braskem day quattor presentation - luiz de mendonça

QuattorLuiz de Mendonça

1

�Quattor� Basic Petrochemicals

� Polymers

� Feedstock

Agenda

�Turning Quattor Around

�Synergies

�Questions

2


� Polymers

� Feedstock

Agenda


�Synergies

�Questions

3

Business overview

Members 1,720

Investments Program R$ 2.3 billion (2005-2009)

Tax Revenue R$ 1.6 billion/year

Gross Revenue R$ 5.3 billion/year

Production Capacity(million ton/year) 2.7 of petrochemicals and 1.9 of thermoplastics (PE + PP)

PE and PP domestic market share 40%

Export of plastic resins 400 kton/year, of which:

4

Export of plastic resins 400 kton/year, of which:

Asia50% Latin

America27%

Europe10%

Africa 13%

Source: Quattor 2009

Business Priorities

� Reach top quartile in Health, Safety and Environment performance

� Maximize asset utilization

� Implement operational improvement investment plan

� Improve reliability and availability of feedstock supply

� Agressive management of fixed and variable costs

5

� Agressive management of fixed and variable costs

� Optimize working capital

� Reinforce Polyethylene product portfolio (Chevron Phillips technology)

� Optimize and invest in the innovation pipeline

� Recover employees pride and motivation for working at Quattor

� Prepare the organization for the future integration with Braskem

Rui Chammas

PE

Armando Bighetti

Polyethylene

Carlos Fontes

Estratégia, Marketinge Supply Chain

Business Development

Share

hold

ers

Simplified Structure – from 9 to 6 direct Reports

A definir

PP

Roberto Bischoff

Vinílicos

VPE – Unidade de Pol í

Luiz de Mendonça

Frank Alcântara

Polypropylene

Celso Ferreira

Basic Chemicals

Quattor CEO

Luiz de Mendonça

Patricia Maia

People & Organization

Eliana Granato

Carlos Fontes

Marcelo Nunes

Estratégia, Marketinge Supply Chain

Fernando Musa

Integration and Planning

Share

hold

ers

Clients

6


� Polymers

� Feedstock

Agenda


�Synergies

�Questions

7

Basic petrochemicals

Footprint Basic PetchemsFootprint Basic Petchems

Duque de

Caxias

Production - ABC

2009Kton/y

Production - DCX

2010 (ytd)Kton/y

2009Kton/y

2010 (ytd)Kton/y

Ethylene

Propylene

493

249

411

203

338

47

257

40

8

Grande ABC

• Significant cost advantage in ABC from new LRH unit• Significant cost advantage in DCX from gas and integration with PE

• Hydrocarbon resins

• Significant cost advantage in ABC from new LRH unit• Significant cost advantage in DCX from gas and integration with PE

• Hydrocarbon resins

Propylene

Benzene

Butadiene

249

228

58

203

162

51

47

-

-

40

-

-


� Polymers

� Feedstock

Agenda


�Synergies

�Questions

9

Polypropylene

Sales per segmentKton, 2010 Jan-Aug

Share%

32%

46%

39%

32%

53%

25%

Footprint PolypropyleneFootprint Polypropylene

Camaçari

Slurry Homo 115 kton/y

Duque de RJ-1 Homo 300 kton/y

22.067

27.619

32.749

38.019

42.134

43.921

Raffia

Caps

Niche

Compounds

BOPP

DistributersDistribution

10

25%

35%

15%

24%

31%

26%

• Largest Plant in Brazil (Mauá)

• Good geographic positioning

• Strong customer relationships

• Largest Plant in Brazil (Mauá)


• Strong customer relationships

Grande ABC

ABC-1 450 kton/y

- Homo, Heco, Raco

Caxias

875 kton/y 10.772

11.455

13.927

14.925

18.879

20.039

Film

Fibre

Rigid packing

Non woven

Electronics

DU/Buckets

Rectangular pail for paint packaging

Innovation: Steel replacement in water based paints.

Target Sales: 4.6 kton/year

Polypropylene – new developments

PP Car Seats(To be launched)

Innovation: Customer support to minimize car seats imports.

Target Sales: 1.5kton/year

11

Footprint PolyethyleneFootprint Polyethylene

Duque de

Caxias

Riopol HD/LL 540 kton/y

Polyethylene

29%

24%

32%

15%

25%

10%

Sales per segmentKton, 2010 Jan-Aug

Share%

10.727

29.104

30.474

59.170

70.439

88.874

Special Films

Bags

Blow molding

Industrial Films

Distribuition

Bobbins

Distribution

Grande ABC

e Cubatão

ABC-1 LD 120 kton/y

ABC-2 HD/LL 230 kton/y

Cubatão LD 150 kton/y

1.040 kton/y

12

• 2 most recent investments in Brazil (CP and Riopol)

• Only gas based plants in Brazil


• High quality products

12%

12%

4%

3%

1%

5%3.043

751

873

2.426

2.602

3.619

Others

Specialties

Extrusion

Injection

Compounds

EVA

New PE Grade for Fuel Tank

Innovation: Monomodal grade, by CPChemtechnology


Plastic Sleepers (ties)

Polyethylene – new developments

Innovation: Less weight due to injection technology adopted, greater strength and durability


New Metalocene PE Grade for Cast Film

Innovation: Better use of raw materials and plant’s risks reduction


13

RioPol

� Only gas based cracker, fully integrated with PE in Brazil

� Significant cost advantage vs. Naphtha based plants

� Good potential for debottlenecking and integration with COMPERJ

� Provides operational know-how and expertise for Braskem’sinternational projects

� Vinmar contract restructured to create flexibility and improve profitability

14

profitability


� Polymers

� Feedstock

Agenda


�Synergies

�Questions

15

Feedstock

Feedstock Issues

� Naphtha

• Significant volume with lower quality• No infrastructure to import directly

� LHR

• Full contract volume still not available

50%

50%

100%Ethylene

Sources of feedstock%

16Source: Basic petrochemicals business unit

• Full contract volume still not available

� Ethane/Propane

• Mix• Full contract volume still not available• Reliability

� Propylene

• Long distances by road• Multiple sources in each site• Reliability

QuattorBraskem

Propylene from refinery

Liquid (Naphtha)

Gas

92%

39%

8%

51%

10%

QuattorBraskem

Propylene


� Polymers

� Feedstock

Agenda


�Synergies

�Questions

17

� ABC cracker debottleneck/LRH unit still not operational. PE new plant with very limited ethylene availability

� Focus on the capacity expansion program limited investment in operational improvements and maintenance

� Synergies from Quattor creation in early stages of capture

High level diagnostic

� Company managed for short term cash generation, with limited focus on profitability

� Centralized decision making process

� Some talent evasion during 2009

� Difficult business situation impacted team motivation

18

Celso Luiz T. Ferreira Frank Alcântara Henrique L. Schulz

Early exchange of people to improve morale and accelerate changes (cultural andoperational), with some key positions being staffed with experienced Braskemexecutives …

Teams and structure

40 80

Carlos AlfanoResponsible for

Health, Safety andEnvironment

Eduardo TergolinaIndustrial

Responsible for PP

Patrícia MaiaResponsible for

People & Organization

Celso Luiz T. FerreiraResponsible for

Basic Petrochemical Business

Frank AlcântaraResponsible forPP Business

Henrique L. SchulzResponsible for Industrial Basic

Petrochemical Business

19Source: HR Quattor information – estimate

Control wastewaterM3/t

Solid wasteKg/ton

Water consumptionM3/ton

Power consumptionGj/ton

Relevant improvement in all key indicators

HSE - Health, Safety and Environment

1.72 3.82 4.27 15.7

20Fonte: Quattor HSE Information

0.97

Real2009

YTD2010

1.87

Real2009

YTD2010

3.81

Real2009

YTD2010

12.2

Real2009

YTD2010

Accident Frequency Rate – SAF + CAFNumber of Events

Recent Actions

Security

� Training of employees and outsourced workers

� Campaign to prevent accidents with arms and

QB BU PP BU PE BU

Safety and accidents prevention have also been prioritized and a very high workaccident rate was reverted.

HSE - Accidents Rate

18.3 accidents with arms and hands

Health

� PCMSO Fulfillment

� Preparation of Life Quality Program

HSE excellence

� Preparation of risk management plans per plant

21Source: Quattor HSE Information

15.6

4.9

Real2009

YTD2010

10.8

4.4

Real2009

YTD2010

18.3

6.3

Real2009

YTD2010

SAP implementation adapted to Braskem´́́́s solution, minimizing implementationrisk and creating the base for a fast integration in the future

Separated Infrastructure and Systems

IT – Formula Project

� Braskem Formula solution implementation

22

Braskem Formula solution implementation� 3 years of stable operations� Braskem team learning experience� Integration process accelerator

� SAP Go Live on August 1, 2010� Integration of processes with Braskem� Standardization of management model� Operational synergies catalyzer� Incorporation of new functionalities� SAP fully operational

With investments in operational improvements, the Basic Petrochemical Unit has been reaching successive records of production...

Ethylene productionKton = production records

77 74 74 86 86 80

97 96

831

669 Highlights

Basic petrochemicals production

� Actions contributing to production increase:� Revamp of Olefins Unit in 2008

80%

Propylene productionKton = production records

Total

2009

Jan

2010

Feb

2010

Mar

2010

Apr

2010

Mai

2010

Jun

2010

Jul

2010

Aug

2010

YTD

2010

27 27 30 32 30 30 34 34

Total

2009

Jan

2010

Feb

2010

Mar

2010

Apr

2010

Mai

2010

Jun

2010

Jul

2010

Aug

2010

YTD

2010

296

243

23

� Revamp of Olefins Unit in 2008� UPGR startup in 2010� Operational reliability program� Integrated operations with

second generation plants

� Previous Production Records:� Ethylene: 80.9 ton, in

August/2009� Propylene: 29.1 ton, in

July/2009

Source: Business Unit Information % - YTD 2010 / Total 2009

82%

May

May

... as well as in Polyethylene and Polypropylene Units

Polyethylene productionKton = production records

� Actions contributing to productionincrease:�Raw material availability at line III�Improved REDUC supply�Operational Reliability

Highlights

54 61 60 67 69 60

73 78

626

521

Polymers production

83%

Polypropylene productionKton = production records

�Operational Reliability�Better alignment between crackerand second generation

55 50 60 56

39 47 53 58

Total

2009

Jan

2010

Feb

2010

Mar

2010

Apr

2010

Mai

2010

Jun

2010

Jul

2010

Aug

2010

YTD

2010

586

417

Total

2009

Jan

2010

Feb

2010

Mar

2010

Apr

2010

Mai

2010

Jun

2010

Jul

2010

Aug

2010

YTD

2010

� Actions contributing to productionincrease:�DBN of ABC plant to 450 kton/year�DBN of DCX plant to 300 kton/year�Favorable production program,with less transition of grids

�Improved REDUC supply

Highlights

24Source: Business Unit Information % - YTD 2010 / Total 2009

71%

May

May

Significant improvement in asset utilization

Capacity utilization rate

Capacity utilization

Basic

71%

85%

Total 2009 YTD 2010

Capacity utilization rate % production / nominal capacity

+ 14 %



25

PP72%

77%

Total 2009 YTD 2010

+ 5 %

PE

61%

75%

Total 2009 YTD 2010

+ 14 %


� Polymers

� Feedstock

Agenda


�Synergies

�Questions

26

400

79

43

R$ million

� Investment of R$ 350 million required to capture all

Quattor synergies of R$ 400 million in EBITDA as of 2012

279

Industrial Logistics Supply EBITDA Synergies

� Production mix

�Maximizing the value of all cracker streams

�Optimization of inventories

�Maximization of gains from product distribution (domestic and export markets)

�Optimization of transportation modes

� Joint management of feedstock purchases

� Renegotiation of third-party agreements

required to capture all synergies

� Financial synergy NPV estimated in R$ 340 million

(a) RecurringSource: Braskem 27

Before After

Xylenes RS to Ortoxylenes SP

� Braskem exports mixed xylenes

� Quattor sells xylenes in SE� Imported OX

� Braskem sells mixed xylenes in SE, reducing exports

� Quattor produces OX from xylenes, reducing OX imports

Detailed projects, showing the evolution from initial status to result aftersynergies, as well as obtained gains

Synergies: Example – Aromatics front

Source: Quattor Economic Planning Information

TolueneSales versusExports

� Braskem sells toluene in SE� Quattor uses toluene to produce Benzene

� Braskem supplies Quattor with BZ (exported before)

� Braskem exports toluene� Quattor supplies toluene in SE

Aliphatic Solvent in the southeast region

� Braskem sells in SE� Quattor uses similar products as feedstock

� Quattor sells products in SE� Braskem uses them as feedstock (with cost advantages over Quattor use)

28

Synergies: Example – Mix PP/PE

The reorganization of product types produced in each plant will provide efficiency gains, through the rationalization of products and adequate use of assets

Product Grades

TotalNumber of grades (%)

PolyethyleneNumber of grades (%)

PolypropyleneNumber of grades (%)

Source: Quattor Economic Planning Information 29

254 61

193

Before ∆ After

156 55

101

Before ∆ After

410 116

294

Before ∆ After

(-36%)

(-25%)

(-28%)

PE1L1 PE1L2 PE2 PE3PEBD PE3PEL PE4AUTO PE4TUB PE4SPH

105 kton 132 kton 120 kton 153 kton 220 kton 357 kton75 kton 140 kton

Future utilization%

Synergies: Example – PE Mix Plant Allocation

99 kton 132 kton 120 kton 150 kton 217 kton 60 kton 133 kton 257 kton

Source: Quattor Economic Planning Information 30


95% 100% 100% 98% 99% 80% 95% 72%

PE5SPH PE5SLU PE6TUB DCXL1 DCXL2 ABCPEBD ABCCHEV ABCCUB



36% 76% 90% 78% 68% 81% 99% 99%

Agenda


� Polymers

� Feedstock

�Operational Turnaround

�Synergies

�Questions

31

braskem day quattor presentation - luiz de mendonça

Business

thermoplastics pe

pe newplant

significant volume

ktony extrusion8733

ktony film10

ktony duque deraffia22

cpchem technology target

gas based plants