Earnings Call Transcript - BAK Q1 2022

Operator, Operator

Good morning, and thank you for waiting. Welcome to Braskem's Q1 2022 Earnings Conference. With us today, we have Mr. Roberto Simoes, CEO; Pedro Freitas, CFO; and Rosana Avolio, IRO of Braskem. We'd like to inform you that this event is being recorded. This event is also being streamed online via webcast and will be available at www.braskem.com/i, where the respective presentation can also be downloaded. The slide deck will be controlled by you. The audio of this event will be available right after its conclusion. Remember that webcast participants will be able to send their questions to Braskem via the website, and those will be answered after the conclusion of this conference by the IR department. Before we proceed, we'd like to clarify that any statement made during this conference about Braskem's business prospects, projections, operating and financial targets are based on beliefs and assumptions of the company's management as well as information currently available to the company. Forward-looking statements are no guarantee of performance, and they involve risks, uncertainties and premises seeing as they refer to future events and, therefore, rely on circumstances that may or may not materialize. Investors and analysts must understand that general economic conditions, the state of the industry and other operating factors may affect Braskem's future earnings and lead to results which are materially different than those expressed in said forward-looking statements. Now I'd like to turn the conference over to Mr. Rosana Avolio, Investor Relations Director, who will begin the presentation. Please, Ms. Avolio, you may proceed.

Rosana Avolio, Investor Relations Director

Good afternoon, ladies and gentlemen, and thank you for participating in Braskem's conference call to present our results for the first quarter of 2022. Let's start the presentation on Slide 3 with the distribution of dividends. On the slide, you can see that Braskem remains committed to returning value to shareholders through the distribution of dividends, with a payment in May of BRL 1.35 billion in dividends based on net income for 2021. Therefore, combined with BRL 6 billion anticipated in December 2021, the total dividend distribution was BRL 7.35 billion, representing 77.5% of adjusted net income for 2021. Remember that Braskem has a transparent dividend policy with guidelines for determining the distribution of dividends in compliance with or exceeding the applicable laws or regulations. Let's go now to the next slide, which shows our net income. In the first quarter, Braskem posted net income of around BRL 3.9 billion, representing BRL 4.88 per common and Class A preferred share and net margin of 15%. As I mentioned on the first slide of the presentation, Braskem has a transparent dividend policy, and the proposal for distributing complementary dividends based on fiscal year 2022 will take into consideration the leverage ratio, which cannot surpass 2.5x in dollars and without Braskem Idesa in the current year or in the subsequent 2 years, considering the best assumptions at the time of decision. Now let's go to the next slide. In the first quarter 2022, recurring EBITDA was $920 million, down 19% from the fourth quarter with the decline explained mainly by the expected normalization of international spreads for the main chemicals and resins in Brazil for PP in the U.S. and Europe and PE in Mexico. The lower sales volume of main chemicals and resins in Brazil and the Brazilian real appreciation against the dollar of 6.3%. In Brazilian real, recurring EBITDA was BRL 4.8 billion, down 23% and 30% lower from the fourth quarter and first quarter of last year, respectively, due to the currency appreciation in the period. Let's go to the next slide, which covers or highlights by segment. Slide 6 shows the highlights of the Brazilian operations. In the first quarter, the petrochemical complexes in Brazil operated at a capacity utilization rate of 86% in line with the fourth quarter. In the Brazilian market, resin sales rose 2% on the prior quarter. This is due to the strong demand for PE and PP due to a restocking trend in the chain. Meanwhile, exports fell 16%, explained by the priority on serving the local market and by the logistics constraints on export shipments. In this context, recurring EBITDA from Brazil in the first quarter was $477 million. Let's go to the next slide on the geological event in Alagoas. The chart on the left shows the balance of the provisioning related to the geological event in Alagoas at the end of the first quarter of around BRL 7.2 billion. The chart on the right shows the disbursement schedule with 56% of the total amount provisioned registered in the short term and 44% in the long term. It is important to remember that Braskem cannot eliminate the possibility of future developments related to the topic or related to expenses and the costs to be incurred could differ from their estimates or amounts provisioned. Moving on, but still on the geological event, the next slide shows the progress made on the work fronts. First, regarding relocation and compensation, Braskem continue to make progress on its relocation and financial compensation of families in high-risk districts of Maceió. The number of proposals for financial compensation submitted reached 14,495 with acceptance of index for proposal submitted at 99.6% on the front of closing and monitoring wells. Until the end of April 2022, of the 35 wells, 9 belonged to the sand backfilling group and the closing of 3 of them is in progress with the progress of 51.3% of cavities 7 and 19 and 35.2% in cavity 17. And last on social and urban development measures. The activities on this work front focus on urban mobility, social compensation and actions in relocated areas. In urban mobility, we are working on defining and detailing 11 mobility actions that were approved by the municipality of Maceió. In social compensation, we held meetings with the municipal government of Maceió to discuss priority topics. And on actions in relocated areas, we are making progress on activities related to the demolition of the Mutange Slope. Let's turn to the next slide, please. This slide presents the highlights of our operations in the United States and Europe. In the first quarter, the PP plants United States operated at a utilization rate of 88%, increasing 15 percentage points from the fourth quarter, driven by the normalization of operations after the scheduled maintenance shutdown. In Europe, the utilization rate increased 5 percentage points due to the normalization of the production after the restarting of operations of a local supplier following a scheduled maintenance shutdown in the previous quarter. In terms of sales performance, the U.S. registered a sales volume in the quarter of 480,000 tons, up 9% on the prior quarter. In Europe, we sold 139,000 tons of PP in the first quarter. The segment recurring EBITDA in the first quarter was $295 million. Moving on, the next slide shows the highlights in Mexico. In Mexico, the utilization rate in the first quarter was 80%, in line with the fourth quarter. In relation to sales, there was an increase of 15% on the fourth quarter, driven by the production remaining stable at healthy levels and the consumption of inventory. The segment's recurring EBITDA in the first quarter was $136 million. Moving on, the next slide shows our consolidated cash generation. In the first quarter, Braskem generated recurring cash of around BRL 467 million, with the main impact coming from the recurring EBITDA in the quarter and the continued monetization of PIS/COFINS tax credits. Including the payments related to the geological event in Alagoas, the company presented a cash consumption of BRL 176 million. Let's move on to the next slide, please. Braskem in the first quarter, maintaining a very long debt maturity profile and strong liquidity position with most of its debt maturing in 2030 onwards. The average debt term was around 14 years, and the current liquidity position covers all liabilities coming due in the next 6 to 9 months. This, without considering the international rotating credit facility in the amount of $1 billion, maturing in 2026. Let's go to the next slide, where we will talk about the company's credit metrics. In line with the dynamics observed in prior quarters, Braskem continued to present solid credit metrics with corporate leverage remaining low in the first quarter, with the ratio in U.S. dollar ending the period at 1.0x. We are committed to maintaining a very efficient capital allocation. On the next slide, we'll discuss our ESG agenda. Recently, we have updated our investment policy with one of the main changes, the adoption of project classification based on ESG criteria. As a result, our assessment and selection of investments involving ESG criteria will be conducted globally and seek to support the long-term goals in sustainable development and the respective commitments undertaken by the company. Additionally, when applicable, the evaluation will consider the potential impact benefit our costs associated with relative CO2 emissions with any additional income or expense obtained from carbon pricing will be updated periodically by the sustainable development team. On the following slide, align with the commitment to combat climate change, Braskem signed another wind power purchase agreement with EDF Renewables Brazil, a leader in renewable energy. The agreement enables the construction of a new wind power complex in the southeastern Bahia state and guarantees the supply of energy to Braskem for a period of 20 years as of 2024. This is the fifth long-term contract for renewable wind or solar energy that Braskem has signed in the last 4 years, which together surpassed 150 average megawatts and positioned Braskem close to reaching 2.2 million tons of CO2 emissions avoided over the duration of those contracts. Moving on to the next slide. In March 2022, Braskem signed the cooperation agreement together with Sojitz Corporation to form a joint venture for producing bio-MEG subject to the development of the technology. The JVs business plan provides for, in the first phase of investment, the implementation of 3 industrial plants. MEG is a raw material for making PET and is essential in sectors such as textiles and packaging. The partnership between Braskem and Sojitz is aligned with the goals of net 0 carbon emissions, geographic and industrial diversification, reinforcing global leadership in biopolymers and in the development of sustainable solutions in the circular economy. Let's go to the next slide, please. In this slide, we will talk about the petrochemical scenario. The beginning of 2022 was marked by geopolitical tensions, which brought a lot of volatility to the petrochemical scenario. As you can see, the external consultants have changed the expectations of the PE naphtha-based spreads for 2022 on a recurring form since the beginning of the war between Russia and Ukraine at the end of February. Despite the volatility, I would like to highlight that the expectation of external consultants for the PE naphtha spreads for 2022 is already at a level above the pre-war Russia and Ukraine. In addition, it's important to mention that due to the feedstock and geographic deposition strategy that Braskem has implemented in the last decade, the company has become a more resilient company to these market variations. Today, we have a global operation in addition to a feedstock profile balance between sources of oil and natural gas. Going to the next slide. Let's talk about the expectations for the spreads that most impact Braskem's profitability. As I mentioned on the previous slide, for the remaining quarters of this year, pre-naphtha spreads are expected to remain at healthy levels and above the recent historical average during the other quarters of 2022. External consultants also forecast gas-based PP spreads to suffer only slight impact from the current political context, and such forecasts continue pointing to spreads at levels above the recent historical average, remaining above $1,100 per ton in all quarters of this year. Regarding PP spreads in the United States, as we can see in the graph on the right of the slide, according to the external consultants, this spread should remain not just above the recent historical average but also relatively close to that observed in 2021 despite being lower than last year. Moving on, the next slide presents our short-term outlook. For Brazil, the expectation is for ethylene production to decline due to the scheduled maintenance shutdown at the petrochemical complex in Rio Grande do Sul in the second quarter of this year. However, resin sales volume is expected to grow mainly due to better demand in Brazil. For spreads, external consultants are calling for better PE spreads and lower PP and PVC spreads. However, PE and PVC spreads should remain at levels above the recent historical average. In the United States, sales volume should be in line with the previous quarter despite the expectation of lower production and U.S. PP propylene spreads should remain at levels in line with the last quarter and above the recent historical average. For Mexico, the expectation is for higher production volume, supported by higher imports from the U.S., but sales volume should remain stable. PE ethane spreads should widen from the first quarter of this year, remaining above the recent historical average. Let's go to the next slide, please. This slide shows how Braskem remains an interesting investment opportunity in the global petrochemical industry. First, looking at recent stock growth on the P3 compared to the market consensus. We also see the potential for price appreciation in Braskem's share. Based on this EBITDA multiple, Braskem remains discounted in relation to not only its peers in the United States but also its peers in Latin America. We would like to reinforce that Braskem is a global company, serving clients on all continents, is a leader in its market, makes concrete contributions to sustainable development, and is the world leader in biopolymers. Braskem has a robust financial strategy with consistent operating cash generation, a healthy financial position, and disciplined capital allocation. Risk management is part of Braskem's strategy by diversifying its feedstocks and geographic profiles, which increases profitability and mitigates risks. Braskem is also highly dollarized with its revenues and a large part of it is cost denominated or pegged to the dollar. On Slide 21, I'll go over our main goals for 2022. On this slide, I would like to remind you of the main goals for 2022 divided in accordance with each of our strategic pillars. Starting with productivity and competitiveness, we will focus on capturing value through the initiatives of the transform for value program to reach recurring annual gains of $302 million in a year. In sustainability, our focus will be on intensifying actions in recycling, expanding renewables and reducing our carbon footprint. In the pillar of diversification, we have 2 important projects from the standpoint not only of diversification but also growth. Starting construction of the ethane import terminal in Mexico and defining the partner and advancing in the feasibility studies for investing jointly with SCG Chemicals in a new green ethylene plant in Thailand. In people, governance and reputation, we will remain focused on advancing on all work fronts related to the geological event in Alagoas. We also will advance in studies for our potential migration to the Novo Mercado listing segment of the B3. Lastly, in the pillar of capital allocation, we will be focused on returning value to shareholders by distributing dividends and maintaining our investment-grade credit rating. I would like to close today's presentation with an invitation to all investors to visit our new Investor Relations website, which was created to share, clearly, reliably, and conveniently important information such as financial indicators, ESG actions and presentations as well as other highlights of Braskem's performance. I also invite everyone to listen to the first episode of our recently created podcast, Braskem Invest, where we will talk about our actions in strategic pillars and present analysis and perspectives about the company and financial market. We conclude today's presentation of Braskem's results for the first quarter of 2022. Thanks, everyone, for your attention. Now let's move on to the Q&A session.

Operator, Operator

Our first question comes from Mr. Guilherme Levy from Morgan Stanley.

Guilherme Levy, Analyst

My first question is about the potential migration to Novo Mercado. I want to know at what stage the process is and what timeline the company is currently working with. How has this timeline changed compared to your expectations at the beginning of the year? My second question relates to your raw materials. Is the spread between your naphtha and ethane basis significantly different now than it was a few months ago? I believe it is, so I’d like to understand your current incentives regarding that, or if you are conducting any studies to enhance the flexibility of your spreads in Brazil. Is that a possibility you are exploring, and what would be the potential cost of such an investment?

Pedro Freitas, CFO

Guilherme. Well, with regard to moving to Novo Mercado, well, first of all, Braskem has introduced to its shareholders the feasibility studies and a new set of bylaws that would be adjusted to Novo Mercado. We understand that they are talking amongst themselves about our proposal and also about a potential new shareholders agreement because what we have currently is not appropriate or in accordance with Novo Mercado's rules. These are meetings that we do not take part in, but we believe that's something they are currently discussing. Now we can't say much about our timeline. The plan that they've communicated and which we replicated to the market late last year was to sell our PN shares and then migrate to Novo Mercado to sell those shares. So within that plan, considering the state of the market, the offering of those PN shares has not been concluded. So we do not have an offering underway at this point. So my understanding of this situation is sort of blurry. We did not have a very clear timeline. And the only thing I can say is that studies have moved forward, and we already have a draft of what those bylaws would look like, but we still need the final say from our shareholders. With regard to our raw materials, one of the stepping stones of our strategy for over a decade is diversifying our set of raw materials. In the current scenario where naphtha prices are higher, and we have become more competitive, our operations in Bahia now operate with ethane to capture that competitiveness within the realm we operate. Also, within that strategy of diversification, it's also important to remember Mexico, where the share of ethane is also increasing. We had 80% in the first quarter and the strategy of fast-tracking that has picked up, and we expect to increase by the end of June the availability and the export capacity for ethane as well. Because of that, our prospect for the second half of the year is to have Mexico running on ethane at about 100% of its operations. So at the end of the day, our flexibility and diversification raw strategy ultimately puts us on a very interesting level where, regardless of where oil prices go, we ultimately have a portfolio that's adjustable to different market situations with interesting profitabilities for our operations. Now on the topic of spreads, I'll turn over to Rosana who will be giving you more details.

Rosana Avolio, Investor Relations Director

Yes. Thank you, Pedro. Thank you, Guilherme, for the question. To address the diversification, this strategic pillar is even broader; it's not only feedstock, but it also involves geography and suppliers. So when we look at our feedstock profile, we can see naphtha gas, and there's a propane portion, which is quite important. When we look at the American market, the producer who is having a higher profitability of PP is in the United States. So when we look at the diversification, we are looking not only at feedstock but also something broader, thinking about expanding the plant of green polyethylene. So it's always important to look at it in a broader way. It's also important to consider feedstock combined with the prices of our products. As we mentioned in the presentation, the expectation of the company aligned with expectation of external consulting firms of the sector is that we should see spreads above the recent historical averages. So we saw an increase of feedstock prices. But in the last four weeks, we noticed that the price is covered at the international level. So in fact, we are very confident towards the result of the dynamics of the spread, but we are always optimistic for 2022 regarding the company's results.

Operator, Operator

Our next question comes from Pedro Soares with BTG Pactual.

Pedro Soares, Analyst

I have only one very quick question about your working capital. We saw your consumption really go up very sharply during this quarter. So especially looking at the chart that you brought that shows the development of naphtha prices over the second quarter, we've seen prices behaving a little bit better and ultimately stabilizing. So I would like you guys to talk a little bit about whether it makes sense for us to imagine a decreased consumption starting on Q3 in a healthier level. And if you could add any color as to what you guys expect in that sense for the rest of the year as well?

Pedro Freitas, CFO

Pedro. Well, our working capital performance can be explained by at least three different trends. The first of them would be our sales volume trend, which went up in Q1. So you see a higher profitability level with a higher price level, which suggests a hike in consumption. The second trend is in our inventories, which went up, especially in preparation for the maintenance shutdown in Triunfo, which is already underway. We always raise our inventory levels before those shutdowns to maintain our operational levels despite the decrease in production. And the third would be the feedstock price trend in the international market, which ultimately led to a higher working capital level with the increase in our investments in that sense. Now with what's going on currently, we have two effects in opposite directions. First of all, compared with March, prices are a bit lower now. In March, oil prices came to $130 a barrel and it's now at $100 a barrel. So at least right now, if prices remain at their current levels, our perspective is for both our accounts receivable and our inventories to be adjusted. Foreign exchange is currently a bit higher; it's above USD 5 to Brazilian real at this point. So it's difficult for us to have a very precise forecast as to whether our working capital levels will be reversed. With the current levels, we do not believe there is any need for us to inject more capital over the course of the year in any substantial way. But that reversal could come with the decrease in our inventories because after the maintenance shutdown, inventories go back to the regular levels. But considering the international reference, prices in Brazilian real and foreign exchange rates, which are more difficult to predict. If they remain at their current level, I believe that we should probably stay with the same level of working capital. I don't know if Rosana has anything to add.

Rosana Avolio, Investor Relations Director

I think this is it, Pedro.

Operator, Operator

Our next question comes from Vicente Falanga from Bradesco BBI.

Vicente Falanga, Analyst

Well, I also had two questions. You announced this change in the mechanical recycling. How much of that do you believe would allow you guys to reach what I believe is 1 billion tons by 2030? And how much of that target would depend on chemical recycling? And do you guys have anything to share on that front? And my second question was, I believe that at one point, you guys were considering maybe make your dividend sharing policy clearer as a connection to your cash flow. If you guys have anything to add in that sense, that would be great.

Pedro Freitas, CFO

It's great to hear from you, Vicente. In our recycling efforts, we have set three goals. We aim to reduce the sales of recyclable products by 320 tons by 2025 and by 1 billion tons by 2030. Additionally, we plan to reduce all plastic in the environment by 1.5 million by 2030, which does not specifically consider Braskem's recycling or the recycling of its plastic products. Currently, our recycling capacity is approximately 23 million tons without the anti-AV, and with AV, it increases another 23 million, positioning us about halfway to our 2025 goal. We're excited about our partnership with the company we're joining, as they offer a scalable technology that can be implemented in various regions worldwide. This proprietary technology is expected to accelerate our growth in the recycling market, and if successful, we envision establishing new recycling plants that will utilize this technology. Notably, this technology produces not a resin, but rather a ready-to-use product suitable for civil construction and transportation pellets, which can be deployed globally. While this is not our only growth platform, it represents a significant opportunity for Braskem to expand its recycling operations under a distinct business model with scalable capabilities. Regarding chemical recycling, we are exploring a variety of technologies. We have a few projects in progress, but at this stage, nothing is mature enough for disclosure. Some projects remain in the technological development phase, while we continue seeking viable business plans. Currently, we're conducting several tests, but we don't have any advancements significant enough to announce at this time.

Vicente Falanga, Analyst

Okay, Pedro. I have another question about your dividends. Is there anything you can comment on?

Pedro Freitas, CFO

Yes, of course. Rosana?

Rosana Avolio, Investor Relations Director

Yes. In relation to our dividend policy, we have one established that defines a minimum amount according to the applicable legislation, 25% of the net income. And we also established the cap; our company is cyclic. It's very important to keep a level of investment that creates a lot of value for our company. So we established a cap that considers the impact on the corporate leverage of the company and also considers a minimal distribution in the medium term. What we have been discussing according to your question, considering that we are a dollarized company and we understand it's difficult to model the net income of the company and to come to a consensus in terms of market. Maybe we should have a metric close to cash generation or linked to cash generation, but we're still studying it. The discussions are incipient. And we are going to have a dividend policy that we establish, considering that we are cyclic. And reinforcing, we will also try to have efficient capital allocation. We want to have a well-equated debt level, make investments in the avenues for growth that we have already announced based on the competitive advantage that we have in the sector, especially renewables and recycling and return value to the shareholders. And last year was a good example where we balanced the three fronts, and we are going to return more value to the shareholders.

Operator, Operator

Our next question comes from Luiz Carvalho with UBS Investment Bank.

Luiz Carvalho, Analyst

I have three questions. First, could you elaborate on the partnership in production you mentioned earlier? I'm trying to understand how the price trend of your shares relates to that partnership. We believe that the tag along will no longer exist if that is the case. Could you provide more details on that? Second, we've been discussing the spread issue since the beginning of the year. As you've noted, feedstock prices have risen significantly due to increasing oil prices, and there may be adjustments in transportation ticket prices. Regarding China, I would like to know how you are addressing the challenges of passing those increased prices onto your end consumers. Lastly, could you comment on the potential regulatory changes in Brazil and Mexico? There has been a lot of discussion this week about petrochemical products possibly being included in a list of items with lower tax rates, and there are concerns about import issues being affected in various ways. What are your insights on that?

Pedro Freitas, CFO

Thank you for your question. Regarding Novo Mercado, I believe that inquiry should be directed to our shareholders. We are not fully aware of their decision-making process or if share prices influence their choice to move towards Novo Mercado. We observed changes related to our supply, but questions about Novo Mercado are better suited for them since we lack that specific information. As for the performance of oil prices in relation to cost adjustments, we continue to align our policies with international pricing trends. The basic chemical products and resins we sell continue to reflect these trends. Given the nature of the industry, the prices typically follow what the marginal producers set. Currently, Asian producers are the benchmark for our margins. Therefore, if feedstock prices rise, it will slightly impact the prices set by producers, which will, in turn, affect our pricing. Historically, this transfer of costs can happen quite quickly, within a few weeks, or it may take several months, but historical data shows that it does occur. We have never seen a case where price increases were not passed along to final prices, so we anticipate that they will be transmitted. We have already observed some of this cost transfer happening across most of our product lines. While we still anticipate some adjustments for a few specific products, we believe the industry's structural composition indicates that prices will generally be passed along. Regarding REIQ and the import rates you mentioned, those discussions are ongoing. It’s important to note that last year, the Brazilian Congress made a determination about REIQ. From what we gather from our contacts with legislators, a change in the short term does not seem likely, but ultimately, Congress will decide in a general assembly, and we expect to receive updates on this in the coming weeks. There have been recent adjustments to some products, but these changes did not impact Braskem’s offerings concerning the new import tariffs. Adjustments were made to the prices of standard products and some capital and IT goods, but not for the products we deal with, at least based on our analysis. Regulatory changes are constant in every country, but in this instance, they haven't significantly impacted our operations. As for Mexico, it is a deficit market, so any changes to tariffs or import rates will have some effect on us. While potential regulatory changes in Mexico could be beneficial, the recent shifts we observed were in gas prices, which have not directly impacted us.

Operator, Operator

Our next question comes from Gabriel Barra with Citibank.

Gabriel Barra, Analyst

I wanted to discuss the investment aspect. It seems to have shifted significantly in terms of your strategy to create value, especially regarding value structures. With that in mind, could you explain a bit about the expected returns from recycling and the Mexico terminal? Additionally, it's been some time since you've sought a partner for investing in your import terminal in Mexico. If you don't find a partner, what would your strategy be? How would you structure the investment within the joint venture? Would Braskem handle it independently? I'm looking for clarification on that situation.

Pedro Freitas, CFO

Gabriel. Well, we have a very robust analysis process in terms of when and where to make our investments using a range of different tools and scenario analysis. Ultimately, what we have, at least historically, is that most of Braskem's investment, especially the larger investments, record a return rate of over 20%. The larger ones, sometimes with rates that are even higher than that. So our decision-making process ultimately leads to that level of return, and that's about the level we see with these projects for green ethane and growth in renewables and also domestic investment. It's still a little bit lower than that in recycling. I think not only us but all players in the business are still looking for business models that will generate higher returns. We expect the investment in this partnership we have in the Netherlands will bring interesting returns on our capital investment. But at first, even to develop the business, I mean, not all renewables and recycling projects reach that level I mentioned. So this is a feature we enjoyed, a characteristic of ours, investments that are not necessarily paying out in the beginning, but that ultimately generate high rate returns. So the regular process for the company ultimately leads to very interesting return rates. Bear in mind that our investments are always made in U.S. dollars. So we are talking about at least 20% denominated in U.S. dollars. Now about our partner in Mexico. We are at a very advanced stage in our decision-making. And even our Board of Directors was informed yesterday of who our partner will be. So our selection process is essentially concluded. It still needs the Mexican side of Braskem to approve that, but I think I can say that the partnership is essentially determined and should be announced to the market over the coming weeks once we have the ultimate approval stamp in Mexico.

Rosana Avolio, Investor Relations Director

Pedro, we received some messages on the webcast. I'm going to read the questions in Portuguese. There is a question here from Eduardo with Bradesco Security. He asks if we could provide some additional color on the net debt in the new cyclic phases and in the long term? And what are the options available to keep the leverage within our targets, if there's any important changes in the global scenario?

Pedro Freitas, CFO

Thank you, Eduardo. I want to emphasize that maintaining our investment grade is a top priority for Braskem. We are actively working towards achieving investment grade with Moody's, which is a significant focus for us. With this goal in mind, we aim to keep our leverage levels within our guidance, targeting an average leverage of 2.5 times. While we may experience some fluctuations in our leverage ratio during declining cycles, we have a clear plan for de-leveraging, similar to what we have accomplished in the past. We have an agreement with credit rating agencies to avoid downgrades, and our leverage is currently under control, sitting at 1 times our net debt-to-EBITDA ratio. It may increase slightly due to our EBITDA performance compared to last year, as we had exceptional results that we do not expect to maintain. Nevertheless, based on our outlook and market consensus for Braskem's potential this year, we are confident that we will remain well below the 2.5 times capital target. While we do anticipate an adjustment, we are fully prepared and there are no concerns about this cycle adjustment. Furthermore, even in a more challenging scenario than expected, Braskem has a policy to minimize near-term exposure. Our debt maturing in the next two to three years is around $700 million to $800 million, and we have successfully de-leveraged since 2020, with most of our debt being long-term. Our average debt maturity is 20 years, which mitigates major risks from international market deterioration. In past crises, we implemented plans to preserve our cash flow and liquidity, including reviewing our investment portfolio, although we prefer not to cancel investments that add value. Alternatively, we could explore selling receivables or changing our working capital management, which would allow us to take more extreme measures if necessary. We are well-equipped to handle unexpected scenarios, and I believe the company is in a strong position to address any challenges that may arise.

Rosana Avolio, Investor Relations Director

There's another question here, I'm going to read it Thomas with. Thomas, for the question. He says that he has some questions in relation to Mexico's operation. The first is, given our corporate strategy of diversifying feedstock. And he mentions reducing the naphtha share, are we considering an expansion in the Mexico plant, especially considering the context that the terminal will be finished in 2024 since this is going to have additional capacity for importation of ethane? And Thomas also asks us to provide that guidance in relation to the dividends to be received by Braskem. When will those dividends be received?

Pedro Freitas, CFO

Thank you for your questions, Thomas. The possibility of expanding in Mexico aligns well with our strategy to diversify feedstock and grow internationally. The Mexican plant is already prepared for expansion, as it was constructed with this in mind. Once the terminal is operational and we have access to the necessary feedstock, we will work towards enabling that expansion. Currently, we do not have approval for investment in that expansion, but it would be sensible to pursue it. After we confirm the terminal’s performance, we will likely look to expand impactfully, given that the asset is equipped for it. Regarding dividends in Mexico, Braskem Idesa’s financial structure allows for approximately $40 million per year in dividends to shareholders, which was paid at the end of last year in December. This year, we expect Braskem Idesa to distribute those dividends, although the specific timing will depend on their cash position. After we announce the partner for the terminal and finalize the engineering plan along with the financing terms, we can anticipate the announcement of those dividends. Our priority is to deliver value to Braskem Idesa, and once financial terms are confirmed, dividend payments will be forthcoming.

Operator, Operator

At this time, we are concluding our Q&A session. I'd like to turn the conference over to Roberto for his final remarks.

Roberto Simoes, CEO

Good morning, everyone. Thank you for joining our earnings conference. I want to share some thoughts with you. This quarter has shown strong results, and I want to emphasize that our feedstock diversification strategy has been made possible by the company’s approach implemented over 20 years ago. The results clearly indicate that we can offset challenges in regions like South America, Brazil, Mexico, or Germany with strength in other areas. Our reduced reliance on naphtha and effective use of ethane spreads reflect this diversification. Our operations in the United States are distinct and robust in both markets. It’s essential to note that we remain committed to sound capital allocation, maintaining a healthy cash flow. We've prioritized higher returns for our shareholders. In May 2022, we distributed dividends totaling BRL 1.35 billion, which, combined with the BRL 100 million paid in December 2021, amounts to BRL 7.35 billion, representing 77.5% of our adjusted net profit for 2021. Given everything discussed this year, we are confident about this year's performance, expecting spreads to surpass recent historical averages despite ongoing political tensions, aligning with what industry consultants anticipate. Thank you for joining us today, and we look forward to reconvening in August for our Q2 earnings results. Thank you, and see you then.

Operator, Operator

Braskem's earnings conference has now concluded. Thank you, everyone, for joining us, and have a great day.