[Interpreted] Good afternoon, and thank you for standing by. Welcome, everyone, to Braskem’s Third Quarter 2022 Results Conference Call. With us today, we have Mr. Roberto Simões, Braskem’s CEO; Mr. and Pedro Freitas, the company’s CFO; and Ms. Rosana Avolio, IRO, Strategic Planning and Corporate Market Intelligence Director.

This event is being recorded and all participants are connected in listen-only mode during the company’s remarks. After Braskem’s presentation, there will be a question-and-answer session when further instructions will be provided.

[Operator Instructions] This event is also being broadcast live via webcast and may be found at Braskem’s website at www.braskem.com/ri, where the respective slide deck can also be found. Slide selection can be made by participants. The audio facility will be made available after the event is over.

Webcast participants may post their questions via the website. They will be addressed after the closing of the presentation by our IR team.

Before moving on, it’s important to say that forward-looking statements made during this call concerning the company’s business outlook, as well as financial and operating targets and prospects are based on the company’s assumptions and beliefs, and also on information currently available to the company.

Those forward-looking statements are no guarantee of performance as they involve risks, uncertainties and assumptions as they refer to future events and, therefore, depend on circumstances that may or may not materialize.

Investors and analysts should have in mind that macroeconomic conditions, industry conditions and other operating factors can also affect future results of the company and, therefore, lead to results that you’ll differ considerably from those expressing these forward-looking statements. I’ll now turn the floor over to Ms.

Rosana Avolio, Investor Relations, Strategic Planning and Corporate Market Intelligence Director, who will start the presentation. Please, Ms. Avolio, you have the floor..

[Interpreted] Good morning, ladies and gentlemen, thank you for participating in Braskem’s conference call. We will present today the results for the third quarter of 2022. Let’s go to Slide #3. I will make some comments about the company’s main highlights for the quarter.

The global scenario in the third quarter of 2022 remained impacted by global macroeconomic uncertainties, geopolitical tensions, and perspectives on the performance of the world’s major economies. These uncertainties directly influenced the global demand and, consequently, the dynamics of the petrochemical industry.

Moving on to financial highlights, the company reported recurring EBITDA of US$371 million. Additionally, cash generation in the quarter was R$889 million. Concerning return to shareholders, the return on cash flow was 31%.

Now, going to our credit metrics, the corporate leverage remained low in the period and we maintain strong liquidity position enough to cover the debt maturities for the next 5 years.

It’s worth noting that the company’s debt profile continues to be very elongated and the company continues to maintain its rated investment-grade by S&P and Fitch Ratings. In the quarter, we had experienced significant advances in the ethane import terminal in Mexico.

Braskem Idesa obtained its approval for the constitution of the joint venture with Advario from the Federal Economic Competition Commission of Mexico. The construction started in July 2022 with physical progress of 22% by September 2022.

We would like to remind you that this terminal will have the capacity to import on average 80,000 barrels of ethane per year, providing conditions for Braskem Idesa to import all its raw materials needs, besides allowing a study for expansion of about 20% of the polyethylene production capacity in Mexico.

Moving on to the highlights of ESG agenda, we launched Voqen, an energy and natural gas trading company that will help Braskem and its clients in the energy transition. In addition, we launched Oxygea, a business and innovation hub that will foster the emergence of new technologies in that sustainability and digital transformation.

Finally, Braskem into the United States signed a contract to purchase renewable energy for the Neal Plant in West Virginia, starting its supply by the end of 2024.

Now, moving on to social area, we advanced in the program of financial compensation and support to the relocation in Alagoas, and ended the quarter with a proposal acceptance rate of 99.6%.

In addition, the company implemented actions to support the needy population, circular economy and environmental education in the communities surrounding its operations. Let’s now go to Slide 4.

In the third quarter of 2022, the recurring EBITDA was US$371 million, 54% lower than the previous quarter, and explained primarily by lowering international resin spreads by the lower export volume of resins in Brazil, lower sales volumes of polypropylene in the United States, and polyethylene in Mexico.

In addition, in the quarter, we had the accounting effect of inventory realization in the net amount of US$75 million. Excluding this inventory realization effect, recurring EBITDA was US$448 million for the quarter. Considering the 9 months of 2022, the company’s accumulated recurring EBITDA was US$2.92 million.

Now, moving on to the next slide, we are going to hear about the highlights of each of the segments. This slide, we present the main highlights of our operations in Brazil.

In the third quarter of 2022, the utilization rate of petrochemical plants in Brazil was 79%, 5 percentage points higher than the previous quarter, mainly due to the resumption of operations after a scheduled maintenance shutdown at the Rio Grande do Sul petrochemical plant.

In the Brazilian market, resin sales in the quarter increased 2% in relation to the previous quarter, due to higher availability of products and the higher demand in the period, because of seasonality.

As for resin exports, they decreased by 18% due to fewer opportunities in the international market, given the high inventory levels in the global chain. Within this context, Brazil’s recurring EBITDA in the third quarter 2022 was US$312 million. The next slide, I’m going to talk about the geological event of Alagoas.

The chart on the left shows the total amount of provisions for the geological event of Alagoas, which is R$13 billion, of which, R$6.1 billion had already been disbursed. Moving on to the chart in the middle, we can see the balance of provisions, the balance registered in the end of the third quarter of 2022 was approximately R$7.2 billion.

The chart on the right we can see the disbursement schedule of the resources of the current balance about 67% was registered in short-term and 33% in the long-term.

It’s important to mention that the company cannot rule out future developments related to the issue or its associated expenses, and the cost to be incurred by Braskem may differ considerably from its estimates or accrued and provisioned amounts. Now, moving on to the next slide.

We keep on speaking about the geological event in Alagoas, and I’ll make some comments on our progresses. Since in relation to relocation and compensation, Braskem maintain its process of relocation and financial compensation of families located in the neighborhood areas of risk areas in Maceió.

All the proposals for financial compensation reached 18,259 in the end of 2022, just focusing on the high maintenance of acceptance of proposals which amounted to 99.6%. In terms of closure and monitoring of wells, by the end of October 2022, out of 35 mining wells [ph], 9 belong to the Sand Backfilling Group.

Out of which 9, 4 have ongoing filling, 3 at advanced stages of filling. Now in relation to the other 26 other wells [ph], the actions of closing and monitoring of south wells are following the schedule approved by ANM, the National Mining Agency. Finally, also make some comments about socio and urban as well as environmental measures.

The activities of these found are concentrated on urban mobility, social compensation, and actions in unoccupied areas. For this specific area, I’d like to highlight the following points.

The hiring of a specialized consulting firm to evaluate and monitor the execution of the environmental plan, and the integrated action plan, in accordance with, which was established in our socio-environmental agreement. We started 2 projects related to urban mobility out of a total of 11 actions.

There was 64% progress in the demolition process at the Mutange hillside area. And finally, we’ve signed and confirmed the term of agreement, the adoption of requalification and indemnification for the region Flexais. Now, let’s move on to the next slide. The slide, I’ll present the main highlights of operations in the United States and Europe.

In the third quarter of 2022, the utilization rate of the polypropylene plants in the USA was 74%, 7 percentage points lower than in the second quarter of 2022. This reduction is explained by lower demand in the region and shorter unscheduled shuts.

In Europe, the utilization rate decreased by 1 percentage point compared to the previous quarter, due to lower availability of raw material, which was caused by operational problems of local suppliers and also to the lower demand in the period.

Now, speaking of commercial performance in the United States, the sales volume for the quarter was 381,000 tons, which represents reduction of 19% over the previous quarter. In Europe, sales volumes in the third quarter of 2022 was 128,000 tons with an increase of 8%, when compared to the previous quarter.

If this segment, recurring EBITDA in the third quarter, was US$62 million. Now going to the next slide, I will address the highlights of the operations in Mexico. In Mexico, the utilization rate in the third quarter of 2022 was 76%, 9 percentage points higher than in the second quarter of 2022.

Due to higher ethane supply by PEMEX, and also ethane imported through Fast Track. Concerning sales, there was a reduction of 5% over the second quarter 2022 due to rebuilding of inventory levels at Braskem Idesa. Recurring EBITDA for the segment in the third quarter of 2022 was US$14 million. Now, let’s go to the next slide.

We will address the ethane terminal in Mexico. The beginning of the construction of the ethane import terminal in Mexico was one of the major highlights of the quarter for the Mexico operation. Terminal Química Puerto México is the joint venture between Braskem and Advario.

With each partner holding 50% of the company’s shares, its raw material supply capacity for the terminal will be approximately 80,000 barrels of ethane per day, which represents 120% of Braskem Idesa current raw material needs.

A CapEx of the project is estimated about $400 million, and the expectation is that the beginning of the terminal operations will be the second half of 2024. The physical progress of the project at the end of September 2022 was 22%.

Finally, it’s worth pointing out that in the amendment [ph] signed with PEMEX in 2021, Braskem Idesa has the right of preference to purchase all the ethane that PEMEX has available and not consume in its own production process until 2045. Now, going to the next slide. We’re going to address company’s cash generation in the quarter.

In the quarter, the company had cash generation amounting to R$889 million. Excluding the payments related to Alagoas geological event in the quarter. The company had a recurring cash generation of R$1.557 billion.

The main thing that were recurring EBITDA for the quarter, and the positive variation in working capital, due to reduction in accounts receivables, caused by lower sales volume and lower price references in the international market, and also by the reduction in inventory levels due to lower price references in the international market.

Now, let’s go to the next slide. The end of the third quarter 2022, the company maintained a very long debt profile with strong liquidity position, and most of its debt maturing after 2030.

The average debt term was around 13 years, and the company’s current liquidity level guarantees the coverage of debt maturities in the next 63 months without considering the available international revolving credit line in the amount of US$1 billion, maturing until 2026.

Let’s move on to the next slide, where we’ll talk about company’s credit metrics. Aligned with the dynamics observed in the previous quarter, Braskem maintained its solid credit metrics and corporate leverage remained low in the third quarter and close at 1.55 times.

It’s worth pointing out that the aim is to maintain a robust cash position with a very long debt profile, and that we are committed to efficient capital allocation and the maintenance of our investment-grade rating. Moving on to the next slide, let’s talk about our ESG agenda.

Braskem held the second edition of ESG Day, a meeting with the financial market to share the advances of our commitments to sustainable development.

During the event, we reinforced our commitment to strengthening Braskem’s role in the carbon neutral and circular economy, and shared Braskem advances in the pillars of actions, which include eliminating plastic waste, and fighting climate change. Both initiatives are part of the company’s growth avenues for the future.

The presentation and the video of the complete event can be accessed on Braskem Investor Relations website. Moving on to the next slide. Now, during the quarter, Braskem launched Voqen, an electric energy and natural gas trading company.

Voqen was born with a portfolio of R$3 billion, and theory and whose aim is to leverage business opportunities through the collaborative creation of competitive solutions that can accelerate the sustainable energy transition of the company and the industry at large.

The company has also launched Sustainea joint venture formed between Braskem and Sojitz for the development of biogas technology, based through plants with a reduction of carbon footprint in its production process. As the reference in 2021 based on external consultancies, the global market of bioMEG represented R$26.3 billion.

We have also launched Oxygea, which is the business innovation hub that will foster the emergence and development of new technologies focused on sustainability, and digital transformation. Now, moving on to the next slide.

Here, I would like to highlight some initiatives carried out by Braskem in order to contribute to the pillar of human rights and social responsibility. To support low income population, Braskem in partnership with NGO Ação da Cidadania has contributed with donations of basics [ph] Braskem.

In addition, Braskem will donate another R$5 million to the same campaign. Regarding private social investments, during the quarter there was Plastianguis held in Mexico encouraging recycling and promoting environmental education. 143 tons of plastic waste recollected benefiting 7,000 people.

In Brazil, another edition of Plastitroque took place provide environmental education in the communities surrounding Braskem operations. More than 18.5 tons of plastic waste were correctly disposed, benefiting about 4,400 people.

In the project Corais de Maré, Braskem is part of a joint initiative that developed an innovative technique to speed up the restoration of corals using plastic, in addition, training environmental agents in the region. This project also included a cleaning task force to raise awareness of the population about the correct disposal of plastics.

Now, let’s go into the next slide. On this slide, we’ll talk about the petrochemical scenario of polyethylene and polypropylene in 2022, lower global demand for resins coupled with higher inflation globally, and high inventory levels in the global chain resulted in lower spreads during the third quarter of 2022.

According to the latest external consultants projections, the expectations are that polyethylene and polypropylene spreads are to remain pressure throughout the fourth quarter 2022 due to lower global demand associated with the entry of new capacity of this products. Moving on to the next slide, I’ll present the company’s short-term outlook.

For Brazil, there is a reduction in ethylene production. In the commercial side, we expect to reduce sales volumes of resins and the main chemicals due to lower demand in the estimated period. Now concerning spreads, external consulting companies expect a drop in the spreads for resins and basic chemicals due to lower global demand.

In the United States, well, the utilization rate and sales volumes are expected to remain at similar levels to those of the third quarter 2022. The spreads of PP-propane in the U.S. are expected to decrease, however, at levels above the recent historical average.

Finally, in relation to Mexico, there is an expectation of include in production volumes because, there is an expected increase in total supply of raw material. In this situation, the expectations have an increase in sales volumes of PE due to bring your product availability.

Now, going to the next slide, I would like to remind you our main goals for 2022, apart and broken into our strategic pillars. Starting with productivity and competitiveness, our focus will be on capturing value with transformation initiatives, a recurring earnings of R$302 million per year for 2022.

Moving on to sustainability, our focus is on intensifying actions in recycling, expansion of renewables and reduction of carbon emissions. As to diversification, there are few relevant projects in terms of diversification and also growth.

The construction of the Ethane Import Terminal in Mexico, in addition to the definition of a partner, both of them already concluded, and also the progress with the feasibility studies to invest jointly with SCG Chemicals in the construction of a new green ethylene plant in Thailand.

Next, people, governance and reputation, we’ll continue to focus on evolving on all fronts related to the geological event in Alagoas. Finally, in our capital allocation pillar, we’ll be focused on returning value to shareholders, in addition to maintaining our investment-grade trading, according to the rating agencies.

With that, we conclude the presentation of Braskem’s third quarter earnings for the year 2022. Thank you very much for your attention. We are now going to move on for the Q&A session..

Ladies and gentleman, we will now start the Q&A session. [Operator Instructions] Our first question comes from Pedro Soares from BTG Pactual. Please go ahead..

[Interpreted] Good morning, everyone. Good morning Roberto, Pedro, Rosana. I have two questions actually. The first one about the spread issue.

Rosana was quite clear in terms of the expectations of the company, and also talking about the further deterioration, if you could perhaps expand your horizon through 2023 mainly? Do you expect this final stretch for 2022 would be getting closer to the valley as opposed to the peak? Or if next year we would see further deterioration vis-à-vis what we’ve seen in the second half of this year? So if you could put those results into context.

And if we would be expecting, maybe that’d below US$2 billion. In other words, we’d be facing a down cycle going forward. If you could comment on it, I’d appreciate it. Thank you. And also a second question about CapEx, the company has been going through a more controlled phase in terms of capital allocation.

But with this deteriorating scenario, if you would foresee additional reduction in the short-term, or not, if you have got that all under control. Thank you..

[Interpreted] Hello, Pedro. This is Pedro Freitas speaking. It’s nice talking to you. So as for the spread issue this year and next year, part of the reason that this spread in this year is dropping, and we’ve been talking about this since last year, we had an expectation of a downtrend and spread levels.

But that’s 3 main drivers some non-recurring events, which happened last year. And also from the point of view of demand, this year we had lower demand than expected, because of the lockdowns in China. And on the offer side, my third driver this year we had new capacity coming in, which was expected, so this down cycle was somewhat expected as well.

So, this new capacity coming in is unfolding now, especially in China. For 2023, there is some more new capacity to kick in. On the demand side, we expect to see a growth in demand across the world below historical levels, of course, because of some events.

But based on macroeconomic news, global wise, when we look at polyethylene next year we see a growth in supply more than the growth in demand not to the tune of this year, but higher. But 2024, we see a reverse in that trend, because investments for 2025 are not being made now.

Things that should be under construction now are not, so looking at those numbers coming from my external consultancy firm. We have this outlook that 2022 will still see more capacity kicking in, but then we’ll see a reverse especially for polyethylene, which suffer if I make more than other products.

Right now, we see a spread moving sideways – I am getting some feedback hear from my voice. Hang on a second please. [Technical Difficulty] Okay. Here we are, okay. So, despite this perspective pointing to Q4, for Q3, we saw as I said a sideways movement as well.

So for the short run, Q4 [Technical Difficulty] So, as I said, new capacity coming in and a higher capacity for 2024. As for capital allocation it’s only natural when you have a cycle of better results [Technical Difficulty] And the opposite also, we are able to reduce investments very much in line with the cycle momentum.

So that review is happening right now. We had announced early in the year US$1.2 billion in investments for the year. The expectation that we have now is about US$1 billion, we have reduced that number within the portfolio by US$200 million in terms of CapEx, without major impacts on the operations, because demand is lower.

So we do not need to have plants working at full steam, right, we do not need to have operational level to the max. So, we’re analyzing that on a case by case basis, of course. And we have this expectation that we will reduce CapEx for the year to the tune of US$200 million give or take. And for next year, CapEx level is expected to be lower as well.

Now, on the same token, we will prioritize safety so investments on safety will be preserved. And, of course, this prioritization effort is very intense, because we are focused also on our growth strategy, especially around recycling and renewables. So, we’re trying to strike that balance right now..

[Interpreted] Okay, thank you. Thank you, Pedro..

Our next question comes from Bruno Montanari from Morgan Stanley. Please go on..

[Interpreted] Good morning, everyone. Thank you for taking my questions. A follow-up to Pedro’s question about the spreads. It’s part of the cyclic nature of the industry, but perhaps the size of the drop was higher than expected.

So in addition to CapEx, what other measures can the company take or is taken right now on the side of expenses and costs to be able to offset those negative numbers in the company’s operating margins? And whether if you could perhaps manage more working capital going forward after several quarters last year, where we were consuming that we saw a better cash generation flow? And also, how can that evolution of the spreads of the cash generation affect the dividend payout discussions, apparently, there is less room to higher payouts? And the last question, if I may, if you could please comment on the material fact released on Novonor Corporation or partnership, so perhaps their potential sale of their stake in the company? Has anything happened on that front? Have you been meeting with them? So any news on that front would be very welcome.

Thank you..

[Interpreted] Hi, Bruno. As you said, the magnitude, the speed of the drop in spreads was slightly higher than expected or above what we expected. Basically, I would say for 2 reasons.

The lockdowns in China, one of the reasons early the year, nobody would imagine that things would play out that way; even last year, when we working on our projections, nobody thought about that scenario to have that level of lockdowns in China, so widespread and for so long.

And, of course, that has an impact on demand, and that led to that drop in spreads. That’s one of the main reasons. A secondary driver was the war in Ukraine, and the subsequent increase in the cost of energy in Europe. Of course, that also led to a drop in spread, because of the cost of gas, an impact on feedstock once again. So that’s a fact.

When we look at the working capital, which was a comment that you made just now. When we have a drop in prices, it is only normal to see that happening.

When spreads go up, you have an increase in prices, and then, we increase the value of what we have in terms of accounts receivable; or in other words credit that we provide our clients, our inventory levels also go up. So you have more working capital be consumed. When feedstock prices go down, we have the opposite effect.

We have more working capital freed up. So this offset, or even a hedge if I may, it’s something we see happening quite often in our industry. As to what else we’re doing to your point, I mentioned, CapEx, we are reviewing our fixed costs line, the hiring of new personnel is going out through a much more rigid approval process than in the past.

We have been looking at all fixed expenses and also variable expenses from SG&A to try and identify where we can have savings. We are revisiting contracts with suppliers as well. We are looking at how we can reduce output.

We are also trying to optimize or looking at our asset portfolio and assess our assets to see if it would make sense for us to simply shutdown one of our lines, right, and see what would happen, or anticipate, or pull back dates on some scheduled maintenance stops. Anything we can do to fine tune our costs.

When we see there, the fact of that another costs that may be favorable, right, and part of that repercussion will be seen and the inventory safety levels, right, and producing less, my inventory security level might also drop. So we are revisiting all of that, including the purchase of inputs for our production.

So let’s say that that’s a deep dive done by assets, by purchase, by procurement, taking into account a lower level production scenario; and as for fixed costs and SG&A also very strict discipline in terms of hiring, approving and so on. We have become extra strict in that regard.

As for the working capital front, there’s also a concentrated action in place, the review payment terms, maybe trying to extend payment terms with suppliers. If you look at our payment terms, you’ll see that as a rule, it is quite good. But we’re always going back trying to find other opportunities in that respect, working with clients as well.

As I said, once again, our safety inventory levels also being looked into. So we are working across the board to your point. As for the dividend payout question, we have consolidated our results at R$1.4 billion in the year. Our dividend payout policy, we’re going to pay the mandatory minimum level 25%, we have to wait for the final quarter results.

I cannot predict what’s going to happen given that foreign exchange variation has an important effect on our results. In this quarter that variation was negative to the tune of R$1 billion, so depending on the foreign exchange variation, you may have either a positive or a negative effect in the bottom line.

So we’ll be paying at least a minimum 25%, and then as every year, we’ll see what we can do in addition to that, always with a look, with an eye to our dividend payout policy.

It is a forward-looking policy as you know, if something changes the market, if the economy picks up faster than expected or if we have an external event that will improve the overall scenario. All that will be factored in as we work on our dividend payout moves.

I think, it’s worth mentioning that our dividend payout policy always looks at our leverage level and looks ahead to be able to strike a balance, especially when we have different cycles beginning or starting with our policy has proven to be very robust to face market volatilities.

And lastly, as to your question about the material fact, which we published last week. We received this letter from Novonor. And as everyone knows, the divestment process has been going on for some time now.

And the interaction they’re having with potential buyers seems to have moved forward that’s what we can assume from the letter that they sent, when they informed us that in the coming weeks, they might come in direct contact with us or other potential interested parties. If that happens, well, Braskem has not taken part in that process directly.

So we have not been negotiating that specific point. So if that happens, Braskem will be – have direct interaction as the due diligence process starts. So that’s what we have in this letter, where – so what this means is, brace yourselves, be ready, because we’re going to need your support very, very soon.

So what are we doing now, we are updating and revealing the information around due diligence processes, so that we can be ready. We are, of course, very much concerned with the confidentiality level of that kind of information, because we’ll be talking about more detailed information, if we reach that stage.

For now, we haven’t started the due diligence process. But we do believe this is going to happen very soon. That’s what we have so far..

[Interpreted] Okay. Thank you, Pedro..

The next question comes from Leonardo Marcondes with Bank of America..

[Interpreted] Good morning. Thank you for getting my questions.

Trying to quantify spreads for 2023, I’d like to understand, if you’re seeing something along the lines of what we observed for the second part of this year? Or do you expect to have narrow spreads for next year? Now, trying to understand when are we going to see the bottom of the cycle, because spreads will probably pick up again by 2024? So I’d like to know, what are the main drivers in your perspective? Would it be increase of demand, reduce capacity? Where would you really expect to see that coming from? Thank you..

[Interpreted] Hello, thank you very much for the question. Concerning spreads for 2023, we are still running internal discussions, because of all the uncertainties in the macro perspective. But relying on our external consulting companies, it seems to expect – we are expecting greater demand.

So PVC, PP, PE is estimated based on the history to have an increase. So there is an effect of global demand not developing so much. And the demand for petrochemical products really growing slowly, it was 1.3% of 1.5% kind of ratio. So considering all, that situation we expect to have spreads similar to what would be the low cycle spreads.

So this is a general comment, of course. And I’ll go back again into diversification. Why have we invested on diversification, it brings positive effect that’s why we invest it for the past 10 years. So basic petrochemical products have some resistance spreads. In the U.S. spreads, the average is even higher than the average of the industry.

So diversification shows that spreads, yes, the lowest of cycles, but some of the spreads are still sustained, and above the average of the industry. And this resulted from our process of resilience. Now, speaking of upside, when you analyze the foundations of petrochemical industry, everything has changed in terms of offering.

There has been a substantial change, as Pedro pointed out in previous question. It has been a change in the perspective of growth of global demand. So the upside results from the scenario in Europe, political tensions, but also the policy of restrictions in China.

And China, of course, plays a very important role in the plastic consumption in the world. So, if China opens the market again, we’ll go back to that narrative that we consider to be more appropriate for upcoming years, which is a spread above the industry levels..

Great. Thank you very much..

The next question comes from Vicente Falanga from Bradesco BBI..

[Interpreted] Good morning. Good morning, Roberto, Pedro, Rosana. Thank you very much for answering my questions. I have 3 quick questions. First, the prices of ethane.

They have changed since the end of September like 30% over to now, and you kept for the benefit of it on the fourth quarter, especially in Mexico, do you have any estimate of impact? Second one, concerning the export of resins, and considering Brazil and Mexico. Last time, I checked, Mexico exports to Europe as well.

So, how badly they’ve been affected by the slowdown in China and Europe? And when do you expect the international global chain due [indiscernible] again? And finally, as we have seen a price adjustment to freight costs, do you expect to keep on running on U.S.

pricing? Or do you plan to change? Or do you expect to change the indexation? Thank you very much..

[Interpreted] Okay. You asked for ethane, it dropped at normal levels. Our cycle from when we buy the feedstock, because we calculate the cost based on the average. At the end of the day, we’re talking about a moving average for costs. So in Mexico, that effect is felt in 2 months.

So we expect to see that benefit, quote unquote, of the drop in ethane costs in the last quarter of the year. Now, we need also to assess the spread. We also had a difference in the polyethylene price, as you mentioned, because of the lower availability of the product across the world.

And, of course, we have this, a lot of those effects on global demand. So, basically, when we look at those specific effects coming from a thing, the answer is the effects will be seen in the final quarter of the year. As for exports in Mexico, we continue to export to Europe. We sell into the U.S., too, but Mexico is very competitive.

So they are able to allocate products across any region. For, the U.S. right now, they have excess offerings in the U.S., given all the investments that were made. So right now to sell in the U.S. is not a priority, because it’s not very attractive.

It’s better for us to sell elsewhere in Europe, for example, or in the Central America, South America regions that continues to be our focus. And the main one, of course, across the Americas minus the U.S. Then, to your question about the indexing metrics, we see no change in that, because those indexes are given by the region that exports the most.

So the ones who export the most resins [ph], so polyethylene and PVC come from the U.S., so the American prices are the index and polypropylene coming from Asia as a different indicator. So those indicators will not change.

Because within our commercial policy, in terms of pricing, that’s what basis our numbers, that’s what we see happening in real life, commercial flows. And that’s what we continue to use going forward..

Okay. Thank you..

Our next question comes from Luiz Carvalho of UBS..

[Interpreted] Hi, Pedro, Rosana, thank you for answering the question. I’d love to go back to some points that you’ve discussed, but maybe take a different side of them. You have broken down results by region, which is great, so Brazil, Mexico, U.S., and Europe.

And in this level of spread, what attracted me attention is that the only region that has really maintained cash generation in Brazil? Could you please tell us about competitiveness levels in all the 3 regions where we are represented? Mexico involved R$40 million, something like that. And the second question about dividends.

We can see some of the companies today changing somewhat their policies, Petrobras has done that that has gained more visibility of basing dividend distribution based on cash generation.

So my question is, would it make sense to come up with any changes along these lines? Considering that have controlled leverage very long-term debt profile, many projects? So would it make sense to ease your dividend distribution on cash generation? And thirdly, concerning sales, you were talking about that in the upcoming week.

So I would like to know based on the contact you have Novonor, because there was an attempt to follow on the beginning of the year, in apparently, there was a demand for one specific price close to R$42. And now the number seems to be very far from that.

So how does it all interact going into a well structured, let’s say, conversation, trying to get to appropriate share prices earning? Of course, consider that the Novonor’s creditors would also have assay in this process. Thank you..

[Interpreted] Hi, Luiz. Well, as to cash generation, you did mention that, while the U.S. also came out, above average for the cycle, when we look into the details of why that happened in the U.S., and in Brazil. In Brazil, we have the basic chemical products, so the effect on basic chemicals bring to Brazil is unique to this country.

That’s one of the positive effects that we saw for Brazil. Also, as Brazil is larger in terms of volume. So most of the working capital that we used was allocated in Brazil, of course, when we look at those two components, they can explain the point that you have raised.

So that’s the reason why in summary, right? Once again, I’m looking ahead, looking forward, we do believe that that ratio, a better cash generation should not present such a mismatch across different regions, but we’ll have to wait and see. When we talk about the dividend payout and what we see other companies do using cash flow levels.

That’s a topic that Braskem is considering adopting in our dividend payout policy. But what we’re living through now is a good explanation of why we haven’t done it yet. Ours is a cyclical industry with significant speed, historically speaking. So when we look at those factors, we are also concerned about preserving our investment grade.

We do not want to push it and commit to a dividend policy that will lead to a mandatory payout at a relevant level, when we are in a down cycle. So to strike that balance within our policy is something we are trying to do. And the asset test, right now, will help us find that balancing point.

In our case, it is more difficult than for other companies, which are dependent on a single product. If you have an iron ore or oil, then you would depend on a single variable. In our case, we have multiple products, several different feedstocks. It’s difficult for us to identify all the parameters to put together a whole policy.

That’s why it takes a bit more time for us to do that, than others. As for sales, as I mentioned, we do not take part in the decision making process or in the sales and price discussions. We know about price, so it won’t because during the follow on in January. We had access to the book. So we knew the prices which were offered in the book.

So we had a reference, right? Nothing came out of that, but we had access to that. So we knew that price played a major role. But that price sensitivity still holds. As far as we know, conditions are in terms are the same, and Petrobras outlook is still the same. So we have no reason to believe that the price sensitivity has dropped.

We believe it has been the same. If you look at the newspaper headlines, we do not know what the basis are for those headlines. But there is an expectation that prices will be at a level, which is pre-January, but we do not know whether or not that is true. In a nutshell, we have no reason to believe that sensitivity to pricing has decreased.

But, again, we have no access to that information, what’s being negotiated, what’s been discussed, what’s on the table..

[Interpreted] Okay, thank you. Thank you..

Next question comes from Gabriel Barra with Citibank..

[Interpreted] Thank you, Roberto, Pedro, Rosana, thank you for getting my question. Can you hear me all right? Yes. Most of the discussions have already been made. But I would like to make some follow-ups and maybe some new sides of it.

If we can talk about the change in the President, and in Brazil, and all the differences that we have observed in terms of input rates and everything, can you tell us your perspective on it for the upcoming year? Will there be any potential changes or impacts for the company? Secondly, if you could tell us more about Alagoas.

In this quarter, there was a small amount in your provisions according to the balance, where there’s still a potential point for discussion and increases.

What are, let’s say, the sensitive points of this discussion? So that we can understand really, what it means for the company in the future? And something with Novo Mercado, we started this discussion, and then no longer it was addressed.

So what is the current status? Do you still expect changes into Novo Mercado? And what kind of discussion are you having with Petrobras? Is this still an open discussion to migrate? So these were my points..

[Interpreted] Hello, Gabrielle, thank you for your questions. As to the change in administration government, we can put it all under the same umbrella of industrial policy. We do not know what the new administration will be doing in terms of industrial policies. We’re still waiting to see what’s going to happen.

Of course, actions which are taken this year in terms of import fees and taxes, we believe that they should be linked to a reduction in the so-called Brazil costs, but we need to wait and see what the next government will do.

But our focus will remain on the fact that any change on industrial policy, or any change on the longstanding framework should be linked to a reduction in the so-called Brazil cost, and that’s where our focus will be. But it’s still early to know. We do not know what the new government will do in terms of concrete measures.

As for Alagoas within our provision for Q3, slightly over R$7 billion, when we split that have the relocation and compensation, we are looking to complete the proposal submission process and to the end of the year.

That’s our goal with we’ll try to reach that goal to the end of the year to avoid extending that to next year, but we are well advanced in that process. As for payments, we make the proposal, the proposal is analyzed, and then we get a feedback. There is an acceptance of that they form monetization process, and then we make the payment.

So that process takes about 2 to 3 months, on average. So that this investment today at R$2.4 billion one-third of the provision, give or take, this should go on until early next year for most of that to be really dispersed. As for the salt hubs at R$1.5 billion, we are moving forward quickly.

2 of the 9 cavities, which we intend on filling with sand are well advanced. We are discussing with the regulating agencies about shutting down those units. A fourth unit is already being studied. And the remaining ones are in the pipeline. It’s a multi-annual program that’s not going to be solved next year, just so you know.

As we move into socio-environmental measures, there is a series of actions being implemented. As I said, it’s a multi-year program is not focused on the short run. So other additional measures are ongoing such as demolition 64% of that work of those houses, and areas, properties being addressed.

So today, or in this short run rather, I mean for the next 12 months we should be forking over R$5 billion of those R$7.2 billion. What do we have in terms of topics that might lead to future liabilities? We have ongoing negotiations with some public agencies with other demands, relative to the same case. We have advanced in terms of negotiations.

We cannot today quantify the final number. We have been making provisions for that, as discussions move forwards. We had an adjustment just now in provisions in the second quarter, which was slightly higher than expected, exactly, because we had advanced in those discussions.

So it has been a productive process at the end of the day, this discussion with the public agencies. We have been making partial provisions as we move forward, like I just said, but it’s difficult for us to state firmly or quantify an amount at the end of the day.

But, I’d say, there’s nothing today that would point to something very material or very relevant in terms of amount, nothing pointing to that that level of impact. When we look at the total of R$13 billion, which is the total amount for the provision, right? We’re talking about much less significant amounts when compared to the R$13 billion.

And, lastly, as the question about the Novo Mercado. The migration to the Novo Mercado as per our strategy, Petrobras and Novonor strategy was to sell preferred shares, and then the sale of common shares, as the sale of preferred shares did not happen because of market conditions that process came to a halt.

Today, we actually made a proposal to have a Braskem and Novo Mercado, but we know that there were discussions between Petrobras and Novonor about that a potential new shareholders agreement, but the process did not move forward that process for selling preferred shares, the dialogue was interrupted.

So maybe something is happening between Petrobras and Novonor, but we are not privy to that, right. So we believe things have come to a standstill. And with this new advancement from Novonor, their move to divest, apparently, that triple plus has a tagalong, right, and also a write-off preference.

So if Novonor moves forward, Petrobras will need to assess their rights to decide what to do going forward..

[Interpreted] Okay, one follow-up if I may.

You talked about Petrobras or any offer made for Novonor, Petrobras has a right to receive the same terms, correct?.

[Interpreted] Yes, this would be the tagalong, right. Not only Petrobras, but all Braskem’s shareholders, when they change and control happens, so that’s a given. And the write-off preference, which is the [full name] [ph] Petrobras may offer the same value, the same terms, same conditions to the contract to Novonor. And so Novonor could buy it, right.

Or Petrobras could buy Novonor, right, if it was in their best interest..

[Interpreted] Okay. Thank you, Pedro..

The next question in English comes from [Matias Ramily of Dudley Asset Management] [ph]..

Hi, good afternoon. Thank you very much for the call and for answering my question. Hopefully, you can hear me all right. Just a few questions from my site. The first one is, I see that both at Braskem, but also the Braskem Idesa are the Mexican operation level.

There has been a positive release of working capital and Braskem it seems to be related to inventories in the Mexican operations.

It seems to be related to accounts receivables, given the positive and sizable impact that these had on the overall cash flows on the free cash flow of both entities, if you could comment a little bit, what was the driver behind that and whether you think this would be reversed in the coming quarter? And then also wondering if you had any contact with the rating agencies to keep them informed and discuss whether the current environment would have any implications on the ratings of either Braskem or Braskem Idesa? Thank you..

[Interpreted] Hi, Matias. I’ll take the question. It’s nice talking to you. Matias asked about the working capital, just to be sure I’m going to translate his questions. The working capital in Brazil, happened based on inventory. And in Mexico, it was based on accounts receivable.

And the question is, what were the drivers for that to happen? And if we see in the coming quarter, you can see a reversal of that. The main driver, Matias, was the drop in prices. In the case of Brazil, the drop in Nafta in oil prices lead to a lower inventory value. We also had some effect coming from a reduction in products prices.

So that also affected accounts receivable in Brazil. We also saw a drop there in Brazil accounts receivable. In the Mexico, the same, they drop in polyethylene, when you’re talking about Mexico led to a reduction and accounts receivable. So, basically, the main reason was this drop in price, we also had a slow reduction in the sales volume.

And some points, especially in exports, leaving Brazil, which also a reduction in accounts receivable. Looking at the price trends, what we see happen in October and November, and as we look to the next quarter. We do not see a reversal of that trends in that short-term. But, again, it will depend on oil prices, and also on prices of products.

As I mentioned earlier, we are closely monitoring our assets, our inventory levels, not only our finished products feedstocks, but other inputs as well. So this optimization process will help us maintain our position in working capital. That’s what we believe.

There is a point which is in our release, we did not really highlight during the presentation, but I’ll take the opportunity does not have a direct link with working capital. But there’s an accounting adjustment which it has no cash effect, but it is pricing in EBITDA of negative R$75 billion.

The EBITDA that we reported is there, but it would have been US$77 million higher, if we had not made the inventory adjustment, the value of the inventory. So we did a test on September 30, the finished products inventory, what was the market price for that.

And then, we made a provision which has a way to be reverted in October vis-à-vis the market value of our inventory. So that US$77 million, which negatively impacted our EBITDA in September reverses and in October, right, just to be sure.

That’s a non-cash amount that affects the results, there was also the third quarter negatively, and then it is reverted in the fourth quarter. As for the rating, the credit rating, we talk with credit agencies on a constant basis. In the past few days, we were in contact with them we did not sense any concern on their side.

We have a very transparent relationship with them. So they know our cash situation, our financial position, our long debt profile is something they look at from a very positive light.

And if you look at our cash position as we close the quarter, it is a cash position, which is higher than usual for the company US$2.2 billion in cash plus US$1 billion that we have available. So it is a cash situation or position, which is quite comfortable in terms of net availability of over US$3 billion to face potential uncertainties.

So, all of that combined impacts our credit rating, of course, a rating until recent, recently, we had a negative bias. And now, we have a stable bias across the three rating agencies. So, we want to maintain our investment-grade, and they do understand our intention of maintaining that investment-grade.

And that’s key for our financial management and our business strategy as well as we move forward..

I was wondering, I don’t know if I can squeeze one more question that you didn’t mention at some point that the CapEx for this year was being revised by about US$200 million at the Braskem level.

And that you were also thinking of lower CapEx next year, I was wondering, if you can give us a bit more – if you have a bit more visibility into next year, but also, if you could comment [Technical Difficulty] of CapEx plans given that they have a big project currently undergoing? Thank you..

[Interpreted] A part of your question was cut, if you could repeat the last bit, please?.

Yeah, thank you. Sorry. Basically, with regards to capital expenditures, I think on the Braskem side, you mentioned that this year’s fiscal 2022 was expected to be US$200 million lower, and also a bit lower for next year.

But if you have a bit of visibility, or you can give us some sort of frame as to how much lower will it be next year? And also thinking about your Mexican operations, given that there’s a big project in Mexico? Do you have any flexibility on delaying or postponing some of their CapEx? Thank you..

[Interpreted] Okay, I’ll take that, Matias. Matias has asked about CapEx, the review over US$200 million approximately, that’s clear. The question is, if from next year, what do we expect? We are now still defining we do not have a number to announce for next year. But it is a definition process, a revision process to have a smaller portfolio.

So, we’re talking about a reduction relative to what we will complete this year actually. This is part of what we have always done looking at the cycle, cash generation, leverage level and CapEx. Our CapEx is also more cyclic driven, right, when I have shorter cycles, and that’s what we do.

If we look at historical levels, I got backs up 60% of EBITDA or something like that. As for Mexico, the construction of the terminal is a priority, because at the end of the day, this will provide us with a stable operating capacity for the future. So, delaying the terminal is not something we are considering right now.

What we are doing is the following. We have brought in a partner Advario, a Dutch company part of a German group, a global leader in midstream logistics industry for liquids and gas. And we brought them in Advario will – the total investment is R$400 million.

R$400 million half of that will be – no, just let me take a step back out of the R$400 million, we are now trying to find external funding, and for at least 60% of the amount to be a long-term financing for 60% at the very least, 6% of R$400 million. And the balance would come from a joint venture 50-50.

So the equity coming in from Braskem would be to the tune of US$80 million part of it this year within our portfolio, but with complements throughout another 2 years. So, if you look at the annual effort is not very material, it is restrict to Braskem Idesa. Braskem corporate is not part of that in terms of investments for that project.

So, that’s how we have designed it. So, it’s a non recourse ideally, right? So coming from the two partners, but again, we do not see as an interest in alternative to delay that investment right now..

Thank you..

[Operator Instructions] There is one question coming from Barbara Halberstadt of JPMorgan..

[Interpreted] Hello, thank you for taking my question. I think, we’ve already discussed most of the questions that I had in mind. But I would like to have a follow-up concerning the funding of the Mexico CapEx. It is to have a project financing.

So do you already have discussions going on with potential banks to carry on this transaction? Is everything already in progress? So please – if you could please give us some more color on the topic? I would appreciate that.

Secondly, concerning cash generation, have you monetized any tax credits? Do you still have them available to monetize in the last quarter or the future quarter of 2023? Or have you already done?.

[Interpreted] Hello, Barbara. So the Mexico financing line is moving forward, we are trying to find that funding we are already in negotiations with counterparts, banks and other institutions. And we hope to finalize that in the coming months, so there is a very high level of interest.

And we are now in the process of choosing right of bidding, to define how that funding we unfold. As we have the utility quality to it, we meet the terminal to work full steam, we have a very interesting level of return, very stable, and that generates very large interest in terms of financing that investment.

That’s a very solid investment and higher, because of the critical role it plays for the operation of the complex as a whole. As for monetizing credits, we didn’t have anything above normal that PIS/COFINS that we had is now over.

It has all been monetized and what we have now in terms of variation in terms of taxes and tax credits is the normal variation that we usually see. Nothing atypical on that front and we do not expect to have anything like that going forward. Thank you..

[Interpreted] You now allocated capital and liquidity, and you said about maintaining liquidity and robust better.

But with the price of bonds in the market, is there any intention idea, have you been analyzing making an additional purchase and using this cash to re-buy anything?.

[Interpreted] Oh, Barbara, we’re always looking at those opportunities. As I mentioned before, we’ve increased our cash level, because of that uncertainty linked to the nature of the cycle.

If the overall scenario improves to a higher level than we had anticipated, then we will look at alternatives of repurchasing it, as we did before, and we did something like that this year. But it’ll depend on the scenario, the overall scenario, as is we are waiting to see what’s happening. And then, we’ll make a decision.

Right now, the focus has been on preserving our liquidity before we make a final decision. Thank you..

With that, we close the Q&A session. I would now like to hand it over to Roberto Simões, CEO of Braskem, for his closing remarks..

[Interpreted] Good afternoon, everyone. Thank you so much for being with us. Pedro and Rosana have covered your main observations and comments and questions. We are aware of the challenges and uncertainties at the macroeconomic level. Especially, as we go through very important geopolitical events in China and Ukraine.

And, of course, those have impacts on what we do in our operations, it’s important for us to remind ourselves of our strengths, our strategies, which have adopted for the past decades to face challenges, such as those who have ahead of us now.

From the point of view of competitiveness and productivity, it’s always nice to remember, as we are a global company leader in Americas with strong assets, all of them well positioned, and within the global cost curve, when compared with other players. And from the point of view of finance, you monitor this situation very closely.

Our credit profile is quite robust. And we apply a very strong discipline and capital allocation. And we need a very strong liquidity position, and with long-term debt only.

When we think about investments and looking ahead in the short run for 2023, we have just completed an analysis for the past 6 months of how we see the petrochemical industry, especially in the main markets by 2030, and where we would like Braskem to be in 2030.

Not only where we should be investing, but also where we should perhaps reduce investments, as Pedro mentioned, perhaps reduced production, or even shutdown some of our internal operations. That exercise which was shared with you and then the main shareholders.

We’re now looking, trying to define across what we feel we want and desire demand on plastic consumers of the projects that we have in our pipeline, both in renewables and in recyclables and by polymers.

The discipline we will have, as we define early next year, our strategic plan for the next 3 years, which of those projects are the ones which are public and the ones which are not yet public, which should we encourage, which should we keep on hold, and which we should perhaps discontinue, especially being very pragmatic, because of the moment we’re going through now in 2022, and as we look for trends for 2023.

We have engaged many people inside the company to do that exercise and also involved the board, and we will be make that public in January and February next year.

So lastly, it’s important to say that within this is strategic guideline, diversification and a broad portfolio of products, and the use of different feedstocks, and working with several suppliers and working with different countries where we have assets, all of that speak to our strong ability to mitigate risks, overcome adversities and, of course, capture new value generation opportunities, as we optimize our assets.

Having said that, thank you very much for your participation, and this completes our conference call. And I’ll see you early next year, when we will meet again to announce our results for the year 2022. Thank you. And have a nice day everyone..

The conference call is close now. Thank you all very much for your participation. Have a great day. Thank you. Thank you for using chorus call..