaldo, for the question. Now, this topic of electrolysis in Brazil, in fact, it was somewhat lower this quarter vis-à-vis the previous quarter, but we can't say it was low. It was an electrolysis of 82%. This has already included the plant of Camaçari at full production. What we do at Unipar is to have integrated management, and when I say integrated management, this includes the assets in Brazil and Argentina, levels of production of inventory and sales.
When we perceive that the market demands more or less, we have that flexibility of also adjusting our production. From markets with great demand, we increase the use; for other markets, we use less. This gives us the flexibility of reducing the use of our capacity. This quarter, we got to electrolysis of 82% in Brazil, vis-à-vis 86% in the first quarter. The root cause is that integrated management to control inventory levels.
Thank you, Gerusalmi. We would like to end the question and answer session. I will turn the floor over for the closing remarks.
Thank you very much. It is a pride to work with the Unipar team that has exceptional performance even during the second quarter with so much uncertainty in Brazil, Argentina, with the economic problems. Despite this, we attained expressive results.
We have enhanced our agenda for restructuring in the company, and we're working at full steam. I would like to thank the associates, the shareholders for this performance. Thank you all for your attendance and have a good weekend.