Braskem S.A. Q1 FY2026 earnings call

Safety and Sustainability

• Achieved a global recordable incident frequency rate of 0.18 events per 1 million hours worked, the best Q1 result in 10 years, with safety designated as a non-negotiable core value.
• Rejoined the ISEB3 Corporate Sustainability Index for the 2026 portfolio, recognizing the company's sustainability efforts. Braskem is on track to become the first chemical company to receive Brazil's Celeverde certification for its I'm Green biobased product portfolio, with certification expected to conclude in H2 2026.

Operational Performance

• Brazil operations saw utilization rate growth driven by post-maintenance normalization at the Bahia plant, pre-maintenance inventory build-up at the Rio Grande do Sul plant, and higher feedstock supply at the São Paulo complex.
• US and Europe operations utilization increased after completing planned maintenance shutdowns in Europe and raising production in the US.
• Mexico operations saw steep utilization declines due to reduced ethane imports (from 29.4 thousand barrels per day to 15.8 thousand barrels per day) and lower ethane supply from third-party provider Panex, both driven by Braskem's liquidity needs.
• Progress on the Alagoas (Maceio) geological event remediation: 99.9% of resident relocation is complete, 99.6% of submitted compensation proposals have been accepted and paid. Total provisions for the event stand at 18.1 billion Brazilian reals, with 14.4 billion reals already disbursed, leaving a 3.4 billion real outstanding provision balance.

Consolidated Financial Performance

• Consolidated recurring EBITDA was US$192 million, 76% higher than Q4 2025. The increase was driven by higher resin spreads, a US$32 million PIS credit on Brazilian feedstock purchases, higher polypropylene spreads in the US/Europe, and lower one-time environmental and restructuring expenses that weighed on prior period results.
• Ended Q1 2026 with US$1.1 billion in total cash (including a drawn US$1 billion standby facility maturing in December 2026), average debt maturity of 7 years, and 61% of corporate debt maturing after 2030. Adjusted net debt (excluding Braskem Idexa) was US$8.5 billion, with a current leverage ratio of 16.81x.
• Reported an operating cash consumption of US$603 million (3.2 billion Brazilian reals) in the quarter, and total cash consumption of 5.0 billion Brazilian reals including Alagoas disbursements, driven by working capital changes, inventory replenishment, and scheduled interest payments on international debt.

2026 Corporate Priorities

• Complete capital structure reorganization to support long-term business continuity across petrochemical cycles.
• Execute the resilience plan focused on preserving liquidity via strict cost control and disciplined capital allocation.
• Advance transformation plan initiatives to strengthen long-term competitiveness, and expand the sustainable product portfolio.
• Maintain full compliance with all Alagoas event agreements.
• Prioritize safe, reliable operations aligned with global industry best practices.

1. Brazil Segment: Recurring EBITDA was US$241 million, a 69% increase from Q4 2025. The segment contributed 125.5% to consolidated positive recurring EBITDA. Utilization rate increased 10 percentage points quarter-over-quarter, with resin sales volume up 5% and chemical sales volume also up 5% from Q4 2025.
2. United States and Europe Segment: Recurring EBITDA was US$21 million. The segment contributed 10.9% to consolidated positive recurring EBITDA. Utilization rate increased 8 percentage points quarter-over-quarter, with total sales volume up 3% from Q4 2025.
3. Mexico Segment: Recurring EBITDA was negative US$15 million. The segment contributed -7.8% to consolidated positive recurring EBITDA. Utilization rate dropped 30 percentage points to 65% quarter-over-quarter, with polyethylene sales volume down 37% from Q4 2025, driven by lower ethane supply and liquidity-focused production cuts.
4. Green ethylene (within Brazil portfolio): Utilization rate was 3 percentage points lower than Q4 2025, impacted by lower demand related to the Chinese New Year.

• Global petrochemical spreads are expected to improve throughout Q2 2026, driven by the global supply shock from the Middle East conflict. Spreads are projected to normalize from Q3 2026 as feedstock costs decline and supply availability improves, for full-year 2026 results aligned with this trajectory.
• The base case projection assumes the Middle East conflict concludes in May 2026. If the conflict is extended beyond this timeline, short-term spreads could see additional volatility, with increased risks to global demand growth and feedstock costs.
• External consultants project Q2 2026 Brazilian chemical spreads will be approximately 30% above the 2010-2025 historical mid-cycle average, and resin spreads will be approximately 20% above the historical average, with similar spread improvements expected across other regions where Braskem operates. If current spread levels hold, recurring EBITDA could reach levels near historical high-cycle peaks (comparable to ~US$1 billion in comparable prior quarters).
• The global petrochemical industry's long-term fundamental supply surplus remains intact, with new capacity projects continuing to come online, and market balance is not expected until the end of the 2020s. If the conflict lasts longer than six months, it could create lasting negative impacts on global demand growth and long-term spread levels.

• The ongoing Middle East conflict and the closure of the Strait of Hormuz has created extreme market uncertainty, with Brent crude prices up more than 50% since the conflict began in late February 2026, causing major volatility in feedstock costs and petrochemical product prices. While negotiations are ongoing, the final outcome remains uncertain, and actual results may differ materially from projections.
• The conflict has caused major disruptions to global energy and logistics markets, shifting global trade flows and creating price disparities across regional markets. A prolonged conflict could cause permanent damage to key Middle Eastern energy and petrochemical infrastructure, leading to sustained higher feedstock prices for a multi-year period.
• Braskem faces significant short-term cash flow and working capital challenges: higher feedstock prices require larger working capital commitments, and the company has reduced access to some payment arrangements with financial institutions and suppliers, creating pressure on liquidity.
• The company's current leverage ratio of 16.81x is well above its medium-term sustainable leverage target of 2.5x to 4.5x, and capital structure restructuring discussions are still ongoing with no final agreements reached.
• The US$1 billion standby credit facility is scheduled to mature in December 2026, and its renegotiation is tied to the broader capital restructuring process, creating near-term refinancing risk.

Q: With gross indebtedness above current levels, what leverage levels does Braskem consider sustainable over the medium term?

A: Management's target leverage ranges with the business cycle: in low EBITDA cycles, the company accepts leverage around 4.5x, and in high EBITDA cycles, it targets 2.5x to 3.0x leverage. Sustainability depends on current cash and EBITDA generation, which has improved recently from higher petrochemical spreads driven by the Middle East conflict.

Q: What is the current status of Braskem's capital structure restructuring process?

A: All options remain on the table, and no final agreements have been approved by governance bodies. There are ongoing discussions with all stakeholders, including a potential controlling stake change that has been publicly announced with new shareholder negotiations and board changes underway. The process has been ongoing since H2 2025, and the company prioritizes keeping all stakeholders informed, with the goal of a broad restructuring that satisfies all counterparties.

Q: With the end-Q1 cash position of ~US$1 billion, how is Braskem managing Q2 2026 operations, and are you planning to cut utilization rates?

A: The Q1 cash drop was driven by normal seasonal inventory build-up, reduced supplier credit lines, and timing of receivables. Management is making weekly operational and cash decisions amid uncertainty, and has so far decided to maintain utilization similar to Q1 to capture the benefits of high spreads. The commercial team has successfully reduced receivable turnaround times, and the company is negotiating extended credit terms with key feedstock suppliers to preserve liquidity while capitalizing on current market opportunities.

Q: Will higher feedstock prices impact working capital in Q2 2026, and what mitigation measures are in place?

A: The majority of the March-April 2026 feedstock price increases will hit the P&L in Q2 due to transit and payment term lags. Mitigation measures include: receivables monetization programs with financial institutions to accelerate cash inflows, negotiated extended payment terms with key suppliers, and an ongoing program to monetize non-core non-liquid assets for immediate liquidity, with several transactions already completed.

Q: Could higher utilization rates be achieved if Braskem had greater liquidity?

A: Management confirmed that yes, utilization would be significantly higher with more working capital. Current system-wide utilization is ~70%, but could exceed 90% given strong market demand and available feedstock, with Mexican operations alone capable of tripling current utilization. The core challenge is securing the additional working capital needed to cover extended receivable and inventory cycles to increase production.