---

---

---

---

---

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ______       No ___X___

---

 

 

Record EBITDA of US$3.9 billion in 2017

Stock price (BRKM5) gains 29% in the period

HIGHLIGHTS:

Braskem – Consolidated:

4  In 4Q17, EBITDA amounted to US$911 million, up 5% from 3Q17, mainly due to the widening of international spreads after Hurricane Harvey in the United States. Compared to 4Q16, EBITDA advanced 25%, explained by sales volume growth and the improvement in chemicals spreads in the international market, PP spreads in the United States and Europe and PE spreads in Mexico.

4  In 2017, consolidated EBITDA was US$3,872 million, a new record for the Company and 17% higher than in 2016, with positive impacts from: (i) sales volume growth in Mexico, due to the complex reaching full ramp-up; (ii) wider spreads for chemicals in the international market, for PP in Europe and for PE in Mexico; (iii) expansion in production capacity and sales volume growth at the units in the United States and Europe; (iv) higher sales volume  in the Brazilian market and record-high production volumes of key chemicals, PP and PE; and (v) capital gain of US$88 million from the quantiQ divestment.

4  In 4Q17, Braskem posted consolidated net income of R$313 million and net income of R$386 million in the Parent Company. In 2017, consolidated net income amounted to R$4,133 million, while net income attributable to shareholders came to R$4,083 million, corresponding to earnings of R$5.12 per common share and per class “A" preferred share¹.

4  In the year, free cash flow was R$2,460 million.

4  Financial leverage measured by the ratio of net debt to EBITDA in U.S. dollar stood at 1.91x at the end of 2017.

4  The recordable and lost-time injury frequency rate, considering both Team Members and Partners per million hours worked, stood at 1.03 in the year, or 41% lower than the global industry average².

4  In December, the Company paid in advance R$1 billion in dividends for fiscal year 2017, representing 24.5% of net income attributable to shareholders for the year.

4  Standard & Poor's reaffirmed Braskem’s investment grade rating of BBB-, with a negative outlook, given the downgrade in Brazil’s sovereign rating in January 2018. In this scenario, the Company maintained investment grade ratings at Standard & Poor's (BBB-) and Fitch Ratings (BBB-) and a rating above Brazil’s sovereign risk at Moody’s.

 

Main Financial Results		4Q17	3Q17	4Q16	Chg.	Chg.	2017	2016	Chg.
R$ million		(A)	(B)	(C)	(A)/(B)	(A)/(C)	(D)	(E)	(D)/(E)
Net Revenue		12,628	12,162	12,046	4%	5%	49,261	47,664	3%
EBITDA		2,952	2,746	2,379	8%	24%	12,334	11,507	7%
Net Profit (Loss)*		386	799	(2,531)	-52%	-	4,083	(411)	-
Free Cash Flow Generation**	-	43	1,068	215	-104%	-120%	2,460	2,247	9%
Net Revenue (US$ million)		3,929	3,788	3,658	4%	7%	15,441	13,734	12%
EBITDA (US$ million)		911	868	727	5%	25%	3,872	3,304	17%
*Net Profit (Loss) Attributable to Company's Shareholders
*** Free Cash Flow Generation relates, according to Annex IV, to the Net Cash provided by operating activities excluding (i) the payment of the leniency agreement and (ii) the effects of
reclassifications between the lines of Financial investments held for trading and Cash and Cash Equivalents; subtracted by the line of Cash used in Investing Activities.

 

---

---

1

 

 

Petrochemical Industry:

4  In 4Q17, the spread of the key chemicals³ produced by Braskem stood at US$344/ton, down 5% from 3Q17, due to the naphtha price increase, which has not been fully reflected in the prices of these products. In 2017, the chemicals spread was US$411/ton, up 28% from 2016, due to increases in the prices of chemicals, especially butadiene and benzene in the first quarter of 2017.

4  In the quarter, the average international spread⁴ for the resins produced by Braskem in Brazil was US$637/ton, down 2% from 3Q17. In the year, the resin spread stood at US$654/ton, down 3% from 2016. In both cases, the spread remained at healthy levels, since resin prices eventually accompanied the increase in naphtha prices.

4  The PP spread in the United States⁵ was US$610/ton, increasing 4% from 3Q17, reflecting the effects from Hurricane Harvey. In the year, the PP spread in the United States was US$585/ton, down 17% from 2016, reflecting the higher propylene price due to the increase in exports and the lower inventories of this product.

4  The PP spread in Europe was US$509/t, down 6% from 3Q17, due to the hike in oil prices, which led to higher propylene prices and to lower seasonal demand for PP in the fourth quarter.

4  The PE spread in Mexico⁶ was US$1,069/ton, increasing 12% from 3Q17, explained by the effects from Hurricane Harvey, by the higher prices for oil/naphtha, which had a greater impact on PE prices than on ethane prices, and by the delays of new capacities expected to come online in the period. In the year, the PE spread in Mexico stood at US$1,001/ton, up 3% from 2016.

 

Petrochemical Spreads - IHS*	4Q17	3Q17	4Q16	Chg.	Chg.	2017	2016	Chg.
US$/ton	(A)	(B)	(C)	(A)/(B)	(A)/(C)	(D)	(E)	(D)/(E)
Chemicals Spread	344	362	325	-5%	6%	411	321	28%
Resins Spread
Brazil	637	650	649	-2%	-2%	654	677	-3%
United States	610	584	588	4%	4%	585	702	-17%
Europe	509	544	438	-6%	16%	505	476	6%
Mexico**	1,069	951	941	12%	14%	1,001	969	3%
* Source: IHS
**Difference between PE and ethane reference prices

Compliance:

4  In keeping with its commitment to acting ethically, with integrity and transparency, the Company launched in 2016 a comprehensive Compliance Program comprising various initiatives to improve its Compliance system. In 4Q17, a total of 31 initiatives under the Compliance Program were concluded, which included:

·       Directives on: (i) Relation with Government Officials; (ii) Internal Controls; (iii) Global Sales; (iv) Attracting & Identifying People; and (v) Disciplinary Measures.

·       Hiring of a Compliance Officer in Europe; and

·       Training programs on the Code of Conduct, Anticorruption and Fair Competition.

 

---

2

---

 

 

Highlights by Segment:

Brazil:

4  Brazilian demand for resins (PE, PP and PVC) was 1.3 million tons in 4Q17, down 4% from 3Q17, due to seasonality. In the year, resin demand was 5.1 million tons, growing 4% from 2016, driven by stronger economic activity, especially from the packaging, automotive, agriculture, retail and electronics industries.

4  Braskem’s resin sales in the Brazilian market amounted to 892 kton in 4Q17, decreasing 2% from 3Q17, lower than the market contraction of 4%. In the year, sales volume in the Brazilian market came to 3.5 million tons, growing 4% from 2016 and setting a new record for PE sales volume. Braskem’s market share stood at 70% in 4Q17 and 69% in 2017.

4  In 4Q17, the average cracker capacity utilization rate was 95%, increasing 3 p.p. from 3Q17. In the year, the average cracker capacity utilization rate was 94%, up 2 p.p. from 2016, supporting record-high production of ethylene, butadiene and gasoline.

4  In 4Q17, the Company exported 339 kton of resins, representing decreases of 15% and 18% compared to 3Q17 and 4Q16, respectively. In the year, resin exports amounted to 1.5 million tons, down 11% from 2016.

4   In 4Q17, the units in Brazil posted EBITDA of R$1,952 million. In the year, EBITDA came to R$8,675 million, which corresponds to 68% of consolidated EBITDA.

United States and Europe:

4  In 4Q17, the average capacity utilization rate stood at 99%, increasing 4 p.p. and 3 p.p. from 3Q17 and 4Q16, respectively. In 2017, the average capacity utilization rate was 97%, down 3 p.p. from 2016.

4  The units in the United States and Europe posted EBITDA of US$175 million in 4Q17 and US$647 million in 2017, corresponding to 16% of the Company’s consolidated EBITDA.

4  Construction of the new PP plant in the United States reached 9% completion in 2017, with investment of US$172 million already disbursed.

Mexico:

4  In 4Q17, the PE plants operated at an average capacity utilization of 86%, down 1 p.p. from 3Q17. In 2017, the average capacity utilization rate was 88%, increasing 46 p.p. from 2016.

4  In the quarter, PE sales in the local market amounted to 144 kton, down 6% from 3Q17. In the year, PE sales in the local market came to 551 kton.

4  EBITDA from the Mexico unit was US$174 million in 4Q17 and US$623 million in the year, corresponding to 16% of the Company’s consolidated EBITDA.

 

OUTLOOK

In January 2018, the International Monetary Fund (IMF) revised upwards its forecast for world GDP growth in 2018 by 0.2 p.p. in relation to its last forecast in October 2017. The current expectation is for the global economy to grow by 3.9% in 2018. The revision reflects (i) the stronger momentum in global growth; (ii) the recent growth in world trade; and (iii) the expected impact from the recently approved U.S. tax policy changes.

According to the Brazilian Central Bank’s “Focus” report, the country’s GDP is expected to grow 2.7% in 2018. The positive result is based on higher levels of household consumption and investments. In the medium and long terms, the main risks to the performance of the Brazilian economy are associated with political uncertainties, which threaten the implementation of structural reforms.

With regard to the dynamics of the oil market, factors supporting the recent upturn in oil prices include the more robust world economy, weather events in the United States, the extension of the agreement to cut oil production by OPEC member nations and other large producers, led by Russia, and geopolitical tensions in the Middle East, while Brent crude oil was quoted as high as US$70 per barrel in mid-January. According to the International Energy Agency (IEA), this price level is not expected to last, given the growing supply of shale oil from the United States, which renders less effective the efforts of global producers to limit production and reduce international inventories. In this scenario, in mid-February, the Brent crude oil price already registered a decline, to US$63.33/barrel.

3

---

 

In the petrochemical industry, the scenario remains positive with healthy spreads expected for the coming years:

§  Chemicals: the chemicals spread in the international market is expected to remain at healthy levels, albeit lower than in 2017, when prices peaked in 1Q17 due to one-off problems with product shortages, especially of butadiene and benzene.

§  Polyethylene (PE): PE spreads in the international market are expected to remain at healthy levels, though still below the level in 2017, given the new polyethylene capacities to come online in the United States during 2018. Spreads should begin to recover as of 2019, given the lack of a second investment phase in the region and the lower production of coal-based product in Asia, leading to high capacity utilization rates for this resin in the global market.

§  Polypropylene (PP): spreads in the international market are expected to remain at healthy levels due to the resin’s supply-demand balance in the global market. In the U.S. market, however, the expectation is for even better PP spreads compared to last year, given the higher supply of propylene feedstock in the region following the startup of another propane dehydrogenator and no new PP capacities expected to come online in 2018.

§  PVC: the scenario remains positive, with the expectation of spreads widening in relation to 2017 over the coming years, since demand exceeds the new capacity added each year, supporting higher global utilization rates.

Furthermore, the global petrochemical market could be affected by the growth in initiatives promoting ethical consumerism and by the change in the Chinese law impacting solid waste imports from other countries to produce resins.

 

In this scenario, the Company’s strategy remains focused on: (i) pursuing higher productivity and competitiveness in its current operations, with a focus on operating efficiency and cost leadership; (ii) diversifying the feedstock profile by increasing the share of gas and maintaining assets flexibility; (iii) expanding the global footprint; and (iv) strengthening Braskem's image and reputation towards Team Members, Clients, Suppliers, Society and Investors, through advances in compliance, sustainability, innovation and people management.

 

4

---

 

 

1.   BRAZIL

Braskem’s results in Brazil⁷ are formed by the following segments: Chemicals, Polyolefins & Vinyls.

 

 

 

---

5

---

 

1.1.  CHEMICALS⁸

 

CHEMICALS	4Q17	3Q17	4Q16	Chg.	Chg.	2017	2016	Chg.
	(A)	(B)	(C)	(A)/(B)	(A)/(C)	(D)	(E)	(D)/(E)
Operating Overview (ton)
Production
Ethylene	902,772	865,570	844,392	4%	7%	3,518,658	3,459,861	2%
Utilization Rate	95%	92%	90%	3 p.p.	5 p.p.	94%	92%	2 p.p.
Propylene	360,984	367,016	330,266	-2%	9%	1,445,887	1,400,466	3%
Cumene	52,817	52,714	54,513	0%	-3%	198,202	193,936	2%
Butadiene	108,576	107,782	95,021	1%	14%	430,032	411,688	4%
Gasolina	245,672	262,085	320,719	-6%	-23%	1,008,579	984,189	2%
BTX*	233,094	257,576	234,028	-10%	0%	977,184	1,000,489	-2%
Others	273,198	273,264	255,590	0%	7%	1,077,453	1,033,848	4%
Total	2,177,113	2,186,008	2,134,529	0%	2%	8,655,996	8,484,476	2%
Sales - Brazilian Market (Main Chemicals)
Ethylene	130,633	133,786	115,902	-2%	13%	523,639	511,865	2%
Propylene	94,647	104,778	75,036	-10%	26%	360,394	291,311	24%
Cumene	53,169	52,409	52,431	1%	1%	199,792	194,472	3%
Butadiene	44,601	48,520	47,187	-8%	-5%	183,849	198,451	-7%
Gasolina	232,772	224,513	213,752	4%	9%	925,867	745,087	24%
BTX*	171,645	163,741	168,721	5%	2%	644,589	676,958	-5%
Total	727,467	727,748	673,028	0%	8%	2,838,130	2,618,144	8%
Exports (Main Chemicals)
Ethylene	36,083	18,397	7,917	96%	356%	100,927	64,193	57%
Propylene	4,601	9,210	7,501	-50%	-39%	43,127	79,312	-46%
Gasolina	14,258	25,508	31,977	-44%	-55%	78,030	194,222	-60%
Butadiene	65,262	57,278	52,167	14%	25%	241,019	213,666	13%
BTX*	80,618	89,734	95,965	-10%	-16%	361,476	347,498	4%
Total	200,822	200,127	195,527	0%	3%	824,579	898,893	-8%
Financial Overview (R$ million)
Net Revenue	6,706	5,958	6,548	13%	2%	25,179	25,063	0%
COGS	(5,450)	(4,876)	(5,294)	12%	3%	(20,530)	(20,248)	1%
Gross Profit	1,256	1,082	1,253	16%	0%	4,649	4,814	-3%
Gross Margin	19%	18%	19%	1 p.p.	0 p.p.	18%	19%	0 p.p.
SG&A	(190)	(207)	(179)	-8%	6%	(773)	(680)	14%
Other Operating Income (Expenses)	(103)	(52)	(295)	99%	-65%	(197)	(410)	-52%
EBITDA	1,255	1,117	1,076	12%	17%	4,809	4,910	-2%
EBITDA Margin	19%	19%	16%	0 p.p.	3 p.p.	19%	20%	1 p.p.
Net Revenue (US$ million)	2,065	1,884	1,989	10%	4%	7,891	7,242	9%
EBITDA (US$ million)	388	353	329	10%	18%	1,510	1,415	7%
BTX* - Benzene, Toluene and Paraxylene

 

Capacity Utilization:

Compared to 3Q17, the 3 p.p. increase in the average capacity utilization of crackers is mainly explained by the record-high utilization rate of 103% at the Rio de Janeiro cracker, which in the prior quarter had been affected by a scheduled shutdown. Compared to the same period of 2016, the average capacity utilization rate of the crackers in 4Q17 was 5 p.p. higher, due to the scheduled shutdown at the Bahia cracker in 4Q16.

In 2017, the average capacity utilization rate of the crackers stood at 94%, advancing 2 p.p. on 2016, reflecting the good operating performance and record production of ethylene, butadiene and gasoline.

 

---

6

---

 

 

Sales Volume – Brazilian Market:

In 4Q17, the volume of sales of key chemicals to third parties was 727 kton, in line with 3Q17 and 8% higher than in 4Q16, which is basically explained by the stronger sales volumes of propylene, ethylene and gasoline.

In 2017, the volume of sales of key chemicals to third parties was a record-high 2,838 kton, growing 8% from 2016, led by the higher volume of propylene sales to the acrylics unit in Camaçari, Bahia and of gasoline sales, reflecting the change in the sales policy.

Sales Volume - Export Market:

Exports of key chemicals came to 201 kton in 4Q17, in line with the volume exported in 3Q17 and 3% higher than in the same period of 2016, driven predominately by sales of ethylene and butadiene.

In 2017, exports of key chemicals amounted to 825 kton, down 8% from 2016, due to the change in the sales mix of gasoline and propylene, both of which are sold in the local market, even though the Company posted record export sales of butadiene and ethylene.

COGS⁹:

In 4Q17, COGS amounted to US$1,678 million, increasing 9% and 4% from 3Q17 and 4Q16, respectively, explained mainly by higher prices for key raw materials.

·         The ARA naphtha price reference averaged US$556/ton, increasing 20% and 26% compared to 3Q17 and 4Q16, respectively, accompanying the higher prices of Brent crude oil. The crude oil price rose 17% and 26% compared to 3Q17 and 4Q16, respectively, reflecting the extension of the OPEC+¹⁰ agreement to cut production and the low oil stocks in the United States. For naphtha supply in the Brazilian market (average of n-1 quote), the average international price reference in 4Q17 was US$532/ton, 24% and 27% higher than in 3Q17 and 4Q16, respectively.

·         The USGC reference price for ethane, the main feedstock used by the Rio de Janeiro cracker, averaged 25¢/gal (US$185/ton), down 4% compared to 3Q17, due to the high inventory build in expectation of new crackers coming online in late 2017, which did not occur on schedule. Compared to 4Q16, the USGC price for ethane rose 4%, which is explained by higher ethane export volumes from the United States, by the higher price for LPG, which led producers to prefer cracking ethane, and by the startup of two new crackers.

·         The USGC price reference for propane in 4Q17 was 96¢/gal (US$ 499/ton), 24% and 65% higher than in 3Q17 and 4Q16, respectively, reflecting the higher volume of exports, especially to Asia, and the signs of a more severe winter in the northern hemisphere.

In 2017, COGS in the Chemical segment amounted to US$6,432 million, up 10% from 2016, due to the growth in sales volume and the higher prices for raw materials, especially naphtha, whose price increased 26% in the period, accompanying the oil price.

SG&A Expenses¹¹:

Selling, general and administrative expenses in 4Q17 and 2017 corresponded to around 3% of the segment’s net revenue in the period.

EBITDA: In 4Q17, EBITDA came to US$388 million, advancing 10% and 18% from 3Q17 and 4Q17, respectively. In 2017, EBITDA from the Chemicals segment was US$1,510 million, up 7% from 2016.

 

---

7

---

 

 

1.2.  POLYOLEFINS¹²

 

POLYOLEFINS	4Q17	3Q17	4Q16	Chg.	Chg.	2017	2016	Chg.
	(A)	(B)	(C)	(A)/(B)	(A)/(C)	(D)	(E)	(D)/(E)
Operating Overview (ton)
Production
PE	697,318	670,673	667,187	4%	5%	2,719,245	2,708,466	0%
Utilization Rate	91%	88%	87%	3 p.p.	4 p.p.	90%	89%	1 p.p.
PP	426,753	430,534	393,676	-1%	8%	1,711,741	1,592,474	7%
Utilization Rate	92%	92%	85%	0 p.p.	7 p.p.	93%	86%	7 p.p.
Total	1,124,071	1,101,207	1,060,862	2%	6%	4,430,986	4,300,940	3%
Sales - Brazilian Market
PE	455,557	477,676	419,557	-5%	9%	1,795,446	1,705,462	5%
PP	289,680	309,945	266,864	-7%	9%	1,164,947	1,105,675	5%
Market Share	74%	73%	71%	1 p.p.	3 p.p.	73%	73%	0 p.p.
Total	745,237	787,621	686,421	-5%	9%	2,960,393	2,811,137	5%
Exports
PE	213,903	222,992	233,859	-4%	-9%	916,115	1,024,233	-11%
PP	116,227	136,175	142,174	-15%	-18%	522,210	566,255	-8%
Total	330,130	359,168	376,032	-8%	-12%	1,438,325	1,590,488	-10%
Financial Overview (R$ million)
Net Revenue	4,984	4,961	4,730	0%	5%	19,650	20,307	-3%
COGS	(3,985)	(3,968)	(3,724)	0%	7%	(15,572)	(15,981)	-3%
Gross Profit	1,000	993	1,007	1%	-1%	4,079	4,326	-6%
Gross Margin	20%	20%	21%	0 p.p.	-1 p.p.	21%	21%	-1 p.p.
SG&A	(346)	(336)	(342)	3%	1%	(1,322)	(1,285)	3%
Other Operating Income (Expenses)	(75)	(57)	(78)	32%	-4%	(178)	(199)	-11%
EBITDA	684	704	694	-3%	-1%	3,001	3,291	-9%
EBITDA Margin	14%	14%	15%	0 p.p.	-1 p.p.	15%	16%	-1 p.p.
Net Revenue (US$ million)	1,536	1,569	1,437	-2%	7%	6,157	5,850	5%
EBITDA (US$ million)	212	223	200	-5%	6%	943	935	1%

 

Capacity Utilization:

The average capacity utilization of PE industrial units rose by 3 p.p. from 3Q17 and by 4 p.p. from 4Q16, when they were affected by the scheduled shutdown of the Rio de Janeiro cracker and one of the cracker lines in Bahia, respectively.

The average capacity utilization rate of the PP industrial units maintained its high level of the previous quarter and increased by 7 p.p. compared to 4Q16, reflecting the improved supply of propylene by the Chemicals segment.

In 2017, the average capacity utilization of the PE plants stood at 90%, increasing 1 p.p. compared to 2016. In the same period, the PP plants operated at an average utilization rate of 93%, 7 p.p. higher than in 2016, influenced by the better performance of the plants in São Paulo state and of the Rio Grande do Sul complex, supported by the improved supply of propylene by the Chemicals segment. In the year, polyolefins production grew 3% compared to 2016, setting a new record.

Brazilian Market:

Influenced by seasonality, the estimated market for polyolefins (PE and PP) in 4Q17 was 1,004 kton, down 7% from 3Q17. Compared to 4Q16, the estimated market for polyolefins expanded 4%, led by sales of PE to the packaging industry, especially for the consumer goods segment, driven by higher household consumption, and of PP to the automotive industry and of raffia to the growing agriculture industry.

In the year, the estimated market for PE and PP grew 5% to 4,061 kton, driven by brisker growth in the packaging industry and by the recovery of certain industries, especially automotive, agriculture, retail and electronics/appliance.

 

12 The Polyolefins segment is formed by 18 industrial plants in Brazil producing polyethylene (PE) and polypropylene (PP), which includes the production of Braskem’s Green PE from renewable feedstock. The industrial operations consist of the PE and PP plants located in the petrochemical complexes of Triunfo, Camaçari, São Paulo, Paulínia and Rio de Janeiro, which have combined annual production capacity of 3,055 kton of PE, with 200 kton of Green PE and 1,850 kton of PP. In 1Q17, the UTEC business, which previously was part of the Polyolefins segment, became part of the United States and Europe segment. 

8

---

 

---

 

 

 

1.3.  VINYLS¹⁴

 

VINYLS	4Q17	3Q17	4Q16	Chg.	Chg.	2017	2016	Chg.
	(A)	(B)	(C)	(A)/(B) (A)/(C)		(D)	(E)	(D)/(E)
Operating Overview (ton)
Production
PVC	157,329	157,052	162,873	0%	-3%	611,217	594,039	3%
Utilization Rate	88%	88%	91%	0 p.p.	-3 p.p.	86%	84%	2 p.p.
Caustic Soda	109,899	108,807	113,282	1%	-3%	408,981	440,907	-7%
Total	267,228	265,859	276,156	1%	-3%	1,020,198	1,034,945	-1%
Sales - Brazilian Market
PVC	147,210	127,193	137,377	16%	7%	525,683	528,314	0%
Market Share	56%	51%	54%	4 p.p.	2 p.p.	52%	52%	0 p.p.
Caustic Soda	96,163	105,748	101,673	-9%	-5%	402,001	436,607	-8%
Total	243,374	232,942	239,050	4%	2%	927,684	964,921	-4%
Exports
PVC	8,452	37,078	39,035	-77%	-78%	82,008	116,919	-30%
Financial Overview (R$ million)
Net Revenue	810	800	794	1%	2%	3,067	3,016	2%
COGS	(670)	(683)	(730)	-2%	-8%	(2,606)	(2,815)	-7%
Gross Profit	140	117	64	20%	118%	461	201	129%
Gross Margin	17%	15%	8%	2 p.p.	9 p.p.	15%	7%	8 p.p.
SG&A	(51)	(36)	(67)	40%	-25%	(163)	(237)	-31%
Other Operating Income (Expenses)	(94)	(19)	(51)	384%	86%	(163)	(72)	127%
EBITDA	73	146	38	-50%	92%	454	241	88%
EBITDA Margin	9%	18%	5%	-9 p.p.	4 p.p.	15%	8%	7 p.p.
Net Revenue (US$ million)	250	253	241	-1%	3%	962	870	11%
EBITDA (US$ million)	22	46	12	-51%	92%	143	69	108%

 

Capacity Utilization:

The average capacity utilization of PVC stood at 88% in 4Q17, in line with 3Q17 and 3 p.p. lower than in the year-ago period. In 2017, the average capacity utilization of the PVC plants stood at 86%, up 2 p.p. from 2016.

---

10

---

 

 

Brazilian Market:

The estimated market for PVC in 3Q17 was 265 kton, expanding 7% and 4% from 3Q17 and 4Q16, respectively. In the year, the estimated PVC market contracted 2%, mainly due to the performance of the construction and infrastructure sectors.

Sales Volume - Brazilian Market:

In 4Q17, PVC sales grew 16% on the prior quarter, outstripping demand in the Brazilian market. In this scenario, Braskem’s market share stood at 56%, gaining 4 p.p. in relation to 3Q17. Compared to the same period last year, PVC sales grew by 7%.

In 2017, sales amounted to 526 kton, in line with 2016, with the highlight the sales to the clothing and footwear sector. Market share also was stable in relation to 2016, at 52%.

Sales Volume - Export Market:

Braskem continued to export PVC to offset the contraction in the local market, although at lower volumes compared to 2016.

COGS¹⁵:

In the year, COGS amounted US$818 million, up 1% from 2016 as a result of higher feedstock prices in the international market. 

SG&A Expenses:

Selling, general and administrative expenses in 4Q17 and in 2017 corresponded to 6% and 5% of the segment’s net revenue, respectively.

EBITDA:                                                   

Supported mainly by the better international spread for PVC and caustic soda, EBITDA in U.S. dollar advanced 108% compared to 2016, to US$143 million. Despite the Brazilian real appreciation in the period, EBITDA amounted to R$454 million, growing 88% from 2016.

 

2.   UNITED STATES AND EUROPE¹⁶

---

11

---

 

VINYLS	4Q17	3Q17	4Q16	Chg.	Chg.	2017	2016	Chg.
	(A)	(B)	(C)	(A)(B)	(A)/(C)	(D)	(E)	(D)/(E)
Operating Overview (ton)
Production
PVC	157,329	157,052	162,873	0%	-3%	611,217	594,039	3%
Utilization Rate	88%	88%	91%	0 p.p.	-3 p.p.	86%	84%	2 p.p.
Caustic Soda	109,899	108,807	113,282	1%	-3%	408,981	440,907	-7%
Total	267,228	265,859	276,156	1%	-3%	1,020,198	1,034,945	-1%
Sales - Brazilian Market
PVC	147,210	127,193	137,377	16%	7%	525,683	528,314	0%
Market Share	56%	51%	54%	4 p.p.	2 p.p.	52%	52%	0 p.p.
Caustic Soda	96,163	105,748	101,673	-9%	-5%	402,001	436,607	-8%
Total	243,374	232,942	239,050	4%	2%	927,684	964,921	-4%
Exports
PVC	8,452	37,078	39,035	-77%	-78%	82,008	116,919	-30%
Financial Overview (R$ million)
Net Revenue	810	800	794	1%	2%	3,067	3,016	2%
COGS	(670)	(683)	(730)	-2%	-8%	(2,606)	(2,815)	-7%
Gross Profit	140	117	64	20%	118%	461	201	129%
Gross Margin	17%	15%	8%	2 p.p.	9 p.p.	15%	7%	8 p.p.
SG&A	(51)	(36)	(67)	40%	-25%	(163)	(237)	-31%
Other Operating Income (Expenses)	(94)	(19)	(51)	384%	86%	(163)	(72)	127%
EBITDA	73	146	38	-50%	92%	454	241	88%
EBITDA Margin	9%	18%	5%	-9 p.p.	4 p.p.	15%	8%	7 p.p.
Net Revenue (US$ million)	250	253	241	-1%	3%	962	870	11%
EBITDA (US$ million)	22	46	12	-51%	92%	143	69	108%

 

Capacity Utilization:

The average capacity utilization rate in the United States and Europe was 99% in 4Q17, increasing 4 p.p. compared to 3Q17, given the shutdown of plants in Texas in August due to Hurricane Harvey. Compared to 4Q16, the utilization rate increased 3 p.p., due to the shutdown for the capacity-expansion project at the Marcus Hook plant in late 2016.

In 2017, the capacity utilization rate was 97%, down 3 p.p. from the previous year, reflecting the revision of production capacity conducted in 2017. Considering the same nominal capacity for both years, the capacity utilization rate in 2017 was 5 p.p. higher than in 2016. In the year, production in the United States and Europe grew 5% to set a new record.

Market:

United States: Despite Hurricane Harvey and the weaker performance of the automotive industry, U.S. PP demand increased in relation to 2016, mainly supported by the food packaging and nonwoven industries.

Europe: The recovery of European economies gained traction over the year, with PP demand in 2017 higher than in the prior year, driven by the automotive industry. Furthermore, local producers increased production in the period due to the lower volume of PP imports, due to maintenance shutdowns in the Middle East and the effects from Hurricane Harvey in the United States. This enabled Braskem to use its position as a local competitor to leverage exports from Brazil.

Sales Volume:

Sales volume in 4Q17 declined 5% compared to 3Q17, due to seasonality, and increased 3% compared to 4Q16, due to stronger PP production in the United States coupled with the increase in demand.

In the year, sales set a new record by advancing 5%, which is basically explained by the capacity expansion projects at the plants in the United States (late 2016) and Germany (early 2017) and by the firm PP demand in these regions.

12

---

 

 COGS¹⁷:

In 4Q17, the segment’s cost of goods sold (COGS) amounted to US$611 million, increasing 29% from 4Q16.

·         The average price of USGC polymer grade propylene in 4Q17 was US$1,080/ton, up 18% and 35% from 3Q17 and 4Q16, respectively, explained by the products shortage due to Hurricane Harvey.

·         The European price reference for propylene averaged US$1,025/ton in 4Q17, increasing 9% and 29% from 3Q17 and 4Q16, reflecting the longer-than-expected maintenance shutdowns at the region’s crackers.

In 2017, COGS stood at US$2,324 million, increasing 33% from 2016.

·         In the year, propylene prices in the United States averaged US$986/ton, increasing 30% from 2016, explained by higher propane prices and low inventory levels. In 2017, the reference price for Europe was US$946/ton, up 30% on the prior year, reflecting the higher oil prices and the growing share of gas used as feedstock by European crackers at the expense of naphtha, which reduced the supply of propylene in the region.

 

SG&A Expenses:

Selling, general and administrative expenses corresponded to 6% of the segment’s net revenue in 4Q17 and 2017.

EBITDA:

EBITDA in 4Q17 came to US$175 million, advancing 6% on 3Q17, explained by the 4% increase in the PP-propylene spread¹⁸ in the United States. In Brazilian real, EBITDA was R$567 million, accounting for 18% of consolidated EBITDA.

In the year, EBITDA was US$647 million, down 7% from 2016, due to the 17% decline in PP-propylene spreads³ in the United States. The result reflects the lower supply of propylene, given the growing demand for the product in the year, while exports increased and new capacity startups were delayed. In Brazilian real, EBITDA amounted to R$2,063 million, accounting for 16% of consolidated EBITDA.

 

3.  MEXICO (Braskem Idesa)¹⁹

---

13

---

 

 

MEXICO	4Q17	3Q17	4Q16	Chg.	Chg.	2017	2016	Chg.
	(A)	(B)	(C)	(A)/(B)	(A)/(C)	(D)	(E)	(D)/(E)
Operating Overview (ton)
Production
PE	226,737	229,504	193,189	-1%	17%	923,540	443,180	108%
Utilization Rate	86%	87%	73%	-1 p.p.	13 p.p.	88%	42%	46 p.p.
Sales
Mexican Market	144,207	153,149	81,862	-6%	76%	551,264	201,066	174%
Exports	86,534	82,357	116,843	5%	-26%	418,067	231,378	81%
Total	230,741	235,506	198,706	-2%	16%	969,330	432,444	124%
Financial Overview (US$ million)
Net Revenue	288	267	217	8%	33%	1,128	474	138%
COGS	(159)	(166)	(141)	-4%	13%	(657)	(344)	91%
Gross Profit	129	101	75	28%	71%	472	131	261%
Gross Margin	45%	38%	35%	7 p.p.	10 p.p.	42%	28%	14 p.p.
SG&A	(23)	(25)	(19)	-9%	16%	(90)	(68)	31%
Other Operating Income (Expenses)	5	3	0	92%	2337%	9	0	11948%
EBITDA	174	136	102	28%	71%	623	163	282%
EBITDA Margin	60%	51%	47%	9 p.p.	13 p.p.	55%	34%	21 p.p.
Net Revenue (R$ million)	936	843	714	11%	31%	3,601	1,587	127%
EBITDA (R$ million)	567	429	336	32%	69%	1,987	530	275%

Capacity Utilization:

In 4Q17, the average capacity utilization rate of the PE industrial units was 86%, down 1 p.p. from 3Q17, given the supply of ethane in the period, and up 13 p.p. from 4Q16. Compared to 2016, the average capacity utilization rate of PE increased 46 p.p., since the plants were in ramp-up phase during the period.

Mexican Market:

In 4Q17, the estimated PE market in Mexico was 523 kton, down 6% from 3Q17, impacted by seasonality and pent-up demand due to the expected decline in PE prices in the region following the startup of new gas-based capacities in the United States. Compared to 4Q16, the estimated market grew 2%.

In 2017, the estimated PE market in Mexico was 2.2 million tons, 1% higher than in 2016, but lagging the projected 2% growth in Mexico’s GDP, according to the IMF, adversely affected by lower consumption due to higher interest rates.

Sales Volume:

In 4Q17, sales volume followed the overall industry performance, decreasing 6% compared to 3Q17. Compared to 4Q16, when the plants were in the ramp-up phase, sales in the local market were 76% higher.

Surplus product in the quarter was directed to exports, which increased 5% compared to 3Q17, mainly to the United States, due to the lower supply of PE in the region caused by Hurricane Harvey. Meanwhile, compared to 4Q16, exports fell 26%, given the priority on sales in the local market.

In 2017, given the product’s higher supply, total PE sales volume grew 124% compared to 2016. Braskem Idesa increased its market share in Mexico, supported by sales growth of 174% compared to 2016.

Exports grew 81%, with more profitable markets, such as Europe and the United States, accounting for a higher share, driven by the expansion of the product portfolio and better coordination between the sales teams in the United States and Europe.

 

19 The segment comprises an ethane-based cracker, two high-density polyethylene (HDPE) plants and one low-density polyethylene (LDPE) plant with combined PE production capacity of 1,050 kta. This unit includes the results of Braskem Idesa SAPI and of the other subsidiaries of Braskem S.A. in Mexico.

14

---

 

 

 

COGS²⁰:

In 4Q17, COGS²¹ stood at US$159 million, down 4% from 3Q17, influenced by the lower sales volume and lower prices of ethane and natural gas. Compared to 4Q16, COGS increased 13%, reflecting the higher sales volume.

·         the U.S. Gulf Coast reference price for ethane (ethane USGC) fell 4% from 3Q17 and increased 4% from 4Q16, as explained above.

·         the Henry Hub reference price for natural gas fell 2% and 5% from 3Q17 and 4Q16, respectively, given the expectation of temperatures above previous forecasts for the U.S. winter.

In the year, COGS²¹ came to US$657 million, increasing 91% from 2016, due to the higher sales volume.

·         The USGC price reference for ethane increased 26% compared to 2016, due to stronger demand after the startup of ethane export terminals, the higher prices of LPG and the expected startup of new crackers.

·         The Henry Hub price reference for natural gas increased 19% compared to 2016, due to higher export volumes to Mexico. Furthermore, in 2016, the natural gas price was affected by inventories above the average in last 5 years, due to high winter temperatures.

 

---

15

---

 

 

SG&A Expenses:

Selling, general and administrative expenses corresponded to 8% of the segment’s net revenue in 4Q17 and 2017.

Other Income/Expenses, Net (OIE):

In 4Q17, OIE included income of R$11.4 million related to the financial penalty established in the ethane supply agreement. In the year, this income amounted to US$19.5 million.

EBITDA:

In 4Q17, EBITDA was US$174 million, growing 28% from 3Q17, due to the higher spreads in the international market. Compared to 4Q16, EBITDA advanced 71%.

In 2017, EBITDA was US$623 million, increasing US$460 million compared to 2016, due to the ramp-up process.

Financial Results Braskem Idesa: 

In 4Q17, the financial result was an expense of R$741 million (compared to the net financial expense of R$363 million in 3Q17), reflecting the impact from an exchange variation loss on the outstanding balance of the loan, due to the depreciation in the Mexican peso against the U.S. dollar in the quarter. On December 31, 2017, the outstanding principal of the loan with the project’s shareholders stood at US$1,998 million. In 4Q17, the Company recognized an expense of R$51 million related to the adoption of hedge accounting in the profit or loss.

Excluding the effects from exchange variation, the financial result in 4Q17 was an expense of R$227 million, down 2% from the expense recorded in 3Q17.

 

Financial Result (R$ million)	4Q17	3Q17	4Q16	Chg.	Chg.	2017	2016	Chg.
BRASKEM IDESA	(A)	(B)	(C)	(A)(B)	(A)/(C)	(D)	(E)	(D)/(E)
Financial Expenses	(241)	(238)	(253)	1%	-5%	(974)	(689)	41%
Interest Expenses	(229)	(218)	(249)	5%	-8%	(867)	(643)	35%
Others	(12)	(21)	(4)	-41%	192%	(107)	(46)	131%
Financial Revenue	14	8	1	80%	n.a.	25	3	672%
Interest	2	2	1	23%	159%	6	3	95%
Others	12	6	0	96%	n.a.	18	0	n.a.
Foreign Exchange Variation, net	(514)	(132)	(384)	289%	34%	132	(1,094)	-112%
Foreign Exchange Variation (Expense)	(595)	(146)	(412)	308%	44%	134	(1,163)	-111%
Foreign Exchange Variation (Revenue)	80	14	28	491%	187%	(2)	69	-102%
Net Financial Result	(741)	(363)	(636)	104%	17%	(817)	(1,780)	-54%

In 2017, the financial result was an expense of R$817 million (compared to net financial expense of R$1,780 million in 2016), positively impacted by an exchange variation gain on the outstanding balance of the loan, due to the appreciation in the Mexican peso against the U.S. dollar in the year. The Company recognized an expense of R$164 million related to the adoption of hedge accounting in the profit or loss.

Excluding the effects from exchange variation, the net financial result in the year was an expense of R$949 million, compared to an expense of R$686 million in 2016, explained by the capitalization of interest through April 2016, corresponding to the project phase of Braskem Idesa, and by the increase in LIBOR.

 

16

---

 

CONSOLIDATED²²

 

Financial Overview (R$ million)	Net				Minority	Other Revenues	Operating	EBITDA
CONSOLIDATED 4Q17	Revenue	COGS	Gross Profit	SG&A	Interest	and Expenses	Profit
Brazil	10,115	(7,723)	2,392	(647)	11	(307)	1,449	1,952
U.S. and Europe	2,671	(1,983)	687	(161)	-	(16)	510	568
Mexico	936	(519)	418	(72)	-	16	362	567
Other Segments	69	(19)	50	(15)	-	7	42	48
Eliminations and Reclassifications	(1,163)	986	(176)	24	-	(3)	(155)	(182)
Braskem Total	12,628	(9,257)	3,371	(870)	11	(304)	2,208	2,952
Financial Overview (R$ million)	Net				Minority	Other Revenues	Operating	EBITDA
CONSOLIDATED 2017	Revenue	COGS	Gross Profit	SG&A	Interest	and Expenses	Profit
Brazil	38,698	(29,357)	9,341	(2,229)	40	(423)	6,729	8,675
U.S. and Europe	9,854	(7,419)	2,435	(583)	-	(21)	1,831	2,064
Mexico	3,601	(2,097)	1,503	(283)	-	28	1,248	1,987
Other Segments	81	(33)	48	(15)	-	(68)	(35)	56
Eliminations and Reclassifications	(2,974)	2,506	(468)	49	-	6	(414)	(447)
Braskem Total	49,261	(36,401)	12,860	(3,061)	40	(480)	9,359	12,334

 

---

17

---

 

 

NET REVENUE

 

 

In 2017, net revenue amounted to US$15.4 billion, advancing 12% on 2016, which is explained by (i) the sales volume of the Mexico complex; (ii) the recovery in local demand; (iii) higher prices for resins and key chemicals in the international market; and (iv) the capacity expansion projects at plants in the United States and Germany. In Brazilian real, net revenue came to R$49.3 billion, advancing 3% on the prior year.

 

COST OF GOODS SOLD (COGS)

Consolidated COGS in 4Q17 was US$2,852 million, down 1% from 3Q17, due to the lower sales volume in nearly all segments, which offset the higher feedstock prices in the international market. In Brazilian real, consolidated COGS came to R$9,257 million, up 1% from 3Q17, due to the local currency’s depreciation in the period.

Compared to 4Q16, COGS in U.S. dollar increased 4%, due to sales volume growth and higher feedstock prices. In Brazilian real, COGS increased 3% from 4Q16.

In 2017, COGS amounted to US$11,407 million, increasing 13% from 2016, explained by the sales volume growth in Mexico due to reaching full ramp-up and by the higher feedstock prices in the international market. In Brazilian real, COGS came to R$36,401 million, up 4% from 2016.

18

---

 

 

 

SG&A EXPENSES

In 4Q17, selling, general and administrative expenses amounted to R$870 million, increasing 9% compared to 4Q16, reflecting sales volume growth and higher expenses with advertising and publicity. In U.S. dollar, expenses amounted to US$250 million, 4% lower than in 4Q16.

In the year, expenses were R$3,061 million, up 7% from 2016, due to the higher selling expenses in Mexico and audit expenses. In U.S. dollar, SG&A expenses amounted to US$906 million, 3% higher than in 2016.

OTHER INCOME/EXPENSES, NET (OIE)

The Company recorded an expense of R$ 304 million in Other Income (Expenses), Net in 4Q17, which is mainly related to the provision for recovery of environmental damages in the amount of R$102 million, adjustment to the profit sharing of team members in the amount of R$113 million, and provision for legal and labor claims in the amount of R$57 million.

In 2017, other expenses decreased by R$3.4 billion compared to 2016, mainly due to the financial penalty under the global settlement executed in 2016 and provisioned for in 4Q16. Excluding the capital gain from the divestment of quantiQ, in the amount of R$277 million in 2017, the Company recorded an expense of R$756 million under Other Income (Expenses), Net, which mainly includes:

§  employee profit sharing (R$400 million);

§  provision for impairment losses from fixed and intangible assets (R$77 million);

§  write-off of fixed and intangible assets due to discontinuity, including investment projects and ongoing maintenance shutdowns (R$129 million); and

§  provision for legal and labor claims (R$120 million).

19

---

 

 

EBITDA

In 4Q17, Braskem’s consolidated EBITDA²³ amounted to US$911 million, advancing 25% on the year-ago period. In Brazilian real, EBITDA came to R$2,952 million, 24% higher than in 4Q16. Despite the impact from seasonality, EBITDA in 4Q17 grew by 5% compared to 3Q17, due to the widening of spreads caused by shortage of resins in the aftermath of Hurricane Harvey in the U.S. Gulf Coast.

In 2017, consolidated EBITDA was US$3,872 million, a new record for the Company and 17% higher than in 2016, with positive impacts from: (i) higher sales volume in Mexico, due to the conclusion of the complex’s ramp-up process; (ii) higher international spreads for chemicals, PP in Europe and PE in Mexico; (iii) expansion in production capacity and higher sales volume at the units in the United States and Europe, with record PP production in the United States; (iv) higher sales volume in the Brazilian market, with record production volumes of key chemicals, PE and PP; and (v) capital gain of US$88 million from the quantiQ divestment. In Brazilian real, EBITDA amounted to a record-high R$12,334 million, advancing 7% from 2016, influenced by the Brazilian real appreciation in the comparison period.

NET FINANCIAL RESULT²⁴

---

20

---

 

 

 

The net financial result in 4Q17 was an expense of R$1,199 million, compared to an expense of R$638 million in the previous quarter. Excluding the effects from exchange variation, the net financial result in 4Q17 was an expense of R$925 million, increasing R$503 million from the expense in the prior quarter.

• Financial expenses increased 74% from 3Q17, mainly due to the early settlement of derivative operations in the amount of R$810 million, which impacted financial expenses by R$471 million. This derivative is associated with a swap transaction to exchange debt from BRL to USD. Overall, these operations (the derivative and debt) have a higher carrying cost and were settled using the proceeds from the bonds issue concluded in October 2017.
• Financial income was impacted by the reduction in the basic interest rate in Brazil and decreased by 13% compared to 3Q17.
• Net exchange variation was affected by the depreciation in the Brazilian real in the period and by the transition of hedge accounting of exports, in the amount of R$249 million.

In the year, the net financial result was an expense of R$3,131 million, down R$1,084 million from 2016. Excluding the effects from exchange variation, the net financial result in 2017 was an expense of R$2,194 million, stable compared to the expense in the prior year.

• Excluding the impact of R$471 million on “Other Expenses” from the settlement of derivative operations, financial expenses were in line with those recorded in 2016.
• Financial income decreased by 11%, influenced by the reduction in Brazil’s interest rates.
• Net exchange variation was affected by the depreciation in the Brazilian real in the period and by the transition of hedge accounting of exports, in the amount of R$1,023 million.

Currency Hedging Program

Braskem holds net exposure to the U.S. dollar (i.e., more USD-pegged liabilities than USD-pegged assets). At the end of 2017, this net exposure was formed: (i) in the operations, by 56% of suppliers, which was offset by 66% of accounts receivable; and (ii) in the capital structure, by the higher exposure of net debt to the U.S. dollar. Since its operating cash flow is heavily linked to the dollar, maintaining this level of net exposure to the dollar in liabilities acts as a natural hedge. Virtually 100% of its revenue is pegged to the variation in the U.S. dollar and approximately 80% of its costs also is pegged to this currency.

Therefore, in September 2016, Braskem launched a recurring currency hedge program to mitigate the exposure of its cash flows to liabilities denominated in Brazilian real and not pegged to the U.S. dollar (e.g., electricity, payroll, etc.).

With the sole purpose of protecting its cash flow, the program adopts two strategies using derivative instruments: (i) purchase of put options (“puts”) and (ii) purchase of put options associated with the sale of call options (“collars”).

Both alternatives protect Braskem in the event of appreciation in the local currency, with the difference being that the collar strategy can also result in losses for the Company if the USD/BRL exchange rate surpasses the strike price of the call options. With collars, however, the payment of the net premium for obtaining the puts is lower, since the Company receives a premium from the sale of the call options. Lastly, note that any losses from the collar strategy always are offset by gains in competitiveness from the reduction in costs denominated in BRL when translated into USD.

As of December 31, 2017, Braskem held put options in the amount of U$1.4 billion, with an average strike price of 2.96 R$/US$. Braskem also held a total notional value of short options in call option contracts in the amount of U$926 million, with an average strike price of R$4.32. The operations have a maximum term of 18 months.

Such operations were designed for the hedge accounting of cash flows as from January 1, 2017, and seek to hedge future exports denominated in USD with maturities in months coinciding with the maturity of the derivatives.

21

---

 

 

                     

NET INCOME/LOSS

 

DIVIDENDS

In November 2017, the Board of Directors approved the early payment of dividends for fiscal year 2017 in the amount of R$1 billion, representing 24.5% of the net income attributable to shareholders in the year, in the approximate gross amount of R$1.26 per common or class “A” preferred share and R$0.61 per class “B" preferred share. Payment was made in December 2017.

LIQUIDITY AND CAPITAL RESOURCES

22

---

 

---

 

 

Risk-rating agencies:

Braskem maintained investment grade ratings at Standard & Poor's (BBB-) and Fitch Ratings (BBB-) and credit ratings above Brazil’s sovereign risk at the three main rating agencies (S&P, Fitch and Moody’s). The reports are available on the Investor Relations website (http://www.braskem-ri.com.br/home-en).

 

CAPITAL EXPENDITURE²⁵

Braskem’s units in Brazil, United States and Europe made investments in the aggregate amount of R$1,760 million (excluding investments in the new PP plant approved in the year), in line with the initial estimate for 2017.

Investments in the Brazilian units came in 3% below estimate, explained by the savings obtained on the acquisition of equipment, by the effects from the stronger BRL on expenses pegged to the USD and by the changes to the project execution timetable.  In U.S. dollar, because of the difference in actual Brazilian real appreciation compared to expectations for the local exchange rate for the year, expenditures were 6% above the initial estimate.

Considering the investment made in building the new polypropylene plant in the United States, of R$532 million, Braskem’s units aggregate investment in Brazil, United States and Europe was R$2,293million. 

 

 

In the same period, Braskem Idesa made investments totaling R$ 22 million, 58% below the amount forecast for the year as a result of the investment portfolio’ optimization, which resulted in the postponement/ cancellation of some projects.

 

 

---

24

---

 

 

Investments in 2018

Braskem plans to invest around R$2,872 million this year, of which R$1,047 million (US$320 million) is pegged to the U.S. dollar related to operating investments in the United States, Europe and Mexico units.

Of this amount, R$1,987 million will be allocated to maintenance, productivity, HES and operational efficiency, including the disbursements for the scheduled maintenance shutdown of the cracker in Triunfo, Rio Grande do Sul, which is scheduled for 1Q18. The remainder will be allocated to other strategic projects, such as the new PP plant in the United States (US$263 million).

 

 

 

Braskem Idesa plans to invest around US$42 million (R$137 million) in projects related to maintenance, productivity, HES and operating efficiency.

 

 

25

---

 

CASH FLOW²⁶

In 2017, Braskem recorded free cash flow²⁷ of R$2,460 million, 9% higher than in 2016. 

Excluding (i) R$608 million related to the acquisition of interests in Cetrel and Distribuidora de Água Camaçari; (ii) R$450 million received from the quantiQ divestment; and (iii) R$39.6 million in proceeds from the sale of land in the ABC region of Greater São Paulo, free cash flow in the year was R$2,579 million, 15% higher than in 2016. The increase is mainly explained by (i) the higher cash generation from operations; (ii) the 20% reduction in payment of IR/CSLL in the United States; and (iii) the 10% decline in investments, due to the completion of construction of the Braskem Idesa petrochemical complex.

 

VALUE DRIVERS

4 New PP plant in the United States

Consistent with Braskem’s strategy to diversify its feedstock profile and to expand geographically in the Americas, strengthening its leadership in polypropylene production in the United States, the Board of Directors approved, on June 21, 2017, the project to build a new 450 kton polypropylene plant at its site in La Porte, Texas. The project’s startup is slated for the second quarter of 2020.

With investment approved of up to US$675 million, in 2017, Braskem already invested US$172 million, related to expenditures with detailed engineering and equipment purchases. In 2017, the project advanced 9%: 67% of engineering and 43% of purchases were completed, and also site preparation for construction and assembly of temporary facilities was started. Another highlight was the contracting of Linde Group to lead the project’s EPC and the selection of UNIPOL^® technology, from Grace.

4 Feedstock flexibility project in Bahia:

In 4Q17, the project to enable up to 15% of the ethylene produced by the cracker in Bahia state to use ethane as feedstock was completed. A series of modifications were made to the industrial site and to the Port of Aratu over the past 13 months to ensure the reliability, quality and safety of the operations. A total of R$380 million was invested in the technological adaptation of the Chemicals Unit at Camaçari, in the interconnection pipeline and in the adaptation of logistics infrastructure at the Aratu Port Terminal.

In November, the project reached an important milestone with the first vessel loaded with ethane docking at the Port of Aratu. On November 20, the product arrived in the furnaces for cracking, marking Braskem’s first flex operation at Camaçari.

 

SUSTAINABLE DEVELOPMENT

Braskem continues to focus on strengthening its contribution to sustainable development, mitigating risks and seeking shared value creation. Its efforts in this area are structured along three main fronts: (i) Increasingly sustainable Resources and Operations; increasingly sustainable feedstocks and operations, a portfolio of increasingly sustainable products, and solutions for a more sustainable life. The highlights in the quarter include:

 

---

---

 

26

 

4   ISE Index: for the 13^th year in a row, Braskem was included in the Corporate Sustainability Index (ISE) of the São Paulo Exchange (B3), which recognizes the best publicly traded corporations in Brazil in managing sustainable development.

4   CDP Climate: for the second straight year, Braskem was named an “A List” company in the Climate ranking of the Carbon Disclosure Project (CDP), which recognizes the best publicly traded corporations in managing greenhouse gas emissions. Braskem was the only Brazilian and Latin American company to achieve the top score in CDP's Climate ranking, consolidating its position as a reference in the management of GHG emissions and recognizing its contributions to the transition towards a low-carbon economy.

4   CDP Water: for the first time Braskem was named an "A List" company in the CDP’s Water ranking, which recognizes the best publicly traded corporations in managing the use of water resources. Braskem was the only Brazilian and Latin American company to achieve the top score in CDP's Water ranking, consolidating its position as a reference in the management of water resources and recognizing its contributions to the transition towards a more sustainable economy.

4   LCA Study: With Braskem’s support, the Hospital Technical Committee of the Brazilian Association of Nonwovens and Technical Fabric Manufacturers (ABINT) worked on the review of the standard ABNT NBR 16064, seeking not only to specify the materials to be used in producing the kits, but also to establish performance and quality criteria for these products.

4   Wecycle platform: In 2017, Braskem created the Recycling & Wecycle Platform area, which aims to consolidate actions and leverage initiatives, businesses and sustainable solutions related to the circular economy for plastics, especially recycling. Created in 2015, the Wecycle platform will continue to be used to foster businesses and initiatives that value plastic waste and the development of solutions, products and processes that involve plastic recycling, among which we highlight the following:

 

o    The packaging for the stain remover Tira Manchas Qualitá, developed in partnership with Pão de Açúcar, was one of the winning projects of the 11^th edition of the Great Packaging Case Studies Award of the Brazilian Packaging Association (ABRE). 31 projects were recognized at the awards ceremony, which was attended by 500 professionals representing the packaging value chain.

o    The Wecycle resin supported the creation of a new bicycle concept, which is the result of 12 years of research and of investment of some R$5 million by Muzzicycle. The bicycle frame contains around three kilograms of plastic, of which 30% has been recycled.

o    Braskem joined forces with the companies Martiplast, a producer of housewares, and Leroy Merlin, one of the largest construction materials chains, to offer consumers organizing boxes made of 100%-recycled plastic (polypropylene), which was recycled from big bags previously used by the company to transport and move their resins.

 

27

---

 

---

 

 

EXHIBITS LIST:

 

DISCLAIMER

This release contains forward-looking statements. These forward-looking statements are not solely historical data, but rather reflect the targets and expectations of Braskem’s management. Words such as "anticipate," "wish," "expect," "foresee," "intend," "plan," "predict," "project," "aim" and similar terms seek to identify statements that necessarily involve known and unknown risks. Braskem does not undertake any liability for transactions or investment decisions based on the information contained in this document.

 

 

---

29

 

 

Appendix I

Consolidated Statement of Operations

 

 

 

ANNEX II

Calculation of Consolidated EBITDA

 

 

 

(i)   Represents the accrual and reversal of provisions for the impairment of long-lived assets (investments, property, plant and equipment and intangible assets) that were adjusted to form EBITDA, since there is no expectation of their financial realization and if in fact realized they would be duly recorded on the statement of operations.

(ii)  Corresponds to the results of quantiQ and IQAG.

(iii) Corresponds to results from equity investments in associated companies and joint ventures.

 

 

30

---

 

ANNEX III

Consolidated Balance Sheet

 

 

 

 

31

---

 

---

 

 

EXHIBIT IV

Consolidated Cash Flow²⁸

 

 

---

33

---

 

 

EXHIBIT V

Calculation of Free Cash Flow

 

Free Cash Flow Generation	4Q17	3Q17	4Q16	Chg.	Chg.	2017	2016	Chg.
R$ million	(A)	(B)	(C)	(A)/(B)	(A)/(C)	(D)	(E)	(D)/(E)
Net Cash provided by operating activities	1,330	1,472	1,271	-10%	5%	2,462	4,458	-45%
(-) Cash used in Investing Activities	1,330	763	833	74%	60%	2,406	2,552	-6%
(+) Leniency Agreement	-	736	-	n.a.	n.a.	1,344	-	n.a.
(+) Reclassification of cash and cash equivalents	(42)	(378)	(223)	-89%	-81%	1,061	342	210%
(=) Free Cash Flow Generation	(43)	1,068	215	-104%	-120%	2,460	2,247	9%

 

 

 

 

EXHIBIT VI

Statement of Operations – Deconsolidation Braskem Idesa

 

	Consolidated Ex Braskem Idesa		Braskem Idesa Consolidated
Income Statement (R$ million)					Eliminations		Consolidated
	2017	2016	2017	2016	2017	2016	2017	2016
Net Revenue	46,207	46,343	3,657	1,495	(603)	(174)	49,261	47,664
Cost of Good Sold	(34,899)	(34,041)	(2,125)	(1,109)	623	164	(36,401)	(34,986)
Gross Profit	11,308	12,302	1,532	386	20	(10)	12,860	12,678
Selling and Distribution Expenses	(1,288)	(1,287)	(172)	(117)	-	-	(1,460)	(1,404)
General and Administrative Expenses	(1,336)	(1,201)	(122)	(124)	24	40	(1,434)	(1,286)
Research and Development Expenses	(167)	(162)	-	-	-	-	(167)	(162)
Other Net Income (expenses)	192	(923)	-	-	(152)	953	40	30
Investment in Subsidiary and Associated Companies	(512)	(3,914)	32	8	-	-	(479)	(3,906)
Operating Profit Before Financial Result	8,197	4,816	1,270	153	(108)	983	9,359	5,951
Net Financial Result	(3,131)	(4,215)	(817)	(1,780)	6	(96)	(3,942)	(6,091)
Financial Expenses	(3,045)	(3,054)	(974)	(689)	271	172	(3,747)	(3,571)
Financial Revenues	850	955	25	3	(271)	(268)	604	690
Exchange Variation, net	(937)	(2,116)	132	(1,094)	6	-	(799)	(3,210)
Profit Before Tax and Social Contribution	5,066	601	453	(1,627)	(102)	887	5,417	(140)
Income Tax / Social Contribution	(992)	(1,039)	(300)	423	-	-	(1,292)	(616)
Discontinued operations result	9	27	-	-	-	-	9	27
Net Profit (Loss)	4,083	(411)	153	(1,204)	(102)	887	4,133	(729)

 

34

---

 

EXHIBIT VII

Balance Sheet - Deconsolidation Braskem Idesa

 

 

 

 

 

35

---

 

---

 

EXHIBIT IX

Production Volume

 

 

 

 

37

---

 

---