Braskem Bonds Slip After ‘Dismal’ Earnings Prompt Debt Spike

Published 7 August 2025, 18:00:56 GMT

(Bloomberg) -- Braskem SA’s dollar notes tumbled across the curve on Thursday, after the Brazilian petrochemical company reported weak earnings and a surge in debt levels in the second quarter.

Notes due in 2031 fell 3 cents to trade at 74 cents on the dollar as of 1:49 pm in New York. Dollar bonds of subsidiary Braskem Idesa also dropped, while the stock slumped as much as 4.3% in Sao Paulo, hitting its lowest level since 2009 before trimming losses after local media reported that Braskem is in talks to sell some US units.

The company’s net debt increased by $235 million in the second quarter, to $6.8 billion. That was 10.6 times earnings before interest, taxes, depreciation, and amortisation (Ebitda) over the last 12 months, up from 7.98 times in late March. A drop in earnings amid simmering trade tensions was the main cause — recurring Ebitda was 427 million reais, a 74% decline year-on-year, and significantly lower than consensus estimates of 904 million reais.

“Results were dismal,” said Filipe Botelho, an analyst at Lucror Analytics. Botelho said the results were hit by trade tensions between the US and China, uncertainties surrounding tariffs, and weak operating figures in Braskem Idesa.

In a conference call on Thursday, Braskem Chief Executive Officer Roberto Ramos said the company is focused on managing working capital as efficiently as possible. That includes working with suppliers to extend payment terms and with clients to shorten receivables cycles, he said.

“We have a number of different initiatives, and they are all being pursued very diligently,” Ramos told analysts. He also said Braskem’s problem is not the size of its debt, but rather its Ebitda generation — which can improve through the company’s ongoing “resiliency measures” as well as through tariff and commercial protections it’s seeking from the government.

Debt Slump

Braskem’s dollar debt has been under the microscope over the past few months, with bonds slumping amid investor concerns over a potential takeover by Brazilian tycoon Nelson Tanure, which has triggered fear of a debt restructuring.

Disaster Saga

The company has also faced pressure from an ongoing environmental disaster in the town of Alagoas that has dragged on for years, costing the petrochemical giant its investment-grade status in 2023.

Braskem burned through cash in the second quarter, with interest payments and Alagoas-related expenses contributing to a total cash consumption of 1.45 billion reais ($182 million) in the quarter.

Still, Braskem got a boost last month when Brazil’s lower house approved the urgency regime for a bill that promotes the development of the petrochemical industry by granting tax credits for eligible companies.

The silver lining to the poor second-quarter figures is that they might put pressure on the Brazilian congress to approve the tax-relief program, giving breathing room for Braskem and the sector, said Roger Horn, a senior emerging-market strategist at Mariva Capital Markets.

By Giovanna Bellotti Azevedo and Vinícius Andrade

--With assistance from Leda Alvim and Rachel Gamarski