Good morning, everyone, and thank you for waiting. Welcome to Braskem's Fourth Quarter and Year 2023 Results Conference Call. With us here today, we have Mr. Roberto Bischoff, Braskem's CEO; Mr. Pedro Freitas, Braskem's CFO; and Ms. Rosana Avolio, Investor Relations, strategic planning and corporate market intelligence Director. We inform you that this event is being recorded. [Operator Instructions]. After Braskem's remarks, there will be a question-and-answer session. At that time, further restrictions will be given. [Operator Instructions]. Remind you that participants will be able to register via the website questions for Braskem, which will be answered after the end of the conference by the IR department. Before proceeding, we would like to clarify that any statements that may be made during this conference call regarding Braskem's business prospects, prospections, operational and financial goals [indiscernible] beliefs and assumptions of the company's management as well as information currently available to Braskem. Future considerations are not a guarantee of performance and involve risks, uncertainties, and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors and analysts should understand that general conditions, industry conditions and other operational factors may affect Braskem's future results and may lead to results that differ materially from those expressed in such future conditions. Now, I will turn the conference over to Rosana Avolio, Investor Relations, Strategic Planning and Corporate Market Intelligence Director. Ms. Avolio, you may begin your presentation.

Hello, ladies and gentlemen. Thank you for participating in Braskem's earnings call. Today, we'll present the results for the fourth quarter and the full year of 2023. Following the agenda on Slide 3, I will start by presenting the company's main financial highlights in the period on Slide number 4. In 2023, the imbalance between global supply and demand caused by the addition of new polyethylene and polypropylene capacity, in the United States and China associated with the lower global consumption resulted in international spreads reaching their historic lows throughout the year, pressuring the profitability of the global chemical and petrochemical industry. In this context, Braskem's recurring EBITDA was $211 million in the fourth quarter, reaching $743 million in 2023. The company recorded a loss of approximately $935 million in 2023 with a recurring cash consumption, excluding payments related to Alagoas of $375 million in the year. The company continues to have a robust liquidity position, ending the year with $3.6 billion in cash, an amount sufficient to cover debt maturities over the next seven years. This calculation does not take into account the availability international revolving credit line in the amount of $1 billion up to 2026. In addition, Braskem's debt profile remains very long with an average maturity of 12 years with more than 60% due after 2030. The company ended the year with leverage of 8.12 times reduction of approximately 4 times compared to the previous quarter. Finally, it's important to note that Braskem is committed to the company's resilience and financial health. Therefore, in 2023, the implementation of resilience initiatives positively impacted EBITDA by about $319 million and cash generation by about $525 million. In the next slide, I will comment on the company's main operational and strategic highlights. Regarding operational highlights, the global accident frequency…

[Operator Instructions]. Our first question comes from Luiz Carvalho with UBS. You may proceed, sir.

Thanks for taking my question and also for sharing these cash generation and value generation data with us in the long term. Now if you'll allow me, I have three quick questions. The first, I think Pedro was giving an interview, if I'm not mistaken, but he mentioned that there are two ongoing due diligence process. Could you please give some more details about these processes, who they are? I have some thoughts as to what they are. One of them, I think, is Petrobras. Could you please give us more details about the timing to the end of the due diligence? My second question is about Alagoas. You made an additional provision of BRL1 billion in Q4. And of course, I would appreciate any kind of an update as to what is yet to come, what is being discussed in the Senate, Brazilian CPI process? And if you have any other estimates because we're near the end of March now. So is there any information you can give us in advance. And lastly, we've been walking the spreads using the CNA and in fact, there was an improvement now in Q1, but the outlook is still for a drop so the recovery is looking to be improved by 2025. But could you please give us some more information about the spread and what you see in your perspectives? Thank you.

Hi, Luiz, this is Pedro. I hope you're doing well. Thanks for your questions. I will answer the first two questions and then I will ask Rosana to talk about the spread. With regard to the due diligence processes. We've got Petrobras that did their due diligence last year. It is materially it is finished. There's always one or two questions left over. But as far as we're concerned, it's pretty much done. And then we have two other players. One is ADNOC as you mentioned. And there's another one that is also doing their due diligence. Now we don't control their timing. So, I can't give you a specific date as to when it's going to end. It really depends on their dynamic and to what degree they're going to want more information or not and how much detail they're going to want, but we don't control that timing. But if you imagine that a due diligence typically takes something in the order of two months to three months for a company the size of Braskem, then you can have an idea as to what these timings might be for this process. But in fact, we don't control their timing nor do we sit down with them to discuss the process or negotiate terms, what's to be done and what isn't. So, our role here really is to provide the answers to their questions. We don't really have visibility after the process overall. With regard to Alagoas, we did have an increase in provision in the order of $1 billion, as you mentioned. The majority of that is linked to the change in category as Rosana explained, some wells have been paying to filling and also because of the downtime hour because the operations did need to be paused for a number of months, that increases costs. On the other hand, we have an important consumption of the provision payments that have been made. And so that's the source. As to the CPI inquest, we are at their disposal. We are available for them as we have always been to answer any and all questions about everything that's going on in Maceio, everything that has happened, then that is happening. Now with regard to the spreads, I will pass the floor on to Rosana.

Thank you, Pedro. Thank you, Luiz, for the question. I'm going to divide my answer, what we saw in the past year and what we see now and our prospects for the future. What did we see in the last 18 months. In fact, we saw relevant capacity coming in of PE and PP China with target of self-sufficiency in the United States in the last wave, using a very competitive raw material. If this takes about five years to build a major complex. What did you see in terms of change? There was a growth in demand. it has grown less than expected when all the capacities were put into play. So, first is to provide a context of what we saw. And considering the scenario, we saw that the spreads had been suppressed in a very important way, reaching historic lows. Also, the minimal in the 30 years. What do we see since the beginning of the year? We see that the world continues growing. This is everybody's expectation. It grows less, but still growing. And the demand for products, commodities and petrochemicals grows a little higher than the global demand. But the difference is that we see less capacity coming in year after year. That means that we are confident with the industry. We are confident that we are going to normalize the cycle. What we saw last year was something lower than the average cycle. Now we are in a transition for this normalization to go to average level cycles for up to 2026. I would say that 2024 had a cycle of low, but we are undergoing a transition going to normalization. In 2025, we are going towards an average. And then in the future, higher spreads. As you said, Luiz, what do we see in the short term? We saw that the spreads have been improving better than the industry was expecting. Even [indiscernible] consulting firm. And the movement is that restocking is going to be executed, but we see a conflict of the Red Sea, and we also see a conflict in the Panama. And we see that there's a lot of support in Brazil and Mexico. We have base gas capacity also in Brazil. So, in the first quarter in relation to petrochemical spreads, we saw better spreads than expected. For the future, what is a consensus for the industry and according to consulting firms. What we're going to see is better spreads in 2024, better than 2023 directing to normalization after a low cycle and for the future, better spreads back again based on fewer offers because we understand that the world is going to continue growing.

All right. Thank you very much. That was very clear.

Our next question comes from Pedro Soares with BTG Pactual. You may proceed sir,

Good afternoon, everyone. Good afternoon Roberto, Pedro, Rosana. I have two questions. The first is about your CapEx and also your portfolio optimization. You're bringing the tone of adapting to the moment, the cycle and optimizing our portfolio. Could you please share a little bit about what the investments look like for 2024? Are you going to work on delayed investment or recurring investments that are kind of being pushed forward to 2025? And so, it something that we should expect to see in 2025 for these delays to be realized? Or should -- are they likely to be split further down the road? Now this -- I know this is nothing new. We've been talking about some divestment processes and for some assets, could you share anything with us about that? Any news in that trend during the past few months? And my second question is with regard to cash generation over the year 2024. With the reduction in investment for '24, should we still expect -- even in a low cycle, a free cash flow that is closer to breakeven? Or is that likely to occur during 2025 instead?

Hi, Pedro, how are you doing. All right. Both CapEx. Actually, I would say that I'm going to exclude Braskem Idesa because they have a terminal. The terminal still continues, but it tends to pollute the numbers. Now our CapEx for '23 was USD750 million. And the number for '24 is $400 million. So, what has changed. In '23, we had a central stop, which is something in the order of approximately $80 million. If it's a large stop, a small stop is going to be $60 million. So, $60 million to $80 million for a central stop, which is not going to occur in 2024. Then we expanded our Green PE and the green ethene plant in Triunfo, which was also completed in 2023. So that brings us another almost $100 million at least $50 million to $60 million. So just those two major events alone would, in and of itself bring our CapEx reduction to approximately $60 million. There's another aspect. It gives the strategic investment. We have the innovation and technology investments. We have investments in a unit in the South, which is under construction. So, when we look at everything that has already been done in the past, that number drops even lower. And since we are in a low cycle, and we are operating under low rates. We don't need to do investments based on availability of assets because there are some investments we can apply at a higher rate that keep the plant running in a standard location. But during a low cycle that does not need to be done, but you can distribute CapEx more efficiently. And that also involves renegotiating with equipment suppliers, with service providers. They are working on the maintenance on the plant. But at the end of the day,…

Our next question comes from Eduardo [indiscernible] with Santander. You may proceed sir.

Good afternoon, everyone. Thanks for taking my questions. My first question pertains to Mexico. Looking at the Pemex supply, I wonder how sustainable is this supply above contracted volumes? And what is PEMEX rated as internationally? And my next question with regard to Brazil, with the logistics disruptions, has this helped us to gain market share compared to imported products? I can imagine that imported products are being traded with a mind to the higher import costs. So, in that sense, has Braskem managed to regain some of its volume and price.

Thanks for your question. I'll answer Mexico first, and then I'll ask Rosana to answer your second question about the global logistics matters and how that affects the Brazilian market. Well, with regard to PEMEX, since 2022, we have seen stability in the production of ethane on behalf of PEMEX countrywide, Mexico wide, that is. So, the production volume there has been stable. And within the contract that was renegotiated in '21, we have the right of first refusal for anything that PEMEX does not consume internally. So essentially, what has been happening is that when PEMEX has a downtime in one of their plants, if they have any kind of issue, they will redirect that ethane to us. And otherwise, we have 30 million barrels per day, 13,000 barrels per day, which has been honored by them. And in some cases, we have obtained a bit more contractually. So that has been happening and we have managed to increase the Mexico operation rate as a result of the fast track process. Now the end of this year or early '24 or perhaps as late as early '25, we still have that right of first refusal. It remains in place up to 2045, but the minimum contractual volume will cease to exist. So, what we've been seeing is that PEMEX will continue doing business with operating levels at a rate that is different from the past few years. And starting next year, it will -- the terminal will start running at polyethylene. Now with regard to prices and price references, what we have today is very similar to the U.S.-based producers. It's essentially the U.S. price plus the logistics costs, specifically the costs that we have in Mexico in that pipeline, the Pemex pipeline that brings that to our site. So that's the cost that we have there. Now with regard to the market, Rosana, please.

Yes, Pedro of course. Eduardo thank you for the question. I'm also going to divide my answer into spread effects and sales volume. The first spread effect has two main impacts. At the end of the day, you have an increase of a natural freight increase because this is a very important route, mentioning red sea again that transports 25% of the oil in the world. So, it's a very important route. What we have seen that there has been some deviation. What that means is that the freight prices are higher, especially when the price is moving towards Asia. So, if you look at Asia, Asia has the nature of being a marginal producer, meaning that the cost of production is higher. So, the price references are higher, all those who are not marginal producers different from Braskem. We are very well located. And other than that, we see a lot of increase in prices. The second effect when we see logistics structure, which is different from 2021. And I would also like to make a consideration in relation to 2021. But we see that factor is different because the freights increase. And what we'd like to mention is that most of the regions that are deficiency situations such as global. And in that case, we use import parity. This is very common in Europe and in the United States and also in Brazil. That means that with the more expensive international freight in the import parity, and we add all the cost, insurance, aliquot of imports, import tariffs, we form the final price. And at the end of the -- at the end of the day, these are the prices. This is how the prices are formed and this is my comment about spreads. And in relation to 2021, the main effects that we saw in our results and we reached the record results for our company. It came from this variable higher price of logistics in the world. So, it was an effect as a result of this parity. And it was also an effect that was felt in the industry, but contributed to the company's results. My second comment talking about sales volume, whenever there is any kind of rupture higher, lower, no matter, we see some specific situation. If you have a client in Brazil or Latin America or in South America, if this client purchase imported products. This term for the product to arrive this client or in this producer in the transformation cycle is higher. So, we see opportunities for the company to have higher sales volume. This is something that we saw happening in a very specific manner.

Our next question comes from Gabriel Barra with Citi. You may proceed sir.

So, I have three follow-ups from previous questions. Firstly, in the Alagoas case, I think Pedro mentioned that a large portion of that additional investment was because of the wells and filling them. My question is, did this decision come from the company? Or was it enforced by some kind of authority? Or was it a decision that the company made because of safety? And what can we expect for the future. I think this number was not yet mapped out here on our side. So, could you speak a little bit about the future for that? Are there any other wells that are likely to be closed and potential impacts that are likely to be felt for provisioning. The second point for Alagoas and back to cash generation from what it seems, based on what Pedro said, it looks like the scenario for '24 looking toward a breakeven point, but there's a bigger disbursement for Alagoas, maybe bringing that cash value to the negative numbers. So, I'd like to understand a little bit about the consumption of that provisional value, what kind of leveraging position is the company going to stop at in '24. And lastly, we've had some discussions about the company's rate for EBITDA. As Rosana mentioned, we have some spread curve in the order of '24 and '25. It's looking like the spreads are going to improve. -- and we're reaching '25 in a more normalized scenario for the company. So, I'd like to understand, in your opinion, what does a more normalized scenario look like? We talk about $2.5 billion EBITDA. Did something structurally changed in your minds? Or what do you foresee for the company's more normalized spread scenario? Thanks.

Hi, Gabriel. All right. So, with regard to the additional 1 billion, half of that comes from this cavity balance and I'll explain in more detail. And then we have 25% approximately that comes from the fact that we had to halt operations in that region after the Cavity number 18 event, and that was halted for two months. So that's approximately 500 billion that are cavities and 250 approximately are due to downtime. And then we have a number of other knock-on effects, smaller adjustments, legal costs, and other things that add up. Now about the cavities. In our presentation, we have a slide that talks about closing and monitoring the wells. We used to have -- actually, we had four categories on that slide. One was the backfilling with sand. Second was natural filling. One was the plugging and pressurization and the fourth category was monitoring. Now in that monitoring category, we had 6 cavities. What that means is there was an assessment made by international specialists whom we hired. And those 6 cavities were stable. They were located in regions that are geologically stable and but would not make sense to fill those cavities because the risk of a sinkhole occurring, which is what happened in cavity 18 that was a very remote risk. And for the recommendation for those cavities was that they could be monitored. And if they're stable, then they're stable. We don't need to do anything because the regions [indiscernible]. Let's say, it gives us that place of comfort. Now what happened was cavity 18 occurred and so the valuation that we arrived at with the specialists was as follows. Well, an event occurred that was a remote possibility and everything had already been mitigated, but people had been relocated already, but it…

Our next question comes from Matias Vammalle with Bluebay. You may proceed, sir.

Thank you very much. My question has been answered. Thank you.

Our next question comes from Alejandra [indiscernible] JPM. You may proceed, sir.

Hi, good afternoon. Thanks for taking my question. I just had a follow-up on the provisions. I'm just wondering why a portion of it was reclassified. I just wanted to understand a little bit better the reason for that.

Hi, Alejandra, I will answer in Portuguese. The question is why was there a reclassification in the Alagoas system for accounts payable. Well, Alejandra that is an accounting rule. So, it's an obligation that essentially is represented by the flow of payments. So, someone does some work, some contracts are signed. And at that point, you have an obligation to make a payment. And that number every quarter has been in the order of BRL100 million or BRL200 million. But we've also signed an agreement with the municipal government, and they still have some amount that is due. But since as an obligation that has a specific payment schedule predefined that is included. So, it's an accounting issue that you'll see in our presentation that we are providing that information, those numbers. So, it is a net predetermined agreement with municipal government, BRL1.7 billion. We've already paid BRL700 million, so BRL1 billion is remaining.

So, we have some questions related to institutional aspects. So, I'm going to put the questions together. Major part has already been answered. There is an interest. There's a person interested in the topics of China. They ask if we are going to be a net exporter of PE in the long term. And then I'm going to ask the other questions.

[indiscernible] asked this question. So, I would like to thank for the question. In relation to China, I'm going to make some general comments, and then I'll go into specifics about polyethylene. China has been in searching for self-efficiency in different sectors. This was no different in our petrochemical sector. So, in 2015, when we see the convergence of the products that we have with our company. China had some targets of sales efficiency for polypropylene and polypropylene -- and since then, first, we had polypropylene and then the other. And naturally, China has several feedstocks and has been adding capacity since then. And more recently, China has a line of polyethylene also. So, I'm going to divide into CPMP [ph]. As for PP, we believe that China is going to reach self-sufficiency. The consulting firms inform us that is sometimes is difficult to follow all the data provided by China. And China has already reached 91% of self-sufficiency in polypropylene. But as for propylene, the nature of the business is a little more regional. Still commodities, but it's more regional when compared to polyethylene. And this happens because between the difference between more and less producers from the view point of cost is lower. So, what do I mean by this? Braskem is a leader in polypropylene in the Americas. And when we are more focused on the regional level, of course, we have protections. We are large, nature protection even. And when we talk about polyethylene and when we see the data provided by consulting firms, we imagine that China is only reached polyethylene’s efficiency close to 2030, 2032. So, there's still a long journey ahead of us, about 10 years ahead of us. And when we look at the same comparison of PPE and PP and when…

I'm going to move on with the questions Pedro. Okay go ahead. Could you inform what was the cash burn and how much was added to the provision for Alagoas in relation to what was planned for 2023 with an additional provision for the fourth quarter.

Well, there was an additional provision in Q4. That was in the order of BRL1 billion. And in Q4, our disbursements that were made -- they were in the order of BRL400 million, a little bit more than that. So that was the effect of Q4. Now for the year, I don't have those numbers. Rosana, do you have them?

Yes, for the year, we spent in 2023, BRL2.7 billion in the consolidated year.

My last question since we have already answered many of the questions. The question is, is the provision to backfill the original 9 mines was BRL3.8 billion. Why the additional provision to backfill 6 more mines? Is only about BRL500 million.

Alright. Actually, those 6 additional cavities have already been included in those BRL3.8 billion. So that is a total number. And remember that our plan -- our provision for those BRL3.8 billion that does not pertain only to sand filling, that it also includes probing it sometimes includes auxiliary wells for plugging and pressurization. There was the whole monitoring system that was installed in the region. That is also included in that number. The whole monitoring system. There are environmental actions and other technical topics, the consultants we hired, all of that falls under that number. The cost of closing is actually part of that overall number. And just to give you an order of greatness, approximately half of that EUR1 billion that was provisioned in the last quarter, approximately BRL500 million is because of the 6 new cavities that were included, but 2 cavities were removed from that list. So -- if we look at the net variance of 4 additional cavities in the order of $500 million, you'll see that the average cost of filling per cavity is something like BRL130 million, BRL150 million on average. The rest of that cost pertains to all of those other actions. So, if we look at that provision, that is not exclusively for backfilling. Just to add, Pedro, there is also a component of the cavity that is the size of each cavity. And that group has a group -- on average, those cavities are smaller in size. So that tends to contribute to a lower per cavity cost.

Pedro, there are no further questions, so I'm going to turn the call to the operator.

Thank you, everyone. The Q&A session has come to an end. I would like to turn the call over to the company for the final remarks. You may proceed.

All right. Good morning, everyone. This is Roberto Bischoff. Firstly, I'd like to thank all of you for taking part in our earnings call. I would also like to make a few final remarks. First, I want to say that the year 2023, as you've seen, was -- you were all there with us was a difficult year. It was a year with a strong imbalance between supply and demand. It's a year where global consumption did not recover at the speed that it could have. And as a result, there was a drop-in spread. We reached some historic lows over the past of the year. If you recall, we began the year with a spread level that was a little bit higher. And starting in April or May, we saw a worsening of that situation. which actually had an impact on the whole petrochemical industry around the world. In this challenging scenario, we upheld our constant commitment with resiliency and financial strength. We implemented various fixed cost initiatives of all sizes of all types in various different fronts. We optimized global sales and operating cash and that had a relevant impact, both in terms of our results and also an important impact in our cash flow. Furthermore, in spite of those challenges that we faced, we did not falter and we continue to implement our growth strategy. We completed the year, as Pedro has mentioned, and also Rosana during the presentation. We completed the green ethane expansion increased process in Brazil. It's a relevant landmark with the 30% increase in capacity. We reached important landmarks in constructing the ethane terminal in Mexico to over 50% of that construction is completed. And at the same time, we consolidated partnerships around the world pertaining to our growth channel. Now that includes both our traditional business and in bioproducts and recycling. This is a combination of a lot of focus, discipline and resiliency in our operations, but also our concern with maintaining our growth strategy. We're very focused on that. For the year '24, we are confident that the petrochemical cycle is starting to normalize. We've had lots of opportunities to explain our opinion about speed and how likely that is to occur. But especially, we are expecting, we are forecasting a lower increase around the world. especially compared to what was perceived in the past. In any case, I would like to highlight our continuous commitment to resiliency and to allocation of our capital. We always strive for more financial initiatives as well, and we implement our growth strategy. In conclusion, I would like to thank all of you once again for the trust you invest in us and for being with us on our call, and we will see each other once again in May when we provide our results for the first quarter of '24. Thank you all.

The conference of Braskem has come to an end. We'd like to thank you for attending this call, and have a good afternoon, everyone.