By Brazil Stock Guide – Braskem (B3: BRKM5; NYSE: BAK) is navigating one of the most critical phases in its history. In the third quarter of 2025, the company posted a net loss of R$26 million, trimming the R$592 million loss recorded a year earlier. The problem lies in its balance sheet: net debt surged to 14.76 times recurring EBITDA, nearly triple the ratio from a year ago (5.76x), exposing a fragile and unsustainable financial structure for a cyclical, capital-intensive company.
Recurring EBITDA plunged 65% year-on-year to US$150 million (R$818 million), while net revenue dropped 19% to R$17.3 billion, reflecting depressed petrochemical prices and high idle capacity. Operating cash flow turned negative at R$334 million, and total cash consumption reached R$2 billion, widening the company’s financial imbalance.
Margins under pressure and market in retreat
The crisis is structural. The global petrochemical market remains oversupplied — the so-called “China effect” — which pushed down spreads for polyethylene (PE), polypropylene (PP), and PVC by 9% to 16% compared to 3Q24. In Brazil, ethylene cracker utilization fell to 65%, from 73% a year earlier, due to scheduled maintenance in Rio de Janeiro and weak domestic demand.
Resin sales in the Brazilian market dropped 9% to 787,000 tons, while exports rose 9%. Even with operational adjustments and REIQ tax credits, the Brazil/South America segment’s EBITDA tumbled from US$335 million in 3Q24 to US$205 million.
In the U.S. and Europe, the situation deteriorated further: EBITDA swung from a US$71 million profit to a US$15 million loss, amid a 23% drop in PP prices and weak industrial activity. In Mexico, subsidiary Braskem Idesa also reversed performance, posting a US$37 million EBITDA loss versus US$80 million in profit a year earlier, due to high ethane costs and a major maintenance shutdown.
The financial knot
With margins collapsing and cash flow turning negative, Braskem now depends on expensive, long-term funding. Gross debt stood at US$8.4 billion in September, with an average maturity of nine years, while cash reserves (excluding Idesa) totaled US$1.3 billion. An additional US$1 billion international revolving credit facility was drawn in October, but the balance sheet still reflects erosion of liquidity and investment capacity.
Management is betting on its Resilience and Transformation Program, focused on cost control and project rationalization. A short-term relief came from the reduction of the Alagoas geological event provision, from R$5.57 billion in 2024 to R$3.8 billion, following the R$1.2 billion settlement with the State of Alagoas, which extinguished lawsuits and settled compensation obligations tied to the 2018 sinkhole disaster in Maceió.
Despite this progress, the company booked a R$435 million charge to hibernate its chlor-alkali plant in Alagoas under the Transforma Alagoas plan — a step aimed at making PVC production more sustainable, but one that underscores a structural downsizing of operations in the region.
A sector-wide crisis and regulatory push
Brazil’s chemical industry is operating at 39% idle capacity, the highest level in 30 years, according to Abiquim. To prevent a collapse, the government has advanced protectionist measures, including the PRESIQ Bill (PL 892/2025) — approved by the Lower House — and the imposition of provisional anti-dumping duties on polyethylene imports.
Braskem sees these initiatives as essential to level the playing field and preserve domestic output. The company’s board also approved the Transforma Rio Project, a R$4.2 billion investment to expand ethylene and polyethylene capacity in Rio de Janeiro and increase the share of ethane in its feedstock mix.
Trying to reverse the tide
The current management team is struggling to reverse a trajectory that previous administrations failed to correct, even after the boom years of the pandemic, when the company reached its historical peak. In 2021, Braskem reported a record EBITDA of US$5.2 billion, driven by exceptional margins and a global shortage of plastics. Since then, the cycle has turned: prices have fallen, demand has weakened, and profitability has evaporated. The new leadership faces the task of rebuilding financial stability in a sector now in survival mode.
Critical outlook
With EBITDA under pressure, leverage at historic highs, and cash generation deeply negative, Braskem stands at a turning point. The company is operating with tight liquidity, thin margins, and a shrinking global market, while trying to preserve its credit standing and attract capital for strategic projects.
The outlook remains one of simultaneous stress across the three pillars of petrochemicals: demand, margins, and leverage. Any recovery will depend on a rebalancing of global prices and the effectiveness of Brazil’s industrial policy measures expected in 2026.
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