InterviewBraskem seeks larger US footprint via acquisitions

19 April 2011 21:16  [Source: ICIS news]

By Joseph Chang

NEW YORK (ICIS)--Brazil-based petrochemical and polymers company Braskem aims to expand its presence in the US polymers market through acquisitions, its chief executive said on Tuesday.

“In the US we have a broader focus to grow our presence - not just looking at PP [polypropylene], but PE [polyethylene] and PVC [polyvinyl chloride]. We are interested in the US market for these three resins,” said CEO Carlos Fadigas at a media event at the New York Stock Exchange.

“Some consolidation will happen in the US, and we are keeping track of these opportunities,” he added.

There are 11 players in the US PP market, and eight in PE, providing opportunities for consolidation, the CEO pointed out.

And Braskem has the financial wherewithal to fund acquisitions, said Fadigas.

The company has net debt of Brazilian reais (R) 9.9bn ($6.2bn) versus earnings before interest, tax, depreciation and amortisation (EBITDA) of R4.0bn in the last 12 months, giving it a modest debt ratio of 2.43 times, noted chief financial officer Marcela Drehmer.

Braskem has R2.8bn in cash on its books, along with an undrawn $350m (€245m) credit facility. It also was upgraded to an investment-grade credit rating from global credit ratings agencies Standard & Poor’s (S&P) and Moody’s Investors Service on 30 March and 4 April, respectively.

“We view our solid balance sheet as an enabler for acquisitions,” said Fadigas.

Acquisitions the size of its $350m acquisition of Sunoco’s PP business in 2010 at transaction multiples of 5.5-6.5 times EBITDA would not have a major impact on its debt ratio, he added.

“If there was the opportunity to buy something bigger, we could look at a number of creative ways to finance this, but I don’t see that happening at this point,” Fadigas said.

($1 = R1.59) ($1 = €0.70)

Author: Joe Chang

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