Braskem S.A. (BAK) Q2 2012 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. At this time, we would like to welcome everyone to Braskem's Second Quarter 2012 Earnings Conference Call. Today with us, we have Carlos Fadigas, CEO; Marcela Drehmer, CFO; and Guilherme Mélega, IRO and Corporate Controlling. We would like to inform you that this event is being recorded. [Operator Instructions] We have a simultaneous webcast that may be accessed through Braskem's IR website, www.braskem.com.br/ir. The slide presentation may be downloaded from this website. Please feel free to flip through the slides 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&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 the 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 Guilherme Mélega, IRO and Corporate Controlling Officer. Mr. Mélega, you may begin your conference. Guilherme A. Mélega: Good afternoon, ladies and gentlemen. Thank you for participating in yet another Braskem earnings conference call. Today, we'll be commenting on our results for the second quarter and first half of 2012. First, we would like to remind you that pursuant to Federal Law 11638 from 2007, the results presented in today's presentation reflect the adoption of International Financial Reporting Standards, or IFRS. Note also that as of the second quarter, the company began to recognize investments in jointly controlled companies using the equity method and no longer base it on proportionate consolidation. In addition, unless stated otherwise, for the periods presented, Braskem's consolidated results reflect: the proportional consolidation of Refinaria de Petróleo Rio-Grandense, or RPR, until Q1 2012; the full consolidation of Cetrel as of the second quarter of 2011 retroactive to January 2011; and as of the fourth quarter of 2011, the polypropylene business acquired from Dow Chemical. Information in today's presentation was reviewed by the independent external auditors. Let's go to the next slide, where we will begin our comments. Slide 3 presents Braskem's highlights in the period in the quarter marked by continued deceleration in the global economy, which was adversely affected by Europe's sovereign debt crisis and the slowdown in China's economy. Braskem was able to operate its crackers at a high utilization rate, which averaged 88%. Brazilian demand for thermoplastic resins, however, weakened by 9%. Meanwhile, Braskem maintained its strategy based on expanding the local market, growing its domestic market share by 3 percentage points to 71%. Braskem's net revenue in the quarter was BRL 9.2 billion or 11% higher than in the previous quarter, driven by the appreciation in the U.S. dollar in the period. EBITDA was BRL 845 million, growing by 7% sequentially. Excluding the nonrecurring effects of BRL 108 million resulting from the prepayment of installments under the tax amnesty program and the adjustment on the compensation paid by Sunoco, EBITDA was BRL 737 million or 34% higher than recurring EBITDA in the first quarter of BRL 551 million. In US dollars, EBITDA in the quarter was $430 million. In line with its strategy to add value to its existing streams, Braskem began operations at its PVC and butadiene plants, which should reach normalized levels already in the third quarter. In the greenfield project in Mexico, construction has already begun, and earthmoving works are already in the final stage. For the project's financing, $3 billion was already been approved by the various banks structuring the project finance. Braskem also made progress in its strategy to further diversify and improve its competitiveness through the acquisition in July of the propylene splitter assets at the Marcus Hook refinery, which will assure the continuity of operations at the polypropylene plant in the region while also diversifying its feedstock sources. And through the consolidation of its partnership with Enterprise Products with the signing of a long-term propylene supply agreement, for which a portion of the pricing is linked to the U.S. propane reference price. In July, Braskem returned to the capital markets and raised $250 million through the reopening of its 2041 bond issue. Let's go to Slide 4, please. Slide 4 shows the performance of Brazil's thermoplastic resin market, as well as Braskem's performance. Demand for the thermoplastic resins reached 1.1 million pounds in the second quarter of 2012 or 9% lower than its previous quarter. This lower consumption is explained by the continued deceleration in the domestic economy caused by the weak global macroeconomic environment, which led to contraction in Brazil's industrial chain. In this scenario, Braskem's thermoplastic resin sales fell by 6% from the first quarter of the year but grew by 4% comparing to the second quarter of last year. To partially offset the weaker demand in the second quarter, Braskem expanded its market share by 3 percentage points from the previous quarter, which reached 71% in the second quarter. Compared to the second quarter of last year, Braskem's market share expanded by 6 percentage points. Considering only its polyethylene and polypropylene sales, Braskem increased its market share by 2 percentage points to reach 77% market share in the second quarter. Let's go to Slide 5. The slide details the factors that influence EBITDA in the second quarter of 2012 compared to the previous quarter. Braskem's consolidated EBITDA was BRL 845 million, growing 7% from BRL 787 million in the first quarter. The lower sales volume, which had a negative impact of BRL 35 million, was offset by a positive impact of BRL 38 million from the contribution margin, which was influenced by the better price per exit. And 11% depreciation in the average dollar exchange rate generated a net positive impact of BRL 212 million, which was formed by the positive revenue impact of BRL 743 million and the negative cost impact of BRL 532 million. The increase of BRL 28 million in fixed costs and SG&A is explained by the restructuring at Braskem Europe due to the acquisition of the PP assets as projected at the time of their acquisition. The payment of recurring audit service, which, in 2011, were booked in the first quarter and today, no recurring costs which publicity [ph] in the period. Note that Braskem remains focused on improving its competitiveness and continues to work hard to reduce its fixed costs. EBITDA was also positively impacted by nonrecurring effects, totaling BRL 108 million, which included BRL 28 million related to adjustment on the compensation paid by Sunoco and BRL 80 million from the prepayment of tax installments under the tax amnesty program known as REFIS. Excluding these effects, Braskem's EBITDA was BRL 737 million or 34% higher than the recurring EBITDA of BRL 551 million in Q1 2012. Let's go to the next slide, please. Slide 6 shows the change in EBITDA in the first 6 months of the year comparing to the same period last year. Braskem's consolidated EBITDA was 22% lower than in the first half of 2011. The higher sales volume and U.S. dollar appreciation, which generated a positive impact of BRL 496 million, were insufficient to offset the contraction in spreads, which are comparing the downward trend in international markets, decreasing in the period by 25% for resins and by 11% for basic petrochemicals. The variation in periods was also affected by the BRL 267 million increase in the cost and expense, specifically by the increase in selling expense due to the higher production volume of the Brazilian assets, which in 2011, had been impacted by the power blackout in the Northeast, by the consolidation of the polypropylene assets in the United States and Europe which were acquired in late 2011 and by the restructuring of Braskem Europe mentioned earlier. Let's go to Slide 7. Slide 7 shows Braskem's debt on June 30, 2012, when the company had gross debt of $8.3 billion or 2% higher than March 31, which this amount, including Braskem's total amount of the bridge loan for the Mexico project of $110 million, which will be repaid once the project finance is disbursed. In Brazilian reais, gross debt was BRL 16.7 billion, increasing by 13% due to U.S. dollar appreciation of 11% in the period. At the end of the period, 69% of gross debt was denominated in US dollars. Meanwhile, the balance of cash and investments decreased by 12% to $1.8 billion. Braskem's consolidated net debt ended the second quarter at $6.5 billion or 7% higher than at the end of the previous quarter. In Brazilian real, this amount was BRL 13.2 billion, which increased 7%, also due to the U.S. dollar appreciation in the period, and 82% of net debt was denominated in dollar. In line with its strategy to maintain adequate liquidity, Braskem's debt amortization coverage stood at 26 months. And considering the 3 standby credit lines totaling $600 million, this coverage increases to 32 months. The 14% reduction in EBITDA in the last 12 months to $1.8 billion, which was mainly due to the lower spreads in the international markets, led financial leverage as measured by the net debt/EBITDA ratio to increase from 2.87x to 3.55x when measured in US dollars. In Brazilian real, the leverage ratio increased to 4x, mainly due to the U.S. dollar appreciation in the period, as explained before. Excluding the total balance of the company's bridge loan for the Mexico project and the respective cash, financial leverage measured by the net debt/EBITDA ratio was 3.9x in Brazilian real and 3.46x U.S. dollar. On June 30, the average debt term was 15 years. Considering only the portion denominated in US dollars, the average debt term was around 20 years. Maintenance of the lower average debt term reflects the prepayment of short-term debt with higher costs, as well as conclusion in May of the $500 million funding operation. The company's average debt costs in the quarter decreased from the first quarter to 6.07% in dollars and 8.51% in real. Let's go to Slide 8, please. Slide 8 shows CapEx in the first 6 months of 2012. Maintaining its commitment to making investments with high returns above the cost of capital, in 2012, Braskem made operational investments totaling BRL 1.1 billion. Around BRL 508 million or 45% of this amount was allocated to capacity expansion projects and operational improvements in its assets. The new PVC and butadiene capacities that are already operational required disbursements in the year of BRL 300 million and BRL 162 million, respectively. For the project in Mexico, Braskem, based on its equity interest in the project, invested BRL 34 million. The project finance structuring has already received approval for amounts totaling $3 billion, which $600 million loan from Saatchi, $600 million in an A loan from the Inter-American Development Bank and IFC, which will be complemented by a B loan of up to $800 million, $700 million from the BNDES and $400 million from Banco Mexico [ph]. For 2012, Braskem's total capital expenditure is estimated at approximately BRL 1.7 billion, with 40% going to capacity expansion projects. Let's go to the next slide. On Slide 9, we'll comment on the acquisition announced in July of the propylene splitter assets at the Marcus Hook refinery. Following the shutdown of operations at Sunoco's Marcus Hook refinery, which was responsible for supplying 55% of the propylene consumed by the PP plant, Braskem's management began working to develop alternative supply and logistics solutions. The supply agreement signed with Sunoco when acquiring the PP assets included not only the payment of compensation in the event of an interruption in supply, but also the possibility of acquiring the splitter assets located at the refinery. Braskem exercised its right of first refusal and, in July 2012, announced the acquisition of the splitter, which guaranteed feedstock supply for various different sources and the continuity of operations at its 350,000 tons PP plant located in the region. The splitter transforms the refinery-grade propylene into polymer-grade propylene, which is the raw material used to make the polypropylene. The refinery-grade propylene also has historical cost advantage since its average price is around $200 per ton lower than polymer-grade propylene. The splitter assets have the capacity to meet 100% of the supply needs of the Marcus Hook plant; in other words, 350,000 tons per year. Let's go to next slide, Slide 10, please. Slide 10 presents the macroeconomic scenario and the outlook for the petrochemical user. The short-term scenario continues to be marked by caution. The lack of definition regarding Europe's sovereign debt crisis, the slowed down Chinese economy and the still fragile U.S. economy continue to affect the level of global economic growth. It is further aggravated by the geopolitical stability in Arab countries which pressures the price of oil and consequently, the price of naphtha, the main input used by petrochemical industry. In the short term, we expect the high volatility in international spreads to continue. However, a potential recovering demand following the depressed consumption in the first half of the year could support higher profitability in the industry as of the second half of the year. In Brazil, the policies adopted by the government are expected to stimulate economic growth starting in the second half of the year. And here, we should mention that provisional measure that we reduce payroll charge in certain sectors and transfer BRL 45 billion from the Treasury to the Brazilian Development Bank, BNDES, which will use these funds to offer low-interest loans for investments in the industrial sector. These measures, which still require approval by the Senate, could stimulate economic growth in the second half of the year and, in turn, help drive demand for plastic products. It is important to note, however, that Brazil's economic scenario in the medium and long term remains optimistic. The forecast for annual GDP growth in 2013 and beyond remain above 4%, which the economy expected to be positively influenced by the preparations for the Fifa World Cup in 2014 and the Olympic Games in 2016. Let's go to Slide 11, please. On this last slide, we present the main areas on which management is currently focused. In line with its strategy to strengthen its business and boost its competitiveness, Braskem remains committed to supplying its main consumer market and working to build an industrial policy for Brazil that will strengthen the country's petrochemical and plastics chain. The company also remains focused on continuing to improve its partnership with clients and consequently expanding its market share in Brazil on fully capturing the synergies from the acquisitions of Quattor and the polypropylene assets in the United States and Europe. while continually improving its operational efficiency by cutting costs and adding value to its product portfolio; on ensuring reliable and efficient operations at its new PVC and butadiene plants, which add value to existing streams; on structuring the project finance and construction of the Mexico project and beginning presales, marketing efforts which clients in Mexico. In addition to being fully aligned, which is the strategy to increase the diversity and competitiveness of its raw materials, the project further strengthens the company's presence in North America, which currently has one of the world's most competitive gas reserves. And all these will be done without losing sight of maintaining the company's financial solidity in a scenario marked by a global financial crisis. That concludes today's presentation, so let's go now to the question-and-answer session.

[Operator Instructions] The first question comes from Frank McGann from Bank of America.

I was just wondering a couple of things. One, in terms of demand trends, you've been successful over the last year, it seems, in raising market share. And I was wondering if you -- if that was a deliberate move and if you had made a change in pricing policy potentially to enable that to happen, so you would be more competitive against the imports and, as a result, could increase your share. And secondly, as you're looking forward into the third, the fourth quarter, obviously, demand has decelerated a lot in the first quarter. And my understanding is that June was particularly weak for overall demand in Brazil. What is your expectation or what are you seeing from your clients in July and August and as you look out over the next several months? Carlos José Fadigas De Souza Filho: Frank, it's Carlos Fadigas. I'll start with your second question and then address the market share you asked about. June, you're right, you're right. It was a particularly weak month. Naturally, it came from the fact that most of the customers were seeing prices falling internationally, and they knew the price would go further down so they delayed purchases as much as they could. And therefore, when you compare the market, not Braskem, but the market, the second quarter with the first quarter, you'd see a decline in 9%. But if we take the first half of the year, that's where you have a better period, so we can avoid the deep inventory effects and have a longer period to compare. So a longer period to compare, you see that the market grew the first half of the year compared to the first half of last year, 1%. So it's not a big growth. It's actually a very small growth, and Braskem was able actually to grow its sales roughly by 8%, and that's a consequence of the increasing market share. As we think about the third and the fourth quarter, I think that we're going to see growth in the market, especially when we compare with the previous quarters of this year. Because of seasonality in Brazil, there is a combination of both the summer and year-end holidays happen at the same time. So we've always had the second half of the year that is much stronger in terms of demand in the first half of the year. And in the second half of the year, the third quarter is even stronger than the fourth one. That's when our customers are purchasing resins to produce the goods that will be sold during the holidays and so on. So as we go forward, we believe that we're going to have better volume. It's hard to say that, putting aside the seasonality, that makes the second -- that the second half will be stronger. It's very hard to predict at this point whether we're going to have a real growth of the market, especially coming from a year in which the marketing we do did not grow. We saw a lot of import products coming into the country, imported finished goods, I mean. So the plastic converters, our customers lost a little bit of their share of final market, and we didn't see a lot of growth. But for sure, we're going to have the same seasonality effect we have seen that already right now, so we had better sales in June, and we are having a good month in August. But I can't really tell you how much of that will translate into year-over-year growth and how much of that's coming purely from seasonality. In terms of market share, in terms of price strategy, your first question, first of all, it's important to Braskem to have its market share fluctuating within, say, an interval. There's a minimum to that, and we believe we've reached that minimum at some point in the middle of last year. And that happened -- we had a lower market share, and that happened because of several things. One of these things would be -- or was the exchange rate. We've had around June, July last year, the stronger Brazilian real that we have ever had. This currency had -- it was created back in '94, so it's been 17 to 18 years, 17 years last year, and the strongest Brazilian real we ever had happened last year. On top of that, imports were -- had a tax benefit in all Brazilian states. And since that point, we've managed to negotiate with the state of Santa Catarina, and they are right now no longer supporting the imports with tax benefits and as the exchange rates, the rates moved also. But we also decided to, I'll say, instead of talking about the price, I'll just say we change our commercial strategy in order to gain back market share as we felt we have reached a point in which we needed to gain more relationship with the customers and bring some customers back to the relationship with us and increase volumes in the other ones. So there was a little -- there was some change, yes, in commercial strategy as we tried to maximize results combined what we'd call service margins with market share, so choose to actually put some more focus on market share. But exchange rate should also help it. And on top of that, the fact that Santa Catarina is no longer supporting imports, helped a little bit, not that much in the first half of the year. We're going to see hopefully more of this effect in the second half of this year, but that's a factor that it's going to play in our favor in the third quarter. And more than that, as we get through 2013, we are going to have the Brazilian Senate decision presenting the states to provide this type of incentives. I hope I have answered your question. If you have...

Yes, it's very clear. If I could follow up with one just one real small detail. In EBITDA, there's a BRL 37 million adjustment for fixed assets and I was just wondering what that related to. Carlos José Fadigas De Souza Filho: Could you say that again, Frank, please?

Yes, in the EBITDA adjustment, I think it's on Page 21 of the press release, there's a BRL 37 million reais adjustment for some change to fixed assets and I was just wondering what that referred to or related to. Carlos José Fadigas De Souza Filho: Frank, let me.

Page 22, I apologize, Page 22, at the bottom. Carlos José Fadigas De Souza Filho: Okay, we found it. Let me suggest -- let me answer a few questions. The accounting team here is going to identify specifically what that is and I will give that answer as an answer one of the following questions, if you don't mind.

[Operator Instructions] The next question comes from Paula Kovarsky from Itau. Paula Kovarsky - Itaú Corretora de Valores S.A., Research Division: Just a follow-up question from the previous call. I would like to get a better understanding of this reclassification of financial expenses related to the lengthening of the time to pay Petrobras on naphtha purchases. Is it correct to say that in exchange for a larger time or larger number of days to pay, you're actually incurring in a higher price? I mean, you can always say, okay, this is the financial expense, but in essence, I mean you're paying a little bit more to Petrobras. Is this a correct interpretation? And if that's the case, what's the -- amid the 126 million that was adjusted to the financial expenses this quarter or the 74, excluding the number that pertains to the first quarter. What's the recurring level of financial expenses that we should expect? Or what's the penalty, if you like, for having 90 days rather than no additional days to pay? Carlos José Fadigas De Souza Filho: It's Carlos. I'll start the answer, and then I'll pass on to Marcela for her to complement. First of all, yes, the price includes the fact that you are paying in 90 days and, therefore, includes financial interest. The reason why we did not finance, we did not buy from Petrobras with a longer payment period in the past is because, in the past, they had a higher interest rate embedded in a longer-term payment, and we never felt that was to the benefit of Braskem to buy for the longer term because of the level of interest rate. Once we've reached an agreement on something reasonable, we decide to buy, paying 90 days. If these 90 days represent a way of financing or, I would say, a way of supporting financially our operations and it has a financial nature, we believe and we thought it will be better to account for the price of naphtha, taking into consideration exclusively the price of naphtha itself and moving the financial expenses embedded in the Petrobras invoices to the financial expense line. The financial expense line, in its turn, shouldn't change because of that as we have replaced other types of financial instruments with, I would say, a financial support with these payments -- longer-term payments from Petrobras. So it's much less of a commercial thing because of the price of naphtha. And it's just getting finance from a different source. And I do believe that we should have had the support from Petrobras a longer time ago as we also support financially our customers. Is that clear to you now? Paula Kovarsky - Itaú Corretora de Valores S.A., Research Division: Perhaps to help me understand, is that the way you treat the time you give to your clients when they pay you? I mean, do you separate the interest they pay because you give them more time? Or in that case, you book it as a revenue?

No, you're right, Paula. In the case that we provide 90 days for payment for our clients, we have to reclassify in the same price tier that we are classifying a bit with conditions that Petrobras leading to Braskem. So it's the same price criteria for both sides, okay? And this is an accounting rule, actually. We have these EBITDA adjustments because of the accounting rules, so we have the obligation to do that, okay? Carlos José Fadigas De Souza Filho: Okay, the only additional comments that we should actually have done on that in the first quarter of the year because we haven't had this extended payment terms with Petrobras before. At first, we left the account expenses at the wrong place. And then we -- at the second part, we moved that to the right line, to the financial expense line.

Yes, yes. Actually the discussions with the auditors was that the criteria really became applicable because of the amount of the supply that was financed by Petrobras. The amounts increased between the first quarter and the second quarter. So during our discussions in the second quarter, we got the decision that the right thing to do was reclassify that from the inventory, to costs, to the financial expense, okay?

The next question comes from Marcus Sequeira from Deutsche Bank.

Fadigas, I was wondering if you could comment a little bit about -- we know the demand is -- continues to be pretty weak, but if you could comment about the potential capacity additions globally and how much of that has been postponed. And just a question also in Mexico. If we'd compare the price of gas that you have secured with PEMEX and the price of gas in the U.S., and if the U.S. market is a market you're targeting with that plant as well? Carlos José Fadigas De Souza Filho: Okay, let me start with Mexico, and then we move on to the capacity additions worldwide. First of all, one of the main criteria we had here when we set to negotiate and to set the limits of the project, the raw material price in the next quarter is that, first of all, it should be linked to the U.S.; and second, should include, I would say, a better price than the U.S. So it should be more competitive in order to justify the construction of a new cracker, the risks associated with entering the market with new capacity and gaining market share and so on. As the price of U.S. gas and ethylene go down and actually the price for our Mexican project go down as well. We don't see a scenario in which the Mexican project can't compete with U.S. Actually, we see it going down along with the U.S. prices and becoming more and more competitive. On top of that, we will just explain our favor -- there's no import tariff as part of the same trade agreement, the naphtha trade agreement, so the logistics on our side. One additional thing is, that once we establish operations in Mexico, and we are about to start what we call premarketing, they're going to buy resin to start the commercial relationship with the customers and develop a learning curve of the Mexican market. We also learned that more than 60% of the gas converted Mexico is actually supplied by distributors. For the North American companies that's selling to Mexico and had sold into Mexico for several years, they actually never took the time to establish a local sales force and develop the direct relationship with the customers. Even the local Mexican producer, PEMEX, that has a petrochemical company, PEMEX Petrochemical, they sell an important part of their production also through distributors, and that naturally is different than what we do. We only sell through distributors to very small customers. We think supply our customers directly. So I do believe that is also a commercial advantage to be priced in the price of the Braskem resins once we have this product just on top of this project. On top of that, naturally, we have the updated technology, and more important than that, the scale. It's a cracker is bigger than 1 million tons, Although there are crackers bigger than that in the U.S. on average in North American cracker, there is more than the one you're going to have in Mexico. That's why we remain very confident and comfortable and working very hard to have the work at this cracker starting up as soon as we can, hopefully at the end of the first half of 2015 and slightly less than 3 years from now. In terms of capacity addition, I think in this point, we should focus on 3 regions specifically. That's where U.S. is adding a lot of capacity. We've heard announcements coming from several different companies -- only a few of those are actually moving forward. The debottleneck in the U.S. between now and '16 will add roughly 1.5 million to 2 million tons of capacity, more to 1.5 million than to 2 million tons of capacity in the market. That is about 440 million tons worldwide. So the capacity additions between now and '16, and I'm separating '16 for now because we will not see a new cracker in the U.S. before '16. They will end up representing something around slightly less than 1% of the global demand. Actually, yes around 1%, maybe a little bit more than that. We're going to have new crackers coming after '16, and then they're going to bring much more capacity. Well, you have to forecast the growth of the market between now and '16 to have a better idea of the impact of that. In the Middle East, we don't see a lot of additional volume, especially polyethylene, as they move the focus from converting gas to polyethylene and they start to handle different types of projects more integrated coming from heavier feedstock. It's the case, for instance, of the Sadara project in Abu Dhabi -- I'm sorry, in Saudi Arabia, in which they're going to crack naphtha and have integrated plants of propylene oxide, ethylene oxide, oxide, MEG and so and so. The years of projects purely focused on polyethylene for export, I wouldn't say they are over, but the dimension is going to be much more different than one. And China is the third one, not to mention review, but the China is the third one. We don't see China becoming an exporter. China, will have a lot of capacity, some of that is coming from coal, but we see China with growth in demand, still outpacing growth in new capacity, so we're going to have China as a net buyer in the long run. And by long run, I mean, between now in the period between '16 and the end of the decade. So I think the reason to watch and pay very close attention is the U.S. as China remains an importer and the Middle East focus on different types of projects. And the U.S. is really focused on converting gas into polyethylene to export and naturally South America may eventually become a target for them. That's why on our side, we're working hard to have exactly this period of '16 to 2020 of the new gas cracker engine [ph] on stream so we can also compete with them, and I talk of the logistics and several other things. So it's a long answer, but that's our view on capacity additions going forward. Although we see a lot of talk about shale gas, we won't have anything meaningful between now and '16. And then 2016, we're going to have to see and watch carefully what really comes onstream and when it comes onstream and how is demand going to cope with that growth in capacity.

[Operator Instructions] Next question comes from Frank McGann from Bank of America.

Yes, just you announced another share repurchase program. I was just wondering if you could comment on what -- I believe it's replacing the existing program. What percentage of the shares or number of shares were purchased under the last program relative to what was potentially purchasable? And secondly, given the level of leverage that you have, I'm wondering why you'd move forward with share repurchase programs and perhaps don't conserve cash for the investment programs that you have and the strong, strong expansion that you're planning over the next several years. Carlos José Fadigas De Souza Filho: Frank, it's a very good question. Let me start by saying that, first of all, we do believe that having an open and approved repurchase program provides the company with an important tool to defend and to sustain the price of the shares, especially in such a volatile market. So it's -- I would say, although it is, in my belief, a very good investment opportunity even for Braskem itself, although I do believe it is a good investment, but it's not -- this is not the main reason why we are -- we have an open program. We do believe that volatility is in excess of what it should be. Just to give an example, we had our share prices around BRL 14 per share at some point at the beginning of the year. We saw it go all the way down to roughly BRL 10 per share. I wish I could give you the numbers in U.S. Dollars, but these are the numbers I have in my memory. As our share price in reais was going down, we also saw the Brazilian stock exchange move down from 60,000 points down to 50,000, 52,000 points, 53,000 points. You should see it come back right after that, come back again. The share price is above BRL 14 again. And again, we went all the way down to BRL 10 and came back to BRL 14. And the stock exchange, lastly, right now, it's getting close to, say, 60,000 points, 58,000 to 59,000 points. With no material change in competitiveness of the Brazilian petrochemical sector or forecast for growth and so on. It's just influx and outflux of foreign money into the Brazilian Stock Exchange. And that's the main stock exchange that is moving the price of Braskem. So having an open repurchase program provides us with the ability to repurchase some of the shares in ways that we saw, for instance, with our shares going down as much as 5%, 6% in one single day. And we don't think it correctly reflects the value of the company. It's much more a question of pure volatility as the money leaves the Brazilian Stock Exchange or if the money comes back to the stock exchange. Out of the program we have -- we repurchased 21% of the shares, and that is in line with the rationale that I gave to you. So we didn't open the program in order to buy all the shares, and definitely happen again with the new program we have for the next 1 year. We're going to be using that to reduce volatility and to defend the shares well. If it goes back down to a level we feel it shouldn't go, we may be more aggressive and more active and buy some more of the shares. It's not a huge capital requirement also. With the total program, I would say, making a calculation from the top of my mind, it's roughly BRL 200 million. So over the second half of the year and the next year as well, and if we have to go along the lines of what we saw the last program it translates into an expense of BRL 15 [ph] million. So good investment, not a very big cash disbursement, and I believe it's a good tool for us to try to sustain the price of the share where it should be as well. We do have the answer to your previous question. You asked about the change in EBITDA. This was now were reviewed on Page 22. So Marcela has more details on that.

Frank, every 6 months, we try to do a clearance in those accounting. And this is basically an adjustment in some projects, in maintenance costs that we had in the past, and we had just to reduce these assets with these adjustments but did not impact the EBITDA, okay, it was out of the EBITDA.

That concludes the question-and-answer session for today. I'll turn the call back over to Carlos Fadigas for closing remarks. Carlos José Fadigas De Souza Filho: Well, I'd like to thank you for joining us again in this call. Just to share with you that, as you know, we're going through a very challenging time, both in terms of the economic growth globally and petrochemical spreads. But as we go through that, Braskem has been very disciplined, I would say, in making sure the fixed costs grow below inflation. So as we try to reduce costs, we should at least grow below inflation. Very interesting also in the Braskem additional investments we are making. We'd be able to finish 2 additional plants. We expect both the time line and also the budget, so they're going to be contributing to our EBITDA in the second half of the year. We've been trying to operate our plants close to true capacity as we can, naturally taking into consideration whether exports are profitable or not. And we regained some percentage points in market share. So we've been doing everything we can. On top of that, we've been also discussing with the Brazilian government and kind of a fiscal package to provide stimulus through the growth of the industry in Brazil, more specifically, the growth of the petrochemical industry in Brazil. As we take care of the short-term issues, we also are taking care of the long-term with investment in Mexico, that is progressing on schedule. So that's the commitment we have, and we remain, in the long term, optimistic about the petrochemical sector, not only Brazil, but also in the U.S., we have 5 polypropylene plants in Europe that at some point in the future, we will recover from the economic crisis. I'd like to thank you again and wish you all good afternoon.

Thank you for participating in Braskem's second quarter 2012 earnings conference call. This concludes the conference for today. You may all disconnect at this time.