November 3, 2009 / 1:30 PM / 8 years ago

Brazil's Braskem returns to profit on costs, real

* Q3 net 645 mln reais vs loss 819 mln reais year-earlier

* EBITDA rises, company factories operate at full capacity

By Alberto Alerigi Jr. and Guillermo Parra-Bernal

SAO PAULO, Brazil, Nov 3 (Reuters) - Braskem (BRKM5.SA), Latin America’s largest petrochemical company, said on Tuesday it returned to profit in the third quarter as costs fell faster than revenue and a stronger currency trimmed debt-servicing costs.

Net income surged to 645 million reais ($363 million) in the third quarter from a loss of 819 million reais a year earlier, the company said in a securities filing.

Profit in the third quarter got a boost after sales and administrative expenses dropped 7 percent, and nonoperating revenue exceeded expenses such as interest payments by 241 million reais. The company’s factories are operating at full capacity, reflecting a resilient domestic market for resins, it said.

Braskem has more liabilities than assets linked to the dollar, and a strengthening real BRBY often helps bottom-line results. The real advanced 10 percent against the dollar in the third quarter of this year, compared with a 16 percent tumble in the same period of 2008.

Costs dropped 28 percent to 3.1 billion reais on a year-on-year basis, while net revenue fell 21 percent to 4.04 billion reais after prices for oil and derivatives fell worldwide.

Yet, sales volumes for resins in the local market reached 616,638 tonnes, a third straight quarterly record.

“The moment the industry is going through requires additional caution and austerity to overcome the downturn cycle that is foreseen for the 2010 and 2011 years,” said Chief Executive Bernardo Gradin in the filing.

Braskem said it expects a gradual recovery in global petrochemical markets, with a full recovery not expected until at least 2011.

Earnings before interest, taxes, depreciation and amortization, EBITDA, rose to 838 million reais in the third quarter from 726 million reais in the year-earlier period.

EBITDA margins, or EBITDA as a proportion of revenue, rose to 20.7 percent from 14.2 percent in the same period. The margin was 15.3 percent in the second quarter.

Braskem had posted a profit of 1.16 billion reais in the second quarter due to falling costs and helped by a weaker real, which raised the value of exports.

($1=1.773 reais)

(Editing by Dave Zimmerman)

guillermo.parra@thomsonreuters.com +55 11 5644-7714; Reuters Messaging: guillermo.parra.reuters.com@reuters.net

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