Braskem(BAK) - 2024 Q4 - Annual Report

Management Proposal for the Ordinary General Meeting This section outlines the agenda for the Ordinary General Meeting, including the approval of 2024 financial statements and management report, election of Fiscal Council members, and setting 2025 compensation limits, along with shareholder participation guidelines Agenda Item 1: Approval of 2024 Financial Statements The management proposes the approval of the financial statements for the fiscal year ended December 31, 2024. These statements, which report a significant loss, have received favorable opinions from the Board of Directors and the Fiscal Council, and an unqualified opinion from the independent auditors. Due to the reported loss, preferred shares will have voting rights at the meeting - The Company reported a net loss of BRL 11.32 billion for the fiscal year ended December 31, 2024. This loss will be fully recorded under "Accumulated Losses," bringing the updated balance to BRL 14.03 billion[12] - The Board of Directors, Fiscal Council, and Statutory Compliance and Audit Committee have all issued favorable opinions or reports on the 2024 financial statements, which also received an unqualified opinion from the Independent Auditors[9] - Due to the reported loss in fiscal year 2024, Class "A" and "B" preferred shares will have voting rights at the meeting, voting jointly with common shares[8] Agenda Item 2: Approval of 2024 Management Report The proposal includes the examination and voting on the Management Report and the accounts of the administrators for the fiscal year ended December 31, 2024. This report was previously approved by the Board of Directors on February 26, 2025 - The Management Report for the fiscal year ended December 31, 2024, as approved by the Board of Directors, is submitted for shareholder appreciation and voting[15] Agenda Item 3: Election of Fiscal Council Members Management proposes the election of full members and their respective alternates to the Fiscal Council for a term lasting until the Annual General Meeting of 2026. A specific ticket of candidates has been nominated by shareholders Novonor and Petrobras Proposed Fiscal Council Members | FULL MEMBERS | ALTERNATES | | :--- | :--- | | GILBERTO BRAGA | TATIANA MACEDO COSTA REGO | | ANA PATRÍCIA SOARES NOGUEIRA | HEIDER JOSUÉ DE AQUINO NASCIMENTO | | MAURÍCIO NOGUEIRA | CAIO CESAR RIBEIRO | | PAULO CÍCERO DA SILVA NETO | FERNANDA BIANCHINI EGERT | - The proposed term for the new Fiscal Council members will last until the Annual General Meeting of 2026[16] Agenda Item 4: Setting 2025 Compensation Limits The management proposes setting the annual global compensation limits for the Company's managers and Fiscal Council members for the fiscal year ending December 31, 2025. The proposal outlines separate limits for managers (Board of Directors and Officers) and Fiscal Council members Proposed Compensation Limits for FY 2025 | Group | Proposed Limit (BRL) | | :--- | :--- | | Managers (Board & Officers) | Up to 78,000,000.00 | | Fiscal Council Members | 1,115,100.00 | Shareholder Participation Guidelines The Annual and Extraordinary Meeting will be held exclusively in a digital format via the Webex platform. Shareholders can participate by submitting a remote voting ballot or by attending the meeting virtually. Specific documentation and deadlines are required for participation, with documents to be sent via email by April 26, 2025 - The meeting will be held exclusively in a digital manner to reduce costs and encourage shareholder attendance[7][22] - Shareholders must submit required documents via email to braskem-ri@braskem.com by April 26, 2025, to access the digital platform[23][28] - Participation is possible via a remote voting ballot or by attending and voting on the digital platform. If a shareholder who submitted a ballot also votes during the live meeting, the ballot instructions will be disregarded[22] Exhibit I: Management's Comments on Financial Situation This exhibit provides detailed management commentary on the company's financial and equity conditions, operating results, significant events impacting financials, non-accounting measures, and the strategic business plan Financial and Equity Conditions For the fiscal year 2024, the company reported a loss of BRL 11.3 billion, primarily due to a negative exchange rate variation of BRL 11.5 billion. This resulted in negative total equity of BRL 4.8 billion and a consolidated financial leverage of 8.68x in BRL. The company maintains its financial strategy of a long average debt term and robust liquidity, with credit ratings of BB+ (Negative Outlook) from both S&P and Fitch. Total third-party capital stands at BRL 106.4 billion Key Financial Metrics (FY 2024) | Metric | Value | | :--- | :--- | | Loss for the year | BRL 11.3 billion | | Negative exchange rate impact | BRL 11.5 billion | | Total Equity | (BRL 4.8 billion) | | Third Party Capital | BRL 106.4 billion | | Financial Leverage (BRL) | 8.68x | | Financial Leverage (USD) | 7.42x | Credit Ratings (FY 2024) | Rating Agency | Rating | Outlook | | :--- | :--- | :--- | | Fitch Ratings | BB+ | Negative | | Standard & Poor's | BB+ | Negative | - The company's corporate financial strategy focuses on maintaining a long average debt term and a strong liquidity position, utilizing capital markets, commercial banks, and development banks as primary funding sources[44] - The company has an available revolving credit line of US$1.0 billion, maturing in 2026, to be used for additional liquidity needs[53] Indebtedness Levels and Characteristics This section details the company's debt profile, distinguishing between Braskem Corporate and Braskem Idesa, highlighting the predominance of long-term, exchange-rate-sensitive debt Braskem Corporate Debt Profile (excl. Braskem Idesa) - FY 2024 | Category | Value (BRL million) | | :--- | :--- | | Total Debt | 52,323 | | Short-term Debt | 2,278 | | Long-term Debt | 50,954 | | % Debt subject to exchange rate variations | 92% | Braskem Idesa Debt Profile - FY 2024 | Category | Value (BRL million) | | :--- | :--- | | Total Debt | 15,134 | | Short-term Debt | 857 | | Long-term Debt | 14,277 | | % Debt subject to exchange rate variations | 100% | - The company's debt is primarily composed of Bonds (BRL 43.9 billion) and Debentures (BRL 3.1 billion), with maturities extending to 2081[58][60][61] Material Changes in Financial Statements This section analyzes significant year-over-year changes in the income statement, highlighting the impact of negative financial results and exchange rate variations on the net loss, alongside improvements in operating cash flow Income Statement Comparison (FY 2024 vs FY 2023) | Item (BRL million) | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Net revenue | 77,411 | 70,569 | +10% | | Gross profit | 5,997 | 3,021 | +99% | | Net financial income | (16,654) | (3,400) | -390% | | Net loss for the period | (12,053) | (4,890) | +146% | | Net loss attributable to Shareholders | (11,320) | (4,579) | +147% | - The net loss for 2024 was primarily driven by a BRL 12.0 billion negative result from derivatives and net exchange variations, compared to a BRL 511 million gain in 2023. This was due to a 28% depreciation of the Brazilian Real and a 20% depreciation of the Mexican Peso against the US Dollar[90] - Net cash generated by operating activities was BRL 2.43 billion in 2024, a significant improvement from a BRL 2.27 billion use of cash in 2023, driven by higher operating results and positive working capital changes[93][94] Operating and Financial Results The company's performance is significantly influenced by macroeconomic factors, particularly GDP growth in Brazil and other key markets, and the BRL/USD exchange rate, as most revenues and feedstock costs are dollar-linked. In 2024, the Brazilian Real depreciated 28% against the US Dollar. The petrochemical industry's cyclical nature, volatile feedstock prices (naphtha, ethane), and Brazilian industrial policies like tax incentives (REIQ, Reintegra) are also major factors. Operationally, the average utilization rate for petrochemical crackers in Brazil was 72%, in line with 2023, while the US/Europe rate fell to 74% and Mexico's rose to 78% - A substantial portion of the company's net revenue and feedstock costs are denominated in or linked to the U.S. dollar, making the BRL/USD exchange rate a critical factor. The Real depreciated 28% against the dollar in 2024[99][103] - The global petrochemical market is cyclical, affected by periods of limited supply and high margins followed by capacity additions that pressure prices. Structural changes, such as China's move to self-sufficiency, have led to longer-lasting downturns[115][119] Capacity Utilization Rates - 2024 | Product/Region | Utilization Rate | | :--- | :--- | | Ethylene Brazil | 72% | | PP USA and Europe | 74% | | PE Mexico | 78% | - The company benefits from Brazilian tax incentives such as REIQ (PIS/COFINS reduction), which provided a BRL 277 million credit in 2024, and Reintegra, which provided a BRL 8.6 million credit[144][146] Segment Performance Analysis This section analyzes the financial performance of Braskem's key operating segments—Brazil, United States and Europe, and Mexico—highlighting revenue growth, operating profit changes, and key drivers such as international prices and sales volumes - Brazil Segment: Net revenue increased 11% to BRL 54.8 billion, driven by higher international prices for resins and chemicals, increased sales volume of main chemicals, and the 8% depreciation of the Real. The segment's operating result turned from a BRL 1.9 billion loss in 2023 to a BRL 119 million profit in 2024[178][180] - United States and Europe Segment: Net revenue grew 11% to BRL 19.4 billion due to higher PP prices. However, operating profit decreased by 39% to BRL 541 million, impacted by a 12% increase in the cost of goods sold from higher propylene prices[185][186] - Mexico Segment: Net revenue rose 16% to BRL 5.1 billion, thanks to a 5% increase in PE sales volume and higher international PE prices. The segment's operating result improved significantly, moving from a BRL 337 million loss in 2023 to a BRL 131 million profit in 2024[189][190] - Consolidated recurring EBITDA for 2024 was BRL 5.76 billion, an increase from 2023, mainly due to a 98% rise in gross profit driven by higher spreads in Brazil and Mexico and increased sales volumes[191] Relevant Events Affecting Financial Statements The company's financials are materially impacted by the geological event in Alagoas, for which a provision of BRL 5.57 billion was recorded as of December 31, 2024. This provision covers relocation, compensation, mine closure, and socio-urban measures. The company also concluded the sale of its controlling stake in Cetrel S.A. in September 2024. Additionally, a Leniency Agreement related to Operation Car Wash has a remaining balance of BRL 636 million payable Geological Event Provision (Alagoas) | Item | Amount (BRL million) | | :--- | :--- | | Balance at Dec 31, 2023 | 5,240 | | Provisions in 2024 | 2,237 | | Payments and reclassifications in 2024 | (2,052) | | Balance at Dec 31, 2024 | 5,570 | - The provision for the Alagoas event is allocated to four main areas: support for relocation and compensation (BRL 997 million), mine closure and monitoring (BRL 2.6 billion), socio-urban measures (BRL 1.1 billion), and other additional measures (BRL 825 million)[206][212][214][215] - The company faces contingent liabilities with a possible loss prognosis related to the Alagoas event totaling BRL 9.33 billion as of 2024, primarily from civil claims[224] - In December 2024, the company signed an amendment to its Leniency Agreement, adjusting the payment schedule. The balance payable as of Dec 31, 2024, is BRL 636 million[257][258] Non-Accounting Measurements The company uses non-accounting measures like Adjusted Consolidated EBITDA and Financial Leverage to provide a clearer view of its operating performance and financial position. For 2024, Adjusted Consolidated EBITDA was BRL 5.76 billion, resulting in a financial leverage ratio of 8.68x in BRL and 7.42x in USD. These figures are adjusted for non-recurring items such as the Alagoas geological event provision and exclude the debt and EBITDA of the Braskem Idesa subsidiary for leverage calculation purposes Key Non-Accounting Measures (FY 2024) | Metric | BRL (million) | USD (million) | | :--- | :--- | :--- | | Adjusted Consolidated EBITDA | 5,759 | 1,083 | | Adjusted Net Debt | 38,205 | 6,170 | | Financial Leverage | 8.68x | 7.42x | - Adjusted Consolidated EBITDA is calculated by starting with net loss and adding back taxes, net financial results, depreciation/amortization, and then adjusting for non-recurring items like the Alagoas provision, inventory adjustments, and tax regularization programs[264][271] - For its primary leverage calculation, the company excludes the net debt and EBITDA of its subsidiary Braskem Idesa, as its financing is structured as non-recourse project finance[276] Business Plan Braskem's business plan focuses on three strategic pillars: growing its traditional business with high-return investments and decarbonization efforts; expanding its bio-based resins and chemicals portfolio; and growing its circular products through recycling. The company aims to achieve carbon neutrality by 2050, produce 1 million tons of green products by 2030, and produce 1 million tons of products with recycled content by 2030. Total planned investment for 2025 is BRL 2.9 billion for Braskem and BRL 623 million for Braskem Idesa - Strategic goals include achieving carbon neutrality by 2050 and reducing scope 1 and 2 emissions by 15% by 2030[288] - The company has set targets to expand production capacity to 1 million tons of green (bio-based) products and 1 million tons of products with recycled content by 2030[288] Planned Investments for 2025 | Entity | Planned Investment (BRL) | | :--- | :--- | | Braskem (ex-Idesa) | 2.9 billion | | Braskem Idesa | 623 million | Exhibit II: Nomination of Candidates for the Fiscal Council This exhibit presents the professional qualifications and backgrounds of the candidates nominated by shareholders Novonor and Petrobras for both full and alternate positions on the Fiscal Council Candidate Profiles for Fiscal Council This section provides the professional backgrounds of the candidates nominated by shareholders Novonor and Petrobras for the full and alternate positions on the Fiscal Council. The candidates have diverse experience in law, finance, accounting, and management, with several having prior experience at Petrobras, Banco do Brasil, or within the Novonor Group - Candidates for full member positions include Gilberto Braga (Economist/Accountant), Ana Patrícia Soares Nogueira (Lawyer), Maurício Nogueira (Financial Advisor from Petrobras), and Paulo Cicero da Silva Neto (Accountant from Petrobras)[318][320][323][326] - Candidates for alternate member positions include Tatiana Macedo Costa Rêgo, Heider Josué de Aquino Nascimento, Fernanda Bianchini Egert, and Caio Cesar Ribeiro, with backgrounds in administration, accounting, and economics, primarily from Novonor and Petrobras[329][331][333][336] - All candidates have declared that they have no criminal or significant administrative convictions that would disqualify them from their professional activities[319][322][324][328] Exhibit III & IV: Management Compensation Proposal This exhibit details the proposed compensation limits for the company's managers and Fiscal Council members for 2025, outlines the compensation policy, and describes the share-based compensation plan, including a breakdown of individual compensation Compensation Proposal Summary For the 2025 fiscal year, the company proposes a total global compensation of up to BRL 78 million for its managers (Statutory Officers and Board of Directors), a decrease from the BRL 84.4 million approved for 2024. The reduction is mainly due to the settlement of a retention program in 2024. The compensation for the Fiscal Council is proposed at BRL 1.115 million, the same as the previous year. The actual compensation paid in 2024 was BRL 74.6 million for managers, below the approved limit Proposed vs. Approved Manager Compensation (BRL thousands) | Category | 2025 Proposal | 2024 Approved | | :--- | :--- | :--- | | Monthly and Short-Term Fees | 63,460 | 59,126 | | Long-Term Fees (ILP) | 12,750 | 13,080 | | Benefits | 1,790 | 1,809 | | Others (Retention Program) | 0 | 10,380 | | Total | 78,000 | 84,395 | - The proposed global compensation for the Fiscal Council in 2025 is BRL 1.115 million, unchanged from the amount approved for 2024[360][362] - The actual compensation realized for managers in 2024 was BRL 74.6 million, which was lower than the BRL 84.4 million proposed, despite including termination payments for five statutory directors[363] Detailed Compensation Policy Braskem's compensation policy aims to be competitive and transparent to attract and retain top professionals. Compensation for the Board of Directors and Fiscal Council is fixed monthly fees based on market surveys. For the Statutory Office, compensation is a mix of fixed monthly pay, short-term variable incentives tied to individual and company performance (EBITDA and ESG goals), and long-term incentives through a restricted stock plan. The company targets the third quartile of the market for its officers' compensation - The Board of Directors and Fiscal Council receive only fixed monthly fees to maintain their supervisory independence[367][377][382] - Statutory Officers' variable compensation is linked to short-term individual and company performance (EBITDA) and long-term incentives via a restricted stock plan, aligning their interests with shareholders[378] - Individual goals for officers include ESG indicators such as investments in circular economy, reduction of CO2 emissions, and management of socio-environmental risks[378] Share-Based Compensation Plan The company has a Restricted Stock Grant Plan for its officers, with the current plan (2023 Plan) valid until 2028. Under the plan, eligible officers can voluntarily invest 10-20% of their short-term incentive to acquire company shares ('Owned Shares'). In return, the company grants them a multiple of 'Restricted Shares' (typically 2-for-1), which vest after a three-year waiting period, provided the officer remains with the company and retains their Owned Shares. The plan is designed to align long-term interests of executives and shareholders - The current Restricted Stock Grant Plan (2023 Plan) is effective until 2028 and covers up to 1.5% of the company's capital stock[397][431] - Participants voluntarily invest 10% to 20% of their short-term bonus to acquire 'Owned Shares'. The company then grants 'Restricted Shares' as a counterpart, typically at a 2-for-1 ratio[427][428] - The granted shares are subject to a three-year waiting (vesting) period, during which the participant must remain employed by the company and hold their initial investment shares[429] Management Compensation Breakdown (Min, Max, Avg) This section details the minimum, maximum, and average individual compensation for members of the Statutory Office, Board of Directors, and Fiscal Council over the last three fiscal years. In 2024, the highest individual compensation for a Statutory Officer was BRL 18.4 million, which included non-recurring termination payments Individual Annual Compensation in 2024 (BRL) | Body | Highest (BRL) | Lowest (BRL) | Average (BRL) | | :--- | :--- | :--- | :--- | | Statutory Office | 18,437,691 | 6,964,064 | 10,831,864 | | Board of Directors | 2,554,800 | 894,000 | 1,257,006 | | Fiscal Council | 212,400 | 212,400 | 212,400 | - The highest individual compensation for the Statutory Office in 2024 included non-recurring amounts related to the contract termination of the former CEO[471]