Edgar Filing: BRASKEM SA

Form 20-F/A

As filed with the Securities and Exchange Commission on October 2, 2017

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F/A

(Amendment No. 2)

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2015

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-14862

BRASKEM S.A.

(Exact Name of Registrant as Specified in its Charter)


N/A		The Federative Republic of Brazil
(Translation of Registrant’s Name into English)		(Jurisdiction of Incorporation or Organization)

Rua Lemos Monteiro, 120 – 24° andar

Butantã—São Paulo—SP, CEP 05501-050, Brazil

(Address of Principal Executive Offices)

Pedro van Langendonck Teixeira de Freitas

Braskem S.A.

Rua Lemos Monteiro, 120 – 24° andar

Butantã—São Paulo—SP, CEP 05501-050, Brazil

Telephone: + (55 11) 3576-9000

Fax: + (55 11) 3576-9532

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:


Title of Each Class		Name of Each Exchange on which Registered
Preferred Shares, Class A, without par value per share, each represented by American Depositary Receipts		New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

TITLE OF EACH CLASS:

6.450% Notes due 2024, issued by Braskem Finance Limited

The total number of issued shares of each class of stock of Braskem S.A. as of December 31, 2015 was:

451,688,652 Common Shares, without par value

345,002,978 Preferred Shares, Class A, without par value

593,618 Preferred Shares, Class B, without par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer		☒		Accelerated filer ☐		Non-accelerated filer		☐		Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. † The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☐

Standards as issued by the

International Accounting Standards Board ☒

Financial Reporting

International Other

☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

EXPLANATORY NOTE

This Amendment No. 2 on Form 20-F/A, or Amendment No. 2, is being filed solely to amend the Annual Report on Form 20-F for the year ended December 31, 2015, as filed by Braskem S.A., or the Company, with the U.S. Securities and Exchange Commission on May 5, 2016, or the Original Form 20-F, as amended on May 9, 2016 by Amendment No. 1, or Amendment No. 1, to reflect: (1) the restatement of expenses in our income statement of certain payments previously improperly classified as expenses during the fiscal years ended December 31, 2014, 2013, 2012 and 2011, (2) the restatement of tax provisions for the correction of errors in the calculation of taxes payable in the fiscal years ended December 31, 2015, 2014, 2013 , 2012 and 2011, (3) the identification of material weaknesses in internal controls; and (4) a global settlement with governmental authorities in several jurisdictions related to allegations of improper payments in the context of the so-called Operation Car Wash (Operação Lava Jato). The restatements, identification of material weaknesses and the global settlement arose from an independent internal investigation that was conducted by law firms with extensive experience in similar cases in the United States and Brazil, each an Expert Firm and, collectively, the Expert Firms, into these allegations in the context of the so-called Operation Car Wash, or the Investigation.

This Amendment No. 2 amends the Company’s Annual Report on Form 20-F to reflect the following changes:

•

the inclusion of restated financial statements of Braskem S.A. as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013, which have been restated to reflect the reclassification as other income (expenses) of certain payments previously improperly classified as expenses and to correct errors in the calculation of taxes payable;

•

the inclusion of a reissued Report of Independent Registered Public Accounting Firm of PricewaterhouseCoopers Auditores Independentes with respect to the restated financial statements of Braskem S.A. as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013;

•

the inclusion of a reissued Management’s Report on Internal Control over Financial Reporting to report the material weakness and the change in conclusion;

•

the inclusion of a reissued Attestation Report of the Registered Public Accounting Firm of PricewaterhouseCoopers Auditores Independentes modified to report the material weakness;

•

the amendment and replacement in their entirety of Item 3, 4, 5, 6, 8 and 15.

(1) Restatement of Expenses in Income Statement

During the Investigation, the Expert Firms identified payments for services to third parties without corresponding evidence of the services being rendered (the “Improper Commission Payments”). The Company reclassified the Improper Commission Payments from “Selling and Distribution” expenses as originally reported to “Other Income (Expenses)” in its income statements and the Company’s financial statements have been restated to reflect this reclassification. The Company also restated the disclosure in “Item 3 – Key Information” and “Item 5 – Operating and Financial Review and Prospects” to reflect the restated figures in the Company’s restated financial statements and to adjust certain explanations related thereto.

(2) Restatement of Taxes Provisions

As part of the Company’s review of the manner in which the Company recorded the Improper Commission Payments, the Company determined that the Improper Payments were not deductible for tax purposes and, as a result, concluded that it had made material errors in its calculation of its taxes provisions in prior periods as described in more detail in note 2.1 to the restated financial statements. The Company also restated the disclosure in “Item 3 – Key Information” and “Item 5 – Operating and Financial Review and Prospects” to reflect the restated figures in the Company’s restated financial statements and to adjust certain explanations related thereto.

(3) Material Weaknesses in Internal Controls

We also identified material weaknesses in its internal controls and procedures and also implemented a series of actions to remediate the material weaknesses associated with the Improper Commission Payments, as described in more detail in “Item 15 – Controls and Procedures.”

(4) Global Settlement

In December 2016, we entered into a global settlement with Brazil’s Federal Prosecutor’s Office (Ministério Público Federal), or the MPF, the U.S. Department of Justice, or the DoJ, the U.S. Securities and Exchange Commission, or the SEC, and Switzerland’s Office of the Attorney General, or the OAG, with regard to certain matters under within the scope of the Investigation, or the Global Settlement.

On December 14, 2016, we entered into a leniency agreement with the MPF, or the Leniency Agreement. On December 21, 2016, we filed the plea agreement in the United States District Court for the Eastern District of New York under which we agreed to plead guilty to a one-count criminal information charging our company with conspiracy to violate the anti-bribery provisions of the U.S. Foreign Corrupt Practices Act, or the FCPA. On the same date, we consented to the entry of a final judgment in a civil action brought by the SEC alleging civil violations of the anti-bribery, books and records and internal accounting controls provisions of the FCPA. In addition, on December 21, 2016, the OAG closed its investigation of these matters. Under the Global Settlement, we agreed to pay to the governmental authorities in these jurisdictions an aggregate amount of approximately US$957 million (equivalent to approximately R$3.1 billion based on the fixed exchange rate of R$3.27 to US$1.00).The Global Settlement was definitively ratified as follows:

•

In Brazil, the Leniency Agreement was ratified by the 5th Coordination and Review Chamber of the MPF on December 15, 2016 and on June 6, 2017 by the 13th Federal Court of Curitiba.

•

In the United States, the competent courts confirmed the resolution with the DoJ on January 26, 2017 and the resolution with the SEC on February 28, 2017.

•

In Switzerland, the agreement with the OAG did not require ratification to produce effect.

Of the total fine established in the Global Settlement, we have already paid approximately R$1.3 billion in the following manner:

•

US$94.9 million (R$296.6 million) to the DoJ on February 8, 2017;

•

US$65.0 million (R$206.5 million) to the SEC on April 27, 2017;

•

CHF30.2 million (R$104.4 million) to the OAG on June 27, 2017;

•

R$736.5 million to the MPF on July 6, 2017.

The outstanding amount of approximately R$1.8 billion will be paid in the following manner:

•

CHF64.3 million to the OAG in four equal annual and successive installments of CHF16.1 million due on June 30 of each year commencing in 2018; and

•

R$1.6 billion to the MPF in six annual installments adjusted for inflation by the variation in the IPCA inflation index due on January 30 of each year commencing in 2018. To guarantee payment of future installments, Braskem has provided a guaranty in the form of fixed assets in an amount equal to one annual installment

Additional details regarding the Global Settlement are set forth in note 34.d (events after the reporting period) to the restated financial statements.

Other than as set forth above, this Form 20-F/A does not, and does not purport to, amend, update or restate the information in any other item of the Annual Report as originally filed with the SEC, as amended by Amendment No. 1.

TABLE OF CONTENTS


		Page
PRESENTATION OF FINANCIAL AND OTHER INFORMATION			iv
CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS			vi
PART I			1
Item 1.	Identity of Directors, Senior Management and Advisors		1
Item 2.	Offer Statistics and Expected Timetable		1
Item 3.	Key Information		1
Item 4.	Information on the Company		26
Item 4A.	Unresolved Staff Comments		58
Item 5.	Operating and Financial Review and Prospects		59
Item 6.	Directors, Senior Management and Employees		104
Item 7.	Major Shareholders and Related Party Transactions		120
Item 8.	Financial Information		126
Item 9.	The Offer and Listing		134
Item 10.	Additional Information		137
Item 11.	Quantitative and Qualitative Disclosures About Market Risk		152
Item 12.	Description of Securities Other than Equity Securities		156
PART II			157
Item 13.	Defaults, Dividend Arrearages and Delinquencies		157
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds		157
Item 15.	Controls and Procedures		157
Item 16A.	Audit Committee Financial Expert		160
Item 16B.	Code of Ethics		160
Item 16C.	Principal Accountant Fees and Services		160
Item 16D.	Exemptions From the Listing Standards for Audit Committees		161
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchases		161
Item 16F.	Change in Registrant’s Certifying Accountant		161
Item 16G.	Corporate Governance		162
Item 16H.	Mine Safety Disclosure		164
PART III			164
Item 17.	Financial Statements		164
Item 18.	Financial Statements		164
Item 19.	Exhibits		164

iii

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

All references herein to the “real,” “reais” or “R$” are to the Brazilian real, the official currency of Brazil. All references to “U.S. dollars,” “dollars” or “US$” are to U.S. dollars, the official currency of the United States. All references to “CHF” are to Swiss francs, the official currency of Switzerland.

All references herein (1) to “we,” “us” “our company” or “the Company” are references to Braskem S.A., its consolidated subsidiaries and jointly controlled entities, and (2) to “Braskem” are references solely to Braskem S.A. All references herein to “Braskem Europe” mean Braskem Europe GmbH and its consolidated subsidiaries, including Braskem America, Inc., or Braskem America.

On May 4, 2016, the exchange rate for reais into U.S. dollars was R$3.555 to US$1.00, based on the selling rate as reported by the Central Bank of Brazil (Banco Central do Brasil), or the Central Bank. The selling rate was R$3.9048 to US$1.00 on December 31, 2015, R$2.6562 to US$1.00 on December 31, 2014 and R$2.3426 to US$1.00 on December 31, 2013, in each case, as reported by the Central Bank. The real/U.S. dollar exchange rate fluctuates widely, and the selling rate on May 4, 2016 may not be indicative of future exchange rates. See “Item 3. Key Information—Exchange Rates” for information regarding exchange rates for the real since January 1, 2011.

Solely for the convenience of the reader, we have translated some amounts included in “Item 3. Key Information—Selected Financial and Other Information” and elsewhere in this annual report from reais into U.S. dollars using the selling rate as reported by the Central Bank as of December 31, 2015 of R$3.9048 to US$1.00. These translations should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or at any other exchange rate. Such translations should not be construed as representations that the real amounts represent or have been or could be converted into U.S. dollars as of that or any other date.

Financial Statements

We maintain our books and records in reais. Our consolidated financial statements as of December 31, 2015 and 2014 and for the three years ended December 31, 2015 have been audited, as stated in the report appearing herein, and are included in this annual report.

We have prepared our consolidated financial statements included in this annual report in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board, or IFRS.

Market Share and Other Information

We make statements in this annual report about our market share in the petrochemical industry in Brazil and our production capacity relative to that of other petrochemical producers in Brazil, Latin America, the United States and the world. We have made these statements on the basis of information obtained from third-party sources that we believe are reliable. We have calculated our Brazilian market share with respect to specific products by dividing our domestic net sales volumes of these products by the total Brazilian domestic consumption of these products as estimated by the Brazilian Chemical Industry Association (Associação Brasileira da Indústria Química), or ABIQUIM. We derive information regarding the production capacity of other companies in the Brazilian petrochemical industry and the estimated total Brazilian domestic consumption of petrochemical products principally from reports published by ABIQUIM. We derive information regarding the production capacity of other companies in the global petrochemical industry, the United States petrochemical industry and the Latin American petrochemical industry, international market prices for petrochemicals products and per capita consumption in certain geographic regions, principally from reports published by IHS, Inc., or IHS. We derive information regarding the size of the chemical distribution industry and our market share in this industry principally from reports published by the Brazilian Chemical and Petrochemical Distributors Association (Associação Brasileira dos Distribuidores de Produtos Químicos e Petroquímicos). We derive information relating to Brazilian imports and exports from the System for Analyzing International Trade (Sistema de Análise das Informações de Comércio Exterior), or ALICE-Web, produced by the Brazilian Secretary of International Trade (Secretaria de Comércio Exterior) and the Brazilian Secretary of Development, Industry and Trade (Ministério do Desenvolvimento, Indústria e Comércio Exterior). We also include information and statistics regarding economic growth in emerging economies obtained from the International Monetary Fund and statistics regarding gross domestic product, or GDP, growth in Brazil obtained from the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística), or the IBGE.

We have no reason to believe that any of this information is inaccurate in any material respect. However, we have not independently verified the production capacity, market share, market size or similar data provided by third parties or derived from industry or general publications.

We provide information regarding domestic apparent consumption of some of our products, based on information available from the Brazilian government, Institute of Applied Economic Research (Instituto de Pesquisa Econômica Aplicada), or IPEA, and ABIQUIM. Domestic apparent consumption is equal to domestic production plus imports minus exports. Domestic apparent consumption for any period may differ from actual consumption because this measure does not give effect to variations of inventory levels in the petrochemical supply chain.

Production Capacity and Sales Volume

As used in this annual report:

•

“production capacity” means the annual nominal capacity for a particular facility, calculated based upon operations for 24 hours each day of a year and deducting scheduled downtime for regular maintenance; and

•

“ton” means a metric ton, which is equal to 1,000 kilograms or 2,204.62 pounds.

Rounding

We have made rounding adjustments to some of the amounts included in this annual report. As a result, numerical figures shown as totals in some tables may not be arithmetic aggregations of the amounts that precede them.

CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements. Some of the matters discussed concerning our business operations and financial performance include forward-looking statements within the meaning of the U.S. Securities Act of 1933, as amended, or the Securities Act, or the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act.

Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates” and similar expressions are forward-looking statements. Although we believe that these forward-looking statements are based upon reasonable assumptions, these statements are subject to several risks and uncertainties and are made in light of information currently available to us.

Our forward-looking statements may be influenced by numerous factors, including the following:

•

general economic, political and business conditions in the markets in which we operate, including demand and prices for petrochemical products;

•

interest rate fluctuations, inflation and exchange rate movements of the real in relation to the U.S. dollar;

•

the cyclical nature of the global petrochemical industry;

•

competition in global petrochemical industry;

•

prices of naphtha, ethane, propane, propylene and other raw materials;

•

international prices of petrochemical products;

•

actions taken by our major shareholders;

•

our ability to implement our financing strategy and to obtain financing on satisfactory terms;

•

our progress in integrating the operations of companies or assets that we may acquire in the future, so as to achieve the anticipated benefits of these acquisitions;

•

changes in laws and regulations, including, among others, laws and regulations affecting tax and environmental matters and import tariffs in other markets in which we operate or to which we export our products;

•

future changes in Brazilian policy and related actions undertaken by the Brazilian government;

•

a deterioration in the world economy that could negatively impact demand for petrochemicals;

•

decisions rendered in major pending or future tax, labor and other legal proceedings; and

•

other factors identified or discussed under “Item 3. Key Information—Risk Factors.”

Our forward-looking statements are not guarantees of future performance, and our actual results or other developments may differ materially from the expectations expressed in the forward-looking statements. As for forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainty of estimates, forecasts and projections. Because of these uncertainties, potential investors should not rely on these forward-looking statements.

Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

Selected Financial and Other Information

The following selected information should be read in conjunction with “Presentation of Financial and Other Information,” “Item 5. Operating and Financial Review and Prospects” and our audited consolidated financial statements and the related notes thereto, which are included in this annual report.

The selected financial data as of December 31, 2015 and 2014 and for the three years ended December 31, 2015 have been derived from our audited consolidated financial statements, prepared in accordance with IFRS, and included in this annual report.

Our audited consolidated financial statements as of December 31, 2015 and 2014 and for the three years ended December 31, 2015 have been adjusted for the effects of the restatement more fully described in the “Explanatory Note” of this annual report and in note 2.4 to our audited consolidated financial statements.

As a result of the Investigation described in the “Explanatory Note” on this annual report, we identified several errors in our previously issued financial statements as of December 31, 2015 and 2014 and for the three years ended December 31, 2015, which have been restated.

The selected financial data as of December 31, 2013, 2012 and 2011 and for the years ended December 31, 2012 and 2011 have been derived from Braskem’s accounting records and reflect the restatement of improperly classified expenses from selling and distribution expense to other expense and to correct errors in the calculation of taxes payables.

We have included information with respect to the dividends and/or interest attributable to shareholders’ equity paid to holders of our common shares and preferred shares since January 1, 2011 in reais and in U.S. dollars translated from reais at the commercial market selling rate in effect as of the payment date under the caption “Item 8. Financial Information—Dividends and Dividend Policy—Payment of Dividends.” We prepare individual financial statements in accordance with Brazilian GAAP for certain purposes, including for the calculation of dividends.


	For the Year Ended December 31,
	2015(1)			2015 Restated			2014 Restated			2013 Restated			2012 Restated			2011 Restated
	(in millions of US$ (1), except per share data and as indicated)			(in millions of **reais, except per share data and as indicated)**
Statement of Operations Data:
Net sales revenue	US$	12,180.5		R$	47,562.4		R$	45,757.0		R$	40,928.9		R$	36,160.3		R$	33,086.5
Cost of products sold		(9,536.6	)		(37,238.4	)		(39,831.0	)		(35,794.7	)		(32,709.1	)		(29,265.0	)

Gross profit		2,643.9			10,324.0			5,926.0			5,134.2			3,451.2			3,821.5
Income (expenses):
Selling and Distribution		(287.3	)		(1,122.0	)		(1,083.5	)		(945.2	)		(932.8	)		(753.3	)
General and administrative		(343.1	)		(1,339.8	)		(1,254.7	)		(1,078.7	)		(1,071.0	)		(1,008.1	)
Research and development		(43.4	)		(169.6	)		(128.1	)		(115.7	)		(106.2	)		(99.1	)
Results from equity investments		0.6			2.2			3.9			(3.2	)		(25.8	)		(1.0	)
Results from business combinations		—			—			—			—			—			30.0
Other operating income (expenses), net		(193.7	)		(756.2	)		14.0			(327.4	)		239.8			(78.0	)

Operating profit		1,776.9			6,938.5			3,477.6			2,664.0			1,555.2			1,912.0
Financial results:
Financial expenses		(1,077.3	)		(4,206.5	)		(2,767.8	)		(2,540.0	)		(3,936.2	)		(3,563.6	)
Financial income		435.1			1,699.0			355.4			773.1			532.0			759.0

Profit (loss) before income tax and social contribution		1,134.8			4,431.0			1,065.2			897.1			(1,849.0	)		(892.6	)
Income tax and social contribution		(427.9	)		(1,670.8	)		(487.0	)		(457.0	)		783.1			359.5

Profit (loss) from continuing operations		706.9			2,760.2			578.2			440.1			(1,065.9	)		(533.1	)
Results from discontinued operations		—			—			—			—			281.5			27.6

Profit (loss)	US$	706.9		R$	2,760.2		R$	578.2		R$	440.1		R$	(784.4	)	R$	(505.5	)

Profit (loss) attributable to shareholders of the company	US$	768.7		R$	3,001.7		R$	716.0		R$	442.7		R$	(777.1	)	R$	(513.8	)
Profit (loss) attributable to non-controlling interest		(61.8	)		(241.5	)		(137.8	)		(2.7	)		(7.2	)		8.3
Earnings (loss) per share:
Basic:
Common shares		0.9663		R$	3.7732		R$	0.8996		R$	0.5180		R$	(1.3296	)	R$	(0.6782	)
Preferred class “A” shares		0.9663			3.7731			0.8996			0.6062			(1.3296	)		(0.6782	)
Preferred class “B” shares		0.1553			0.6065			0.6062			0.6062			—			—
ADS(2)		1.9326			7.5463			1.7992			1.2124			(2.6592	)		(1.3564	)
Diluted:
Common shares		0.9663		R$	3.7732		R$	0.8996		R$	0.5180		R$	(1.3296	)	R$	(0.6782	)
Preferred class “A” shares		0.9663			3.7731			0.8996			0.6062			(1.3296	)		(0.6782	)
Preferred class “B” shares		0.1553			0.6065			0.6062			0.6062			—			—
ADS(2)		1.9326			7.5463			1.7992			1.2124			(2.6592	)		(1.3564	)

(1)	Translated for convenience only using the selling rate as reported by the Central Bank as of December 31, 2015 for reais into U.S. dollars of R$3.9048=US$1.00.

(2)	American depositary shares (ADS) are U.S. dollar-denominated equity shares of a foreign-based company on an American stock exchange. In our case, each ADS represents two class A preferred shares.


	At and For the Year Ended December 31,
	2015(1)			2015 Restated			2014 Restated			2013 Restated			2012 Restated			2011 Restated
	(in millions of US$ (1), except as indicated)			(in millions of **reais, except as indicated)**
Balance Sheet Data:
Cash and cash equivalents	US$	1,803.7		R$	7,043.3		R$	3,891.3		R$	4,289.7		R$	3,287.6		R$	2,986.8
Short-term trade accounts receivable		705.7			2,755.7			2,409.1			2,792.3			2,326.5			1,843.8
Inventories (including current and non-current assets)		1,599.0			6,243.7			5,688.3			5,172.4			4,102.1			3,623.5
Non-current assets held for sale		—			—			—			37.7			277.8			—
Property, plant and equipment, net		8,732.9			34,100.3			29,071.0			25,409.2			21,176.8			20,622.7
Total assets		15,526.2			60,626.9			49,501.9			46,845.2			41,170.0			37,397.2
Short-term borrowings (including current portion of long-term borrowings)		504.5			1,970.0			1,419.5			1,249.6			1,836.0			1,391.8
Non-current liabilities held for sale		—			—			—			—			109.8			—
Long-term borrowings		6,499.8			25,380.5			18,926.7			17,362.9			15,675.6			13,753.0
Long-term debentures		—			—			—			—			—			19.1
Share capital		2,059.8			8,043.2			8,043.2			8,043.2			8,043.2			8,043.2
Shareholders’ equity (including non-controlling interest)		242.1			945.5			5,597.1			7,539.7			8,588.7			9,962.6
Other Financial and Operating Information:
*Cash Flow Information:*
Net cash provided by (used in):
Operating activities	US$	2,017.5		R$	7.,877.8		R$	3,813.0		R$	2,411.6		R$	2,571.8		R$	2,777.5
Investing activities		(1,055.2	)		(4,120.3	)		(5,054.1	)		(4,954.2	)		(2,834.3	)		(2,866.5	)
Financing activities		(25.0	)		(97.5	)		894.4			3,614.2			633.9			494.7
*Other Information:*
Capital expenditures:
Property, plant and equipment		1,051.0			4,103.9			5,378.8			5,656.4			2,792.9			2,252.5
Investments in other companies		—			—			—			—			—			619.2
**Domestic Sales Volume Data (in thousands of tons)*** (2):
Ethylene					3,279.3			3,203.9			3,360.0			3,329.3			3,097.4
Propylene					1,188.9			1,068.5			1,187.7			1,170.4			1,123.1
Polyethylene					1,705.9			1,706.1			1,765.7			1,668.2			1,524.9
Polypropylene					1,126.9			1,204.0			1,268.9			1,233.3			1,149.8
Polyvinyl chloride (PVC)					606.3			659.6			636.5			560.9			484.0

(1)	Translated for convenience only using the selling rate as reported by the Central Bank as of December 31, 2015 for reais into U.S. dollars of R$3.9048=US$1.00.

(2)

Including intra-company sales within our company. Intra-company sales of ethylene totaled approximately 2,793.531 tons in 2015, 2,704,300 tons in 2014, 2,828,200 tons in 2013, 2,805,500 in 2012 and 2,606,100 in 2011. Intra-company sales of propylene totaled approximately 942,710 tons in 2015, 859,500 tons in 2014, 977,900 tons in 2013, 950,000 tons in 2012 and 905,400 tons in 2011.

(*)	Unaudited.

Exchange Rates

The Brazilian foreign exchange system allows the purchase and sale of foreign currency and the international transfer of reais by any person or legal entity, regardless of the amount, subject to certain regulatory procedures.

Since 1999, the Central Bank has allowed the U.S. dollar-real exchange rate to float freely, and, since then, the U.S. dollar-real exchange rate has fluctuated considerably.

In the past, the Central Bank has intervened occasionally to control unstable movements in foreign exchange rates. We cannot predict whether the Central Bank or the Brazilian government will continue to permit the real to float freely or will intervene in the exchange rate market through the return of a currency band system or otherwise. The real may depreciate or appreciate against the U.S. dollar substantially. Furthermore, Brazilian law provides that, whenever there is a serious imbalance in Brazil’s balance of payments or there are serious reasons to foresee a serious imbalance, temporary restrictions may be imposed on remittances of foreign capital abroad. We cannot assure you that such measures will not be taken by the Brazilian government in the future. See “—Risk Factors—Risks Relating to Brazil—Brazilian government exchange control policies could increase the cost of servicing our foreign currency-denominated debt, adversely affect our ability to make payments under our foreign currency-denominated debt obligations and impair our liquidity” and “—Risk Factors—Risks Relating to Our Class A Preferred Shares and the ADSs— If holders of the ADSs exchange them for class A preferred shares, they may risk temporarily losing, or being limited in, the ability to remit foreign currency abroad and certain Brazilian tax advantages.”

The following table shows the selling rate for U.S. dollars for the periods and dates indicated. The information in the “Average” column represents the average of the exchange rates on the last day of each month during the periods presented.


	*Reais* per U.S. Dollars
Year	High		Low		Average		Period End
2011	R$	1.902	R$	1.535	R$	1.675	R$	1.876
2012		2.112		1.702		1.955		2.043
2013		2.446		1.953		2.161		2.343
2014		2.740		2.197		2.355		2.656
2015		4.195		2.575		3.339		3.905


	*Reais* per U.S. Dollars
Month	High		Low
September 2015	R$	4.195	R$	3.673
October 2015		4.001		3.739
November 2015		3.851		3.701
December 2015		3.983		3.748
January 2016		4.039		4.011
February 2016		4.049		3.865
March 2016		3.991		3.559
April 2016		3.692		3.451
May 2016 (through May 4)		3.555		3.499

Source: Central Bank

Risk Factors

Risks Relating to Our Company and the Petrochemical Industry

The cyclical nature of the petrochemical industry may reduce our net sales revenue and gross margin.

The petrochemical industry, including the markets in which we compete, is cyclical and sensitive to changes in global supply and demand. This cyclicality may reduce our net sales revenue and gross margin, including as follows:

•

downturns in general business and economic activity may cause demand for our products to decline;

•

when global demand falls, we may face competitive pressures to lower our prices; and

•

if we decide to expand our plants or construct new plants, we may do so based on an estimate of future demand that never materializes or materializes at levels lower than we predicted.

Historically, the international petrochemical markets have experienced alternating periods of limited supply, which have caused prices and profit margins to increase, followed by expansion of production capacity, which has resulted in oversupply and reduced prices and profit margins. Prices in the Brazilian petrochemical industry follow the global petrochemical industry, and we establish the prices for the products we sell in Brazil with reference to international market prices. Therefore, our net sales revenue and gross margin are increasingly linked to global industry conditions that we cannot control.

Our revenue from customers is significant, and the credit risks associated with certain of these customers could adversely affect our operating results.

We engage in a number of transactions where counterparty credit risk is a relevant factor, including transactions with customers and those businesses we work with to provide services, among others. These risks are dependent upon market conditions and also the real and perceived viability of the counterparty. The failure or perceived weakness of any of our counterparties has the potential to expose us to risk of loss in certain situations. Our revenue from our customers is significant, and the credit risks associated with certain of these customers could adversely affect our operating results. Certain contracts and arrangements that we enter into with counterparties may provide us with indemnification clauses to protect us from financial loss. To the extent the credit quality of these customers deteriorates or these customers seek bankruptcy protection, our ability to collect our receivables, and ultimately our operating results, may be adversely affected.

The Company’s reported results may be adversely affected by increases in reserves for uncollectible accounts receivable.

The Company has a large balance of accounts receivable and has established a reserve for the portion of such accounts receivable that the company estimates will not be collected because of the company’s customers’ non-payment.

If the business viability of certain of the Company’s customers deteriorates or the company’s credit policies are ineffective in reducing the company’s exposures to credit risk, additional increases in reserves for uncollectible accounts may be necessary, which could have a material adverse effect on our cash flows and results of operations. We record an allowance for doubtful accounts in an amount considered sufficient to cover estimated losses on the realization of our trade accounts receivable, taking into account our loss experience and the aging of our accounts receivable.

As of December 31, 2015, our total trade accounts receivable was R$3,103.5 million and the provision for doubtful accounts was R$328.0 million. Significant changes in our historical loss experience on accounts receivable which are not apparent through our aging analysis could require significant changes to our provisions for doubtful accounts.

Global macroeconomic factors have had, and may continue to have, adverse effects on the margins that we realize on our products.

Our results of operations may be materially affected by adverse conditions in the financial markets and depressed economic conditions generally. Economic downturns in geographic areas in which we sell our products may substantially reduce demand for our products and result in decreased sales volumes. Recessionary environments adversely affect our business because demand for our products is reduced.

Slowed growth in emerging economies resulted in decreased growth in the global economy, which increase is estimated at 3.1% in 2015, according to the International Monetary Fund. In 2015, Brazil’s GDP contracted 3.8%, as compared to growth of 0.1% in 2014 and 3.0% in 2013. In 2015, apparent consumption for thermoplastic resins in Brazil declined by 7.6%.

In the U.S. and Europe, GDP grew by 2.4% and 1.5%, respectively in 2015 compared to growth of 2.4% and 0.9% in 2014. Mexico’s GDP grew by 2.5% in 2015 compared to 2.3% in 2014.

Our ability to export to other countries is a function of the level of economic growth in these countries and other economic conditions, including prevailing inflation and interest rates. In addition, disruptions in the global balance between supply and demand may impair our ability to export our products in response to a decline in domestic demand for these products. Prolonged volatility in economic activity in our key export markets could continue to reduce demand for some of our products and lead to increased margin pressure by importers into Brazil, which would adversely affect our results of operations.

We face competition from producers of polyethylene, polypropylene, PVC and other petrochemical products.

We face competition in Brazil from foreign producers of polyethylene, polypropylene, PVC and other petrochemical products. Our U.S. operations face competition in the United States from other U.S. producers of polypropylene. Our German operations face competition in Europe and the other export markets that it serves from European and other foreign producers of polypropylene. We expect that our Mexico operations will face competition from U.S. producers of polyethylene producers.

We generally set the prices for our second generation products sold in Brazil with reference to the prices charged for these products by foreign producers in international markets. We generally set the prices for our second generation products exported from Brazil based on international spot market prices. We set the prices for polypropylene sold in the United States and Europe based on regional market pricing. The price for polyethylene in Mexico will be based on prices for the polymer in the U.S Gulf Coast region.

As a result of the announced commissioning of new ethylene capacity, particularly in the United States, in the Middle East and in China, coupled with the increased competitiveness of gas-based ethylene producers in United States as a result of their relatively lower raw material costs, we anticipate that we may experience increasing competition from other producers of second generation products in the markets in which we sell these products. In addition, the appreciation of the real against the U.S. dollar may increase the competitiveness of prices of imported products in reais, which may increase the competition in Brazil from other producers of second generation products. Some of our foreign competitors are substantially larger and have greater financial, manufacturing, technological and/ or marketing resources than our company.

Higher raw materials costs would increase our cost of goods sold and services rendered and may reduce our gross margin and negatively affect our overall financial performance.

Naphtha, a crude oil derivative, is the principal raw material used by our Basic Petrochemicals Unit and, indirectly, in our other business units. Naphtha accounted, directly and indirectly, for approximately 44.5% of our consolidated cost of sales and services rendered in 2015.

We purchase a portion of the naphtha and natural gas used by our Basic Petrochemicals Unit from Petróleo Brasileiro S.A.—Petrobras, or Petrobras, at prices based on the Amsterdam-Rotterdam-Antwerp and Mont Belvieu market prices of naphtha and natural gas liquids.

The price of naphtha that we purchase from international suppliers is also linked to the Amsterdam-Rotterdam-Antwerp reference. The Amsterdam-Rotterdam-Antwerp market price of naphtha fluctuates primarily based on changes in the U.S. dollar-based price of Brent crude oil on the Intercontinental Exchange based in London. Oil markets may face strong volatility due to: (1) the impact of new non-OPEC production, primarily from the United States; (2) OPEC’s decisions with regards to their production quotas; and (3) political uncertainties in the Middle East and North Africa. In 2015, the price of the front-month contract on Brent crude oil decreased by 40.6% from a high of US$64.32 per barrel in May 2015 to a low of US$38.21 per barrel in December 2015. Volatility of the price of naphtha and the upward trend in the price of oil and naphtha have effects on the price competitiveness of our naphtha-based crackers.

The average Amsterdam-Rotterdam-Antwerp market price of naphtha in U.S. dollars declined by 44.7% to US$462 per ton in 2015 from US$836 per ton in 2014 and US$903 per ton in 2013, with its highest price of reaching US$551 per ton in May 2015 and its lowest price reaching US$387 per ton in December 2015.

The Mont Belvieu prices of ethane have had similar volatility, with the average market price of ethane decreasing to US$139 per ton in 2015 from US$228 per ton in 2014 and US$190 per ton in 2013, with its highest price reaching US$165 per ton in January 2015 and its lowest price reaching US$108 per ton in November 2015.

The price of naphtha and natural gas liquids in U.S. dollars has been, and may continue to be, volatile. In addition, the fluctuations of the U.S. dollar in the future may effectively increase our naphtha or natural gas costs in reais. Any increase in naphtha or natural gas costs would reduce our gross margin and negatively affect our overall financial performance to the extent we are unable to pass on these increased costs to our customers and could result in reduced sales volumes of our products.

The production of natural gas liquids, particularly in North America, may reduce the global prices of polyethylene, which would reduce our gross margin and negatively affect our overall financial performance.

In recent years, the use of ethane as a feedstock for the production of ethylene has increased as a result of its increasing availability and the divergence between the cost of natural gas and oil (from which naphtha is derived and the pricing of condensate is based). Production of natural gas liquids have increased, particularly in North America, as the technology to extract gas from shale has improved. In order to improve their global competitiveness, most U.S. ethylene producers with the raw material flexibility to use ethane as a feedstock have converted to the use of light feedstocks.

As a result of the increase in the production of natural gas liquids in North America, (1) ethane has returned as a low-cost alternative to oil-based products and (2) additional gas production has resulted in an increasingly competitive ethane price. North American polyethylene producers have benefited from the low-cost position of natural gas prices, and the resulting increased competitiveness of North American polyethylene producers could decrease the global and domestic price of polyethylene, which would reduce our gross margin and negatively affect our overall financial performance.

We do not hedge against changes in the price of our principal raw materials, so we are exposed to fluctuations in the price of these primary raw materials.

Currently, we do not hedge our feedstock’s price exposure. We believe the petrochemical industry has a natural hedge, mainly due to the observed historical correlation between its feedstock (most notably, naphtha) and its final products (Polyethylene, Polypropylene, PVC, etc.). Historically, fluctuations in naphtha’s price were followed by variations in the same direction in petrochemical products of the first and second generation. This eventual hedge solely in naphtha’s price would break this natural protection, probably making our results more volatile. However, considering Braskem’s ongoing process of feedstock diversification, with ethane, propane and propylene representing a more significant portion of our variable costs, the natural hedge described above tends to be impaired. This occurs because ethane and propane have significantly lower correlation to the price of our final products, when compared to naphtha and propylene. If this scenario materializes, we may not immediately be able to pass on all of the corresponding increases in our feedstocks costs, which would likely reduce our gross margin and net income.

We depend on Petrobras to supply us with a substantial portion of our naphtha, ethane and propane requirements.

Petrobras is the only Brazilian supplier of naphtha and has historically supplied approximately 70% of the naphtha consumed by our Basic Petrochemicals Unit. Petrobras produces most of the naphtha it sells to us and imports naphtha to serve the gasoline pool and to sell to us. Petrobras currently is also the only Brazilian supplier of ethane and propane and has historically supplied the ethane and propane consumed at our petrochemical complex located in Duque de Caxias in the State of Rio de Janeiro, or the Rio de Janeiro Complex.

Our production volume and net sales revenue would likely decrease and our overall financial performance would likely be negatively affected in the event of the following:

•

significant damage to Petrobras’ refineries or to the port facilities through which Petrobras imports naphtha, or to any of the pipelines connecting our plants to Petrobras’ facilities, whether as a consequence of an accident, natural disaster, fire or otherwise; or

•

any termination by Petrobras of the naphtha, ethane or propane supply contracts with our company, which provide that Petrobras may terminate the contracts for certain reasons described in “Item 4. Information on the Company—Basic Petrochemicals Unit—Raw Materials of Our Basic Petrochemicals Unit.”

On December 23, 2015, we finalized and executed an agreement for the supply of naphtha with Petrobras at a price indexed to the Amsterdam-Rotterdam-Antwerp naphtha quotation. This agreement replaced the previous amendments and will be valid for a five-year period as of December 23, 2015 and establishes that both parties will have commercial renegotiation rights as of the third year should certain market conditions change.

In addition, although regulatory changes have ended Petrobras’ monopoly in the Brazilian naphtha market and have allowed us to import naphtha, any restrictions imposed on the importation of naphtha into Brazil could increase our production costs.

We depend on propylene supplied by third parties in the US and in Europe

Our reliance on third-party suppliers poses significant risks to our operating results, business and prospects. We rely upon third-party suppliers for our plants, to supply us with propylene. We acquire propylene for our polypropylene plants in the Unites States under a variety of long-term supply agreements and through the spot market. As of December 31, 2015, we had long-term supply agreements with multiple suppliers. In Germany, we acquire propylene for our polypropylene plants under long-term supply agreements that provide for the supply of approximately 95% of the propylene requirements of these plants.

We are subject to substantial risks because of our reliance on these and other limited or sole source suppliers, including the following risks:

•

if a supplier does not provide propylene that meet our or their specifications in sufficient quantities and with acceptable performance or quality on time or deliver when required, then sales, production, delivery, acceptance and revenue from our plants could be adversely affected;

•

if our relationship with a key supplier, is adversely affected, for example, due to competitive pressures (or conflicting interests), our ability to obtain propylene on advantageous financial terms could be adversely affected;

•

if an interruption of supply of propylene occurs because a supplier changes its technology roadmap, suffers damage to its manufacturing facilities, decides to no longer provide those products or services, increases the price of those products or services significantly or imposes reduced delivery allocations on its customers, it could take us a considerable period of time to identify and qualify alternative suppliers;

•

some of our key suppliers are small companies with limited financial and other resources, and consequently may be more likely to experience financial and operational difficulties than larger, well-established companies, which increases the risk that they will be unable to deliver products as needed; and

•

if a key supplier is acquired or has a significant business change, the production and sales of our systems and services may be delayed or adversely affected, or our development programs may be delayed or may be impossible to complete.

Delays in the availability of propylene or propylene of acceptable quality, or our inability to obtain such acceptable propylene in the quantities we need or at all, may adversely affected our revenue and operating results.

Our Polyolefins Unit and Vinyls Unit depend on our basic petrochemicals plants to supply them with their ethylene and propylene requirements.

Our Basic Petrochemicals Unit is the only supplier of ethylene to our Vinyls Unit, the only supplier of ethylene to the polyethylene plants of our Polyolefins Unit and the principal supplier of propylene to the polypropylene plants of our Polyolefins Unit. Because the cost of storing and transporting ethylene is substantial and there is inadequate infrastructure in Brazil to permit the importing of large quantities of ethylene and propylene, our polyolefins plants in Brazil and our Vinyls Unit are highly dependent on the supply of these products by our basic petrochemicals plants. Consequently, our production volumes of, and net sales revenue from, polyolefins and vinyls products would decrease, and our overall financial performance would be negatively affected, in the event of the following:

•

any significant damage to the facilities of our Basic Petrochemicals Unit through which ethylene or propylene is produced, or to the pipeline or other facilities that connect our polyolefins plants or vinyls plants to our basic petrochemicals plants, whether as a consequence of an accident, natural disaster, fire or otherwise;

•

any significant reduction in the supply of naphtha to our Basic Petrochemicals Unit, as naphtha is the principal raw material used by our Basic Petrochemicals Unit in the production of ethylene and propylene; or

•

any significant reduction in the supply of ethane or propane to our subsidiary Rio Polímeros S.A., or RioPol, as ethane and propane are the principal raw materials used by RioPol in the production of ethylene and propylene.

We depend on Petrobras for a significant portion of the propylene that we use in Brazil to produce polypropylene and we will depend on Pemex Gas for all of the ethane that we will use in Mexico to produce ethylene .

During 2015, approximately 36% of the propylene used by our Polyolefins Unit was supplied by Petrobras. During 2015, our Etileno Project was not yet operational; however, once operational, all of the ethane used by the project will be supplied by Pemex.

As a result of limited infrastructure in Brazil to allow the importation of propylene in large quantities and substantial costs associated with the storage and transportation of the product, we are highly dependent on the propylene supplied by Petrobras. Thus, production volumes and net sales revenue from polypropylene products would decrease and adversely affect our overall financial performance in the event of the following:

•

significant damage to Petrobras’ refineries or to any of the pipelines connecting our polypropylene plants to Petrobras’ facilities, whether as a consequence of an accident, natural disaster, fire or otherwise; or

•

termination by Petrobras of our supply contracts. Such contracts include early termination provisions including a change of control, an event of default on our other financing agreements, failure to cure any breach of the agreement or assignment without previous notice.

Braskem Idesa has entered into a long-term supply contract to purchase ethane from Pemex Transformación Industrial (successor of Pemex Gas y Petroquímica Básica), or Pemex TRI, a state-owned Mexican company, under competitive commercial conditions. Any termination by Pemex TRI of this supply contract could have a material adverse effect on our overall financial performance. The provisions for early termination by Pemex TRI include but are not limited to (i) material breach of our obligations or failure to cure any breach of the agreement or assignment and (ii) continuous occurrence of a force majeure event or emergency shutdown.

Any downgrade in the ratings of our company or our debt securities would likely result in increased interest and other financial expenses related to our borrowings and debt securities and could reduce our liquidity.

Standard & Poor’s Ratings Group, a division of McGraw Hill, Inc., or S&P, Moody’s Investors Service, Inc., or Moody’s, and Fitch Ratings Ltd., or Fitch, maintain ratings of our company and our debt securities. Currently, Standard & Poor’s and Fitch maintain ratings of our company on global and national basis. Moody’s only maintains ratings of our company on a global basis. Standard & Poor’s maintains a rating for our company of “BBB- (negative)” on a global basis and a rating for our company of “brAAA (negative)” on a national basis; Fitch maintains a rating for our company of “BBB- (negative)” on a global basis and a rating for our company of “AA+ (negative)” on a national basis; and Moody’s maintains a rating for our company of “Ba1 (negative)” on a global basis. Any decision by these agencies to downgrade the ratings of our company or of our debt securities in the future would likely result in increased interest and other financial expenses relating to our borrowings and debt securities and the inclusion of financial covenants in the instruments governing new indebtedness, and could significantly reduce our ability to obtain such financing on satisfactory terms or in amounts required by us and our liquidity and would require us to post cash collateral pursuant to our obligations.”

Some of our shareholders may have the ability to determine the outcome of corporate actions or decisions, which could affect the holders of our class A preferred shares and the ADSs.

Odebrecht S.A., or Odebrecht, directly or through its wholly-owned subsidiary Odebrecht Serviços e Participações S.A., or OSP, owns 38.3% of our outstanding share capital, including 50.1% of our voting share capital and Petrobras holds 36.1% of our outstanding share capital, including 47.0% of our voting share capital. Designees of Odebrecht constitute a majority of the members of our board of directors. Under a shareholders’ agreement to which OSP and Petrobras are parties, which we refer to as the Petrobras Shareholders’ Agreement, we may only undertake certain actions after Odebrecht and Petrobras have reached a consensus with respect to those actions. However, Odebrecht will have the sole power to approve the business plan of our company, through the board of directors, as described under “Item 7. Major Shareholders and Related Party Transactions—Major Shareholders—Shareholders’ Agreements.” As a result, Odebrecht has the ability to determine the outcome of most corporate actions or decisions requiring the approval of our shareholders or our board of directors — in certain instances, with the consent of Petrobras — which could affect the holders of our class A preferred shares and the American Depositary Shares, or ADSs.

We may face conflicts of interest in transactions with related parties.

We maintain trade accounts receivable and current and long-term payables with some of our affiliates and other related parties, including Petrobras, which is our domestic supplier of naphtha and other raw materials such as propylene, ethane, propane and light refinery hydrocarbons. These accounts receivable and accounts payable balances result mainly from purchases and sales of goods, which are at prices and on terms equivalent to the average terms and prices of transactions that we enter into with third parties. These and other transactions between us and our affiliates could result in conflicting interests between our company and these shareholders.

We may make significant acquisitions which, if not successfully integrated with our company, may adversely affect our operating results.

We may make significant acquisitions in the future. Acquisitions involve risks, including the following:

•

failure of the acquired businesses to achieve expected results;

•

possible inability to retain or hire key personnel of the acquired businesses;

•

possible inability to achieve expected synergies and/or economies of scale; and

•

unanticipated liabilities.

If we are unable to integrate or manage acquired businesses successfully, we may not realize anticipated cost savings, revenue growth and levels of integration, which may result in reduced profitability or operating losses.

We may face unforeseen challenges in the operation of Project Ethylene XXI which could result in this project failing to provide expected benefits to our company.

During the first half of 2016, we expect to conclude the construction phase of an olefins complex, or the Mexico Complex, located in the Mexican state of Veracruz. For more information about this project, which we refer to as Project Ethylene XXI, see “Item 5. Operating and Financial Review and Prospects—Capital Expenditures—Joint Venture Projects—Project Ethylene XXI.”

Braskem Idesa S.A.P.I., or Braskem Idesa, our joint venture with Grupo Idesa, S.A. de C.V., or Idesa, one of Mexico’s leading petrochemical groups, to develop Project Ethylene XXI, required significant capital expenditure. Our ability to achieve the strategic objectives of this project will depend largely on its successful operation. Factors that could affect the operation of this project include:

•

the outcome of performance tests included in the EPC and technology licensing contracts;

•

the conclusion of negotiations with export channels and providers of logistics services in order to launch sales;

•

macroeconomic conditions in Mexico and demand for polyethylene; and

•

the occurrence of unforeseen technical and mechanical difficulties, including technical problems that may delay start-up, interrupt production or lead to unexpected downtime of the Project’s plants).

We cannot assure you that this project will provide the expected benefits to our company and that the actual cost or time required to complete the implementation of this project will not substantially exceed our current estimates. Any significant interruption could hinder or prevent the implementation of our business plan as originally conceived, and result in revenues and net income below expected.

Future adjustments in tariffs on imports that compete with our products could cause us to lower our prices.

We currently benefit from tariffs imposed by the Brazilian government on imports that allow us to charge prices for our polyolefin and vinyl products in the domestic market that include a factor based on the tariffs levied on comparable imports of those products. However, the Brazilian government has in the past used import and export tariffs to effect economic policies, with the consequence that tariffs can vary. For example, in September 2012, the Brazilian government increased import duties on 100 products related to various industries, including an increase on the import tariff for polyethylene. In October 2012, it increased the import tariff for polyethylene from 14% to 20% and in October 2013, it reduced the import tariff for polyethylene to the previous level of 14%. Future adjustments of tariffs could lead to increased competition from imports and cause us to lower our domestic prices, which would likely result in lower net sales revenue and could negatively affect our overall financial performance. Additionally, the products we export to the United States and Europe are subject to tariffs in the amount of 6.5% in each jurisdiction, subject to certain preferences. These tariffs generally favor our products produced locally and any future adjustments to these tariff structures could negatively impact our sales in these jurisdictions. Future trade agreements entered into by Brazil, the United States or the European Union could also lead to increased competition from imports and lower domestic prices.

Our business is subject to stringent environmental regulations, and the imposition of new regulations could require significant capital expenditures and increase our operating costs.

We, like other Brazilian petrochemical producers, are subject to stringent Brazilian federal, state and local environmental laws and regulations concerning human health, the handling and disposal of solid and hazardous wastes and discharges of pollutants into the air and water. Petrochemical producers are sometimes subject to unfavorable market perceptions as a result of the environmental impact of their business, which can have an adverse effect on their results of operations.

Our operations in the United States, Germany and Mexico are subject to extensive U.S., German and Mexican federal, state and local laws, regulations, rules and ordinances relating to pollution, protection of the environment and the generation, storage, handling, transportation, treatment, disposal and remediation of hazardous substances and waste materials. U.S. environmental laws and regulations may impose liability on us for the conduct of third parties, or for actions that complied with applicable requirements when taken, regardless of negligence or fault. Of particular significance to us are (1) regulatory programs to be established to implement air quality standards under the National Ambient Air Quality Standards for ozone and fine particles promulgated by the U.S. Environmental Protection Agency, or the EPA, and (2) various legislative and regulatory measures in the United States which are under review, discussion or implementation to address greenhouse gas emissions. In Mexico, we adhere to the comprehensive responsibility program promoted by ANIQ, which is based on the Responsible Care standard used in the United States and Canada.

Costs and capital expenditures relating to environmental, health or safety matters are subject to evolving regulatory requirements and will depend on the timing of the promulgation and enforcement of specific standards which impose the requirements. Moreover, changes in environmental regulations could inhibit or interrupt our operations, or require modifications to our facilities. Accordingly, environmental, health or safety regulatory matters may result in significant unanticipated costs or liabilities.

We manufacture products that are subject to the risk of fire, explosions and other hazards.

Our operations are subject to hazards, such as fires, explosions and other accidents, associated with the manufacture of petrochemicals and the storage and transportation of feedstock and petrochemical products. These hazards can cause personal injury and loss of life, severe damage to or destruction of property and equipment and environmental damage. A sufficiently large accident at one of our plants or storage facilities could force us to suspend our operations temporarily and result in significant remediation costs and lost net sales revenue.

Although we maintain insurance coverage for losses due to fire damage and for losses of income resulting from shutdowns due to fire, explosion or electrical damage, those insurance proceeds may not be available on a timely basis and may be insufficient to cover all losses, which could have a material adverse effect on our financial performance.

Unfavorable outcomes in pending or future litigation may reduce our liquidity and negatively affect our financial performance and financial condition.

We are, and in the future may be, involved in numerous tax, civil and labor disputes, among others, involving monetary claims. If unfavorable decisions are rendered in one or more of these lawsuits, we could be required to pay substantial amounts. For some of these lawsuits, we have not established any provision on our balance sheet or have established provisions only for part of the amounts in question, based on our judgments as to the likelihood of winning these lawsuits.

In July 2015, two putative class action lawsuits were filed against us and certain of our then-current and former officers and directors, or the Defendants, in the United States District Court for the Southern District of New York. The lawsuits were subsequently consolidated under the caption In re Braskem, S.A. Securities Litigation, No. 15-cv-5132. In November 2015, Boilermaker-Blacksmith National Pension Trust, or the Lead Plaintiff, filed a consolidated class action complaint, which asserted claims under Section 10(b) and Section 20(a) of the Exchange Act, on behalf of a putative class of purchasers of our American Depositary Receipt, or ADRs, from June 1, 2010 to March 11, 2015. In the operative complaint, the Lead Plaintiff alleges that the Defendants made misrepresentations or omissions that inflated the price of our stock in violation of U.S. securities laws. We filed a motion to dismiss on July 6, 2016. On March 31, 2017, the court ruled on the motion to dismiss, granting it in part and denying it in part. With respect to the remaining claims, the class action is now in the discovery stage. The parties are also currently engaged in settlement negotiations and have signed a proposed settlement agreement and submitted it to the U.S. court for preliminary approval on September 14, 2017. Under the terms of the proposed settlement, we would pay

US$ 10 million to resolve all claims of a settlement class consisting of purchasers of our ADRs during the period of July 15, 2010 through March 11, 2015, that arise out of or relates to the subject matter of the class action, with the exception of any such claims belonging to purchasers who file, valid and timely, requests to opt out of the settlement class. We have made no admission of any wrongdoing or liability as part of the proposed settlement, and it is subject to a number of conditions, including court approval. Furthermore, we may be named as a defendant in other legal actions, and we may be required, in accordance with any applicable legal and regulatory limits, to indemnify directors, officers and employees that are defendants in this securities class action and any other related actions that may arise in the future. The litigation has required and may continue to require significant time and attention in the future. For more information about our legal proceedings, see “Item 8. Financial Information—Legal Proceedings.”

Labor unrest may materially and adversely affect our operations.

Labor unrest in our plants and facilities may have a material adverse effect on our financial condition or results of operations. For example, in August 2010, the unionized employees at our Neal, West Virginia plant went on strike. During the strike, the plant operated under the supervision of management until May 2011, when Braskem America entered into a new collective bargaining agreement. Although we believe that we maintain good relations with our employees, future labor actions, including strikes, could have a material adverse effect on our financial performance.

Natural disasters, severe weather and climate conditions could have a material adverse effect on our overall business.

Some of our facilities are located in places that could be affected by natural disasters, such as floods, earthquakes, hurricanes, tornados and other natural disasters, which could disrupt our operations or the operations of our customers and could damage or destroy infrastructure necessary to transport our products as part of the supply chain. Such events could require maintenance shutdowns, delay shipments of existing inventory or result in costly repairs, replacements or other costs, all of which could have a material adverse effect on our financial performance.

While Braskem’s energy risk policy dictates that it purchases energy in advance at fixed prices through long-term contracts, the majority of Brazilian power generation capacity is provided by hydroelectric generation facilities. If the amount of water available to energy producers becomes scarce due to drought or diversion for other uses, the cost of energy may increase. Such conditions could have a material adverse effect on our sales and margins.

We could be materially adversely affected by the impacts of the Global Settlement.

In the context of allegations of improper payments in connection with the so-called Operation Car Wash in Brazil, we engaged the Expert Firms to conduct the Investigation and report their findings. We have cooperated with governmental authorities in several jurisdictions, including the DoJ, the SEC, the MPF, and the OAG. On December 14, 2016, we entered into a leniency agreement with the MPF, or the Leniency Agreement, which was ratified by the competent Brazilian court on June 6, 2017. On December, 21, 2016, we filed a plea agreement in the United States District Court for the Eastern District of New York under which we agreed to plead guilty to a one-count criminal information charging our company with conspiracy to violate the anti-bribery provisions of the FCPA. On the same date, we consented to the entry of a final judgment in a civil action brought by the SEC based on civil violations of the anti-bribery, books and records and internal accounting controls provisions of the FCPA. The competent federal courts in the United States approved the DoJ and SEC resolutions on January 26, 2017 and February 28, 2017, respectively. In addition, on December 21, 2016, the OAG closed its investigation of these matters. We refer to these actions as the Global Settlement.

Under the Global Settlement, we agreed to pay to the governmental authorities in these jurisdictions an aggregate amount of approximately US$957 million (equivalent to approximately R$3.1 billion).

Of the total amount payable pursuant to the Global Settlement, we have already paid approximately R$1.3 billionas follows:

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US$94.9 million (R$296.6 million) to the DoJ on February 8, 2017;

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US$65.0 million (R$206.5 million) to the SEC on April 27, 2017;

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CHF30.2 million (R$104.3 million) to the OAG on June 27, 2017; and

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R$736.4 million to the MPF on July 6, 2017.

The aggregate amount of approximately R$1.8 billion outstanding pursuant to the Global Settlement will be paid in the following manner:

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CHF64.3 million to the OAG in four equal annual and successive installments of CHF16.1 million due on June 30 of each year commencing in 2018; and

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R$1.6billion to the MPF in six equal annual installments, adjusted for inflation by the variation in the Broad Consumer Price Index (Índice Nacional de Preços ao Consumidor Ampliado), or IPCA, due on January 30 of each year commencing in 2018. As guarantee for payment of the outstanding installments, Braskem has provided fixed assets in an amount corresponding to one annual installment.

The Global Settlement may have a material adverse effect on our business, reputation, financial condition, financial instruments and operational results, as well as on the liquidity and price of our securities, including our class A preferred shares and ADSs. Furthermore, the negative publicity resulting from the Global Settlement, the facts made public through our plea agreement in the United States, and the facts that will be made public when the Leniency Agreement with the MPF is ultimately disclosed, could have a material adverse impact on our business, including reducing the demand for our products, our financial instruments and other effects that currently cannot be estimated or measured. In addition, other authorities with jurisdiction over our company may seek to impose additional monetary sanctions or fines or commence new investigations against us. Finally, as a result of the Global Settlement, we may be barred from entering into certain agreements with governmental authorities, and may be subject to increased operating costs in connection with our obligations to improve our governance and anti-corruption practices, including the cost of required external monitorship.

Under the terms of the Global Settlement, we are required to cooperate with these governmental authorities and improve our governance and anti-corruption compliance practices. We will also be subject to external monitorship for a period of three years, during which time the monitor will assess compliance with the Global Settlement, including the effectiveness of our internal controls, policies and procedures to reduce the risk of any anti-corruption violations. The monitorship period may be terminated early or extended for up to one year at the authorities’ discretion depending on our compliance with the Global Settlement. We have retained monitors pursuant to the provisions of the Global Settlement, and they have been approved by the relevant authorities. The monitors may recommend changes to our policies and procedures, which we must adopt unless they are unduly burdensome or otherwise inadvisable, in which case we may propose alternatives that the authorities may choose to accept. Operating under the oversight of the monitors will likely require the assumption of additional responsibilities by members of our management. We currently cannot estimate the costs that we are likely to incur in connection with compliance with the Global Settlement, including the implementation of the recommended changes, if any, to our policies and procedures as required by the monitors. However, the costs of the monitorship could be significant and could negatively impact our company by requiring the efforts of our management team, diverting attention from our ordinary business operations.

Compliance and Control Risks

We could be materially affected by violations of the U.S. Foreign Corrupt Practices Act, the Brazilian Anti-Corruption Law and similar anti-corruption laws.

We, our subsidiaries and our joint venture partners are subject to a number of anti-corruption laws, including Law No. 12,846/2013, or the Brazilian Anti-Corruption Law, which became effective on January 28, 2014, the FCPA and various other anti-corruption and anti-bribery laws of other jurisdictions.

The FCPA, the Brazilian Anti-Corruption Law and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials or other persons for the purpose of obtaining or retaining business. Violations of these laws may result in criminal or civil

sanctions, inability to do business with existing or future business partners, injunctions against future conduct, profit disgorgements, disqualifications from directly or indirectly engaging in certain types of businesses, the loss of business permits or other restrictions which could have a material adverse effect on our business, financial condition, results of operations or liquidity.

We are exposed to behaviors of our employees and non-employees that may be incompatible with our ethics and compliance standards, and failure to timely prevent, detect or remedy any such behavior and/or process vulnerabilities may have a material adverse effect on our results of operations and financial condition.

Our business, including our relationships with third parties, is guided by ethical principles. We have adopted a Policy on Compliance in Acting Ethically with Integrity and Transparency, and several internal policies designed to guide our management, employees and counterparties and reinforce our principles and rules for ethical behavior and professional conduct. We maintain an independent whistleblower channel (denominated “Ethics Line”) managed by a third party available for employees and non-employees (including third parties). Every whistleblower complaint is investigated and submitted for evaluation by our Ethics Committee.

We are subject to the risk that our employees, counterparties or any person doing business with us may engage in fraudulent activity, corruption or bribery, circumvent or override our internal controls and procedures or misappropriate or manipulate our assets for their personal or business advantage. In the event that we believe or have reason to believe that our employees or agents have or may have violated applicable anti-corruption laws, including the FCPA, we may be required to investigate or have outside counsel investigate the relevant facts and circumstances, which can be expensive and require significant time and attention from senior management. We have in place a robust Compliance and Anti-Corruption Program being implemented through every area of our company, including several processes for identifying, monitoring and mitigating these risks, but such program may not be completely effective.

As a result of the Investigation, we determined that material weaknesses in our internal control over financial reporting as of December 31, 2015 existed. We identified material weaknesses related to (i) our control environment and anti-corruption compliance controls and programs designed to prevent and detect violations of the FCPA and other applicable anti-corruption laws, (ii) the review and approval of reconciliation and manual payments, and (iii) the review of the ledger accounts used to record accruals and payments of commissions. These material weaknesses were identified primarily because a number of deficiencies in controls and errors were detected during the Investigation.

We subsequently identified an additional material weakness related to (iv) the review and monitoring over in-transit inventory for naphtha imports processed by our subsidiary, Braskem Netherlands. This material weakness was identified during the financial statement audit performed for Braskem Netherlands.

A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

We are currently implementing several remediation efforts to improve our governance and compliance systems. See “Item 4. Information on the Company—Compliance.” However, such improvements may not be completely effective, and certain of our employees and non-employees may behave in a manner that is incompatible with our ethics and compliance standards. In addition, we may make accounting errors in our future financial reporting, and we cannot be certain that in the future additional material weaknesses in our internal control over financial reporting will not exist. Any failure—real or perceived—to follow our compliance principles or to comply with applicable governance or regulatory obligations could harm our reputation and image, limit our ability to obtain financing and otherwise have a material adverse effect on our results of operations and financial condition.

If we are unable to comply with the restrictions and covenants in the agreements governing our indebtedness, there could be a default under the terms of these agreements, which could result in an acceleration of payment of funds that we have borrowed and could affect our ability to make principal and interest payments on our debt obligations.

Any default under the agreements governing our indebtedness that is not cured or waived by the required lenders could result in the holders of any such indebtedness accelerating the payment of amounts outstanding, which could make us unable to pay principal and interest on those and other debt obligations. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal and interest on our indebtedness, or if we otherwise fail to comply with the various covenants in the agreements governing our indebtedness (including covenants in the project finance debt related to our Mexico Complex), we could be in default under the terms of such agreements. In the event of such default:

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the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest;

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the lenders under such agreements could elect to terminate their commitments thereunder and cease making further loans; and

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we could be forced into bankruptcy or liquidation.

Although our Mexico Complex is fully operational and Braskem Idesa has satisfied and continues to satisfy its debt service requirements and all other payment obligations under its US$3,194 million senior secured Syndicated Facility on a timely basis, certain defaults have occurred and are continuing thereunder. These defaults give the creditors thereunder the right to vote to accelerate their debt under this facility and exercise their remedies in respect of the collateral for the facility, including the Mexico Complex and the outstanding shares of Braskem Idesa. Braskem Idesa has submitted requests for waiver of these defaults to and is currently negotiating such waiver with the intercreditor agent for this facility. However, there can be no assurance that the intercreditor agent and the lenders will agree to extend such waiver, or if they agree to extend such waiver, whether the waiver will include additional obligations with which Braskem Idesa would be required to comply.

We may in the future need to obtain waivers under our other indebtedness to avoid being in default. If we breach any covenants under any of our debt instruments and seek a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we would be in default under such agreements, the lenders could exercise their rights or remedies, as described above, and we could be forced into bankruptcy or liquidation.

Risks Relating to Brazil

Brazilian political and economic conditions, and the Brazilian government’s economic and other policies, may negatively affect demand for our products as well as our net sales revenue and overall financial performance.

The Brazilian economy has been characterized by frequent and occasionally extensive intervention by the Brazilian government and unstable economic cycles. The Brazilian government has often changed monetary, taxation, credit, tariff and other policies to influence the course of Brazil’s economy. The Brazilian government’s actions to control inflation and implement other policies have at times involved wage and price controls, blocking access to bank accounts, imposing capital controls and limiting imports into Brazil.

Our results of operations and financial condition may be adversely affected by factors such as:

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fluctuations in exchange rates;

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exchange control policies;

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interest rates;

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inflation;

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tax policies;

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expansion or contraction of the Brazilian economy, as measured by rates of growth in GDP;

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liquidity of domestic capital and lending markets; and

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other political, diplomatic, social and economic developments in or affecting Brazil.

Brazilian markets have been experiencing heightened volatility due to the uncertainties derived from the ongoing Car Wash investigation, which is being conducted by the Office of the Brazilian Federal Prosecutor, and its impact on the Brazilian economy and political environment. Members of the Brazilian federal government and of the legislative branch, as well as senior officers of the state-owned oil company Petróleo Brasileiro S.A. – Petrobras, or Petrobras, have faced allegations of political corruption. These government officials and senior officers allegedly accepted bribes by means of kickbacks on contracts granted by Petrobras to several infrastructure, oil and gas and construction companies, including our controlling shareholder Odebrecht S.A. We cannot currently predict how the Car Wash investigation and any future decisions and actions by authorities in relation to our shareholders, may impact the Company. The profits of these kickbacks allegedly financed the political campaigns of political parties of the current federal government that were unaccounted for or not publicly disclosed, as well as served to personally enrich the recipients of the bribery scheme. As a result of the ongoing Car Wash investigation, a number of senior politicians, including congressman and officers of the major state-owned companies in Brazil resigned or have been arrested. Senior elected officials and other public officials in Brazil are being investigated for allegations of unethical and illegal conduct identified during the Car Wash investigation.

In addition, the Brazilian Congress opened impeachment proceedings against President Dilma Rousseff on December 2, 2015 for allegedly breaking budget laws as she increased economic stimulus during her re-election campaign last year. On April 17, 2016, the Brazilian Congress voted in favor of the admissibility of the impeachment proceedings and the Brazilian Senate is expected to vote on the impeachment on May 11, 2016. The impeachment proceedings have adversely affected and we expect that they will continue to adversely affect the Brazilian markets and trading prices of securities issued by Brazilian issuers. We cannot predict either the outcome of the impeachment proceedings or their effects on the Brazilian economy. Any developments in the impeachment proceedings could have a material adverse effect on us.

The potential outcome of these investigations and proceedings is uncertain, but they have adversely affected and we expect that they will continue to adversely affect the Brazilian markets and trading prices of securities issued by Brazilian issuers. We cannot predict whether the allegations or proceedings will lead to further political and economic instability or whether new allegations against government officials or other companies in Brazil will arise in the future. In addition, we can neither predict the outcome of any such allegations and proceedings nor their effect on the Brazilian economy. The development of those unethical conduct cases could have a material adverse effect.

Future changes in industrial policy and related actions undertaken by the Brazilian government may negatively affect demand for our products as well as our net sales revenue and overall financial performance.

We currently benefit from certain industrial policies and related actions undertaken by the Brazilian government intended to strengthen the domestic economy and certain local industries. Some of these policies and actions have recently included reductions in payroll taxes for plastic manufacturers, a program to improve the competitiveness of Brazilian producers in the export markets by refunding the federal taxes levied on their export sale, intervention of the federal government to reduce incentives to imports at local ports, increases in import duties on certain products, including polyethylene, and the reduction in the rates of Social Integration Program (Programa de Integração Social), or PIS, a federal value-added tax, and Contribution for Social Security Financing (Contribuição para Financiamento da Seguridade Social), or COFINS, taxes on feedstock purchases by first- and second-generation petrochemical producers.

These taxes on feedstock purchase were set at a rate of 5.6% for naphtha and 9.25% for other feedstocks prior to June 2013, when they were lowered to 1% until 2015, increasing to 3% in 2016 and 5% in 2017 and, then return to the 5.6% rate in 2018 and on. We cannot predict or control which policies will be renewed or discontinued and whether future changes to Brazilian industrial policy will be proposed and enacted in the future. If industrial policies that benefit us expire, or policies detrimental to us are implemented, our business, results of operations and financial condition may be adversely affected.

Fluctuations in the real/U.S. dollar exchange rate could increase inflation in Brazil, raise the cost of servicing our foreign currency-denominated debt and negatively affect our overall financial performance.

The exchange rate between the real and the U.S. dollar and the relative rates of depreciation and appreciation of the real have affected our results of operations and may continue to do so.

The Brazilian currency has been devalued on several occasions during the last four decades. Throughout this period, the Brazilian government has implemented various economic plans and various exchange rate policies, including sudden devaluations, periodic mini-devaluations (during which the frequency of adjustments has ranged from daily to monthly), exchange controls, dual exchange rate markets and a floating exchange rate system. From time to time, there have been significant fluctuations in the exchange rate between the Brazilian currency and the U.S. dollar and other currencies. The real depreciated by 12.6% against the U.S. dollar during 2011, by 8.9% during 2012, by 14.6% during 2013, by 13.4% during 2014 and by 47.0% during 2015.

Depreciation of the real relative to the U.S. dollar also could result in inflationary pressures in Brazil by generally increasing the price of imported products and services. On the other hand, the appreciation of the real against the U.S. dollar may lead to a deterioration of the country’s current account and the balance of payments and may dampen export-driven growth.

We had total foreign currency-denominated debt obligations, all of which were denominated in U.S. dollars, in an aggregate amount of R$21,293.8 million (US$5,453.2 million) as of December 31, 2015, representing 77.9% of our consolidated indebtedness, net of transaction costs[delete comma]. This indebtedness does not include (i) an aggregate amount of R$1,111.6 million (US$284.7 million) outstanding as of December 31, 2015 in connection with derivatives transactions (including interest rate swaps, exchange rate swaps and currencyoptions), and (ii) an aggregate amount of R$12,277.4 million (US$3,144.2 million) outstanding as of December 31, 2015 in connection with the project finance finance facility to fund the development of Project Ethylene XXI, or the Braskem Idesa Financing. As of December 31, 2015, we had R$4,753.8 (US$1,217.4 million) in foreign currency-denominated cash and cash equivalents, not including the aggregate amount of R$134.6 million (US$34.5 million) of Braskem Idesa’s cash and cash equivalents

A significant depreciation of the real in relation to the U.S. dollar or other currencies could increase our financial expenses as a result of foreign exchange losses that we must record and could reduce our ability to meet debt service requirements of our foreign currency-denominated obligations. To enable us to more efficiently manage the effects of exchange rate fluctuations on our results, in 2013 we decided to designate part of our U.S. dollar-denominated liabilities as a hedge for our future exports.

The prices of naphtha, our most important raw material, and of some of our other raw materials, are denominated in or linked to the U.S. dollar. Naphtha accounted, directly and indirectly, for 44.4% of our consolidated cost of sales and services rendered in 2015. When the real depreciates against the U.S. dollar, the cost in reais of our U.S. dollar-denominated and U.S. dollar-linked raw materials increases, and our operating income in reais may decrease to the extent that we are unable to pass on these cost increases to our customers.

The Brazilian government’s actions to combat inflation may contribute significantly to economic uncertainty in Brazil and reduce demand for our products.

Historically, Brazil has experienced high rates of inflation. Inflation, as well as government efforts to combat inflation, had significant negative effects on the Brazilian economy, particularly prior to 1995. The inflation rate, as measured by the General Price Index—Internal Availability (Índice Geral de Preços—Disponibilidade Interna), or the IGP-DI, reached 2,708% in 1993. Although inflation rates have been substantially lower since 1994 than in previous periods, inflationary pressures persist. Inflation rates, as measured by the IGP-DI, were 5.0% in 2011, 8.1% in 2012, 5.5% in 2013, 3.8% in 2014 and 10.7% in 2015. The Brazilian government’s measures to control inflation have often included maintaining a tight monetary policy with high interest rates, thereby restricting availability of credit and reducing economic growth. Inflation, actions to combat inflation and public speculation about possible additional actions also may contribute to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets.

Brazil may experience high levels of inflation in future periods. Increasing prices for petroleum, the depreciation of the real and future governmental measures seeking to maintain the value of the real in relation to the U.S. dollar may trigger increases in inflation in Brazil. Periods of higher inflation may slow the rate of growth of the Brazilian economy, which would lead to reduced demand for our products in Brazil and decreased net sales revenue. Inflation is also likely to increase some of our costs and expenses, which we may not be able to pass on to our customers and, as a result, may reduce our profit margins and net income. In addition, high inflation generally leads to higher domestic interest rates, and, as a result, the costs of servicing our real denominated debt may increase, causing our net income to be reduced. Inflation and its effect on domestic interest rates can, in addition, lead to reduced liquidity in the domestic capital and lending markets, which could adversely affect our ability to refinance our indebtedness in those markets. Any decline in our net sales revenue or net income and any deterioration in our financial condition would also likely lead to a decline in the market price of our securities, including class A preferred shares and the ADSs.

Fluctuations in interest rates could raise the cost of servicing our debt and negatively affect our overall financial performance.

Our financial expenses are affected by changes in the interest rates that apply to our floating rate debt. As of December 31, 2015, we had, among other debt obligations, R$2,061.1 million of loans and financing and debentures that were subject to the Long-Term Interest Rate (Taxa de Juros de Longo Prazo), or TJLP, R$1,750.3 million of loans and financing and debentures that were subject to the Interbank Deposit Certificate (Certificado de Depósito Interbancário), or CDI rate, and R$12,297.2 million of loans and financing that were subject to the London Interbank Offered Rate, or LIBOR.

The TJLP includes an inflation factor and is determined quarterly by the Central Bank. In particular, the TJLP and the CDI rate have fluctuated significantly in the past in response to the expansion or contraction of the Brazilian economy, inflation, Brazilian government policies and other factors. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk.” A significant increase in any of these interest rates could adversely affect our financial expenses and negatively affect our overall financial performance.

Brazilian government exchange control policies could increase the cost of servicing our foreign currency-denominated debt, adversely affect our ability to make payments under our foreign currency-denominated debt obligations and impair our liquidity.

The purchase and sale of foreign currency in Brazil is subject to governmental control. Many factors could cause the Brazilian government to institute more restrictive exchange control policies, including the extent of Brazil’s foreign currency reserves, the availability of sufficient foreign exchange on the date a payment is due, the size of Brazil’s debt service burden relative to the economy as a whole, Brazil’s policy towards the International Monetary Fund and political constraints to which Brazil may be subject. A more restrictive policy could increase the cost of servicing, and thereby reduce our ability to pay, our foreign currency-denominated debt obligations and other liabilities.

Our foreign-currency debt denominated in U.S. dollars represented an aggregate of 77.9% of our consolidated indebtedness as of December 31, 2015, net of transaction costs. This indebtedness does not include (i) an aggregate amount of R$1,111.6 million (US$284.7 million) outstanding as of December 31, 2015 in connection with derivatives transactions (including interest rate swaps, exchange rate swaps and currencyoptions), and (ii) an aggregate amount of R$12,277.4 million (US$3,144.2 million) outstanding as of December 31, 2015 in connection with the Braskem Idesa FinancingIf we fail to make payments under any of these obligations, we will be in default under those obligations, which could reduce our liquidity as well as the market price of our securities, including class A preferred shares and the ADSs.

Changes in tax laws may result in increases in certain direct and indirect taxes, which could reduce our gross margin and negatively affect our overall financial performance.

The Brazilian government implements from time to time changes to tax regimes that may increase our and our customers’ tax burdens. These changes include modifications in the rate of assessments and, on occasion, enactment of temporary taxes, the proceeds of which are earmarked for designated governmental purposes. We cannot predict the changes to Brazilian tax law that may be proposed and enacted in the future. However, future changes in Brazilian tax law may result in increases in our overall tax burden, which could reduce our gross margin and negatively affect our overall financial performance.

Risks Relating to Mexico

Political and economic conditions and government policies in Mexico and elsewhere may have a material impact on our operations.

A deterioration in Mexico’s economic condition, social instability, political unrest or other adverse social developments in Mexico could adversely affect our business and financial condition. These events could also lead to increased volatility in the financial markets, thereby affecting our ability to maintain financial liquidity and service our debt. Additionally, the Mexican Government recently cut spending in response to a downward trend in international crude oil prices, and it may cut spending in the future. These cuts could adversely affect the Mexican economy and, consequently, our business, financial condition, operating results and prospects.

In the past, Mexico has experienced several periods of slow or negative economic growth, high inflation, high interest rates, currency devaluation and other economic problems. These problems may worsen or reemerge, as applicable, in the future and could adversely affect our business and ability to service our debt. A worsening of international financial or economic conditions, such as a slowdown in growth or recessionary conditions in Mexico’s trading partners, including the United States, or the emergence of a new financial crisis, could have adverse effects on the Mexican economy, our financial condition and our ability to service our debt.

Furthermore, our long-term supply agreement to purchase ethane from Pemex TRI, a state-owned Mexican company, could be terminated by them as a result of expropriation or nationalization measures taken by the Mexican government. Any termination or interruption of this supply agreement could have a material adverse effect on our results of operations or financial condition.

Mexico has experienced a period of increasing criminal activity, which could affect our operations.

In recent years, Mexico has experienced a period of increasing criminal activity, primarily due to the activities of drug cartels and related criminal organizations. In addition, the development of the illicit market in fuels in Mexico has led to increases in theft and illegal trade in the fuels that Pemex, our principal supplier in Mexico, produces. In response, the Mexican Government has implemented various security measures and strengthened its military and police forces aimed at decreasing incidents of theft and other criminal activity directed at petrochemical facilities and petrochemical products. Despite these efforts, criminal activity continues to exist in Mexico, some of which may target our facilities and products or those of Pemex and other suppliers. These activities, their possible escalation and the violence associated with them may have a negative impact on our financial condition and results of operations.

Risks Relating to Our Equity and Debt Securities

Holders of our class A preferred shares or the ADSs may not receive any dividends or interest on shareholders’ equity.

According to our by-laws and Brazilian corporate law, we must generally pay our shareholders at least 25% of our annual net income as dividends or interest on shareholders’ equity, as calculated and adjusted under Brazilian GAAP (which, for this purpose, is identical to IFRS). This adjusted net income may be capitalized, used to absorb losses or otherwise retained as allowed under Brazilian GAAP and may not be available to be paid as dividends or interest on shareholders’ equity. The Brazilian Corporation Law allows a publicly traded company like ours to suspend the mandatory distribution of dividends in any particular year if our board of directors informs our shareholders that such distributions would be inadvisable in view of our financial condition or cash availability. Holders of our class A preferred shares or the ADSs may not receive any dividends or interest on shareholders’ equity in any given year if our board of directors makes such a determination or if our operations fail to generate net income.

Our class A preferred shares and the ADSs have limited voting rights and are not entitled to vote to approve corporate transactions, including mergers or consolidations of our company with other companies, or the declaration of dividends.

Under the Brazilian Corporation Law and our by-laws, holders of our class A preferred shares and, consequently, the ADSs are not entitled to vote at meetings of our shareholders, except in very limited circumstances. These limited circumstances directly relate to key rights of the holders of class A preferred shares, such as modifying basic terms of our class A preferred shares or creating a new class of preferred shares with superior rights. Holders of preferred shares without voting rights are entitled to elect one member and his or her respective alternate to our board of directors and our fiscal council, depending on specific circumstances provided in the Brazilian Corporation Law. Holders of our class A preferred shares and the ADSs are not entitled to vote to approve corporate transactions, including mergers or consolidations of our company with other companies, or the declaration of dividends. However, if we do not pay dividends for three consecutive years, holders of our class A preferred shares and the ADSs will be granted voting rights. See “Item 10. Additional Information—Description of Our Company’s By-laws—Voting Rights.”

Holders of the ADSs may find it difficult to exercise even their limited voting rights at our shareholders’ meetings.

Under Brazilian law, only shareholders registered as such in our corporate books may attend our shareholders’ meetings. All class A preferred shares underlying the ADSs are registered in the name of the depositary. ADS holders may exercise the limited voting rights with respect to our class A preferred shares represented by the ADSs only in accordance with the deposit agreement relating to the ADSs, which provides that voting rights are only available to ADS holders at our discretion. There are practical limitations upon the ability of ADS holders to exercise their voting rights due to the additional steps involved in communicating with ADS holders. For example, we are required to publish a notice of our shareholders’ meetings in certain newspapers in Brazil. To the extent that holders of our class A preferred shares are entitled to vote at a shareholders’ meeting, they will be able to exercise their voting rights by attending the meeting in person or voting by proxy. By contrast, holders of the ADSs will receive notice of a shareholders’ meeting by mail from the depositary following our notice to the ADR depository requesting the ADR depository to do so. To exercise their voting rights, ADS holders must instruct the depositary on a timely basis. This noticed voting process will take longer for ADS holders than for holders of class A preferred shares. If it fails to receive timely voting instructions for all or part of the ADSs, the depositary will assume that the holders of those ADSs are instructing it to give a discretionary proxy to a person designated by us to vote their ADSs, except in limited circumstances.

In the limited circumstances in which holders of the ADSs have voting rights, they may not receive the voting materials in time to instruct the depositary to vote the class A preferred shares underlying their ADSs. In addition, the depositary and its agents are not responsible for failing to carry out the voting instructions of the holders of the ADSs or for the manner of carrying out those voting instructions. Accordingly, holders of the ADSs may not be able to exercise their voting rights, and they will have no recourse if the class A preferred shares underlying their ADSs are not voted as requested.

If holders of the ADSs exchange them for class A preferred shares, they may risk temporarily losing, or being limited in, the ability to remit foreign currency abroad and certain Brazilian tax advantages.

The Brazilian custodian for the preferred shares underlying the ADSs must obtain an electronic registration number with the Central Bank to allow the depositary to remit U.S. dollars abroad. ADS holders benefit from the electronic certificate of foreign capital registration from the Central Bank obtained by the custodian for the depositary, which permits it to convert dividends and other distributions with respect to the class A preferred shares into U.S. dollars and remit the proceeds of such conversion abroad. If holders of the ADSs decide to exchange them for the underlying preferred shares, they will only be entitled to rely on the custodian’s certificate of registration with the Central Bank for five business days after the date of the exchange. Thereafter, they will be unable to remit U.S. dollars abroad unless they obtain a new electronic certificate of foreign capital registration in connection with the preferred shares, which may result in expenses and may cause delays in receiving distributions. See “Item 10. Additional Information—Exchange Controls.”

Also, if holders of the ADSs that exchange the ADSs for our Class A preferred shares do not qualify under the foreign investment regulations, they will generally be subject to less favorable tax treatment of dividends and distribution on, and the proceeds from any sale of, our preferred shares. See “Item 10. Additional information—Exchange Controls” and “Item 10. Additional Information—Taxation—Brazilian Tax Considerations.”

Restrictions on the movement of currency out of Brazil may impair the ability of holders of the 6.450% Notes due 2024, issued by Braskem Finance Limited, or the 2024 Notes, to receive interest and other payments on the notes.

The Brazilian government may impose temporary restrictions on the conversion of Brazilian currency into foreign currencies and on the remittance to foreign investors of proceeds of their investments in Brazil. Brazilian law permits the government to impose these restrictions whenever there is a serious imbalance in Brazil’s balance of payments or there are reasons to foresee a serious imbalance. The Brazilian government imposed remittance restrictions for approximately six months in 1990. Similar restrictions, if imposed in the future, would impair or prevent the conversion of interest payments on the notes from reais into U.S. dollars and the remittance of U.S. dollars abroad to holders of the 2024 Notes. The Brazilian government may take similar measures in the future.

The foreign exchange policy of Brazil may affect the ability of Braskem to make money remittances outside Brazil in respect of the guarantees.

Under current Brazilian regulations, Brazilian companies are not required to obtain authorization from the Central Bank in order to make payments under guarantees in favor of foreign persons, such as the holders of the 2024 Notes. We cannot assure you that these regulations will continue to be in force at the time Braskem is required to perform its payment obligations under the guarantees. If these regulations or their interpretation are modified and an authorization from the Central Bank is required, Braskem would need to seek an authorization from the Central Bank to transfer the amounts under the guarantees out of Brazil or, alternatively, make such payments with funds held by Braskem outside Brazil. We cannot assure you that such an authorization will be obtained or that such funds will be available. If such authorization is not obtained, we may be unable to make payments to holders of the 2024 Notes in U.S. dollars. If we are unable to obtain the required approvals, if needed for the payment of amounts owed by Braskem through remittances from Brazil, we may have to seek other lawful mechanisms to effect payment of amounts due under the notes. However, we cannot assure you that other remittance mechanisms will be available in the future, and even if they are available in the future, we cannot assure you that payment on the 2024 Notes would be possible through such mechanism.

Judgments of Brazilian courts enforcing Braskem’s obligations under the guarantees would be payable only in reais.

If proceedings are brought in the courts of Brazil seeking to enforce Braskem’s obligations under the guarantees, Braskem would not be required to discharge its obligations in a currency other than reais. Any judgment obtained against Braskem in Brazilian courts in respect of any payment obligations under the guarantees would be expressed in reais. We cannot assure you that this amount in reais will afford you full compensation of the amount sought in any such litigation.

Holders of the ADSs may face difficulties in protecting their interests because we are subject to different corporate rules and regulations as a Brazilian company and our shareholders may have fewer and less well-defined rights.

Holders of the ADSs are not direct shareholders of our company and are unable to enforce the rights of shareholders under our by-laws and the Brazilian Corporation Law.

Our corporate affairs are governed by our by-laws and the Brazilian Corporation Law, which differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States, such as the State of Delaware or New York, or elsewhere outside Brazil. Even if a holder of ADSs surrenders its ADSs and becomes a direct shareholder, its rights as a holder of the class A preferred shares underlying the ADSs under the Brazilian Corporation Law to protect its interests relative to actions by our board of directors may be fewer and less well-defined than under the laws of those other jurisdictions.

Although insider trading and price manipulation are crimes under Brazilian law and are the subject of continuously evolving regulations promulgated by the CVM, the Brazilian securities markets are not as highly regulated and supervised as the U.S. securities markets or the markets in some other jurisdictions. In addition, rules and policies against self-dealing or for preserving shareholder interests may be less well-defined and enforced in Brazil than in the United States and certain other countries, which may put holders of our class A preferred shares and the ADSs at a potential disadvantage. Corporate disclosures also may be less complete or informative than for a public company in the United States or in certain other countries.

Holders of the ADSs may face difficulties in serving process on or enforcing judgments against us and other persons.

We are a corporation (sociedade por ações) organized under the laws of Brazil, and all of our directors and executive officers and our independent public accountants reside or are based in Brazil. Most of our assets and those of these other persons are located in Brazil. As a result, it may not be possible for holders of the ADSs to effect service of process upon us or these other persons within the United States or other jurisdictions outside Brazil or to enforce against us or these other persons judgments obtained in the United States or other jurisdictions outside Brazil. In addition, because a substantial portion of our assets and all of our directors and officers reside outside the United States, any judgment obtained in the United States against us or any of our directors or officers may not be collectible within the United States. Because judgments of U.S. courts for civil liabilities based upon the U.S. federal securities laws may only be enforced in Brazil if certain conditions are met, holders may face greater difficulties in protecting their interests in the case of actions by us or our directors or executive officers than would shareholders of a U.S. corporation.

We cannot assure you that a judgment of a U.S. court for liabilities under U.S. securities laws would be enforceable in Brazil or the Cayman Islands, or that an original action can be brought in Brazil or the Cayman Islands against Braskem or Braskem Finance Limited or their respective officers and directors for liabilities under U.S. securities laws, among others.

Braskem Finance Limited is an exempted company incorporated with limited liability under the laws of the Cayman Islands. Braskem is a corporation organized under the laws of Brazil. All of the directors of Braskem Finance Limited, all of the directors and officers of Braskem and some of the advisors named herein reside in Brazil or elsewhere outside the United States, and all or a significant portion of the assets of such persons may be located

outside the United States. As a result, it may not be possible for investors to effect service of process within the United States or other jurisdictions outside Brazil upon such persons, or to enforce against such persons judgments predicated upon the civil liability provisions of the U.S. federal securities laws or the laws of such other jurisdictions. In addition, it may not be possible to bring an original action in Brazil against Braskem for liabilities under applicable securities laws. Furthermore, as most of our assets are located in Brazil, any action for enforceability of the guarantees would likely need to be validated by the courts of Brazil. We cannot assure you that such judicial validation would be obtained in a timely manner or at all.

Actual or anticipated sales of a substantial number of class A preferred shares could decrease the market prices of our class A preferred shares and the ADSs.

Sales of a substantial number of our class A preferred shares could negatively affect the market prices of our class A preferred shares and the ADSs. If, in the future, substantial sales of shares are made through the securities markets by OSP, Petrobras or other existing or future holders of class A preferred shares, the market price of our class A preferred shares and, by extension, the ADSs may decrease significantly. As a result, holders of the ADSs may not be able to sell the ADSs at or above the price they paid for them.

Holders of the ADSs or class A preferred shares in the United States may not be entitled to the same preemptive rights as Brazilian shareholders have, pursuant to Brazilian legislation, in the subscription of shares resulting from capital increases made by us.

Under Brazilian law, if we issue new shares in exchange for cash or assets as part of a capital increase, subject to certain exceptions, we must grant our shareholders preemptive rights at the time of the subscription of shares, corresponding to their respective interest in our share capital, allowing them to maintain their existing shareholding percentage. We may not legally be permitted to allow holders of ADSs or class A preferred shares in the United States to exercise any preemptive rights in any future capital increase unless (1) we file a registration statement for an offering of shares resulting from the capital increase with the SEC, or (2) the offering of shares resulting from the capital increase qualifies for an exemption from the registration requirements of the Securities Act. At the time of any future capital increase, we will evaluate the costs and potential liabilities associated with filing a registration statement for an offering of shares with the SEC and any other factors that we consider important in determining whether to file such a registration statement. We cannot assure the holders of the ADSs or class A preferred shares in the United States that we will file a registration statement with the SEC to allow them to participate in any of our capital increases. As a result, the equity interest of such holders in our company may be diluted.

Brazilian tax laws may have an adverse impact on the taxes applicable to the disposition of our ADSs and preferred shares.

According to Law No. 10,833, enacted on December 29, 2003, if a nonresident of Brazil disposes of assets located in Brazil, the transaction will be subject to taxation in Brazil, even if such disposition occurs outside Brazil or if such disposition is made to another nonresident. Dispositions of our ADSs between nonresidents, however, are currently not subject to taxation in Brazil. Nevertheless, in the event that the concept of “disposition of assets” is interpreted to include the disposition between nonresidents of assets located outside Brazil, this tax law could result in the imposition of withholding taxes in the event of a disposition of our ADSs made between nonresidents of Brazil. Due to the fact that as of the date of this annual report Law No. 10,833/2003 has no judicial guidance as to its application, we are unable to predict whether an interpretation applying such tax laws to dispositions of our ADSs between nonresidents could ultimately prevail in Brazilian courts. See “Item 10. Additional Information—Taxation—Brazilian Tax Considerations.”

The relative volatility and liquidity of the Brazilian securities markets may adversely affect holders of our class A preferred shares and the ADSs.

The Brazilian securities markets are substantially smaller, less liquid and more volatile than major securities markets in the United States and other jurisdictions, and may be regulated differently from the manner in which U.S. investors are accustomed. Factors that may specifically affect the Brazilian equity markets may limit the ability of holders of the ADSs to sell class A preferred shares underlying ADSs at a price and at a time when they wish to do so and, as a result, could negatively impact the market price of the ADSs themselves.

Developments in the international capital markets may decrease the market price of our securities, including class A preferred shares, ADSs and 2024 Notes.

The market price of our securities, including class A preferred shares, ADSs and 2024 Notes may be adversely affected by declines in the international financial markets and world economic conditions. Brazilian securities markets are influenced, to varying degrees, by economic and market conditions in other countries, especially those in Latin America.

Although economic conditions are different in each country, investors’ reaction to developments in one country may affect the securities markets and the securities of issuers in other countries, including Brazil. The recent global economic and financial crisis has had a significant negative impact on the economies of countries around the world. Developed economies like the United States have sustained some of the most direct effects while some emerging economies like China have suffered substantial but comparatively milder effects. More recently, several European economies have revealed significant macroeconomic imbalances. We cannot assure you that the market for Brazilian securities will not continue to be affected negatively by events elsewhere. Any adverse economic developments in other emerging markets may adversely affect investor confidence in securities issued by Brazilian companies, causing their market price and liquidity to suffer. Any such developments could immediately affect our ability to raise capital when needed and the market price of our securities, including class A preferred shares, ADSs and 2024 Notes.

The imposition of IOF taxes may indirectly influence the price and volatility of our ADSs and preferred shares.

Brazilian law imposes the IOF/Exchange Tax, on the conversion of reais into foreign currency and on the conversion of foreign currency into reais. The objective of this tax is to slow the pace of speculative inflows of foreign capital into the Brazilian market and the appreciation of the real against the U.S. dollar. The imposition of this tax may discourage foreign investment in shares of Brazilian companies, including our company, due to higher transaction costs, and may negatively impact the price and volatility of our ADSs and preferred shares on the NYSE and the Brazilian Securities, Commodities and Futures Exchange (BM&FBOVESPA – Bolsa de Valores, Mercadorias e Futuros), or BM&FBOVESPA. See “Item 10. Additional information—Taxation—Brazilian Tax Considerations.”

Because Braskem Finance Limited has no operations of its own, holders of the 2024 Notes must depend on Braskem to provide Braskem Finance Limited with sufficient funds to make payments on the 2024 Notes when due.

Braskem Finance Limited, a wholly-owned subsidiary of Braskem incorporated in the Cayman Islands, has no operations other than the issuing and making payments on the 2024 Notes and other indebtedness ranking equally with the 2024 Notes, and using the proceeds therefrom as permitted by the documents governing these issuances, including lending the net proceeds of the 2024 Notes and other indebtedness incurred by Braskem Finance Limited to Braskem and subsidiaries of Braskem. Accordingly, the ability of Braskem Finance Limited to pay principal, interest and other amounts due on the 2024 Notes and other indebtedness will depend upon our financial condition and results of operations and our subsidiaries that are creditors of Braskem Finance Limited. In the event of an adverse change in our financial condition or results of operations and our subsidiaries that are creditors of Braskem Finance Limited, these entities may be unable to service their indebtedness to Braskem Finance Limited, which would result in the failure of Braskem Finance Limited to have sufficient funds to repay all amounts due on or with respect to the 2024 Notes.

Payments on Braskem’s guarantees will be junior to Braskem’s secured debt obligations and effectively junior to debt obligations of Braskem’s subsidiaries and jointly controlled companies.

The 2024 Notes will be fully guaranteed by Braskem on an unsecured basis. The Braskem guarantees will constitute senior unsecured obligations of Braskem. The guarantees will rank equal in right of payment with all of Braskem’s other existing and future senior unsecured indebtedness. Although the guarantees will provide the holders of the 2024 Notes with a direct, but unsecured claim on Braskem’s assets and property, payment on the guarantees will be subordinated to secured debt of Braskem to the extent of the assets and property securing such debt. Payment on the guarantees will also be structurally subordinated to the payment of secured and unsecured debt and other creditors of Braskem’s subsidiaries and jointly controlled companies.

Upon any liquidation or reorganization of Braskem, any right of the holders of the 2024 Notes, through enforcement of the guarantees, to participate in the assets of Braskem, including the capital stock of its subsidiaries and jointly controlled entities, will be subject to the prior claims of Braskem’s secured creditors, and to participate in the assets of Braskem’s subsidiaries and jointly controlled entities will be subject to the prior claims of the creditors of its subsidiaries and jointly controlled entities. The indenture relating to the 2024 Notes includes a covenant limiting the ability of Braskem and its subsidiaries to create or suffer to exist liens, although this limitation is subject to significant exceptions.

As of December 31, 2015, Braskem had (1) consolidated corporate debt, net of transaction costs, of R$27,350.5 million (US$7,004.3 million), and (2) the Braskem Idesa Financing of R$12,277.4 million (US$3,144.2 million). Of the consolidated corporate debt, R$5,475.1 million (US$1,402.3 million) was unsecured debt of Braskem, R$3,727.9 million (US$954.7 million) was secured debt of Braskem, R$5,478.1 million (US$1,402.9 million) was debt of Braskem’s subsidiaries and special purpose entities (other than Braskem Finance Limited and Braskem Idesa S.A.P.I.).

Braskem conducts a portion of its business operations through subsidiaries and jointly controlled companies, including Braskem Qpar, Braskem Petroquímica (formerly Quattor Petroquímica S.A.), Braskem America and QuantiQ. In servicing payments to be made on its guarantees of the 2024 Notes, Braskem will rely, in part, on cash flows from these subsidiaries and jointly controlled companies, mainly in the form of dividend payments and interest on shareholders’ equity. The ability of these subsidiaries and jointly controlled entities to make dividend payments to Braskem will be affected by, among other factors, the obligations of these entities to their creditors, requirements of Brazilian corporate and other law, and restrictions contained in agreements entered into by or relating to these entities.

Braskem’s obligations under the guarantees are subordinated to certain statutory preferences.

Under Brazilian law, Braskem’s obligations under the guarantees are subordinated to certain statutory preferences. In the event of a liquidation, bankruptcy or judicial reorganization of Braskem, such statutory preferences, including post-petition claims, claims for salaries, wages, social security, taxes and court fees and expenses and claims secured by collateral, among others, will have preference over any other claims, including claims by any investor in respect of the guarantees. In such event, enforcement of the guarantees may be unsuccessful, and holders of the 2024 Notes may be unable to collect amounts that they are due under the 2024 Notes.

Brazilian bankruptcy laws may be less favorable to you than bankruptcy and insolvency laws in other jurisdictions.

If we are unable to pay our indebtedness, including our obligations under the guarantees, then we may become subject to bankruptcy proceedings in Brazil. The bankruptcy laws of Brazil currently in effect are significantly different from, and may be less favorable to creditors than, those of certain other jurisdictions. For example, holders of the 2024 Notes may have limited voting rights at creditors’ meetings in the context of a court reorganization proceeding. In addition, any judgment obtained against us in Brazilian courts in respect of any payment obligations under the guarantees normally would be expressed in the real equivalent of the U.S. dollar amount of such sum at the exchange rate in effect (1) on the date of actual payment, (2) on the date on which such judgment is rendered, or (3) on the date on which collection or enforcement proceedings are started against us. Consequently, in the event of our bankruptcy, all of our debt obligations that are denominated in foreign currency, including the guarantees, will be converted into reais at the prevailing exchange rate on the date of declaration of our bankruptcy by the court. We cannot assure you that such rate of exchange will afford full compensation of the amount invested in the 2024 Notes plus accrued interest.

ITEM 4. INFORMATION ON THE COMPANY

According to IHS we are the largest producer of thermoplastic resins in the Americas, based on annual production capacity of our 29 plants in Brazil, five plants in the United States and two plants in Germany as of December 31, 2015. We are the only producer of ethylene, polyethylene and polypropylene in Brazil. We produce a diversified portfolio of petrochemical and thermoplastic products and have a strategic focus on thermoplastic resins, including polyethylene, polypropylene and PVC. We are also the seventh largest Brazilian company, based on net revenue in 2014, according to Valor Magazine. We recorded net sales revenue of R$47,562.4 million and a net profit of R$2,760.2 million during the year ended December 31, 2015.

As of December 31, 2015, our business operations were organized into five production business units, which corresponded to our principal production processes, products and services. Our business units were as follows:

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our Basic Petrochemicals Unit, which includes our production and sale of basic petrochemicals at the petrochemical complex located in Camaçari in the State of Bahia, or the Northeastern Complex, the petrochemical complex located in Triunfo in the State of Rio Grande do Sul, or the Southern Complex, the petrochemical complex located in Capuava in the State of São Paulo, or the São Paulo Complex and the Rio de Janeiro Complex and our supply of utilities produced at these complexes to second generation producers, including some producers owned or controlled by our company. This segment accounted for net sales revenue of R$24,269.8 million, or 43.2% of the net sales revenue of all reportable segments, including net sales to our other business units, and had an operating margin of 13.9% in 2015;

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our Polyolefins Unit, which includes the production and sale of polyethylene, including the production of “green polyethylene” from renewable resources, and polypropylene produced by our company in Brazil. This segment accounted for net sales revenue of R$19,986.2 million, or 35.6% of the net sales revenue of all reportable segments, including net sales to our other business units, and had an operating margin of 15.9% in 2015;

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our Vinyls Unit, which includes our production and sale of PVC and caustic soda. This segment accounted for net sales revenue of R$2,780.1 million, or 5.0% of the net sales revenue of all reportable segments, including net sales to our other business units, and had an operating margin of 4.0% in 2015;

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our USA and Europe Unit, which includes our production, operations and sale of polypropylene in the United States and Germany. This segment accounted for net sales revenue of R$8,239.9 million, or 14.7% of the net sales revenue of all reportable segments, including net sales to our other business units, and had an operating margin of 10.6% in 2015; and

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our Chemical Distribution Unit, which includes the operations of QuantiQ and IQAG and distributes petrochemical products manufactured by our company and other domestic and international companies. This segment accounted for net sales revenue of R$874.6 million, or 1.6% of the net sales revenue of all reportable segments, including net sales to our other business units, and had an operating margin of 6.1% in 2015.

Strategy of Our Company

Our strategic objective is to satisfy our customers in the plastics value chain and the chemical industry in Brazil and the Americas, while maximizing return on the capital invested by shareholders.

The key elements of our strategy include:

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Differentiation of Our Business. We recognize the cyclical nature of the markets for our petrochemical products and believe that, by focusing on relationships with our customers, we can foster customer loyalty even during periods of lower demand. For instance, we offer our customers more flexible delivery options and credit terms than importers, which typically offer deliveries only through port facilities financed through letters of credit. Our growth strategy is centered on increasing the consumption of our products,

enabling customers to substitute non-plastic materials with thermoplastic resins. We are seeking to establish close, long-term relationships with our customers and are committed to providing technological support and solutions to our customers through our research centers in Rio Grande do Sul (Brazil), and in Pittsburgh, Pennsylvania (United States), which develop processes, products and applications for the petrochemical sector and which, as of December 31, 2015, collectively had 234 employees.

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Acquisition of Feedstocks at Competitive Prices and Diversification of Feedstock. In order to obtain feedstocks at competitive prices, we are constantly seeking to diversify our feedstock profile and to negotiate purchases of feedstocks at competitive prices.

As part of our efforts to acquire feedstock at competitive prices, in 2012 we acquired from Sunoco Chemicals, in the United States, a propylene splitter that was integrated into our unit in Marcus Hook, Pennsylvania. This acquisition provides a long-term solution to the unit’s propylene supply. Additionally, we have entered into a partnership with Enterprise Products in the United States, which will supply approximately 65% of the propylene feedstock required by our three plants in the U.S. Gulf region. In addition to guaranteeing the supply of this feedstock for 15 years, the partnership establishes Enterprise’s obligation to build a propane dehydrogenation plant (PDH) that will use shale gas and other non-traditional feedstock sources, giving Braskem access to competitive opportunities in gas-based feedstock in the region.

With respect to the diversification of our feedstock profile, we have advanced in the construction of the Ethylene XXI Project, a complex in Mexico that will include a cracker using ethane as feedstock and three integrated polyethylene plants with annual capacity of 1.05 million tons, with startup slated for the first half of 2016. Developed through a joint venture with Idesa, Braskem Idesa has entered into a long-term supply contract to purchase ethane from Pemex Gas y Petroquímica Básica, or Pemex Gas, a state-owned Mexican company, under competitive commercial conditions. In 2016, we expect to invest approximately R$380 million to enable the use of up to 15% of ethane as raw material in the Northeastern Complex in Brazil. The project will modernize this industrial unit and improve the port infrastructure. We expect to complete this modernization in the second half of 2017. Furthermore, we entered into a long-term ethane supply agreement with a U.S. company with pricing based on the Mont Belvieu market prices. These are strategies that we use to diversify our feedstock and increasing our competitiveness in the petrochemical supply chain in Brazil.

Additionally, we are involved in studies for a new project for the integrated production of polyethylene in the state of West Virginia. This project, called the Appalachian Shale Cracker Enterprise, or the Ascent Project, contemplates the involvement of third party investors. The role of each participant and the business model of the project has not yet been determined and will be subject to board approval if the initial findings of the study are positive. Given recent developments in the world energy markets, we are considering new oil price models into this project analysis.

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Expansion in Selected International Markets. As part of the continuous evaluation of our business and plans, we regularly consider a range of strategic options and transactions. From time to time, we consider a variety of potential strategic transactions to expand our presence in the global petrochemicals market. We plan to expand the production capacity of our business units during the next several years by constructing new facilities (greenfield projects) with access to competitive raw material sources independently or in conjunction with third parties and/or through the acquisition of petrochemical producers that currently compete with us or produce complementary products.

We believe that additional capacity purchased or developed by us together with joint venture partners will enable us to maintain and expand our leadership position in the Americas and support the growth of our main markets.

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New Business Opportunities. We seek to pursue new business opportunities by developing new and specialized products and technologies, including the following:

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We have expanded and converted one of our polyethylene production lines in Bahia to produce metallocene-based linear low density polyethylene. This resin has distinctive characteristics for the flexible packaging industry, including greater resistance to impact and punctures, higher polish and greater transparency. This production line commenced operations in the fourth quarter of 2014;

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We are continuously evaluating opportunities to improve our existing products and to act as partner or supplier in connection with the manufacture of new value-added products; and

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We are seeking a strong position in the technological development of chemicals from renewable resources and/or using production processes that generate fewer emissions by investing in research, development and technological innovation.

Long-Term Naphtha Agreement

On December 23, 2015, we and Petrobras entered into a Petrochemical Naphtha Purchase Agreement. This long-term naphtha agreement was the result of our efforts with Petrobras to renegotiate agreements terminated in February 2014 for the supply of naphtha to our basic petrochemicals plants.

Under the terms of this new agreement:

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Petrobras has agreed to sell and deliver naphtha, for a period of five years, to our basic petrochemicals plants in the Northeastern, Southeastern and the Southern Complex exclusively for our use as a raw material;

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we are required to purchase a minimum monthly volume of naphtha;

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we provide Petrobras with a firm commitment order for naphtha each month, together with an estimate of the volume of naphtha that we will purchase over the following six months;

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we may request volumes of naphtha that exceed a monthly firm commitment order, which Petrobras may supply at its discretion;

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naphtha’s price is based on 102.1% of ARA;

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the contract may be amended in the event that unforeseen extraordinary events occur that cause a disruption in the economic-financial equilibrium of the contract;

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the contract can be renegotiated from January 2018 onwards depending on the occurrence of certain specific markets events for each party;

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parties may terminate the contract, without prior notice, in the event of: (1) failure to cure any breach of the contract following a 30 day grace period; (2) a force majeure event that continues for more than 90 days; (3) transfer or offer as a guaranty all or part of its rights and obligations under the contract to a third party without prior consent; (4) change of ownership or corporate purposes that conflicts with the object of the contract; (5) dissolution; or (6) failure to perform the compliance obligations of the contract.

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Petrobras may terminate the contract, without prior notice, in the event of bankruptcy or liquidation of Braskem.

History and Development of Our Company

Our business began when the Odebrecht Group (comprised of Odebrecht S.A. and its subsidiaries) and Mariani Group acquired control of Copene, a raw materials petrochemical complex in Camaçari, in July 2001, and then subsequently integrated their assets in the petrochemical sector with Copene. From 2001 to 2004, we underwent a corporate reorganization and merged many recently acquired companies. In addition, we acquired Polialden in 2005 and Politeno in 2006.

Through a partnership with Petrobras, we began consolidating the Southern Complex in Brazil in March 2007 with the acquired petrochemical assets from the Ipiranga group. In November 2007, we signed an agreement with Petrobras and Odebrecht, which required them to contribute part of their assets in the petrochemical sector to Braskem. In September 2008, Ipiranga Petroquímica, Petroquímica Paulínia and the spun-off portion of Ipiranga Química were merged into our company. In May 2009, our merger with Triunfo was approved.

In January 2010, we announced the acquisition of Quattor in order to strengthen the Brazilian petrochemical sector and establish ourselves among the five largest and most competitive petrochemical companies in the world. In February 2010, we announced the acquisition of the polypropylene assets of Sunoco Chemicals, the fourth largest producer of this resin in the United States. This acquisition represented an important step towards strengthening our internationalization strategy, which combines our growth in the U.S. market with alternative access to competitive raw materials and main consumer markets. As a result of this acquisition, we became a leader of thermoplastic resins in the Americas, consolidating our position as a major player in the international petrochemical market and the third largest global player in the polypropylene industry.

In July 2011, we announced the acquisition of Dow Chemical’s polypropylene business, including four plants (two plants in the United States and two plants in Germany). The U.S. assets, located in Freeport and Seadrift, Texas, have a combined annual production capacity of 545,000 tons, which represented a 50% increase in annual capacity polypropylene production in the United States. The German assets, located in the cities of Wesseling and Schkopau, have a combined annual production capacity of 545,000 tons. This acquisition represented an important step in the consolidation of our international strategy, positioning us as the largest producer of polypropylene in the United States.

The following discussion highlights the important developments in our business since January 1, 2015.

Our Corporate Structure

The following chart presents our ownership structure and the corporate structure of our principal subsidiaries as of the date of this annual report. The percentages in bold italics represent the direct and indirect percentage of the voting share capital owned by each entity, and the percentages not in bold italics represent the direct and indirect percentage of the total share capital owned by each entity.

LOGO

Basic Petrochemicals Unit

As of December 31, 2015, according to IHS, our Basic Petrochemicals Unit’s facilities had one of the largest annual production capacities of all first generation producers in Latin America. Including net sales to our other business units, our Basic Petrochemicals Unit generated net sales revenue of R$24,269.8 million in 2015, or 43.2% of the net sales revenue of all reportable segments. Net sales revenue generated by internal sales to our other business units was R$11,526.0 million during 2015, representing 47.5% of the net sales revenue of our Basic Petrochemicals Unit.

Our Basic Petrochemicals Unit is comprised of the basic petrochemicals operations conducted by our company in the Northeastern Complex, the Southern Complex, the São Paulo Complex and the Rio de Janeiro Complex.

Our Basic Petrochemicals Unit produces:

•

olefins, such as ethylene, polymer and chemical grade propylene, butadiene, isoprene and butene-1;

•

BTX products;

•

fuels, such as automotive gasoline and liquefied petroleum gas, or LPG;

•

intermediates, such as cumene; and

•

other basic petrochemicals, such as ethyl tertiary butyl ether, or ETBE, solvent C9 and pyrolysis C9.

The products of our Basic Petrochemicals Unit are used primarily in the manufacture of intermediate second generation petrochemical products, including those manufactured by our Polyolefins Unit and our Vinyls Unit. Our Basic Petrochemicals Unit also supplies other second generation producers in each of the petrochemical complexes in which we operate and other companies located outside of these complexes, and renders services to those producers. In 2015, 83.1% of our Basic Petrochemicals Unit’s net sales revenue (including intra-company sales) was derived from the sale of basic petrochemicals, 6.3% from the sale of fuels, 4.5% from the sale of naphtha and condensate, 3.0% from the sale of intermediates and 3.1% from the sale of utilities and services. In 2015, 47.5% of our Basic Petrochemicals Unit’s net sales revenue from sales of basic petrochemicals was derived from sales made to our Polyolefins and Vinyls Units.

Products of Our Basic Petrochemicals Unit

Our other business units and third-party petrochemical producers use ethylene and propylene produced by our Basic Petrochemicals Unit to produce second generation products such as polyethylene, polypropylene and PVC. We also sell butadiene, a variety of aromatics, including BTX products, and intermediates, such as cumene, to third-party petrochemical producers for use as raw materials in the production of a variety of second generation products, including synthetic rubber, elastomers, resins, nylon fibers, ethyl benzene (which is used to make styrene monomer/polystyrene), linear alkyl benzene, purified terephthalic acid, dimethyl terephthalate, bisphenol A, a feedstock for the production of polycarbonate resins, phthalic anhydride, plasticizers and paint.

The following table sets forth the sales volume of basic petrochemicals by our Basic Petrochemicals Unit (excluding our intra-company sales) for the periods indicated.


	Year Ended December 31,
	2015		2014		2013
	(thousands of tons)
Domestic sales:
Ethylene		485.8		499.6		531.8
Propylene		246.1		208.9		209.9
Cumene		206.0		211.6		234.1
Butadiene		220.1		210.0		210.8
BTX products(1)		724.7		716.0		686.3
Others		443.5		394.9		395.0

Total domestic sales of basic petrochemicals		2,326.2		2,241.0		2,267.9
Total export sales of basic petrochemicals		1,237.0		1,324.9		1,274.6

Total sales of basic petrochemicals		3,563.2		3,565.9		3,542.5

(1)	Includes benzene, toluene, ortho-xylene, para-xylene and mixed xylenes.

In addition, we had the following intra-company sales:


	Year Ended December 31,
	2015		2014		2013
	(thousands of tons)
Ethylene		2,793.5		2,704.3		2,828.2
Propylene		942.7		859.5		977.9
Benzene		—		—		7.5

Production Facilities of Our Basic Petrochemicals Unit

We believe that the technological processes we use at our basic petrochemicals plants are among the most advanced in the world. Our Basic Petrochemicals Unit currently owns and operates:

•

five major basic petrochemicals units in the Northeastern Complex (two olefins units, two aromatics units and one utilities unit);

•

four major basic petrochemicals units in the Southern Complex (two olefins units, one aromatics unit, and one utilities unit);

•

three basic petrochemicals units in the São Paulo Complex (one olefins unit, one aromatics unit and one utilities unit); and

•

two basic petrochemicals units in the Rio de Janeiro Complex (one olefins unit and one utilities unit).

We define the term “unit” to mean several production lines that are linked together to produce olefins, aromatics or utilities.

The table below sets forth the primary products of our Basic Petrochemicals Unit, annual production capacity as of December 31, 2015 and annual production for the years presented.


	Annual Production		Production For the Year Ended December 31,
Primary Products	Capacity		2015		2014		2013
	(in tons)
Olefins:
Ethylene		3,952,000		3,357,078		3,237,886		3,372,825
Propylene		1,585,000		1,389,796		1,306,636		1,505,595
Butadiene		480,000		389,272		374,827		389,854
Aromatics:
BTX products(1)		1,479,000		1,031,280		1,013,873		1,217,831

(1)	Consists of benzene, toluene, para-xylene and ortho-xylene.

Raw Materials of Our Basic Petrochemicals Unit

Naphtha

Naphtha is the main raw material that we use to produce our basic petrochemical products and represents the principal production and operating cost of our Basic Petrochemicals Unit. We also use condensate as a raw material in our basic petrochemicals units in the Southern Complex.

The price of naphtha and condensate that we purchase varies primarily based on changes in the U.S. dollar-based international price of crude oil. Naphtha and condensate accounted for 59.0% of the total cost of sales of our Basic Petrochemicals Unit during 2015, and naphtha accounted for 45.2% of our direct and indirect consolidated cost of sales and services rendered during 2015.

The following table shows the average Amsterdam-Rotterdam-Antwerp market price of naphtha for the periods indicated.


	2016		2015		2014		2013
Average(1)	US$	332.82	US$	461.89	US$	836.23	US$	903.01
Month ended:
January		317.83		396.91		918.58		932.95
February		293.00		502.13		913.65		991.86
March		351.07		504.86		911.40		910.29
April		372.00		525.61		925.63		815.70
May		—		550.86		937.84		833.20
June		—		538.07		952.45		843.60
July		—		472.37		935.59		876.79
August		—		403.38		865.81		913.88
September		—		411.66		841.36		929.81
October		—		430.26		711.52		901.87
November		—		419.18		628.94		929.33
December		—		387.41		491.98		956.78

(1)	The information in the “Average” row represents the mean average monthly naphtha prices during each respective year.

Source: IHS

Supply Contracts and Pricing of the Basic Petrochemicals Unit

Naphtha

The following table shows the distribution of the naphtha purchases by our Basic Petrochemicals Unit for the periods indicated by geographic location of the suppliers.


	Year Ended December 31,
	2015			2014			2013
Brazil		55.5	%		69.8	%		72.4	%
Algeria		19.7	%		10.2	%		13.0	%
United States of America		4.5	%		—			—
Venezuela		9.9	%		9.0	%		9.0	%
Others		10.4	%		11.0	%		5.7	%

Total		100	%		100	%		100	%

Supply Contracts with Petrobras

On December 23, 2015, we and Petrobras entered into a new five-year Naphtha Purchase Agreement. This contract replaced the naphtha supply contract between our company and Petrobras for the supply of naphtha to our basic petrochemicals plants located in the Northeastern Complex and superseded the naphtha supply contract between our company and Petrobras for the supply of naphtha to our basic petrochemicals plants located in the Southern Complex. The new contract will expire in December 2020.

Under the terms of this new agreement:

•

we are required to purchase a minimum monthly volume of naphtha;

•

we provide Petrobras with a firm commitment order for naphtha each month, together with an estimate of the volume of naphtha that we will purchase over the following six months;

•

we may request volumes of naphtha that exceed a monthly firm commitment order, which Petrobras may supply at its discretion;

•

the price we pay for naphtha is equal to 102.1% of ARA;

•

the contract will be amended in the event that unforeseen extraordinary events occur that cause a disruption in the economic-financial equilibrium of the contract;

•

beginning in January 2018, either party can renegotiate the contract upon the occurrence of certain market events;

•

either party may terminate the contract, without prior notice, in the event of: (1) failure to cure any breach of the contract following a 30 day grace period; (2) a force majeure event that continues for more than 90 days; (3) transfer or offer as a guaranty all or part of either party’s rights and obligations under the contract to a third party without the other party’s consent; (4) an alteration of ownership or corporate purposes that conflicts with the object of the contract; (5) dissolution; or (6) failure to comply with the compliance obligations of the contract; and

•

Petrobras may terminate the contract, without prior notice, in the event of our bankruptcy or liquidation.

Supply Arrangements with SONATRACH

La Société Nationale pour la Recherche, la Production, le Transport, la Transformation et la Commercialisation des Hydrocarbures, or SONATRACH (the Algerian national oil company), is one of our suppliers of imported naphtha and condensate. We have imported naphtha supplied by SONATRACH since 2002. On an annual basis, we negotiate the minimum and maximum volumes of naphtha and condensate that we will purchase from SONATRACH. In the event that we were unable to renew our supply arrangements with SONATRACH, we believe that we could purchase sufficient quantities of naphtha from other suppliers to meet the supply needs of our basic petrochemicals plants.

Other Supply Contracts

As part of our strategy to diversify our sources of supply of naphtha, we are acquiring naphtha under annual supply arrangements with Venezuelan and multinational suppliers.

Spot Market Purchases of Naphtha

In addition to our supplies of naphtha under the agreements described above, we purchase naphtha on the spot market from time to time from foreign suppliers located in Africa, Europe, North America and Latin America.

Ethane and Propane

Ethane and propane are the principal raw materials that we use to produce our basic petrochemical products in the Rio de Janeiro Complex and represent the principal production and operating cost of the basic petrochemicals unit in the Rio de Janeiro Complex. The price of ethane and propane that we purchase varies primarily based on changes in the U.S. dollar-based international price of these feedstocks.

In December 2000, RioPol and Petrobras entered into an ethane and propane supply agreement. The initial term of this contract expires in 2020 and this agreement is automatically renewable for one two-year period, unless either party notifies the other party in writing, at least one year prior to the expiration of the contract, that it does not intend to renew this agreement. Under the terms of this agreement:

•

Petrobras agrees to sell and deliver ethane and propane to our basic petrochemical plant in the Rio de Janeiro Complex exclusively for use as a raw material;

•

we are required to purchase and Petrobras is required to deliver a minimum annual volume of ethane and/or propane;

•

we agree to provide Petrobras with a firm commitment order for ethane and propane each month, together with an estimate of the volume of ethane and propane that we will purchase over the immediately succeeding four months;

•

the price for ethane and propane is based on the US Marketscan Mont Belvieu price; and

•

Petrobras may terminate the contract, without prior notice, in the event of: (1) our failure to cure any breach of the contract following a 60-day grace period; (2) a force majeure event that continues for more than 365 days; (3) we transfer or offer as a guaranty all or part of our rights and obligations under the contract to a third party without Petrobras’ consent; and (4) the dissolution, bankruptcy or liquidation of RioPol.

Light Refinery Hydrocarbons

In January 2005, Braskem Qpar and Petrobras entered into an agreement for the purchase and sale of a steam of light refinery hydrocarbons, from which we separate ethylene and propylene. This agreement provides that we and Petrobras will negotiate the renewal of this agreement prior to its expiration in 2020 and that, in the event that Petrobras does not intend to renew this agreement, it must notify us at least two years prior to the expiration of this agreement and must perform under the terms and conditions of this agreement until 2028. Under the terms of this agreement:

•

Petrobras agrees to sell and deliver light refinery hydrocarbons to our basic petrochemical plant in the São Paulo Complex exclusively for use as raw materials;

•

we are required to purchase a minimum daily volume of light refinery hydrocarbons;

•

the price for light refinery hydrocarbons is based on a variety of market indices;

•

the contract will be amended in the event that unforeseen extraordinary events occur that cause a disruption in the economic-financial equilibrium of the contract; and

•

Petrobras may terminate the contract, without prior notice, in the event of: (1) our failure to cure any breach of the contract following a 30-day grace period; (2) a force majeure event that prevents the execution of the contract; (3) we transfer or offers as a guarantee all or part of its rights, obligations and credits under the contract to a third party without Petrobras’ consent, unless the third party is a member of our economic group; (4) the dissolution or bankruptcy of Braskem S.A; and (5) a change of entity type, merger, sale, spin-off or any other corporate reconstruction of Braskem S.A that conflicts with or impedes the execution of contract’s object.

Utilities

We self-generated approximately 36% of the Bahia Complex’s energy consumption. About 53% of the demand was supplied by Companhia Hidrelétrica do São Francisco, or CHESF, a Brazilian government-owned electric power generation company. The remaining energy was supplied under long-term contracts in the free power market (Mercado Livre de Energia) from several companies.

Approximately 78% of the Alagoas Complex’s energy consumption was supplied by CHESF. About 15% of the demand was delivered by Eletrobras Alagoas, another Brazilian government-owned electric power generation company. The remainder energy was supplied under long-term contracts in the free power market from several companies

We self-generated approximately 35% of the Southern Complex’s energy consumption, and the remainder energy was acquired primarily under long-term contracts in the free power market from several companies.

We self-generated approximately 11% of the São Paulo Complex’s energy consumption, and the remainder energy was acquired primarily under long-term contracts in the free power market from several companies.

We purchased substantially all of the energy consumption requirements of the Rio de Janeiro Complex’s from Petrobras Energia until August 2015 when the contract expired. Since then, we acquired all energy consumption from other energy suppliers under several long-term contracts.

Sales and Marketing of Our Basic Petrochemicals Unit

We sell our basic petrochemical products principally in Brazil, mainly to second generation petrochemical producers, including our other business units, as well as to customers in the United States, Europe, South America and Asia.

As is common with other first generation petrochemical producers, our Basic Petrochemicals Unit has a high concentration of sales to a limited number of customers. Net sales to our Basic Petrochemicals Unit’s 10 largest customers (excluding intra-company sales) accounted for 61% of our Basic Petrochemicals Unit’s total net sales revenue (excluding intra-company sales) during the year ended December 31, 2015.

The following table sets forth our net sales revenue derived from domestic and export sales, excluding inter-company sales, by our Basic Petrochemicals Unit for the years indicated:

For the Year Ended December 31,

2015

2014

2013

(in millions of reais)

Net sales revenue:

Domestic sales

7,523.5

8,459.5

7,786.3

Export sales

4,944.2

5,389.8

5,661.7

12,467.7

13,849.3

13,448.0

Domestic Sales of Basic Petrochemicals

As part of our commercial strategy, our Basic Petrochemicals Unit focuses on developing longer-term relationships with our customers and entering into long-term supply contracts that provide for minimum and maximum quantities to be purchased and monthly deliveries. We determine the domestic prices that we charge for ethylene by reference to Western European contract prices. We determine the domestic prices that we charge for propylene based on a formula under which 34% of the price is determined by reference to Northwest Europe prices and the remaining 66% is determined by reference to the North American contract prices. We determine the domestic price of butadiene by reference to the U.S. Gulf contract price, and our price for butadiene, unlike our prices for our other basic petrochemical products, include freight costs. We set the domestic prices of our BTX products, including benzene, para-xylene, ortho-xylene and toluene by reference to North American spot market prices. We set the domestic prices of solvents by reference to international market prices and we determine the domestic prices for our other olefins and aromatics products with reference to several market indicators.

Export Sales of Basic Petrochemicals

We export basic petrochemicals mainly to customers in the United States and in Europe. We set export prices for:

•

benzene, toluene and para-xylene with reference to market prices prevailing in the U.S. Gulf market; and

•

propylene, ETBE, ortho-xylene, butene-l and isoprene with reference to market prices prevailing in the European market.

We are focused on maintaining our leading position in the Brazilian market, while continuing to use our exports to protect our operations and adjust the imbalances between demand and production. Export net sales of our Basic Petrochemicals Unit represented 20.4% of our Basic Petrochemicals Unit’s net sales revenue during 2015.

Additionally, we have applied our expertise in commodities trading to increase our resale operations of naphtha and oil derivatives in the international markets. In order to meet our crackers’ naphtha requirements (in terms of timing, pricing and quality), we maintain an excess supply of naphtha and resell the surplus on the spot market. During 2015, we recorded average resale operations of R$369.3 million per month.

Competition

Our basic petrochemical customers, which are mostly second generation petrochemical producers with plants located in the Brazilian petrochemical complexes, would have difficulty obtaining their feedstocks from other sources at lower prices due to the high cost of transportation of these products, as well as other logistical difficulties. In addition, because Brazil produces sufficient quantities of olefins to meet domestic demand, imports of these products are generally sporadic and usually related to scheduled plant maintenance shutdowns or to meet unsatisfied domestic demand.

During the past several years, as the relative cost of naphtha and gas as feedstocks for petrochemical crackers has diverged, many crackers using gas as a feedstock have become low-cost producers in the global markets and have seen their margins improve substantially as compared to naphtha crackers, such as our company. However, as gas crackers are able to produce fewer of the co-products and byproducts that naphtha crackers generate, such as propylene, butadiene and BTX products, and in smaller quantities, the prices of these products in the international markets have increased. As a result of the increased prices available for these co-products and byproducts, our net sales revenue from export sales of these products increased and we believe that this increase in net sales revenue from exports of these products will continue in future periods in which the relative competitiveness of cracker feedstocks is disrupted. Competition in the international markets for these products is primarily based on the price of delivered products and competition has increased since mid-2008 as the balance between supply and demand was disrupted due to the impact of the global economic downturn on consumers of these products. In the international markets for our basic petrochemical products, we compete with a large number of producers, some of which are substantially larger and have substantially greater financial, manufacturing, technological and marketing resources than our company.

Polyolefins Unit

As of December 31, 2015, our polyolefins production facilities had the largest annual production capacity of all second generation producers of polyolefins products in Latin America. Our Polyolefins Unit generated net sales revenue of R$19,986.2 million during 2015, or 35.6% of the net sales revenue of all reportable segments.

Our Polyolefins is comprised of the operations conducted by our company at thirteen polyethylene plants and five polypropylene plants located in the Northeastern Complex, the Southern Complex, the São Paulo Complex and the Rio de Janeiro Complex.

Products of Our Polyolefins Unit

Our Polyolefins Unit produces:

•

polyethylene, including LDPE, LLDPE, HDPE, ultra-high molecular weight polyethylene, or UHMWPE, EVA and “green polyethylene” from renewable resources; and

•

polypropylene.

We manufacture a broad range of polyolefins for use in consumer and industrial applications, including:

•

plastic films for food and industrial packaging;

•

bottles, shopping bags and other consumer goods containers;

•

automotive parts; and

•

household appliances.

The following table sets forth a breakdown of the sales volume of our Polyolefins Unit by product line and by market for the years indicated.


	Year Ended December 31,
	2015		2014		2013
	(thousands of tons)
Domestic sales*:
Polyethylene (1)		1,684.4		1,743.0		1,765.7
Polypropylene		1,126.9		1,204.0		1,268.9
Other		21.4		20.3		19.6

Total domestic sales		2,832.8		2,967.4		3,054.2
Total export sales		1,307.1		1,112.5		1,150.3

Total Polyolefins Unit sales		4,139.9		4,079.9		4,204.5

(1)	Includes EVA.

(*)	Unaudited.

We provide technical assistance to our customers to meet their specific needs by adapting and modifying our polyethylene and polypropylene products. In particular, we develop customized value-added polypropylene compounds for use by our customers in their specialized applications. We believe that the variety of technological processes at our polyolefins plants provides us with a competitive advantage in meeting our customers’ needs.

Production Facilities of Our Polyolefins Unit

As of December 31, 2015, our Polyolefins Unit owned 19 production facilities. Our Polyolefins Unit operates seven plants located in the Southern Complex, five plants located in the Northeastern Complex, five plants located in the São Paulo Complex and two plants located in the Rio de Janeiro Complex.

The table below sets forth for each of our primary polyolefins products, our annual production capacity as of December 31, 2015 and annual production for the years presented.


	Annual Production Capacity		Production For the Year Ended December 31,
Primary Products	Annual Production Capacity		2015		2014		2013
	(in tons)		(in tons)
Polyethylene:
LDPE/EVA(1)		825,000		645,072		616,849		697,540
HDPE/LLDPE/UHMWPE(2)		2,230.000		2,003,747		1,890,974		1,960,394
Polypropylene(3)		1,850,000		1,510,363		1,592,491		1,627,142

(1)	Represents capacity and production at five plants with swing line capable of producing two types of resins.

(2)	Represents capacity and production at eight plants with swing line capable of production two types of resins. Capacity varies depending on actual production demands.

(3)	Represents capacity and production at five plants.

In September 2010, we commenced production of ethylene at a new plant located in the Southern Complex that produces “green” ethylene using sugar cane ethanol received through the Santa Clara Terminal as its primary raw material. This plant has an annual production capacity of 200,000 tons of ethylene.

During 2014, we converted and expanded, by 25,000 tons, one of our polyethylene lines in the state of Bahia to produce metallocene-based LLDPE. The project began its operations in January 2015.

Raw Materials of Our Polyolefins Unit

Ethylene and Propylene

The most significant direct costs associated with our production of polyethylene and polypropylene are the costs of purchasing ethylene and propylene, which together accounted for 86.3% of our Polyolefins Unit’s total variable cost of production during 2015. During 2015, our Polyolefins Unit purchased all of its ethylene requirements and approximately 64% of its propylene requirements from our Basic Petrochemicals Unit.

Propylene Contracts with Petrobras and its Subsidiaries

Braskem holds multiple propylene contracts with Petrobras refineries, which in 2015 were responsible for the supply of 36% of our propylene demand to produce polypropylene. These supply contracts have initial terms expiring at various dates between May 2021 through April 2028, and are priced based on international references to assure competitiveness of feedstock.

Petrobras may terminate these contracts, without prior notice, in the event of: (1) our failure to cure any breach of the contract following a 30-day grace period; (2) a force majeure event occurs, although some of these contracts require that the force majeure event continues for more than 180 days; (3) we transfer or offer as a guaranty all or part of its rights and obligations under the contract to a third party without Petrobras’ consent; (4) an alteration of Braskem management or corporate purposes that conflicts with the object of the contract; (5) the dissolution, bankruptcy or liquidation of Braskem; and (6) a change of entity type, merger, sale, spin-off or any other corporate reconstruction of Braskem that conflicts with or impedes the execution of contract’s object.

Ethanol Supply Contracts

Braskem holds multiple ethanol contracts with major producers of ethanol to supply our new facility that produces ethylene using sugar cane ethanol. These supply contracts have initial terms expiring at various dates between May 2016 through April 2017. Under these contracts, we are or will be required to purchase an annual supply of ethanol sufficient to meet approximately 70% of the capacity of this ethylene plant. The price that we pay under these contracts is or will be determined by reference to the monthly price of combustible hydrated alcohol as published by the Center for Advanced Studies in Applied Economics of the Superior School of Agriculture (Centro de Estudos Avançados em Economia Aplicada da Escola Superior de Agricultura – CEPEA/ESALQ).

We also purchase ethanol on the spot market from time to time to supplement the supplies that we obtain under these contracts. The price that we pay for ethanol under most of these contracts is determined by reference to market indexes.

Other Materials and Utilities

In addition to direct sales of polyolefins to our customers, our Polyolefins Unit sells products in Brazil through exclusive independent distributors. Our Polyolefins Unit is served by five distributors, through which we distribute our products pursuant to formal agreements and spot market transactions.

Our Polyolefins Unit uses butene and hexane as raw materials in the production of HDPE and LLDPE. Butene is supplied by our Basic Petrochemicals Unit, and we import hexane from suppliers located in South Africa.

Our Unipol^® plants in the Northeastern Complex and Rio de Janeiro Complex use catalysts supplied to us by Univation Technologies. Our HDPE plant in the São Paulo Complex uses catalysts supplied to us by W.R. Grace & Co. Our HDPE slurry plant in the Northeastern Complex produces its own catalysts, and we purchase the inputs that we need to produce our own catalysts from various suppliers at market prices. We purchase most of the catalysts that we use in our Polyolefins Unit’s polypropylene plants from Basell Polyolefins Company N.V., or Basell, and we also import some catalysts from suppliers in the United States and Europe. We purchase the catalysts that our Polyolefins Unit uses in its swing line LLDPE/HDPE plants from Basell. We produce our own catalysts for our HDPE plants in the Southern Complex using Hoechst technology, and we purchase the inputs that we need to produce these catalysts from various suppliers at market prices.

Our Basic Petrochemicals Unit supplies most of the steam and water requirements of our Polyolefins Unit’s facilities. We purchase steam and water for our polyethylene plant in the Rio de Janeiro Complex from Lanxess. We purchase water for our polyethylene plants located in Santo André from Petrobras’ Refinaria de Capuava, or RECAP, or Serviço Municipal de Saneamento Ambiental de Santo André. We purchase water for our basic petrochemicals unit in Santo André from Aquapolo Ambiental S.A. We purchase electric power for each of our polyolefins plants, other than our plants in the Northeastern Complex, from third parties pursuant to long-term power purchase agreements. In the Northeastern Complex, our polyolefins plants purchase their electric power requirements from our Basic Petrochemicals Unit. Our polyolefins plants in the Northeastern Complex are able to purchase electric power from alternative sources if our Basic Petrochemicals Unit is unable to meet our total demand for electric power.

In general, we believe that there are sufficient alternative sources available at reasonable prices for each of these other inputs used in our polyolefins production process such that the loss of any single supplier would not have a material adverse effect on our operations.

Sales and Marketing of Our Polyolefins Unit

Our Polyolefins Unit sells polyethylene and polypropylene products to approximately 2,000 customers. We have a diversified product mix that allows us to serve a broad range of end users in several industries. The customers of our Polyolefins Unit generally are third generation petrochemical producers that manufacture a wide variety of plastic-based consumer and industrial goods.

Net sales revenue to the 10 largest customers of our Polyolefins Unit accounted for 16.8% of our Polyolefins Unit’s total net sales revenue during 2015. No customer of our Polyolefins Unit accounted for more than 3.0% of our total net sales revenue in 2015, 2014 or 2013.

The following table sets forth our net sales revenue derived from domestic and export sales by our Polyolefins Unit for the years indicated:


	For the Year Ended December 31,
	2015		2014		2013
	(in millions of *reais*)
Net sales revenue:
Domestic sales	R$	14,032.1	R$	14,098.6	R$	12,848.6
Export sales:
South America (excluding Brazil)		2,806.5		2,421.1		2,093.2
Europe		1,675.4		872.1		905.2
North America		866.5		896.4		642.9
Asia		446.9		189.4		166.0
Other		158.6		24.6		288.8

Total export sales		5,953.9		4,403.6		4,096.1

	R$	19,986.2	R$	18,502.2	R$	16,944.7

Domestic Sales

We are focused on developing longer-term relationships with our customers. Given the cyclical nature of the markets for our polyolefins products, we believe that we can strengthen customer loyalty during periods of reduced demand for polyethylene or polypropylene by providing a reliable source of supply to these customers during periods of high demand. We work closely with our customers to determine their needs, to provide technical assistance and to coordinate the production and delivery of our products. Customers submit annual proposals giving their estimated monthly requirements for the upcoming year for each of our polyolefins products, including technical specifications, delivery terms and proposed payment conditions. We evaluate these proposals on a monthly basis to make any required adjustments and to monitor and attempt to ensure adequate supply for each customer.

We have selected our distributors based on their ability to provide full service to their customers, including the ability to prepare our products on a customized basis. These distributors sell our polyethylene and polypropylene products to manufacturers with lower volume requirements and are able to aggregate multiple orders for production and delivery to customers that would otherwise be uneconomical for us to serve. Furthermore, by serving smaller customers through a network of distributors, our account managers focus their efforts on delivering high quality service to a smaller number of large, direct customers.

Export Sales

Our volume of polyolefins export sales has generally varied based upon the level of domestic demand for our products. Our Polyolefins Unit has a sales office in Argentina which we use to consolidate our marketing efforts in Argentina. Our Polyolefins Unit has a sales office in the Netherlands which we use to support our European customers, improve our knowledge of the European market, optimize our logistics process in this market and develop regional partners. We also maintain a sales office in Chile, Peru and Colombia.

We have established a strategic position in the polyolefins business in South America and Europe through regular direct sales, local distributors and agents who understand their respective markets. Our strategy to increase our presence in these foreign markets is intended, among other things, to reduce our exposure to the cyclicality of the international spot market for polyolefins through the development of long-term relationships with customers in neighboring countries. Our local presence in Europe allows us to further enhance our position in that market and sell our polyolefins segment products through our US and Europe segment.

The main focus of our Polyolefins Unit is to maintain our leading position in the Brazilian market while continuing to export in order to manage the relationship between our production capacity and domestic demand for our products. We believe that our continued presence in export markets is essential to help manage any overcapacity in the Brazilian market and to maintain our position as leader in the supply of polyolefins in South America.

Prices and Sales Terms

We determine the domestic prices for polyethylene by reference to North American contract prices and our domestic prices for polypropylene by reference to Northeast Asian spot market prices. Our customers in Brazil may pay in full on delivery or elect credit terms that require payment in full within seven to 56 days following delivery. We charge interest based on prevailing market rates to our Brazilian customers that elect to pay on credit.

Over the last few years, some Brazilian states have encouraged imports of polyethylene and polypropylene, as well as final products made from these polymers, by providing tax benefits on imported goods. However, on January 1, 2013, federal legislation took effect reducing the maximum Imposto sobre Circulação de Mercadorias e Serviços, or ICMS tax (a state value-added tax on sales and services) tax that states can charge from a rate of 12% to 4% on interstate sales of imported raw materials and other goods that are not wholly or partially manufactured in Brazil. As a result, Brazilian states are less able to attempt to attract imports at local ports by offering tax benefits in the form of reduced ICMS tax rates. For more information, see “Item 5. Operating and Financial Review and Prospects—Principal Factors Affecting Our Results of Operations—Effects of Brazilian Industrial Policy—Import Tariffs at Local Ports.”

Our Polyolefins Unit generally conducts export sales to buyers in countries outside the Southern Cone through the international spot market. Our customer base in these markets consists primarily of trading houses and distributors, most of which have operations in Europe, the United States or in Asia, principally Hong Kong. Pricing is based on international spot market prices. We make all sales in these markets with letters of credit. Export prices for polyethylene and polypropylene sales in the Southern Cone countries by our Polyolefins Unit are primarily based on regional prices and sales are generally made either with letters of credit or through direct bank collections.

Competition

We are the only producer of polyethylene and polypropylene in Brazil. We compete with polyolefins producers located in South America and with other importers of these products. In 2015, Brazilian polyethylene and polypropylene imports declined by 11% and represented 27% of Brazilian polyolefin consumption.

We compete for export sales of our polyolefins products in other countries in Latin America and in markets in the United States, Asia and Europe. Our export business is a commodities business and we compete with a variety of resin producers, some of which have greater financial, research and development, production and other resources than our company. Our competitive position in the export markets that we serve is primarily based on raw material costs, selling prices, product quality and customer service and support.

Vinyls Unit

We are the leading producer of PVC in Brazil, based on sales volumes in 2015. As of December 31, 2015, our PVC production facilities had the third largest annual production capacity in Latin America. Our Vinyls Unit generated net sales revenue of R$2,780.1 million in 2015, or 5.0% of our net sales revenue of all reportable segments.

Our Vinyls Unit is the only vertically integrated producer of PVC in Brazil. Our PVC production is integrated through our production of chlorine, ethylene and other raw materials. Our Vinyls Unit also manufactures caustic soda, which is used by producers of aluminum, paper and chlorine.

In 2015, we had an approximate 51% share of the Brazilian PVC market, based on sales volumes of our Vinyls Unit.

Products of Our Vinyls Unit

The following table sets forth a breakdown of the sales volume of our Vinyls Unit by product line for the years indicated.


	For the Year Ended December 31,
	2015		2014		2013
	(thousands of tons)
PVC		529.5		659.5		636.4
Caustic soda		435.7		478.1		475.0
Other(1)		114.5		126.7		127.6

Total domestic sales		1,079.7		1,252.2		1,239.0

Total export sales		65.4		12.1		0.1

Total Vinyls Unit sales		1,145.1		1,264.4		1,239.1

(1)	Includes chlorine, hydrogen, caustic soda flake and sodium hypochlorite.

(*)	Unaudited.

Production Facilities of Our Vinyls Unit

We own five vinyls production facilities. Two of our facilities are located in the Northeastern Complex, and three others are located in the State of Alagoas.

The table below sets forth for each of our primary vinyls products, our annual production capacity as of December 31, 2015 and annual production for the years presented.


	Annual Production Capacity		Production For the Year Ended December 31,
Primary Products	Annual Production Capacity		2015		2014		2013
	(in tons)
PVC(1)		710,000		542,297		633,942		582,579
Caustic Soda(2)		539,000		436,185		448,062		437,334

(1)	Represents capacity at three plants and production at four plants.

(2)	Represents capacity and production at two plants.

Raw Materials of Our Vinyls Unit

Ethylene

The most significant direct cost associated with the production of PVC is the cost of ethylene, which accounted for 54.0% of our Vinyls Unit’s total cost of sales in 2015. Our Basic Petrochemicals Unit supplies all of the ethylene required by our Vinyls Unit.

Electric Power

Electric power is a significant cost component in our production of chlorine and caustic soda. Electric power accounted for 18.7% of our Vinyls Unit’s total cost of sales in 2015. Our Vinyls Unit obtains its electric power requirements from various generators under long-term power purchase agreements. Our caustic soda plants at Camaçari and Alagoas and our PVC plant at Camaçari purchase their electric power requirements from CHESF under a long-term contract that expires in 2037. Companhia Energética de Alagoas S.A., or CEAL, distributes electric power to our PVC plant in Alagoas. The power purchase agreement with CEAL is renewable contracts with automatic rolling one-year extensions. These agreements provide us with the option to purchase our total electric power requirements based on an annual estimate. The price terms of this contract are based upon tariffs regulated by the Brazilian National Electrical Energy Agency (Agência Nacional de Energia Elétrica).

Salt

We used approximately 848,885 tons of salt during 2015. Salt accounted for 0.5% of our Vinyls Unit’s total cost of sales in 2015. We have exclusive salt exploration rights at a salt mine located near our Alagoas plant. We estimate that the salt reserves of this mine are sufficient to allow us to produce chlorine at expected rates of production for approximately 35 to 45 years. We enjoy significant cost advantages when compared to certain of our competitors due to the low extraction costs of rock salt (particularly compared to sea salt), and low transportation costs due to the proximity of the salt mine to our production facility.

Sales and Marketing of Our Vinyls Unit

Net sales revenue to our 10 largest Vinyls Unit customers accounted for 42.1% of our Vinyls Unit’s total net sales revenue during 2015. One customer accounted for 9.7% of our Vinyl Unit’s total sales revenue in 2015, 9.4% in 2014 and 13.3% in 2013.

There is a structural link between the PVC and caustic soda markets that exists because caustic soda is a byproduct of the production of chlorine required to produce PVC. When demand for PVC is high, then greater amounts of caustic soda are produced, leading to an increase in supply and generally lower prices for caustic soda. Conversely, when demand for PVC is low, prices for caustic soda tend to rise.

We make most of our sales of PVC and caustic soda directly to Brazilian customers without the use of third party distributors. However, our Vinyls Unit maintains contractual relationships with three distribution centers located in Paulínia and Barueri, both in the State of São Paulo, and Joinville in the State of Santa Catarina that provide logistical support. In addition, we operate three warehouse facilities for PVC and six terminal tank facilities for caustic soda strategically located along the Brazilian coast to enable us to deliver our products to our customers on a “just-in-time” basis. Our Vinyls Unit develops its business through close collaboration with its customers, working together to improve existing products as well as to develop new applications for PVC. Our marketing and technical assistance groups also advise customers and potential customers that are considering the installation of manufacturing equipment for PVC end products.

Prices and Sales Terms

We determine the domestic prices for our PVC resins with reference principally to the prices paid by third generation producers in Brazil for imports of PVC, which generally reflect the Northeast Asian spot market price, plus additional service charges and transportation costs. Delivery time, quality and technical service also affect the levels of sales of PVC resins. We establish our domestic price for caustic soda based on North American spot market prices, taking into account any import duties and freight costs. Approximately 59% of our caustic soda sales in 2015 were effected pursuant to agreements that are generally for one- to three-year terms and may include minimum and maximum prices.

Prices that we charge for our PVC and caustic soda products in the Brazilian market are traditionally higher than the prices that we could obtain if we exported these products. The difference in prices between the Brazilian and export markets results generally from:

•

transportation costs;

•

tariffs, duties and other trade barriers;

•

a pricing premium reflecting the tighter demand/supply relationship in Brazil; and

•

our reliability of supply, coupled with the technical support that we provide.

Our customers in Brazil may pay in full on delivery or elect credit terms that require payment in full within seven to 90 days following delivery. We charge interest based on prevailing market rates to our customers in Brazil that elect longer payment options. In the event we export PVC and caustic soda products, terms for exports generally require payment between 90 and 120 days following delivery. We require irrevocable letters of credit for export sales made on the spot market.

Competition

PVC

We and Solvay are the only two producers of PVC in Brazil. Solvay’s total Brazilian installed annual production capacity is 300,000 tons, compared to our annual production capacity of 710,000 tons. Solvay’s production facilities are located in São Paulo and, therefore, are closer than our facilities to the primary PVC market in Brazil. However, we believe that our vertically integrated production capabilities, our modern PVC suspension plants, our strong relationship with our customers and our technical assistance programs enable us to compete effectively with Solvay.

We also compete with importers of PVC. Solvay, which has a plant in Argentina in addition to its plants in Brazil, is also our principal competitor in the Brazilian PVC market. Imports accounted for approximately 22.5% of Brazilian PVC consumption in 2015. Domestically produced PVC is currently competitively priced with imported PVC after taking into account transportation costs and import duties.

In addition, we compete with other producers of thermoplastics that manufacture the same PVC products or substitutes for products in our PVC product line. Thermoplastic resins, principally polyethylene and polypropylene, are used in certain applications as substitutes for PVC. Wood, glass and metals also are used in some cases as substitutes for PVC.

Caustic Soda

The four largest Brazilian producers of caustic soda accounted for 84% of Brazilian production in 2015. Our company and another international petrochemical company operate in this market throughout Brazil, while the other domestic producers of caustic soda generally operate on a local or regional basis. Imports accounted for 38.8% of Brazil’s total caustic soda consumption in 2015.

Our principal competitors in the caustic soda market elsewhere in South America are other international petrochemical companies operating in Brazil and producers located on the U.S. Gulf Coast.

USA and Europe Unit

Our USA and Europe Unit includes:

•

the operations of Braskem America, which consist of five polypropylene plants in the United States; and

•

the operations of two polypropylene plants in Germany.

As of December 31, 2015, our USA and Europe Unit’s facilities had the largest annual polypropylene production capacity in the United States. Our USA and Europe Unit generated net sales revenue of R$8,239.9 million during 2015, or 14.7% of the net sales revenue of all reportable segments.

In June 2014, we announced the construction of an UHMWPE production facility in our La Porte, Texas site, which is expected to become operational in 2017. We believe that the production of specialized UHMWPE at this new plant complements our existing portfolio of products and will enable us to access new markets and to develop close relationships with new and existing clients.

Products of Our USA and Europe Unit

Our USA and Europe Unit produces polypropylene. The sales volume of polypropylene by this unit was approximately 1,973,274 tons in 2015, 1,862,600 tons in 2014 and 1,790,700 tons in 2013. For a description of the uses of our polypropylene products, see “—Polyolefins Unit.”

Production Facilities of our USA and Europe Unit

The table below sets forth the annual production capacity as of December 31, 2015 of the USA and Europe Unit’s polypropylene plants in the United States and Germany and the annual production for the years presented.


	Annual Production Capacity		Production For the Year Ended December 31,
Plant	Annual Production Capacity		2015		2014		2013
	(in tons)
United States		1,465,000		1,434,671		1,317,800		1,306,863
Germany		545,000		532,357		537,876		479,075

Raw Materials of Our USA and Europe Unit

Propylene

The most significant direct cost associated with the production of polypropylene by our USA and Europe Unit is the cost of purchasing propylene.

We acquire propylene for our polypropylene plants in the Unites States under a variety of long-term supply agreements and through the spot market. As of December 31, 2015, we had long-term supply agreements with multiple suppliers. The pricing formulas for propylene under these supply agreements are generally based on market prices. A portion of the propylene supplied to our gulf coast plants is provided by a limited partnership that we formed with a leading basic petrochemicals producer, under which we acquire propylene produced by an ethylene facility of that producer in La Porte, Texas. Under the terms of the partnership agreement, the partnership has agreed to provide us with sufficient propylene to produce up to 25% of our U.S. gulf coast plants’ current annual production capacity into early 2018, at prices calculated based on a cost-based formula that includes a fixed discount that declines until 2018.

As a result of rising natural gas production and related production of natural gas liquids, several companies have announced plans to build propane dehydrogenation (PDH) plants, which would produce on-purpose propylene. Braskem has secured a long-term, approximately 15 years, propylene agreement with one of those companies, Enterprise Products, which is currently building a PDH plant in Texas with an annual capacity of 750,000 tons. We expect this agreement with an established producer to provide us with a competitive, long-term supply of propylene, using shale gas and other nontraditional sources as its feedstock. This plant is expected to commence operations in the first quarter of 2017. Under this arrangement, the pricing of these contracts will be based on market prices for propane and other market costs.

In June 2012, we acquired the propylene splitter assets at Sunoco’s Marcus Hook refinery, which we are currently using to convert refinery grade propylene to polymer grade propylene for use at our Marcus Hook polypropylene plant.

We acquire propylene for our polypropylene plants in Germany under long-term supply agreements that provide for the supply of 95% of the propylene requirements of these plants. One of these supply agreements will expire in March 2021, and is automatically renewable for consecutive one-year terms, unless cancelled by one of the parties, and the other supply agreement expires in December 2021. The pricing formula for propylene under these supply agreements is based on market prices.

Sales and Marketing of Our USA and Europe Unit

Our USA and Europe Unit sells polypropylene products to approximately 350 customers. We have a diversified product mix that allows us to serve a broad range of end users in several industries. The customers of our USA and Europe Unit generally are third generation petrochemical producers that manufacture a wide variety of plastic-based consumer and industrial goods.

Net sales revenue to the 10 largest customers of our USA and Europe Unit accounted for 33.4% of our USA and Europe Unit’s total net sales revenue in 2015, 50.4% in 2014 and 49.1% in 2013 respectively.

The following table sets forth our net sales revenue derived from sales of our USA and Europe Unit for the years indicated:

For the Year Ended December 31,

2015

2014

2013

(in millions of reais)

Net sales revenue:

Europe

2,339.9

2,167.3

1,690.1

North America

5,900.1

5,767.0

5,058.4

8,240.0

7,934.3

6,748.5

Approximately 50% of the sales of polypropylene by the USA and Europe Unit are made under long-term supply agreements with our customers. These supply contracts generally have an initial two-year term and are automatically renewable for one-year periods unless one party notifies the other of its intention not to renew. These contracts also provide for minimum and maximum quantities to be purchased and monthly deliveries.

We market the remainder of the polypropylene production of the USA and Europe Unit through (1) our direct sales force that seeks to establish supply relationships with customers, (2) a select number of distributors authorized to represent the Braskem brand in the U.S. and European markets, (3) resellers that trade these products under private labels in the North American and European markets, and (4) traders that resell these products in the export markets.

Competition

The USA and Europe Unit is largely a commodities business and competes with local, regional, national and international companies, some of which have greater financial, research and development, production and other resources than our company. Although competitive factors may vary among product lines, our competitive position is primarily based on raw material and production costs, selling prices, product quality, product technology, manufacturing technology, access to new markets, proximity to the market and customer service and support.

Our primary competitors for sales in the polypropylene industry in North America are other large international petrochemical companies. In general, demand is a function of economic growth in North America and elsewhere in the world.

Our primary competitors for sales in the polypropylene industry in Europe are other large international petrochemical companies. In general, demand is a function of economic growth in Europe and elsewhere in the world.

Chemical Distribution Unit

Our Chemical Distribution Unit generated net sales revenue of R$874.6 million during 2015, or 1.5% of the net sales revenue of all reportable segments. Our Chemical Distribution Unit distributes products manufactured by our Basic Petrochemicals Unit, as well as products from more than 100 domestic and international companies. Our Chemical Distribution Unit distributes products in a broad range of market segments, including agrochemicals, rubber and general purpose chemicals; food and feed; flavor and fragrance; cosmetics and pharmaceuticals; household and other industrial segments; engineering plastics; and paints, resins, adhesives and civil construction.

Products Distributed by Our Chemical Distribution Unit

Our Chemical Distribution Unit distributes a large and diverse portfolio of products consisting of more than 1,000 products. We classify the products distributed by our Chemical Distribution Unit as:

•

solvents, including aliphatic solvents, aromatic solvents, synthetic solvents and ecologically-friendly solvents (having lower toxicity and greater biodegradability than standard solvents);

•

hydrocarbon solvents and isoparafins; and

•

general purpose chemicals, including process oils, chemical intermediates, blends, specialty chemicals and pharmaceuticals.

The following table sets forth a breakdown of the sales volume of our Chemical Distribution Unit by product for the periods presented.


	For the Year Ended December 31,
	2015		2014		2013
	(thousands of tons)
Solvents		125.8		122.4		149.5
General purpose chemicals		94.8		99.3		122.7

Total net sales		220.6		221.7		271.3

(*)

Unaudited.

Distribution Agreements

We have commercial relationships with more than 100 domestic and international companies, under which our Chemical Distribution Unit distributes specified products, including:

•

Conoco-Phillips for the distribution of hydrocarbon solvents;

•

Sasol Solvents for the distribution of synthetic solvents;

•

Wacker Chemie GmbH for the distribution of silicone-derived products;

•

RT Vanderbilt for the distribution of specialty chemicals for the rubber, cosmetics and lubricants industries;

•

Sasol Wax for the distribution of waxes;

•

DCC for the distribution of pigments; and

•

Emerald Kalama for the distribution of chemical intermediates and specialty chemicals.

In addition, our Chemical Distribution Unit has exclusive distribution rights for specified products in Brazil as a result of various distribution agreements with international companies, including:

•

Ergon for the distribution of naphtenic oils;

•

SK for the distribution of paraffinics GIII; and

•

Methanex, for the distribution of methanol.

Generally, our Chemical Distribution Unit initiates distribution activities for a producer with a letter of intent with a one-year term. Following this period, the commercial relationship or the distribution agreement is extended for an indefinite period of time. The distribution agreements with our Chemical Distribution Unit may be terminated by either party with 30 to 180 days prior notice.

Our distribution agreements are generally local stock agreements, indent sales agreements or agreements that combine the features of both. With respect to our local stock agreements, we purchase chemicals for resale to its customers. These agreements do not contain minimum volume or maximum margin requirements. Under local stock agreements, the sales price is negotiated between us and the producer. Our distribution agreement with Petrobras can provides us a price deduction on purchases based on the volume of products acquired. Under our indent sales agreements, we act as a sales agent and receive a percentage of the total sales revenue (FOB price) generated for producer.

Sales and Marketing by Our Chemical Distribution Unit

Our Chemical Distribution Unit distributes products to chemical retailers, third generation petrochemical producers and other manufacturers. We determine the prices for the distributed products according to several market references, including prices paid by third generation producers regarding imports and prevailing market prices in Brazil.

We serve approximately 5,000 active clients in more than 50 market segments through eight business units supported by ten sales offices throughout Brazil. We operate four distribution centers that include warehouses and tank farms. The distribution centers are located in Guarulhos and Mauá in the State of São Paulo, Canoas in the State of Rio Grande do Sul and Duque de Caxias in the State of Rio de Janeiro.

Our Chemical Distribution Unit distributes products in a broad range of market segments. No customer represented more than 10% of the net sales revenue of our Chemical Distribution Unit during 2015, 2014 or 2013.

Competition

According to The Brazilian Association Chemicals and Petrochemicals Distributors (Associquim), the chemical distribution industry in Brazil had revenue of US$ 6.8 billion in 2014 (most recent data available). The chemical distribution industry in Brazil is highly fragmented. There are a small number of large distributors, such as Bandeirantes Brazmo, Brenntag, IMCD, MCassab, Pochteca and Univar, and a large number of small distributors. Associquim estimates that only 16% of the companies of the chemical distribution sector have annual sales of more than US$150 million, while 58% have annual sales of less than US$50 million.

Technology, Research and Development

Technology Licenses

Our Basic Petrochemicals Unit uses engineering process technology under non-exclusive arrangements from a variety of sources for specific production processes. We have entered into several non-exclusive agreements with a number of leading petrochemical companies to use certain technology and catalysts for our Polyolefins Unit. Some of the license agreements used by our Polyolefins Unit allow us to use the licensed technology in both existing and future plants. We have entered into several non-exclusive agreements with a number of leading petrochemical companies to use technology for our Vinyls Unit. We have entered into several non-exclusive agreements with a number of leading petrochemical companies to use certain technology and catalysts for the polypropylene production of our USA and Europe Unit. Some of the license agreements used by our USA and Europe Unit allow us to use the licensed technology in both existing and future plants. If any of the arrangements or licenses under which we use third-party technology were terminated or no longer available to us, we believe that we would be able to replace this technology with comparable or better technology from other sources.

We do not pay any continuing royalties under any of the arrangements or licenses used by our Basic Petrochemicals Unit or our Vinyls Unit. Most of the license agreements used by our Polyolefins Unit or our USA and Europe Unit do not require us to pay any continuing royalties. Under the license agreements that require continuing royalty payments, we pay royalties on a quarterly basis based on the volume of the products produced using the licensed technology.

Our largest chlor-alkali plant in Alagoas uses asbestos cell technology to produce chlorine and caustic soda, which technology can no longer be used in new petrochemical production facilities under Brazilian legislation due in part to environmental concerns regarding mercury emissions resulting from this manufacturing process. The Brazilian government may require us to shift to newer diaphragm technology, which we use in our Alagoas chlor-alkali plant, or membrane technology. We are currently studying new options and technologies but we have not shifted to these newer technologies yet, in part because the return from the capital expenditures associated with this shift would not be as high as those from other potential investments that we may undertake.

Research and Development

Our ability to compete in the Brazilian and foreign markets that we serve depends on our ability to integrate new production processes developed by our company and third parties in order to lower our costs and offer new thermoplastic products. In addition, our relationships with our customers are enhanced by our ability to develop new products and customize existing products to meet their needs.

In, November 2015, we and Genomatica announced that we have been successfully producing butadiene at our lab since June 2015, using our direct process. We are jointly developing a commercial process for the on-purpose production of a more sustainable butadiene, made from renewable feedstocks, as announced in December 2013. Butadiene is an ingredient used in the production of rubber for tires, as well as for electrical appliances, footwear, plastics, asphalt, building materials and latex. The demand for butadiene is over 20 billion pounds per year worldwide, and growing. By producing a more sustainable butadiene, the everyday products made with it can become more sustainable as well and will have a smaller environmental footprint. Program results include:

•

Direct and continuous production. Genomatica has successfully developed a microorganism that consumes sugar and converts it to butadiene in our lab. At our lab, butadiene is produced, collected and continuously measured over the course of multiple days during each fermentation.

•

Development of multiple direct pathways and novel enzymes: To develop an optimal process, Genomatica used its computational tools to develop 60 potential biological pathways to theoretically convert a microorganism into butadiene. The top five hypotheses were selected for experimentation, conducted by our and Genomatica’s teams in San Diego, Campinas and São Paulo in conjunction our full-time visiting scientists at Genomatica’s Innovation Center. These teams explored a large array of enzyme candidates, applying environmental sampling and metagenomics, for each step in determining the potential pathways. Genomatica then multiplied enzyme activity 60-fold on non-native substrates using its high-throughput screening and enzyme engineering capabilities.

•

Expansion of intellectual property: Our and Genomatica’s program teams have significantly added to our and Genomatica’s extensive intellectual property related to this field. Such intellectual property includes design of optimal microorganisms and processes, which supports subsequent development stages. Such intellectual property represents an important competitive advantage.

We maintain a research and development program that is primarily implemented at two research centers that we operate: the Braskem Center for Technology and Innovation located in the Southern Complex and the Braskem America Technology Center located in Pittsburgh, Pennsylvania. Through these research centers, we coordinate and maintain our research and development program, which includes the operation of (1) pilot plants, (2) catalysis, polymerization and polymer sciences laboratories, and (3) process engineering and automation centers. Our investments in research and development, which are classified as expenses, totaled R$169.6 million in 2015, R$128.1 million in 2014 and R$115.7 million in 2013.

Maintenance

Most of our maintenance is performed by third-party service providers. For example, we have contracts with CNO, Asea Brown Boveri Ltd., Cegelec Ltda., Rip Serviços Industriais S.A., Cl Engenharia Ltda. and other service providers to perform maintenance for our basic petrochemical plants in the Northeastern Complex and in the Southern Complex. We also perform some of our ordinary course maintenance with our small team of maintenance technicians, which also coordinate the planning and execution of maintenance services performed by third parties.

Basic Petrochemicals Plants

Regular basic petrochemicals plant maintenance requires complete plant shutdowns from time to time, and these shutdowns usually take approximately 30 to 40 days to complete. We occasionally undertake brief shutdowns of the basic petrochemical operations at our basic petrochemical plants that do not materially affect our production output, primarily for maintenance purposes, catalyst regeneration and equipment cleaning. In addition, because we have two independent Olefins units and two independent Aromatics units at the Northeastern Complex and two independent Olefins units at the Southern Complex, we may continue production of basic petrochemicals at these complexes without interruption, even while we perform certain maintenance services.

The next scheduled general maintenance shutdown of:

•

the Northeastern Complex’s Olefins 2 and Aromatics 2 units are scheduled to occur in the fourth quarter of 2016;

•

the Rio de Janeiro Complex’s Olefins unit is scheduled to occur in 2017;

•

the Southern Complex’s Olefins 2 and Aromatics 2 units are scheduled to occur in 2018;

•

the Northeastern Complex’s Aromatics 1 and Olefins 1 units in 2019;

•

the Southern Complex’s Olefins 1 and Aromatics 1 units are scheduled to occur in 2020; and

•

the São Paulo Complex’s Olefins and Aromatics units are scheduled to occur in 2020.

Plants of Our Polyolefins, Vinyls and USA and Europe Units

We have a regular maintenance program for each of our polyolefins plants. Production at each of our polyolefins plants generally is shut down for seven to 20 days every two to three years to allow for regular inspection and maintenance. In addition, we undertake other brief shutdowns for maintenance purposes that do not materially affect our production of polyolefins. We coordinate the maintenance cycles of our polyolefins plants with those of our basic petrochemicals plants. While our basic petrochemicals facilities must be shut down for up to 30 days for maintenance, our polyolefins facilities may be shut down for shorter periods because these facilities are less complex to operate and maintain than our basic petrochemicals plants. Similarly, our USA and Europe plants attempt to coordinate their maintenance cycles with the routines of their largest suppliers.

We have a regular maintenance program for each of our vinyls plants. Our Camaçari and Alagoas PVC plants are generally shut down for 15 to 20 days every two years to allow for regular inspection and maintenance. Our caustic soda and chlorine plant in Alagoas shuts down once a year for three days of maintenance in different parts of the plant. Our caustic soda and chlorine plant in Camaçari does not require prolonged maintenance shutdowns and is shut down for two or three days each year.

Environmental Regulation

In each of the countries in which we operate, our operations are subject to federal, state and local laws and regulations governing the discharge of effluents and emissions into the environment and the handling and disposal of industrial waste and otherwise relating to the protection of the environment.

Our consolidated annual expenditures on environmental control were R$221.9 million in 2015, R$190.0 million in 2014, R$292.6 million in 2013, R$256.3 million in 2012 and R$198.9 million in 2011. Our consolidated environmental expenses relate to our continuous control and monitoring policies, and we do not expect to have any material future environmental liabilities. However, our environmental compliance costs are likely to increase as a result of the projected increase in our production capacity and projected increases in unit costs for treatment and disposal of industrial waste, as well as the cost of compliance with future environmental regulations.

We had established a provision for recovery of potential environmental liabilities in the amount of R$127.2 million as of December 31, 2015.

Compliance with Environmental Laws in Brazil

The Brazilian government enacted an Environmental Crimes Law in 1998 that imposes criminal penalties on corporations and individuals causing environmental damage. Corporations found to be polluting can be fined up to R$50.0 million, have their operations suspended, be prohibited from government contracting, be required to repair damage that they cause and lose certain tax benefits and incentives. Executive officers, directors and other individuals may be imprisoned for up to five years for environmental violations.

Our operations are in compliance in all material respects with applicable Brazilian environmental laws and regulations currently in effect. Some environmental studies that we have commissioned have indicated instances of environmental contamination at certain of our plants. In addition, we and certain executive officers of our company and of our subsidiaries have received notices from time to time of minor environmental violations and are or have been subject to investigations or legal proceedings with respect to certain alleged environmental violations. These environmental issues, and any future environmental issues that may arise, could subject us to fines or other civil or criminal penalties imposed by Brazilian authorities. We are addressing all environmental issues of which we are aware, and we believe that none of these issues will have a material adverse effect on our business, financial condition or results of operations.

Operating Permits

Under Brazilian federal and state environmental laws and regulations, we are required to obtain operating permits for our manufacturing facilities. If any of our environmental licenses and permits lapse or are not renewed or if we fail to obtain any required environmental licenses and permits, we may be subject to fines ranging from R$500 to R$50.0 million, and the Brazilian government may partially or totally suspend our activities and impose civil and criminal sanctions on our company or both.

Each State in which we operate has its own environmental standards and state authorities in each state have issued operating permits that must be renewed periodically. Additionally, all projects for the installation and operation of industrial facilities in the Northeastern Complex, Southern Complex, São Paulo Complex and Rio de Janeiro Complex are subject to approval by various environmental protection agencies, which must approve installed projects prior to their commencement of operations and must renew such approval periodically thereafter. State authorities have issued operating permits for all of our plants, as follows: the Northeastern Complex (State of Bahia); Southern Complex (State of Rio Grande do Sul), São Paulo Complex and Cubatão, Santo André, Mauá and Paulínia plants (State of São Paulo), Rio de Janeiro Complex (State of Rio de Janeiro) and our Alagoas plants (State of Alagoas). We are in possession of all necessary permits and do not expect to have difficulty in renewing any of them.

Industrial Waste

Companhia Riograndense de Saneamento, or Corsan, a state-owned sanitation company, operates an integrated system for liquid effluents treatment, or Sitel, in the Southern Complex. Sitel treats wastewater generated by our company and the other petrochemical producers at the Southern Complex at a liquid effluents treatment station located in the Southern Complex. This treatment station also includes a system for the collection of contaminated wastewater and disposal after treatment. We treat wastewater generated by our company at the Rio de Janeiro Complex at a liquid effluents treatment station located in the Rio de Janeiro Complex. This treatment station also includes a system for the collection and disposal of contaminated wastewater. Hazardous solid waste is co-processed in cement kilns or incinerated and other kinds of solid waste are disposed of in landfills at facilities approved by our company.

We treat wastewater generated by our company at the São Paulo Complex at a liquid effluents treatment station located in the São Paulo Complex. This treatment station also includes a system for the collection and disposal of contaminated wastewater, while hazardous waste generated at the São Paulo Complex is incinerated in cement kilns and other kinds of solid waste is disposed of in landfills.

In our Bahia facilities, all wastewater is transported to Cetrel, a wastewater treatment facility. Solid waste is incinerated in cement kilns or incinerators and the remaining waste is disposed of in landfills.

Additionally, we have a series of recycling programs that includes recycling of solid waste and wastewater. We recycle or reuse 26.8% of the solid waste generated by our facilities and 28.2% of the water used in our production processes.

Compliance with Environmental Laws in the United States

Our operations in the United States are subject to U.S. federal, state and local laws and regulations governing the discharge of effluents and emissions into the environment; the generation, storage, handling, management, transportation and disposal of hazardous waste, industrial waste and other types of waste; the use, storage, and handling of various types of products and materials; and the protection of human health, safety and the environment. In many instances, specific permits must be obtained for particular types of operations, emissions or discharges. For example, our facilities in Texas, Pennsylvania and West Virginia are required to maintain various permits relating to air quality and treatment of industrial wastewater, and to comply with regulatory requirements relating to waste management. We are in possession of necessary permits to operate our facilities (or they are in the process of being renewed in the ordinary course). We believe that our operations in the United States are in compliance in all material respects with applicable U.S. federal, state and local environmental laws and regulations currently in effect.

As with the U.S. petrochemical industry generally, compliance with existing and anticipated laws and regulations increases the overall cost of operating our U.S. plants, including operating costs and capital costs to construct, maintain and upgrade equipment and facilities. These laws and regulations have required, and are expected to continue to require us to make, expenditures of both a capital and an expense nature.

The Clean Air Act, which was last amended in 1990, requires the United States Environmental Protection Agency, or the EPA, to set National Ambient Air Quality Standards, or the NAAQS, for pollutants considered harmful to public health and the environment. The Clean Air Act requires periodic review of the science upon which the standards are based and the standards themselves. NAAQS for ozone and fine particulate matter (referred to as PM2.5), promulgated by the EPA have resulted in identification of nonattainment areas throughout the country, including certain areas within Texas, Pennsylvania and West Virginia, where Braskem America operates facilities. As a result of these nonattainment designations by the EPA, state or local air pollution control agencies are required to apply permitting and/or control requirements intended to reduce emissions of ozone precursors (nitrogen oxides and volatile organic compounds), and fine particles (including PM2.5, particles less than 2.5 micrometers in diameter, precursors), in order to demonstrate attainment with the applicable NAAQS. Such requirements may include imposition of offset requirements, and could result in enhanced emission control standards. In addition, in 2015 the EPA reevaluated the sufficiency of the current PM2.5 NAAQS. This reevaluation could result in more stringent ambient standards, which could in turn translate into additional state-specific requirements to further reduce allowable emission rates for PM2.5 or its precursor pollutants and issued a proposed rule. However, no final determination has been made. Any state-specific requirements would become applicable, if at all, following a multi-year process. Furthermore, in October 2015, the EPA lowered the primary NAAQS for ozone from 0.075 ppm to 0.070 ppm.

In addition to permitting and/or control requirements that may result from the implementation of the NAAQS at the state or local level, the EPA may promulgate new or revised federal New Source Performance Standards or National Emission Standards for Hazardous Air Pollutants that would apply directly to certain facility operations and may require the installation or upgrade of control equipment in order to satisfy applicable emission limits and/or operating standards under these regulatory programs. The EPA’s currently-proposed regulations in this area would not specifically apply to Braskem America’s operations.

Additionally, there are various legislative and regulatory measures to address greenhouse gas emissions which are in various stages of review, discussion or implementation by Congress and the EPA. In August, 2015, the EPA promulgated new regulations aimed at lowering greenhouse gas emissions from existing, new and reconstructed electric generating units. While it is currently not possible to predict the final impact, if any, that these regulations may have on Braskem America or the U.S. petrochemical industry in general, they could result in increased utility costs to operate our facilities in the United States. In addition, future regulations limiting greenhouse gas emissions of carbon content of products, which target specific industries such as petrochemical manufacturing could adversely affect our ability to conduct Braskem America’s business and also may reduce demand for its products. The EPA’s currently-proposed regulations in this area would not specifically apply to Braskem America’s operations.

Environmental Regulation in Germany and the European Union

Our operations of Germany are subject to German federal, state and local laws and regulations governing the discharge of effluents and emissions into the environment and the handling and disposal of industrial waste and otherwise relating to the protection of the environment and waste management. Our operations in Germany are in compliance in all material respects with applicable German federal, state and local environmental laws and regulations currently in effect.

As with the petrochemical industry in the European Union generally, compliance with existing and anticipated German laws and regulations increases the overall cost of operating our European business, including operating costs and capital costs to construct, maintain and upgrade equipment and facilities. These laws and regulations have required, and are expected to continue to require us to make expenditures of both a capital and an expense nature.

At our Schkopau and Wesseling, Germany facilities, we are required to maintain air, radiation, waste water and waste management permits from the German government and local agreements relating to the treatment of industrial wastewaters. We are in possession of all necessary permits.

Furthermore, our Wesseling, Germany facility is subject to existing European greenhouse gas regulations and a cap and trade program relating to emissions. We have purchased sufficient carbon dioxide emissions permits for its operations until 2018, provided it operates under normal business conditions. We will purchase any additional permits that may be required on the emission trade market. We are not aware of any new environmental regulations that would affect our European operations. Accordingly, we cannot estimate the potential financial impact of any future European Union or German environmental regulations.

Environmental Regulation in Mexico

Our operations are subject to the Mexican General Law for Ecological Equilibrium and Protection of the Environment (Ley General del Equilibrio Ecológico y la Protección al Ambiente), or LGEEPA, and its regulations; the Mexican General Law for the Prevention and Comprehensive Management of Waste (Ley General para la Prevención y Gestión Integral de los Residuos), or Waste Law, and its regulations, the National Waters Law (Ley de Aguas Nacionales), or Water Law, and its regulations; the Mexican General Law of National Assets (Ley General de Bienes Nacionales) and its regulations; the Regulations for Ground Transport of Hazardous Materials and Waste (Reglamento para el Transporte Terrestre de Materiales y Residuos Peligrosos); and the Regulations for the Protection of the Environment against Contamination due to Noise Pollution (Reglamento para la Protección del Ambiente contra la Contaminación Originada por la Emisión de Ruido).

The LGEEPA sets forth legislation applicable to activities with environmental impact, as well as the release of contaminants into the environment.

Regulations Related to the Evaluation of Environmental Impact (Reglamento en Materia de Evaluación de Impacto Ambiental) of the LGEEPA regulates the procedure for evaluation of environmental impact through which SEMARNAT authorizes, limits or forbids environmental impact together with risky activities that each project creates. Any variation or modification to the original project shall be carried out in accordance with applicable legislation, which in some cases requires the previous authorization of SEMARNAT or the corresponding environmental authority.

The Waste Law regulates the generation, management, treatment, transportation, storage and disposal of hazardous waste, as well as contamination of the soil, subsoil and underground water caused by the release and/or spillage of such waste resulting from a company’s activities and operations. Additionally, the Waste Law sets forth the specific steps to be followed for the prevention and management of hazardous waste. Companies that produce hazardous waste must register with SEMARNAT and establish a plan for the handling of hazardous waste and must maintain records of the production and transportation of hazardous waste. Additionally, companies must deliver an annual report to SEMARNAT.

The Water Law establishes the regulatory framework applied to the use, application and exploitation of Mexican bodies of water and the discharge of waste water to Mexican bodies of water. Some of our projects require concessions provided by the National Water Commission (Comisión Nacional del Agua), or CNA, whether for the use, application and exploitation of Mexican waters or the discharge of waste water to certain bodies of water under national jurisdiction. The concession titles issued by the CNA are subject to certain terms and conditions, as well as payment of rights. The payment of rights must be made at the time and in the form established by the Federal Duties Law (Ley Federal de Derechos); and failure to pay may result in the imposition of penalties and inflationary adjustments for such payments.

The majority of environmental concessions, authorizations, licenses and permits issued in connection to our projects have a specific effective period, which may be extended subject to certain authorizations by the environmental authorities. In their consideration, the authorities take into consideration the level of compliance with the terms and conditions of the concessions, as well as the authorizations, licenses and/or permits in question.

The federal governmental authority responsible to oversee compliance of the applicable legal provisions is SEMARNAT, through the Mexico’s Federal Attorney Office for Environmental Protection (Procuraduría Federal de Protección al Ambiente), or PROFEPA, and the CNA. State and municipal authorities are responsible to apply Environmental Legislation within their respective jurisdictions and oversee compliance of the applicable legal provisions.

Property, Plant and Equipment

Our properties consist primarily of petrochemical production facilities in:

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Camaçari in the State of Bahia;

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Triunfo in the State of Rio Grande do Sul;

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Duque de Caxias in the State of Rio de Janeiro;

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São Paulo, Paulínia, Cubatão, Santo André and Mauá in the State of São Paulo;

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Maceió and Marechal Deodoro in the State of Alagoas;

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the United States in La Porte, Freeport and Seadrift, Texas, Marcus Hook, Pennsylvania, Neal, West Virginia;

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Germany in Schkopau and Wesseling; and

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Coatzacoalcos in Mexico.

Our principal executive offices are located in São Paulo in the State of São Paulo, and we have an administrative support office in the City of Salvador in the State of Bahia. We also have equity interests in investments located in other parts of the country. We own all our production facilities, but we generally rent our administrative offices.

The following table sets forth our properties as of December 31, 2015 by location of facilities, products produced and size of plant.


Type of Product or Service	Location of Facilities	Size of Plant
		(in hectares)(1)
Basic petrochemicals	Triunfo		152.8
Basic petrochemicals	Santo André		74.1
Basic petrochemicals	Camaçari		65.5
Basic petrochemicals	Duque de Caxias		53.0
Basic petrochemicals	Mexico		23.6
Polypropylene	Paulínia		39.7
Polyethylene	Triunfo		30.5
Polyethylene	Camaçari		24.5
Polyethylene	Cubatão		17.6
Polyethylene	Santo André		15.8
Polyethylene	Duque de Caxias		15.0
Polyethylene	Mexico		14.9
Polypropylene	LaPorte, Texas		87.0
Polypropylene	Neal, West Virginia		27.1
Polypropylene	Mauá		15.8
Polypropylene	Duque de Caxias		15.0
Polypropylene	Camaçari		13.2
Polypropylene	Triunfo		10.0
Polypropylene	Marcus Hook, Pennsylvania		6.9
Polypropylene	Freeport, Texas		8.9
Polypropylene	Seadrift, Texas		2.5
Polypropylene	Schkopau, Germany		3.7
Polypropylene	Wesseling, Germany		26.0
Caustic soda/chlorine	Maceió		15.0
PVC/caustic soda/chlorine	Camaçari		12.6
PVC	Marechal Deodoro		186.7
Distribution Center	Vila Prudente/Capuava		3.2

(1)	One hectare equals 10,000 square meters.

We believe that all of our production facilities are in good operating condition. As of December 31, 2015, the consolidated net book value of our property, plant and equipment was R$34,111.6 million.

The following properties are mortgaged or pledged to secure certain of our financial transactions: (1) our basic petrochemicals plant and our polyethylene plant located in the Southern Complex; (2) our chlor-alkali plant and PVC plant located in the Northeastern Complex; (3) our basic petrochemicals plant and our polyethylene plant located in São Paulo Complex; (4) our chlor-alkali plant and PVC plant located in the State of Alagoas; (5) our basic petrochemicals plant, our polyethylene plant and our polypropylene plant located in the Rio de Janeiro Complex; and (6) our basic petrochemical plant and our polyethylene plants located in Mexico.

Insurance

In addition to the policies described below for our Brazilian and international operations, we maintain other insurance policies for specific risks, including directors and officers liability coverage, workers’ compensation, employers practice liability and automotive insurance.

We do not anticipate having any difficulties in renewing any of our insurance policies and believe that our insurance coverage is reasonable in amount and consistent with industry standards applicable to chemical companies operating globally.

Operations in Brazil, the United States and Germany

We carry insurance for all our plants against material damage and consequent business interruption through comprehensive “all risk” insurance policies.

The all risks insurance program for our plants provides for a total replacement value of US$19.5 billion for property damage. This insurance program is underwritten through separate policies in Brazil and the United States by large insurance companies. This all risk insurance program/policies are in force until April 2017.

The material damage insurance for our plants provides insurance coverage for losses due to accidents resulting from fire, explosion and machinery breakdown, among others. This coverage has a maximum indemnification limit of US$2 billion per event (combined material damage and business interruption coverage) for the Brazilian plants and US$250 million (combined material damage and business interruption coverage, excluding flood and earthquake damages, which have a maximum indemnification limit of US$200 million per event) for our plants in the United States and Germany. Our policies have deductibles from US$250,000 to US$20 million, depending on the plant and/or coverage.

The business interruption coverage under our policies provides coverage for losses resulting from interruptions due to any material damage covered by the policy. The losses are covered with maximum indemnity periods ranging from 12 to 24 months and deductibles ranging from 45 to 90 days, depending on the plant.

As a part of our insurance program, we also have a third-party liability policy for our operations, which covers losses for damages caused to third parties from our operations, including sudden environmental pollution.

Operations in Mexico

We have an insurance program for our Project Ethylene XXI project in Mexico that provides coverage for the project during the construction and testing stages until the commencement of operations, which is expected to occur in the first half of 2016. This insurance program is comparable to policies issued by large insurance companies in Mexico and includes: (1) all risk policies for construction and delays in commencement of operations up to an aggregate amount of US$5.2 billion, (2) terrorism coverage up to a limit of US$ 900 million, (3) marine cargo coverage up to a limit per shipment of US$50 million and (4) delays in commencement of operations up to a combined limit of US$1.4 billion. The project also has comprehensive third-party liability insurance coverage for the construction and testing period.

Compliance

We have adopted a Policy on Compliance in Acting Ethically with Integrity and Transparency, and several internal policies designed to guide our management, employees and counterparties and reinforce our principles and rules for ethical behavior and professional conduct. We maintain an Ethics Line managed by a third party available for employees and non-employees. Every whistleblower complaint is investigated and submitted for evaluation by our Ethics Committee.

Following our discovery of vulnerabilities in our internal controls in connection with the Investigation, we have designed and implemented remediation efforts to improve and evolve our Global Governance and Compliance system, including a series of efforts designed to ensure that every vulnerability that permitted the occurrence of the material weaknesses in our internal control over financial reporting described in “Item 15. Controls and Procedures” is mitigated. We expect such measures to be implemented and producing the desired effects by the end of 2017. We have taken the following measures, among others: (a) established the Compliance Committee (as defined below), (b) hired a Chief Compliance Officer (as defined below) and increased staffing and resources for our Internal Controls, Risk Management, Compliance and Internal Audit departments, (c) created an Internal Audit department, (d) incorporated anti-corruption clauses in our contracts with third-parties,

(e) adopted the Policy on Compliance in Acting Ethically with Integrity and Transparency, (f) developed and implemented training programs for our directors, senior management and other employees, (g) enhanced vendor data, due diligence, procurement and payment procedures and associated controls, and (h) redesigned our process for monitoring in-transit inventory of raw materials, including naphtha. Furthermore, we implemented a new set of controls in the fourth quarter of 2016 that improved the processes in connection with manual journal entries, monitoring of payments of commissions and ledger accounts. We have also taken actions to implement controls within the process of posting entries in the inventory and trade payable balance accounts for naphtha imports processed by Braskem Netherlands.. We believe that these steps, taken together, will provide additional supervision, approval and review of accounting transactions and will enable us to better prevent and detect potential issues in our internal controls. For more information, see “Item 6. Directors, Senior Management and Employees—Directors and Senior Management” and “Item 15. Controls and Procedures.”

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements as of December 31, 2015 and 2014 and for the three years ended December 31, 2015, included in this annual report, as well as with the information presented under “Presentation of Financial and Other Information” and “Item 3. Key Information—Selected Financial and Other Information.”

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those set forth in “Cautionary Statement with Respect to Forward-Looking Statements” and “Item 3. Key Information—Risk Factors.”

Overview

Our results of operations for the years ended December 31, 2015, 2014 and 2013 have been influenced, and our results of operations will continue to be influenced, by a variety of factors, including:

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Brazil’s GDP, which contracted 3.8%, as compared to growth of 0.1% in 2014 and 3.0% in 2013, which affects the demand for our products and, consequently, our domestic sales volume;

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the U.S. GDP, which expanded 2.4%, as compared to growth of 2.4% in 2014 and 1.9% in 2013, which affects the demand for our products and, consequently, our domestic sales volume;

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Europe’s GDP, which expanded 1.5%, as compared to growth of 0.9% in 2014 and a contraction of 0.5% in 2013, which affects the demand for our products and, consequently, our domestic sales volume;

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the expansion of global production capacity for the products that we sell and the growth rate of the global economy;

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the international market price of naphtha, our principal raw material, expressed in U.S. dollars, which has a significant effect on the cost of producing our products and which has been volatile during the three years ended December 31, 2015, fluctuating in a range between US$387 and US$551 per ton during 2015, US$492 and US$952 per ton during 2014 and US$816 and US$992 per ton during 2013;

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the average domestic prices of our principal products expressed in U.S. dollars, which fluctuate to a significant extent based on fluctuations of international prices for these products and which also have a high correlation to our raw material costs;

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our crackers’ capacity utilization rates, which increased in 2015 as result of the improvements in processes and the investments made over recent years, as well the company’s capacity to export any surplus not absorbed by Brazil’s domestic market;

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government industrial policy;

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sales outside Brazil, which increased to R$23.2 billion in 2015 from R$19.8 billion in 2014;

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changes in the real/U.S. dollar exchange rate, including the depreciation of the real against the U.S. dollar by 47.0% in 2015, 13.4% in 2014 and 14.6% in 2013;

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the level of our outstanding indebtedness, fluctuations in benchmark interest rates in Brazil, which affect our interest expenses on our real-denominated floating rate debt and financial income on our cash and cash equivalents, and fluctuations in the LIBOR rate, which affect our interest expenses on our U.S. dollar-denominated floating rate debt;

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the inflation rate in Brazil, which was 10.7% in 2015, 3.8% in 2014 and 5.5% in 2013, in each case, as measured by the IGP-DI, and the effects of inflation on our operating expenses denominated in reais and our real-denominated debt that is indexed to take into account the effects of inflation or bears interest at rates that are partially adjusted for inflation; and

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the tax policies and tax obligations.

Our financial condition and liquidity is influenced by various factors, including:

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our ability to generate cash flows from our operations and our liquidity;

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prevailing Brazilian and international interest rates and movements in exchange rates, which affect our debt service requirements;

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our ability to continue to be able to borrow funds from Brazilian and international financial institutions and to sell our debt securities in the Brazilian and international securities markets, which is influenced by a number of factors discussed below;

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our capital expenditure requirements, which consist primarily of maintenance of our operating facilities, expansion of our production capacity and research and development activities; and

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the requirement under Brazilian Corporate law and our by-laws that we pay dividends on an annual basis in an amount equal to at least 25% of our adjusted net income, unless our board of directors deems it inconsistent with our financial position and the decision of our board of directors is ratified by our shareholders.

Financial Presentation and Accounting Policies

As described in the “Explanatory Note” on this annual report, as a result of the adjustments in our financial statements for the fiscal years ended December 31, 2015, 2014 and 2013, our consolidated financial statements as of December 31, 2015 and 2014 and for the three years ended December 31, 2015 were restated. For further information on the effect in our consolidated financial statements, see note 2.4 to our audited consolidated financial statements included elsewhere in this annual report.

We have identified material weaknesses in our internal controls and procedures. For information on the material weaknesses identified in our internal controls and procedures, see “Item 15. Controls and Procedures.”

Presentation of Financial Statements

We have prepared our audited consolidated financial statements as of December 31, 2015 and 2014 and for each of the years ended December 31, 2015, 2014 and 2013 in accordance with IFRS.

Our consolidated financial statements have been prepared in accordance with IFRS 10 (Consolidated Financial Statements).

Operating Segments and Presentation of Segment Financial Data

We believe that our organizational structure as of December 31, 2015 reflected our business activities and corresponded to our principal products and production processes. As of December 31, 2015, we had five production business units and reported our results by five corresponding segments to reflect this organizational structure:

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Basic Petrochemicals—This segment includes (1) our production and sale of basic petrochemicals at the Northeastern Complex and the Southern Complex, (2) our production and sale of basic petrochemicals at the São Paulo Complex and the Rio de Janeiro Complex, and (3) our supply of utilities produced at these complexes to second generation producers, including some producers owned or controlled by our company.

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Polyolefins—This segment includes the production and sale of polyethylene, including the production of “green polyethylene” from renewable resources, and polypropylene by our company, excluding the operations of Braskem Europe.

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USA and Europe—This segment includes the operations of our five polypropylene plants in the United States and the operations of our two polypropylene plants in Germany.

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Vinyls—This segment includes our production and sale of PVC and caustic soda.

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Chemical distribution—This segment includes operations of QuantiQ and IQAG, which consists of distribution of petroleum-based solvents, intermediate chemicals, special chemicals and pharmacons.

We have included a reconciliation of the results of operations of our segments, as they existed as of December 31, 2015, to our consolidated results of operations under “—Results of Operations” below.

Critical Accounting Policies

The presentation of our financial condition and results of operations in conformity with IFRS requires us to make certain judgments and estimates regarding the effects of matters that are inherently uncertain and that impact the carrying value of our assets and liabilities. Actual results could differ from these estimates. In order to provide an understanding about how we form our judgments and estimates about certain future events, including the variables and assumptions underlying the estimates, and the sensitivity of those judgments to different variables and conditions, we have included comments related to the following critical accounting policies under IFRS:

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Impairment of property, plant and equipment and non-financial assets. Our goodwill based on expected future profitability as of December 31, 2015 were R$2,058.9 million. The recoverable value of property, plant and equipment and other noncurrent assets including intangible assets (other than goodwill based on expected future profitability) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable value of goodwill based on expected future profitability is reviewed for impairment on an annual basis. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of (1) an asset’s fair value less costs to sell; and (2) its value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows that can be cash-generating units or operating segments. Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

We did not record any impairment charges in the years ended December 31, 2015, 2014 and 2013. As of December 31, 2015, we do not believe that any of our cash generating units were at risk of impairment.

Our impairment tests of goodwill consider the lowest level of cash-generating operations at (1) the Southern Complex in the Basic Petrochemicals Unit, (2) the Polyolefins Unit and (3) the Vinyls Unit.

The discount rate applied is based on the weighted average cost of capital for our company at the relevant dates of valuation. Our projections include assumptions regarding (1) volumes that consider our current and projected production; (2) prices based on a sales prices cycle of approximately five years for our products; (3) costs of goods sold based on international reference prices; and (4) capital expenditures projected for future years. The current price cycle reached a low point in 2012 due to global economic volatility. Changes to our projected margins resulting from changes in the petrochemical cycle, global economic conditions or strategic decisions to suspend or terminate production of certain products and to close the related plants could significantly impact our impairment charges. The impairment test performed as of October 31, 2012 supports a 5% negative fluctuation in contribution margin without changing the impairment result.

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Valuation of derivative instruments. We use swaps, non-deliverable forwards and other derivative instruments to manage risks from changes in foreign exchange, interest rates and commodities prices. We record these instruments at their estimated fair market value based on market quotations for similar instruments, and based on standard mark-to-market practices, which take into account reliable market curves for interest rates, foreign exchange rates and commodities prices.

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Deferred Income Tax and Social Contribution. We recognize deferred income tax and social contribution assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities using prevailing tax rates. We regularly review any deferred income tax and social contribution assets for recoverability and reduce their carrying value based on our historical taxable income, projected future taxable income and the expected timing of any reversals of existing temporary differences. If one of our subsidiaries operates at a loss or is unable to generate sufficient future taxable income, or if there is a material change in the actual effective tax rates or the time period within which the underlying temporary differences become taxable or deductible, we evaluate the need to reduce partially or completely the carrying value of our deferred income tax and social contribution assets.

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Provisions and Contingencies. We are currently involved in numerous judicial and administrative proceedings, as described under “Item 8. Financial Information—Legal Proceedings,” and in notes 20 and 23 to our audited consolidated financial statements. We record accrued liabilities for provisions that we deem probable of creating an adverse effect on our results of operations or financial condition. For the main contingencies that we deem possible of creating an adverse effect on our results of operations or financial condition, we disclose relevant information regarding the proceedings in accordance with IAS 37. Additionally, the contingencies assumed in a business combination for which an unfavorable outcome is considered possible are recognized at their fair value on the acquisition date. We believe that these judicial and administrative proceedings are properly recognized or disclosed in our financial statements.

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Pension plans. For defined benefit plans that we sponsor, we calculate our funding obligations based on calculations performed by independent actuaries using assumptions provided by the plan’s management, such as interest rates investment returns, and levels of inflation, and provided by the actuaries, such as mortality rates and future employment levels. Collectively, these assumptions directly impact our liability for accrued pension costs and the amounts we record as pension costs, although individual assumptions are not expected to be material.

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Useful life of long-lived assets. We recognize the depreciation of long-lived assets based on their estimated useful life, which in turn is based on industry practices and previous experience. However, the actual useful life can vary based on the current state of technologies at each unit. The useful life of the long-lived asset also affects the impairment testing. We do not believe that there are any indications of material change in the estimates and assumptions used in the calculation or the impairment losses of long-lived assets. However, if the actual results are not consistent with the estimates and assumptions used in the future cash flows estimating the fair value of the assets, we could be exposed to potentially significant losses.

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Valuation of assets and liabilities in business combinations. We have entered into certain business combinations that we have accounted for in accordance with IFRS. In this regard, we hire and supervise the specialized service providers to evaluate the fair value of the assets acquired and liabilities assumed. We allocate the cost of the entity acquired to the assets acquired and liabilities assumed, on a fair value basis, estimated at the date of acquisition. Any difference between the cost of the acquisition and the fair value of the assets acquired and liabilities assumed is recorded as goodwill or a gain on bargain purchase. We exercise significant judgment in the process of identifying the tangible and intangible assets and liabilities, valuing such assets and liabilities in determining the remaining useful life. Assumptions used to value those assets and liabilities include estimates of discounted cash flows or discount rates and may result in a difference between the estimated and actual values. If the actual results are not consistent with the estimates and assumptions used, we could be exposed to potentially significant losses.

Principal Factors Affecting Our Results of Operations

Growth of Brazil’s GDP and Domestic Demand for Our Products

Our sales in Brazil represented 51.6% of our net sales revenue in the year ended December 31, 2015. As a Brazilian company with a substantial majority of our operations in Brazil, we are significantly affected by economic conditions in Brazil. Our results of operations and financial condition have been, and will continue to be, affected by the growth rate of Brazilian GDP because our products are used in the manufacture of a wide range of consumer and industrial products.

Because of our significant market share in many of the Brazilian markets in which our petrochemical products are sold, fluctuations in Brazilian demand for polyethylene, polypropylene and PVC affect our production levels and net sales revenue. Brazilian GDP grew at an estimated compound average annual rate of 0.3% from 2011 through 2015. From 2011 through 2015, the apparent consumption volumes in Brazil of polyethylene (including EVA), polypropylene and PVC increased (decreased) at compound average annual rates of 2.7%, (0.2)% and (2.8)%, respectively.

The following table sets forth the growth rates of Brazilian GDP and domestic apparent consumption for polyethylene, polypropylene and PVC for the periods presented.


	Year Ended December 31,
	2015			2014			2013			2012			2011
Brazilian GDP		(3.8	)%		0.1	%		3.0	%		1.9	%		3.9	%
Brazilian consumption of polyethylene		(2.0	)		—			10.2			2.9			(3.4	)
Brazilian consumption of polypropylene		(7.4	)		(5.7	)		8.7			4.5			(4.0	)
Brazilian consumption of PVC		(19.6	)		(3.2	)		16.0			(1.1	)		5.7

Source: Brazilian government, IPEA and ABIQUIM

Brazilian GDP growth has fluctuated significantly, and we anticipate that it will likely continue to do so. Our management believes that economic growth in Brazil should positively affect our future net sales revenue and results of operations. However, continued low growth or a recession in Brazil would likely reduce our future net sales revenue and have a negative effect on our results of operations.

In 2013, Brazilian GDP growth fell short of market expectations and increased by only 3.0% in 2013. However, the stronger performance of certain sectors, such as food, infrastructure, automotive and agribusiness, and the trend toward restocking supply chains positively influenced apparent consumption of thermoplastic resins, which increased by 10.2% for polyethylene, 8.7% for polypropylene and 2.4% for PVC.

In 2014, the Brazilian economy continued to face challenges, registering low GDP growth. The decrease in consumer confidence, demonstrated by the deceleration of consumption, and weaker external demand affected most economic sectors, including the industrial and services sectors, which registered decreased growth as compared to 2013. As a result, Brazilian consumption volumes of thermoplastic resins declined by 5.7% for polypropylene and 3.2% for PVC. Brazilian consumption volumes of polyethylene remained stable.

In 2015, Brazil was affected by the continued political crisis, lower-than-expected GDP growth in China (6.9%, the lowest in 25 years), declines in international commodity prices and weakening currencies in emerging economies, led by the Brazilian real. Key sectors in the Brazilian economy, such as services, construction and infrastructure, experienced a slowdown which affected the labor market by reducing income levels and consequently household spending and investment. According to the IBGE, Brazil’s GDP contracted 3.8% in 2015. As a result, Brazilian consumption volumes of thermoplastic resins declined by 2.0% for polypropylene, 7.4% for polyethylene and 19.6% for PVC.

We generally obtain higher prices in Brazil for our products than the prevailing international prices. The difference in prices between the Brazilian and export markets results from:

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costs of transporting products to and within Brazil;

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warehousing, and other logistics costs; and

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tariffs and duties.

In addition, we are generally able to charge higher prices for our products than the real price of imports because we are able to provide better product customization services to our customers than sellers of imported products.

During periods in which the domestic demand for our products is reduced, we actively pursue export opportunities for our products in order to maintain capacity utilization rates. During periods of increased domestic demand for our products, our export sales volumes may decline as we increase domestic sales of our products.

We believe that domestic demand for thermoplastic resins may continue to be affected by global macroeconomic factors. Exports of basic petrochemicals and thermoplastic resins, which represent a large percentage of our sales, are also affected by global macroeconomic factors.

Effect of Sales Outside Brazil on Our Financial Performance

We have significant production capacity located outside of Brazil from our plants located in the United States and Germany, through our subsidiaries Braskem America and Braskem Europe.

During the past several years, as the relative cost of naphtha and gas as feedstocks for petrochemical crackers has diverged, the profit margins of many naphtha crackers, including ours, have decreased as crackers using gas as feedstock have become the low-cost producer in the global markets. However, since gas crackers are unable to produce the co-products and byproducts that naphtha crackers generate, such as propylene, butadiene and BTX products, the prices of these products in the international markets have increased. As a result of the increased prices available for most of these co-products and byproducts, our net sales revenue from export sales of these products increased.

During the year ended December 31, 2015, 48.7% of our net sales revenue was derived from sales of our products outside Brazil as compared with 43.4% during 2014 and 42.7% during 2013. Net sales revenues derived from sales outside Brazil increased by 16.7% during 2015, 13.4% during 2014 and 14.2% during 2013.

During the year ended December 31, 2015, sales to customers in countries in the Americas (other than Brazil) accounted for 60.5% of our sales outside Brazil. During the year ended December 31, 2015, sales to customers in Europe accounted for 26.3% of our sales outside Brazil, and sales to customers in East Asia accounted for 8.7% of our sales outside Brazil.

Our ability to export to other countries is a function of the level of economic growth in these countries and other economic conditions, including prevailing inflation rates and interest rates. We believe that continued slow or negative growth in the global economy, coupled with the increase in global capacity in the petrochemical industry, may lead to reduced profitability of the global petrochemical industry, and consequently reduced margin for our products. In addition, reduced global demand for our products may impair our ability to export our products in response to a decline in domestic demand for these products.

Cyclicality Affecting the Petrochemical Industry

Global consumption of petrochemical products has increased significantly over the past 30 years. Due to this growth in consumption, producers have experienced periods of insufficient capacity for these products. Periods of insufficient capacity, including some due to raw material shortages, have usually resulted in increased capacity utilization rates and international market prices for our products, leading to increased domestic prices and operating margins. These periods have often been followed by periods of capacity additions, which have resulted in declining capacity utilization rates and international selling prices, leading to declining domestic prices and operating margins.

We expect that these cyclical trends in international selling prices and operating margins relating to global capacity shortfalls and additions will likely persist in the future, principally due to the continuing impact of four general factors:

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cyclical trends in general business and economic activity produce swings in demand for petrochemicals;

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during periods of reduced demand, the high fixed cost structure of the capital intensive petrochemicals industry generally leads producers to compete aggressively on price in order to maximize capacity utilization;

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significant capacity additions, whether through plant expansion or construction, can take three to four years to implement and are therefore necessarily based upon estimates of future demand; and

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as competition in petrochemical products is generally focused on price, being a low-cost producer is critical to improved profitability. This favors producers with larger plants that maximize economies of scale, but construction of plants with high capacity may result in significant increases in capacity that can outstrip demand growth.

A variety of petrochemical companies have announced plans to build significant additional ethylene production capacity, primarily in Asia, the Middle East and North America. According to IHS, 32.0 million tons of annual global ethylene capacity is scheduled to be commissioned between 2016 and 2020, including approximately 9.0 million tons of annual capacity in China, 4.3 million tons of annual capacity in the Middle East and 10.0 million tons of annual capacity in North America. According to IHS, the majority of the new capacity in China (5.9 million tons of annual capacity) will be based on coal as their principal feedstock. The majority of the new capacity in the Middle East (4.2 million tons of annual capacity) will be based on ethane as their feedstock, either as the only raw material, or with another feedstock for flexible crackers. However, expansions of ethylene capacity are frequently subject to delays, and we cannot predict when the planned additional capacity will be commissioned, if at all.

International pricing pressures increased in 2011 and 2012 as the price differential between naphtha and gas increased and producers using ethane as raw materials were able to maintain competitive margins at sales prices lower than those required by some naphtha based producers. In 2013, the global economy showed signs of recovery, as reflected by the improved performance of the U.S. economy and indications that the euro zone had begun to emerge from crisis. This scenario helped support a recovery in the profitability of the global petrochemical industry, and the spreads for thermoplastic resins and main basic petrochemicals improved during the year. In 2014, world GDP growth fell short of initial forecasts for the year, reflecting the slower growth in emerging economies and in the euro zone. However, the recovery in the U.S. economy and the good performance of other developed markets, such as the United Kingdom, had a positive impact on the world economy in 2014. In 2015 crude oil prices fell sharply, which reduced the competitive advantage of gas-based producers compared to naphtha-based producers.

The combination of the decline in oil prices, and consequently the decline in naphtha prices, the main feedstock used by the global petrochemical industry, which registered an average price in 2015 of US$462/ton, down 45% from 2014, as well as the cancelation and postponements of previously announced petrochemical projects, supported healthy thermoplastics resins spreads.

We believe that the pricing scenario for the short-term is marked by caution. As expected, petrochemical prices have followed the downward trend in naphtha prices, which in turn followed the downward trend in crude oil markets. However, it is expected that the improvement in the world economy will continue to positively influence the demand and profitability of the sector in the short term.

Based on historical growth of demand for polyethylene, polypropylene and PVC, we believe that the additional capacity introduced in the market in 2013, 2014 and 2015 will be absorbed by the market in the medium-term. However, the production generated by this increase in capacity may lead to continued pressure on prices in the international markets and an increase in competition from imports in the Brazilian markets, which could adversely affect our net sales revenues, gross margins and overall results of operations.

Effects of Fluctuations in Naphtha Prices and Natural Gas

Fluctuations in the international market price of naphtha have significant effects on our costs of goods sold and the prices that we are able to charge our customers for our first and second generation products. Political instability in the Middle East or similar events that may occur in the future may lead to unpredictable effects on the global economy or the economies of the affected regions, have had and may continue to have negative effects on oil production and price volatility, consequently driving naphtha and petrochemical prices higher worldwide.

The price of natural gas in the Mont Belvieu region in Texas is used as a reference for our costs of natural gas. Any future developments that affect the U.S. supply/demand balance for natural gas may adversely affect the Mont Belvieu price of natural gas (including ethane, propane and butane) and increase our production costs or decrease the price of petrochemical products. External factors and natural disasters such as hurricanes, harsh winters or industry developments, such as shale gas exploration, may disrupt the supply of natural gas, thereby increasing the cost, which may materially adversely affect our cost of sales and results of operations.

Effects on Cost of Sales

Naphtha is the principal raw material used by our Basic Petrochemicals Unit and, indirectly, in several of our other business units. Naphtha and condensate accounted for approximately 59.0% of the total cost of sales of our Basic Petrochemicals Unit during 2015. Naphtha accounted for approximately 44.5% of our direct and indirect consolidated cost of sales and services rendered during 2015.

The cost of naphtha varies in accordance with international market prices, which fluctuate depending upon the supply and demand for oil and other refined petroleum products. We purchase naphtha under a long-term supply contract with Petrobras, and we import naphtha from other suppliers through our terminal at Aratú in the State of Bahia and Petrobras’ terminal at Osório in the State of Rio Grande do Sul. The prices that we pay for naphtha under these arrangements, other than our supply contract with Petrobras, are based on the Amsterdam-Rotterdam-Antwerp market price for naphtha. As a result, fluctuations in the Amsterdam-Rotterdam-Antwerp market price for naphtha have had a direct impact on the cost of our first generation products.

Our contracts with Petrobras provides for naphtha prices based on a variety of factors, including the market prices of naphtha and other basic petrochemical derivatives, the volatility of the prices of these products in the international markets, the real/U.S. dollar exchange rate, and the level of paraffinicity of the naphtha that is delivered. We believe that these contracts have reduced the exposure of the cost of our first generation products to fluctuations in the Amsterdam-Rotterdam-Antwerp market price for naphtha.

The international price of naphtha has fluctuated significantly in the past, and we expect that it will continue to do so in the future. Significant increases in the price of naphtha and, consequently, the cost of producing our products, generally reduce our gross margins and our results of operations to the extent that we are unable to pass all of these increased costs on to our customers, and may result in reduced sales volumes of our products. Conversely, significant decreases in the price of naphtha and, consequently, the cost of producing our products, generally increase our gross margins and our results of operations and may result in increased sales volumes if this lower cost leads us to lower our prices. In periods of high volatility in the U.S. dollar price of naphtha, there is usually a lag between the time that the U.S. dollar price increases or decreases and the time that we are able to pass on increased, or required to pass on reduced, costs to our customers in Brazil. These pricing discrepancies decrease when the U.S. dollar price of naphtha is less volatile.

We do not currently hedge our exposure to changes in the prices of naphtha because a portion of our sales are exports payable in foreign currencies and linked to the international market prices of naphtha and also because the prices of our polyethylene, polypropylene and PVC products sold in Brazil generally reflect changes in the international market prices of these products.

Effects on Prices of Our Products

The prices that we charge for many of our basic petrochemical products are determined by reference to the European contract prices for these products. Because European producers of basic petrochemical products primarily use naphtha as a raw material, changes in the European contract prices are strongly influenced by fluctuations in international market prices for naphtha. To the extent that our prices are based on the European contract prices for our products, the prices that we charge for these products are significantly influenced by international market prices for naphtha.

We negotiate the real prices for certain of our products, principally polyethylene, polypropylene and PVC, on a monthly basis with our domestic customers. We attempt to revise our prices to reflect (1) changes in the international market prices of these products, which tend to fluctuate in tandem with naphtha prices, and (2) the appreciation or depreciation of the real against the U.S. dollar. However, during periods of high volatility in international market prices or exchange rates, we are sometimes unable to fully reflect these changes in our prices in a prompt manner.

The international market prices of our petrochemical products have fluctuated significantly, and we believe that they will continue to do so. Volatility of the price of naphtha and the upward trend in the price of petroleum and naphtha have effects on the price competitiveness of our naphtha-based crackers and our resins. Because pricing trends for naphtha and ethane have diverged in recent years to a greater extent than has been the case historically, producers of ethylene and resin products derived from ethane generally have experienced lower unit raw material costs than naphtha-based producers of these products. As a consequence, significant increases in the pricing differential between naphtha and gas increases the competitiveness of products derived from ethane and may result in pricing pressure in the international markets.

Significant increases in the international market prices of our petrochemical products and, consequently, the prices that we are able to charge, generally increase our net sales revenue and our results of operations to the extent that we are able to maintain our operating margins and increased prices do not reduce sales volumes of our products. Conversely, significant decreases in the international prices of our petrochemical products, and, consequently, the prices that we charge, generally reduce our net sales revenue and our results of operations if we are unable to increase our operating margins or these reduced prices do not result in increased sales volumes of our products.

Capacity Utilization

Our operations are capital intensive. Accordingly, to obtain lower unit production costs and maintain adequate operating margins, we seek to maintain a high capacity utilization rate at all of our production facilities.

The table below sets forth capacity utilization rates with respect to the production facilities for some of our principal products for the periods presented.


	Year Ended December 31,
	2015			2014			2013
Ethylene		89	%		86	%		90	%
Polyethylene		87	%		80	%		85	%
Polypropylene		76	%		81	%		83	%
PVC		76	%		89	%		83	%
Polypropylene USA and Europe		98	%		92	%		91	%

In 2013, our utilization rate was affected by (1) a power outage that occurred on August 28, 2013, which affected the entire Brazilian Northeast and caused unscheduled shutdowns at our plants in the region; (2) planned maintenance shutdowns of the Northeastern Complex’s Olefins 1 unit for 40 days in September, October and November of 2013, and (3) a lack of ethane and propane supply at the Rio de Janeiro Complex.

In 2014, the average capacity utilization of Braskem’s crackers was affected by (1) the scheduled maintenance shutdown of one of our cracker production lines in the Southern Complex; (2) the scheduled maintenance shutdown at our cracker production line in the São Paulo Complex; (3) a lack of propylene supply at the Rio de Janeiro Complex, and (4) a lack of ethane and propane supply at the Rio de Janeiro Complex.

In 2015, the average capacity utilization of Braskem’s crackers was affected by (1) improved performance of the complexes in the Northeastern Complex and the Southern Complex; (2) incident at the complex in São Paulo; and (3) a lack of propylene supply at the Rio de Janeiro Complex and (4) a lack of ethane and propane supply at the Rio de Janeiro Complex.

Effects of Brazilian Industrial Policy

The Brazilian government has a significant influence in some sectors of the domestic economy, including the petrochemical sector in which we operate. The Brazilian government has adopted, or is considering adopting, measures to boost the competitiveness of domestic companies, as described below.

Reintegra

In December 2011, the Brazilian government implemented the “Reintegra” program, which is designed to improve the competitiveness of Brazilian plastics producers in the export markets by refunding the federal taxes levied on their export sales. As a result of this incentive, exports of third generation products by Brazilian companies have increased, therefore increasing Brazilian demand for our products. The original program ended in the end of December 2013. It was reinstated in August 2014 with a refund tax rate of 0.1% and in October 2014, the Brazilian government restored the rate to 3.0% until the end of 2015. However, in March 2015, the Brazilian federal government again decreased the rate to 1.0% for 2015 and 2016. In October 2015, according to the Decree 8,543, the Brazilian federal government decreased the refund rate to decrease to 0.1% as of December 1, 2015. The currently rate of 0.1% will remain valid until December 31, 2016. In January 2017, the Reintegra rate is expected to increase to 2% in 2017 and 3% in 2018.

Import Tariffs at Local Ports

Historically, tariffs on imports have been established by the federal government. However, in recent years, some Brazilian states established tax benefits to attract imports at local ports in order to raise revenue and develop local port infrastructure, primarily in the form of reductions of ICMS taxes that would otherwise be due to these states. Industry and union leaders alleged that such legislation creates a subsidy for imported products, thereby harming local industry.

On January 1, 2013, legislation took effect reducing the maximum ICMS tax that the state can charge from a rate of 12% to 4% on interstate sales of imported raw materials and other goods that are not wholly or partially manufactured in Brazil. In addition to certain other limited exceptions, this tax reduction does not apply to imported goods that do not have Brazilian-made substitutes. As a result, current tax benefits offered by some Brazilian states for the import of goods in the form of reduced ICMS tax rates have become less attractive.

Pricing and Tariffs

We set prices for ethylene, the principal first generation petrochemical product that we sell to third-party second generation producers, by reference to international market prices. See “—Basic Petrochemicals Unit—Sales and Marketing of Our Basic Petrochemicals Unit.” Prices paid by second generation producers for imported first generation petrochemical products partly reflect transportation and tariff costs. We establish the prices of ethylene by-products, such as butadiene, by reference to several market factors, including the prices paid by second generation producers for imported products. Prices paid for such imports also reflect transportation and tariff costs.

Second generation producers, including our company, generally set prices for their petrochemical products by reference to several market factors, including the prices paid by third generation producers for imported products. Prices paid for such imports also reflect transportation and tariff costs.

The Brazilian government has used import tariffs to implement economic policies. As a result, import tariffs imposed on petrochemical products have varied in the past and may vary in the future. Tariffs on imports of first generation petrochemical products are between 0% and 4%, and tariffs on polyethylene, polypropylene and PVC resins are 14.0%.

Imports and exports within the free trade area in South America (Mercado Comum do Sul), or Mercosul, which is composed of Argentina, Brazil, Paraguay and Uruguay, have not been subject to tariffs since December 2001. Imports of suspension PVC from Colombia are not subject to tariffs and imports of suspension PVC from Venezuela are subject to reduced tariffs of 2.1% under the Acordo de Alcance Parcial de Complementação Econômica nº 59, under which imports from these countries are lower than generally applicable tariffs.

Imports of suspension PVC from the U.S. and Mexico have been subject to anti-dumping duties of 16.0% and 18.0%, respectively, that were imposed by the Brazilian Foreign Trade Chamber (Câmara de Comércio Exterior), or CAMEX, of the Ministry of Development, Industry and Trade. In 2005, the anti-dumping regime was changed so that duties were assessed on a sliding scale (from 0% to 16.0% and 0% to 18.0% for the U.S. and Mexico, respectively), in which the rate of the duties are determined based on a variety of factors, including the price of the products and the likelihood that imports of these products will adversely affect local industry. In September 2011, however, CAMEX changed the application of the anti-dumping practices for imports from the U.S. to an ad valorem rate of 16%, maintaining the sliding scale for Mexico, which is scheduled to expire in December 2015. The renewal of this anti-dumping regime is under analysis, during which time the same rates will be maintained.

Since 2008, imports of suspension PVC from China have been subject to duties ranging between 10.5% and 21.6%, and imports of suspension PVC from South Korea have been subject to duties ranging between 0% and 18.9%, depending on the producer, as a result of the imposition of anti-dumping duties by CAMEX. In August 2014, CAMEX changed the anti-dumping rates for imports from China to 21.6% and maintained the range of duties on imports from South Korea to between 0% and 18.9%.

Additionally, in December 2010, CAMEX imposed an additional anti-dumping duty of 10.6% on polypropylene imports from the United States for a period of five years. The renewal of this anti-dumping regime is under analysis, during which time the same rates will be maintained.

Beginning in August 2014, the Brazilian government imposed additional anti-dumping duties on polypropylene imports from South Africa, India and South Korea of 16.0%, 6.4 to 9.9% and 2.4 to 6.3%, respectively. These duties are scheduled to expire in 2019.

In 2015, approximately 26% of Brazilian polyethylene, polypropylene and PVC resins were imported products, which reflected a 12% annual decrease in the volume of resins imported, reflecting the volatility in the U.S. dollar-denominated prices of thermoplastic resins, which triggered an increase in the purchase of thermoplastic resins in Brazil. For more information, see “Effects of Brazilian Industrial Policy—Import Tariffs at Local Ports.”

Increased Import Duties on Polyethylene

As part of its initiative to strengthen domestic manufacturers, on October 1, 2012, the Brazilian government adopted a resolution that increased import duties on 100 products related to various industries, including an increase on the import tariff for polyethylene from 14% to 20%. In October 2013, the Brazilian government reduced the import tariff for polyethylene to the previous level of 14%.

Legislative Change Affecting Accumulated ICMS

In May 2013, the State of São Paulo approved new legislation reducing ICMS on certain acquisitions of naphtha, ethylene and propylene within the state. This reduction is conditioned upon certain requirements, including (1) the parties to the transactions must use a specified governmental data processing system to issue and account for tax documents, and they must regularly comply with related obligations and (2) the buyer must be accredited by the applicable governmental authority. In accordance with the requirements prescribed by law, in 2014 we used the reduced ICMS on the purchase of naphtha, ethylene and propylene, resulting in an ICMS credit balance in the State of São Paulo of zero

Effects of Fluctuations in Exchange Rates between the Real and the U.S. Dollar

Our results of operations and financial condition have been, and will continue to be, affected by the rate of depreciation or appreciation of the real against the U.S. dollar because:

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a substantial portion of our net sales revenue is denominated in or linked to U.S. dollars;

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our costs for some of our raw materials, principally naphtha and certain catalysts required in our production processes, are incurred in U.S. dollars or are U.S. dollar-linked;

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we have operating expenses, and make other expenditures, that are denominated in or linked to U.S. dollars; and

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we have significant amounts of U.S. dollar-denominated liabilities that require us to make principal and interest payments in U.S. dollars.

Virtually all of our sales are of petrochemical products for which there are international market prices expressed in U.S. dollars. We generally attempt to set prices that take into account (1) the international market prices for our petrochemical products, and (2) in Brazil, variations in the real/U.S. dollar exchange rate. As a result, although a significant portion of our net sales revenue is denominated in reais, substantially all of our products are sold at prices that are based on international market prices that are quoted in U.S. dollars.

Fluctuations in the real affect the cost of naphtha and other U.S. dollar-linked or imported raw materials. The price of naphtha, our principal raw material, is linked to the U.S. dollar. The pricing formula included in the contract with Petrobras under which we purchase naphtha for our basic petrochemical plants in the Northeastern Complex and in the Southern Complex includes a factor that adjusts the price to reflect the real/U.S. dollar exchange rate.

The depreciation of the real against the U.S. dollar generally increases the production cost for our products and we generally attempt to increase the Brazilian prices for our products in reais (to the extent possible in light of then-prevailing market conditions in Brazil), which may result in reduced sales volumes of our products. To the extent that our price increases are not sufficient to cover the increased costs for raw materials, our operating margin decreases. Conversely, the appreciation of the real against the U.S. dollar generally decreases the production cost for our products and we generally decrease the Brazilian prices for our products in reais, which may result in increased sales volumes of our products. In periods of high volatility in the real/U.S. dollar exchange rate, there is usually a lag between the time that the U.S. dollar appreciates or depreciates and the time that we are able to pass on increased, or are required to pass on reduced, costs in reais to our customers in Brazil. These pricing discrepancies decrease when the real/U.S. dollar exchange rate is less volatile.

Our consolidated U.S. dollar-denominated indebtedness represented 77.8% of our outstanding indebtedness as of December 31, 2015. As a result, when the real depreciates against the U.S. dollar:

•

the interest costs on our U.S. dollar-denominated indebtedness increase in reais, which adversely affects our results of operations in reais;

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the amount of our U.S. dollar-denominated indebtedness increases in reais, and our total liabilities and debt service obligations in reais increase; and

•

our financial expenses tend to increase as a result of foreign exchange losses that we must record, mitigated by our decision to designate, on May 1, 2013, part of our U.S. dollar-denominated liabilities as a hedge for our future exports.

Appreciation of the real against the U.S. dollar has the converse effects.

Export sales and sales by our USA and Europe Unit, which enable us to generate receivables payable in foreign currencies, tend to provide a hedge against a portion of our U.S. dollar-denominated debt service obligations, but they do not fully match them. To further mitigate our exposure to exchange rate risk, we try, where possible, to enter into trade finance loans for our working capital needs, which funding is generally available at a lower cost because it is linked to U.S. dollar exports.

Effect of Level of Indebtedness and Interest Rates

As of December 31, 2015, our total outstanding consolidated corporate indebtedness was R$27,350.5 (US$7,004.3 million), net of transaction costs. This indebtedness does not include (i) an aggregate amount of R$1,111.6 million (US$284.7 million) outstanding as of December 31, 2015 in connection with derivatives transactions (including interest rate swaps, exchange rate swaps and currency options), and (ii) an aggregate amount of R$12,277.4 million (US$3,144.2 million) outstanding as of December 31, 2015 in connection with the project finance finance facility to fund the development of Project Ethylene XXI, or the Braskem Idesa Financing. The level of our indebtedness results in significant financial expenses that are reflected in our statement of operations. Financial expenses consist of interest expense, exchange variations of U.S. dollar- and other foreign currency-denominated debt, foreign exchange losses or gains, and other items as set forth in note 29 to our audited consolidated financial statements. In the year ended December 31, 2015, we recorded total financial expenses in the financial expenses, net line item of R$2,507.3 million, of which R$1,722.8 million consisted of net interest expense, R$377.5 million consisted of net expenses related to monetary variation on financing and a negative R$1,035.0 million consisted of net foreign exchange variation. The interest rates that we pay depend on a variety of factors, including prevailing Brazilian and international interest rates and risk assessments of our company, our industry and the Brazilian economy made by potential lenders to our company, potential purchasers of our debt securities and the rating agencies that assess our company and its debt securities.

Standard & Poor’s, Moody’s and Fitch maintain ratings of our company and our debt securities. Currently, Standard & Poor’s and Fitch maintain ratings of our company on global and national basis. Moody’s only maintains ratings of our company on a global basis. Standard & Poor’s maintains a rating for our company of “BBB- (negative)” on a global basis and a rating for our company of “brAAA (negative)” on a national basis; Fitch maintains a rating for our company of “BBB- (negative)” on a global basis and a rating for our company of “AA+ (negative)” on a national basis; and Moody’s maintains a rating for our company of “Ba1 (negative)” on a global basis. Any decision by these agencies to downgrade the ratings of our company or of our debt securities in the future would likely result in increased interest and other financial expenses relating to our borrowings and debt securities and the inclusion of financial covenants in the instruments governing new indebtedness, and could significantly reduce our ability to obtain such financing on satisfactory terms or in amounts required by us and our liquidity and would require us to post cash collateral pursuant to our obligations.

Effects of Brazilian Inflation

Brazilian inflation affects our financial performance by increasing some of our operating expenses denominated in reais (and not linked to the U.S. dollar). A significant portion of our costs of sales and services rendered, however, are denominated in or linked to the U.S. dollar and are not substantially affected by the Brazilian inflation rate. Some of our real-denominated debt is indexed to take into account the effects of inflation. Under this debt, the principal amount generally is adjusted with reference to the General Price Index—Market (Índice Geral de Preços—Mercado), an inflation index, so that inflation results in increases in our financial expenses and debt service obligations. In addition, a significant portion of our real-denominated debt bears interest at the TJLP or the CDI rate, which are partially adjusted for inflation.

Effect of Taxes on Our Income

We are subject to a variety of generally applicable Brazilian federal and state taxes on our operations and results. We are generally subject to Brazilian federal income tax (combined with Social Contribution on Net Income (Contribuição Social Sobre o Lucro Líquido), or CSLL) at an effective rate of 34%, which is the standard corporate tax rate in Brazil. We have available certain federal tax exemptions based upon federal law that offers tax incentives to companies that locate their manufacturing operations in the Brazilian states of Bahia and Alagoas. These exemptions have been granted for varying lengths of time to each of our manufacturing plants located in these states.

We are entitled to pay 25% of the statutory income tax rate on the profits arising from the sale of:

•

polyethylene manufactured at one of our polyethylene plants in the Northeastern Complex until December 31, 2016; and

•

PVC manufactured at our plant in the Alagoas until December 31, 2019.

•

Polyethylene manufactured at one of our polyethylene plants in the Northeastern Complex and caustic soda, chlorine and ethylene dichloride produced at our plants in the Northeastern Complex and Alagoas until 2024.

Each of our exemptions entitles us to pay only 44.9% of the statutory income tax rate (of 34%) on the profits arising from products manufactured at these plants.

Due to operating losses sustained by us in the past, we had R$2,114.5 million of deferred income tax and social contribution assets arising from tax loss carryforwards available as of December 31, 2015. Income tax loss carryforwards available for offset in Brazil do not expire. However, the annual offset is limited to 30% of our adjusted net profits. This limit also affects the CSLL.

Our export sales are currently exempt from (1) PIS (2) COFINS, a federal value-added tax, (3) the Tax on Industrial Products (Imposto sobre Produtos Industrializados), or IPI, a federal value-added tax on industrial products, and (4) ICMS.

Recent Developments

The following is a summary of major transactions entered into, and other developments affecting, our company since December 31, 2015.

Management Changes

In April and May 2016, we announced a new Chief Financial and Investor Relations Officer and Chief Executive Officer.

Approval of Annual Dividend Payment

At our annual shareholders’ meeting on April 6, 2016, our shareholders approved the payment of dividends in the amount of R$1.0 billion, which was paid on April 15, 2016.

Mexico Complex

On April 6, 2016, Braskem Idesa successfully produced its first batch of polyethylene in the Mexico Complex. This is part of a gradual start-up process which began in December 2015.

Feedstock Investment

On March 18, 2016, our board of directors approved a project that includes investments of R$380 million to permit flexibility in the use of up to 15% of ethane as feedstock for our Bahia cracker. The investments also include the modernization of the industrial unit and the renovation of port infrastructure and it is expected to start operations in the second half of 2017. In addition, we entered into a long-term contract with an affiliate of Enterprise Products Partners L.P. for the supply of ethane imported from the United States at a price based on the international Mont Belvieu reference price.

This project is part of Braskem’s strategy of diversifying its feedstock matrix, with a focus on increasing its competitiveness and that of the Brazilian petrochemical chain.

Termination of BNDESPAR Shareholders’ Agreement

In February 2016, we received a letter from BNDESPAR informing us of its sale of preferred shares of our capital stock on the BM&FBOVESPA. As a result of these sales, BNDESPAR held preferred shares and total share capital of 6.61% and 2.86%, respectively. The shareholders’ agreement to which BNDESPAR was a party automatically terminated as a result of BNDESPAR holding less than 5.0% of our total share capital.

Global Settlement

In December 2016, we entered into a global settlement with the MPF, the DoJ, the SEC and the OAG with regard to certain matters under investigation, which we refer to as the Global Settlement. The Global Settlement was reached at the conclusion of the Investigation into the allegations of improper payments in connection with the so-called Operation Car Wash in Brazil. Under the Global Settlement, Braskem will pay the aforementioned authorities in Brazil and overseas the aggregate approximate amount of US$957 million, equivalent to approximately R$3.1 billion. The Global Settlement was definitively ratified as follows:

•

In Brazil, the Leniency Agreement was ratified by the 5th Coordination and Review Chamber of the MPF on December 15, 2016 and on June 6, 2017 by the 13th Federal Court of Curitiba.

•

In the United States, the competent courts confirmed the resolution with the DoJ on January 26, 2017 and the resolutionwith the SEC on February 28, 2017.

•

In Switzerland, the agreement with the OAG did not require ratification to produce effect.

Of the total fine established in the Global Settlement, we have already paid approximately R$1.3 billion in the following manner

•

US$94.9 million (R$296.6 million) to the DoJ on February 8, 2017;

•

US$65.0 million (R$206.5 million) to the SEC on April 27, 2017;

•

CHF30.2 million (R$104.4 million) to the OAG on June 27, 2017;

•

R$736.5 million to the MPF on July 6, 2017.

The outstanding amount of approximately R$1.8 billion will be paid in the following manner:

•

CHF64.3 million to the OAG in four equal annual and successive installments of CHF16.1 million due on June 30 of each year commencing in 2018; and

•

For more information regarding the Global Settlement, see “Item 8. Financial Information—Legal Proceedings—Global Settlement.”

Results of Operations

The following discussion of our results of operations is based on our restated consolidated statements of income. For further information on the restatement, see note 2.4 to our financial statements included elsewhere in this annual report.

The discussion of the results of our business segments is based upon financial information reported for each of the segments of our business, as presented in the following tables, which set forth the results of each of our segments and the reconciliation of these results of our segments to our consolidated results of operations. This segment information was prepared on the same basis as the information that our senior management uses to allocate resources among segments and evaluate their performance. We evaluate and manage the performance of our segments based on information generated from our statutory accounting records maintained in accordance with IFRS, and reflected in our consolidated financial statements.


	Year Ended December 31, 2015 – Restated
	Net sales revenue			Cost of products sold			Gross profit			Selling, general, and , distribution expenses			Results from equity investments		Other operating income (expense), net(1)			Operating profit (loss)
	(in millions of *reais*)
Basic Petrochemicals		24,269.8			(20,053.1	)		4,216.7			(658.9	)		—		(178.1	)		3,379.6
Polyolefins		19,986.2			(15,461.2	)		4,525.0			(1,224.6	)		—		(130.7	)		3,169.7
Vinyls		2,780.1			(2,415.9	)		364.2			(224.9	)		—		(27.0	)		112.4
USA and Europe		8,239.9			(6,908.6	)		1,331.3			(445.9	)		—		(13.4	)		872.0
Chemical Distribution		874.6			(692.7	)		182.0			(123.4	)		—		(5.0	)		53.5

Total segments		56,150.6			(45,531.3	)		10,619.2			(2,677.7	)		—		(354.3	)		7,587.3
Other segment(2)		631.5			(637.0	)		(5.5	)		(94.7	)		—		(70.1	)		(170.3	)
Corporate unit(3)		—			—			—			(9.0	)		2.2		(244.6	)		(251.3	)
Reclassifications and eliminations(4)		(9,219.7	)		8,930.0			(289.7	)		149.9			—		(87.3	)		(227.1	)

Consolidated		47,562.4			(37,238.4	)		10,324.0			(2,631.4	)		2.2		(756.2	)		6,938.5


	Year Ended December 31, 2014 – Restated
	Net sales revenue			Cost of products sold			Gross profit			Selling, general, and , distribution expenses			Results from equity investments		Other operating income (expense), net(1)			Operating profit (loss)
	(in millions of *reais*)
Basic Petrochemicals		25,576.3			(23,252.8	)		2,323.5			(692.7	)		—		190.3			1,821.1
Polyolefins		18,502.2			(15,599.6	)		2,902.6			(965.7	)		—		(53.2	)		1,883.7
Vinyls		2,709.5			(2,551.5	)		158.0			(205.3	)		—		57.3			10.0
USA and Europe		7,934.3			(7,481.2	)		453.0			(294.9	)		—		(82.5	)		75.6
Chemical Distribution		842.7			(700.9	)		141.8			(105.2	)		—		(28.8	)		7.8

Total segments		55,565.0			(49,586.1	)		5,978.9			(2,263.9	)		—		83.0			3,798.0
Other segment(2)		402.7			(284.3	)		118.4			(170.0	)		—		(4.1	)		(55.7	)
Corporate unit(3)		—			—			—			(110.5	)		3.9		(96.6	)		(203.1	)
Reclassifications and eliminations(4)		(10,210.6	)		10,039.3			(171.3	)		78.1			—		31.7			(61.6	)

Consolidated		45,757.0			(39,831.0	)		5,926.0			(2,466.3	)		3.9		14.0			3,477.6


	Year Ended December 31, 2013—Restated
	Net sales revenue			Cost of products sold			Gross profit			Selling, general, and , distribution expenses			Results from equity investments			Other operating income (expense), net(1)			Operating profit (loss)
	(in millions of *reais*)
Basic Petrochemicals		25,037.8			(22,561.2	)		2,476.6			(534.9	)		—			(67.8	)		1,873.9
Polyolefins		16,944.7			(14,694.3	)		2,250.4			(852.7	)		—			(30.7	)		1,367.1
Vinyls		2,581.1			(2,384.5	)		196.5			(174.1	)		—			(11.2	)		11.3
USA and Europe		6,748.5			(6,420.5	)		328.0			(282.9	)		—			(37.6	)		7.5
Chemical Distribution		891.7			(761.1	)		130.6			(96.7	)		—			(6.5	)		27.4

Total segments		52,203.8			(46,821.7	)		5,382.1			(1,941.2	)		—			(153.8	)		3,287.1
Other segment(2)		130.3			(133.0	)		(2.7	)		(68.6	)		—			0.2			(71.1	)
Corporate unit(3)		—			—			—			(219.9	)		(3.2	)		(173.8	)		(397.0	)
Reclassifications and eliminations(4)		(11,405.2	)		11,160.0			(245.2	)		90.0			—			0.1			(155.0	)

Consolidated		40,928.9			(35,794.7	)		5,134.2			(2,139.7	)		(3.2	)		(327.4	)		2,664.0

(1)	Includes research and development.

(2)	Includes revenues and expenses of Braskem ldesa S.A.P.I. and revenues and expenses related to sales of cyclohexane and cyclohexanone.

(3)	Represents expenses of Braskem that are not allocated to any particular segment.

(4)	Eliminations consist primarily of intersegment sales, which are made in similar terms as arm’s length transactions.

In the following discussion, references to increases or declines in any period are made by comparison with the corresponding prior period, except as the context otherwise indicates.

Year Ended December 31, 2015 Compared with Year Ended December 31, 2014

The following table sets forth consolidated financial information for the years ended December 31, 2015 and 2014.


	Year Ended December 31,
	2015 Restated			2014 Restated			% Change
(in millions of *reais*)
Net sales revenue	R$	47,562.4		R$	45,757.0			3.9	%
Cost of products sold		(37,238.4	)		(39,831.0	)		(6.5	)%

Gross profit		10,324.0			5,926.0			74.2	%
Income (expenses):
Selling and distribution		(1,122.0	)		(1,083.5	)		3.6	%
General and administrative		(1,339.8	)		(1,254.7	)		6.8	%
Research and development		(169.6	)		(128.1	)		32.4	%
Results from equity investments		2.2			3.9			(43.6	)%
Other operating income (expenses), net		(756.2	)		14.0			n.m.

Operating profit		6,938.5			3,477.6			99.5	%
Financial results:
Financial expenses		(4,206.5	)		(2,767.8	)		52.0	%
Financial income		1,699.0			355.4			378.1	%

Profit before income tax and social contribution		4,431.0			1,065.2			316.0	%
Income tax and social contribution		(1,670.8	)		(487.0	)		243.1	%

Profit	R$	2,760.2		R$	578.2			377.4	%

n.m.: Not meaningful

Net Sales Revenue

Net sales revenue increased by 3.9% during 2015, primarily as a result of (1) an 8.0% increase in net sales revenue of our Polyolefins segment, and (2) a 3.9% increase in net sales revenue of our USA and Europe segment, the effects of which were partially offset by a 5.1% decline in net sales revenue of our Basic Petrochemicals segment. Reclassifications and eliminations of net sales revenues of our segments in consolidation, primarily reflecting intercompany sales of basic petrochemicals by our Basic Petrochemicals segment to our other segments, declined by 9.7% during 2015.

Net Sales Revenue of Basic Petrochemicals Segment

Net sales revenue of the Basic Petrochemicals segment declined by 5.1% during 2015, primarily as a result of a 12.9% decline in net sales revenue generated by sales of basic petrochemicals (excluding condensate, fuels, intermediates and utilities) to third parties to R$8,647.9 million during 2015 from R$9,932.9 million during 2014.

Net sales revenue generated by sales of:

•

basic chemicals (including fuels and intermediaries) declined by 10.4% to R$2,247.3 million during 2015 from R$2,508.2 million during 2014, primarily as a result of a 18.9% decline in net sales revenues from intermediates.

•

naphtha, condensate and crude oil increased by 43.3% to R$4,432.1 million during 2015 from R$3,092.3 million during 2014, primarily as a result of a 62.6% increase in volume of these sales.; and

•

utilities increased by 21.2% to R$757.5 million during 2015 from R$625.3 million during 2014.

The most significant factors contributing to the decline of net sales revenue generated by sales of basic petrochemicals to third parties were (1) a R$687.6 million, or 20.0%, decline in net sales revenue generated by sales of BTX products, (2) a R$341.8 million, or 23.5%, decline in net sales revenue generated by sales of propylene, and (3) and a R$196.2 million, or 16.4%, decline in net sales revenue generated by sales of butadiene. The effects of these declines was partially offset by a R$66.1 million, or 3.6%, increase in net sales revenue generated by sales of ethylene.

Sales volume of ethylene to third parties increased by 7.3% to approximately 548,600 tons during 2015 from approximately 511,400 tons during 2014, primarily as a result of a 430.9% increase in export sales reflecting our solid operating performance and favorable pricing in the international market. Domestic sales volume of ethylene to third parties declined by 2.8%, principally due to reduced demand in the domestic market. Export sales volume of ethylene more than quadrupled as a result of favorable pricing in the international market primarily reflecting the favorable foreign exchange effect of a strong U.S. dollar. The average prices that we realized for sales of ethylene declined primarily as a result of the 17.1% decline in the average Western Europe contract price of ethylene in euros, as reported by IHS, the effects of which were partially offset by the 18.3% average depreciation of the real against the euro.

Sales volume of propylene to third parties declined by 6.5% to approximately 416,500 tons in 2015 from approximately 445,400 tons during 2014. Domestic sales volume of propylene to third parties increased by 17.8%, primarily as a result of BASF’s inauguration of its world-scale production complex for acrylic acid, butyl acrylate and superabsorbent polymers in Camaçari, Bahia. Export sales volume of propylene declined by 28.0%, mainly reflecting the products’ lower supply and the prioritizing domestic demand. The average prices that we realized for sales of propylene declined primarily as a result of a 45.1% decline in the average North American contract price of propylene in U.S. dollars, as reported by IHS, the effects of which were partially offset by the effects of the 41.6% average depreciation of the real against the U.S. dollar.

Sales volume of butadiene to third parties increased by 1.8% to approximately 385,500 tons during 2015 from approximately 378,900 tons during 2014. Domestic sales volume of butadiene to third parties increased by 4.8%, principally due to reduction of import reflecting low supply in the international market, given the scheduled and unscheduled shutdowns at certain crackers, particularly in Europe. Export sales volume of butadiene declined by 2.1%, principally due to butadiene’s lower supply and the prioritizing of domestic demand. The average prices that we realized for sales of butadiene increased primarily as a result of a 43% decline in the average North American contract price of butadiene in U.S. dollars, as reported by IHS, the effects of which were partially offset by the effects of the average depreciation of the real against the U.S. dollar.

The principal factors leading to the decrease in net sales revenue generated by sales of BTX products to third parties were (1) a 27.6% decline in net sales revenue generated by sales of benzene, (2) a 39.3% decline in net sales revenue generated by sales of mixed xylenes, and (3) a 28.6% decline in net sales revenue generated by sales of toluene. The effects of these increases were partially offset by an 81.6% increase in net sales revenue generated by sales of para-xylene.

Sales volume of benzene to third parties declined slightly to approximately 666,700 tons during 2015 from approximately 667,200 tons during 2014. The average prices that we realized for sales of benzene declined primarily as a result of a 48.6% decline in the average North American contract market price of benzene in U.S. dollars, as

reported by IHS, the effects of which were partially offset by the effects of the average depreciation of the real against the U.S. dollar. Sales volume of mixed xylenes to third parties declined by 45.0% to approximately 71,700 tons during 2015 from approximately 130,300 tons during 2014, primarily as a result of reduction in domestic demand. The average prices that we realized for sales of mixed xylenes increased primarily as a result of the effects of the average depreciation of the real against the U.S. dollar, the effects of which were partially offset by a 30% decline in the average North American contract market price of mixed xylenes in U.S. dollars, as reported by IHS. Sales volume of toluene to third parties declined by 20.8% to approximately 141,500 tons during 2015 from approximately 178,700 tons during 2014, primarily as a result of the lower production. The average prices that we realized for sales of toluene declined primarily as a result of a 32.8% decline in the average North American contract market price of toluene in U.S. dollars, as reported by IHS, the effects of which were partially offset by the effects of the average depreciation of the real against the U.S. dollar. Sales volume of para-xylene to third parties increased by 81.4% to approximately 179,500 tons during 2015 from approximately 99,000 tons during 2014, primarily as a result of the stronger demand in Brazil and in export markets fueled by the product’s low supply in the international market, given the scheduled and unscheduled shutdowns of certain crackers, particularly in Europe and Asia. The average prices that we realized for sales of para-xylene remained stable during 2015.

Net Sales Revenue of Polyolefins Segment

Net sales revenue of the Polyolefins segment increased by 8.0% during 2015, primarily as a result of an 11.5% increase in net sales revenue generated by sales of polyethylene.

Sales volume of polyethylene increased by 5.3% to approximately 2,436,500 tons during 2015 from approximately 2,313,300 tons during 2014. During 2015, domestic sales volume of polyethylene declined by 4.3%, principally as a result of the weak performance of the Brazilian economy. Export sales volume of polyethylene increased by 29.0%, primarily as a result of (1) our capacity to export volumes not absorbed by the domestic market and (2) favorable foreign exchange. The average prices that we realized for sales of polyethylene increased primarily as a result of the effects of (1) the average depreciation of the real against the U.S. dollar and (2) a 32%, 29% and 31% increase in average HDPE, LLDPE and LDPE contract prices in the North American market, respectively, according to IHS.

Sales volume of polypropylene declined by 4.8% to approximately 1,515,700 tons during 2015 from approximately 1,591,900 tons during 2014. During 2015, domestic sales volume of polypropylene declined by 6.4%, reflecting the weak performance of the Brazilian economy mainly in the industrial and automotive sector. Export sales volume of polypropylene were stable. The average prices that we realized for sales of polypropylene increased primarily as a result of the effects of the average depreciation of the real against the U.S. dollar, the effects of which were partially offset by a 27.3% decline in the average spot prices of the Northeast Asian market, according to IHS.

Net Sales Revenue of Vinyls Segment

Net sales revenue of the Vinyls segment increased by 2.6% during 2015, primarily as a result of a 17.0% increase in net sales revenue from the sale of caustic soda, the effects of which were partially offset by a 1.3% decline in net sales revenue from the sale of PVC.

Sales volume of PVC declined by 8.1% to approximately 606,300 tons during 2015 from 659,500 tons during 2014. During 2015, domestic sales volume of PVC declined by 18.0%, reflecting the weak performance of the infrastructure and construction sectors of the main consumers of resin. The reduction in domestic demand and devaluation of the real against the U.S. dollar led us to export part of our PVC production, with export sales volume reaching approximately 65,000 tons in 2015 compared to no export sales volume in 2014. The average prices that we realized for sales of PVC increased primarily as a result of the average depreciation of the real against the U.S. dollar and the 19% decrease in the average Northeast Asian spot market prices of PVC in U.S. dollars, as reported by IHS.

Sales volume of caustic soda declined by 7.2% to approximately 443,800 tons during 2015 from approximately 472,200 tons during 2014, primarily as a result of the reduction in domestic demand, particularly in the aluminum industry. The average prices that we realized for sales of caustic soda increased primarily as a result of the 24.6% increase in the average North American spot market prices of caustic soda in U.S. dollars, as reported by IHS, and the effects of the average depreciation of the real against the U.S. dollar.

Net Sales Revenue of USA and Europe Segment

Net sales revenue of the USA and Europe segment, which includes our polypropylene assets in the United States and Europe, increased by 3.9% during 2015, primarily as a result of the 5.9% increase in sales volume of polypropylene of the USA and Europe segment to approximately 1,973,300 tons during 2015 from approximately 1,862,600 tons during 2014, primarily due to the recovery in the U.S. economy and the increased competitiveness of polypropylene over substitute materials. The effects on net sales revenue of the increase in sales volume was partially offset by the decline in average polypropylene sales prices of the USA and Europe segment as a result of a 27.3% decline in the spot prices of the Northeast Asian market of polypropylene, according to IHS, the effects of which were partially offset by the effects of the depreciation of the real against the currencies in which the USA and Europe segment made sales (principally, the U.S. dollar and the euro) on our net sales revenue reported in reais.

Net Sales Revenue of Chemical Distribution Segment

Net sales revenue of the Chemical Distribution segment increased by 3.8% during 2015, primarily as a result of the depreciation the real against the U.S. dollar, the effects of which were partially offset by a decrease in the average price of our principal products.

Cost of Products Sold and Gross Profit

Cost of products sold declined by 6.5% during 2015, primarily as a result of (1) a 13.8% decline in cost of products sold in our Basic Petrochemicals segment, and (2) a 7.7% decline in cost of products sold in our USA and Europe segment. Reclassifications and eliminations of cost of sales and services rendered of our segments in consolidation, primarily reflecting the costs of basic petrochemicals purchases by our Polyolefins and Vinyls segments from our Basic Petrochemicals segment, declined by 11.0% during 2015.

Consolidated gross profit increased by 74.4% during 2015. Gross margin (gross profit as a percentage of net sales revenue) increased to 21.7% during 2015 from 13.0% during 2014.

Cost of Products Sold of Basic Petrochemicals Segment

Cost of products sold of the Basic Petrochemicals segment declined by 13.8% during 2015, as a result of a reduction of the cost of naphtha, the main feedstock, which registered an average price of US$462 per ton in 2015, a decline of 45% from 2014. This decline is partially explained by a 47% reduction in the price of crude oil during 2014.

Gross profit of the Basic Petrochemicals segment increased by 81.5% to R$4,216.7 million during 2015 from R$2,323.5 million during 2014, and gross margin increased to 17.4% during 2015 from 9.1% during 2014.

Cost of Products Sold of Polyolefins Segment

Cost of products sold of the Polyolefins segment declined by 0.9% during 2015, primarily as a result of (1) the effects on our average cost of ethylene of the 17.1% decline in the average Western Europe contract price of ethylene in euros, as reported by IHS, and (2) the effects on our average cost of propylene of the 45.1% decline in the average North American contract price of propylene in U.S. dollars and a 23.6% decline in the average Western Europe contract price of propylene in euros, as reported by IHS. The effects of these factors were partially offset by (1) the effects of the average depreciation of the real against the U.S. dollar and the euro on the cost of raw materials of our Polyolefins Unit that are determined by reference to U.S. dollar- and euro-denominated prices, and a 1.6% increase in sales volume of the Polyolefins segment.

Gross profit of the Polyolefins segment increased by 55.9% to R$4,525.0 million during 2015 from R$2,902.6 million during 2014, and gross margin increased to 22.6% during 2015 from 15.7% during 2014.

Cost of Products Sold of Vinyls Segment

Cost of products sold of the Vinyls segment declined by 5.3% during 2015, primarily as a result of a 7.8% decline in the total sales volume of our Vinyls Unit. The effects of this decline in sales volume were partially offset by the effects on our Vinyls Unit’s average cost of ethylene of the 17.1% of decline in the average Western Europe contract price of ethylene in euros, as reported by IHS, partially offset by the effects of the average depreciation of the real against the euro on the cost of raw materials of our Vinyls Unit that are determined by reference to euro-denominated prices.

Gross profit of the Vinyls segment increased by 130.5% to R$364.2 million during 2015 from R$158.0 million during 2014, while gross margin increased to 13.1% during 2015 from 5.8% during 2014.

Cost of Products Sold of USA and Europe Segment

Cost of products sold of the USA and Europe segment declined by 7.7% during 2015, primarily as a result of (1) the effects on this segment’s average cost of propylene of a 45.1% decline in the average North American contract price of propylene in U.S. dollars, as reported by IHS, the effects of which were partially offset by the currency translation effects of a 42% average depreciation of the real against the U.S. dollar, and (2) the effects on this segment’s average cost of propylene of a 23.6% decline in the average Western Europe contract price of propylene in euros, as reported by IHS, the effects of which were partially offset by the currency translation effects of a 18.3% average depreciation of the real against the euro. The effects of these reductions in the unit cost of raw materials were partially offset by the 5.9% increase in polypropylene sales volume recorded by this segment.

Gross profit of the USA and Europe segment increased by 193.9% to R$1,331.3 million during 2015 from R$453.0 million during 2014, and gross margin increased to 16.2% during 2015 from 5.7% during 2014.

Cost of Products Sold of Chemical Distribution Segment

Cost of sales of the Chemical Distribution segment declined by 1.2% during 2015 primarily as a result of the lower sales volume and lower price of raw materials.

Gross profit of the Chemical Distribution segment increased by 28.3% to R$182.0 million during 2015 from R$141.8 million during 2014, while gross margin increased to 20.8% during 2015 from 16.8% during 2014.

Selling and Distribution Expenses

Selling and distribution expenses increased by 3.6% during 2015, primarily as a result of the higher sales volume of our United States and Europe segment, as well as fluctuations in the relative value of the currencies of the countries in the USA and Europe segment against the real. Selling and distribution expenses as a percentage of net sales revenue remained stable at 2.4 during 2015 and 2014.

General and Administrative Expenses

General and administrative expenses increased by 6.8% during 2015, primarily as a result of expenses related to innovation and technology and higher expenses with payroll and third-party services. General and administrative expenses as a percentage of net sales revenue increased to 2.8% during 2015 from 2.7% during 2014.

Research and Development Expenses

Research and development expenses increased by 32.4% during 2015, primarily as a result of higher expenses under contracts denominated in U.S. dollars. Research and development expenses as a percentage of net sales revenue increased to 0.4% during 2015 from 0.3% during 2014.

Results from Equity Investments

Results from equity investments declined by 43.6% to a R$2.2 million gain in 2015 from a R$3.9 million gain in 2014, primarily as a result of losses on exchange variation on financial results in our jointly controlled investments and associated companies.

Other Operating Income (Expenses), Net

Other operating expense, net was R$756.2 million during 2015, consisting primarily of: (1) expenses of R$174.5 million related to investment losses and expenses with projects, (2) depreciation expenses and maintenance costs of R$152.5 million related to idle industrial plants, including the São Paulo site during the period the unit was shut down; (3) expenses of R$147.2 million related to the Ascent Project, (4) allowances for judicial and labor claims of R$105.6 million, and (5) expenses of R$65.8 million related to environmental provisions.

Other operating income, net was R$14.0 million during 2014, primarily consisting of (1) revenues from the divestment of the water treatment unit in the Southern Complex of R$277.3 million, and (2) revenues from the recognition of credits of subsidiaries to settle installment payment under Federal Law 11,941/09 of R$98.3 million. This revenue was partially offset by (1) allowances for judicial and labor claims of R$132.6 million; (2) depreciation expenses and maintenance costs of R$119.8 million related to idle industrial plants, (3) payments for services to third parties without corresponding evidence of the services being rendered of R$72.3 million, (4) expenses of R$44.3 million related to the Ascent Project, (5) expenses related to provisions for environmental damages of R$30.7 million, and (6) extemporaneous taxes of R$30.6 million.

Operating Profit (Loss)

As a result of the foregoing:

•

operating profit on a consolidated basis increased by 99.5% during 2015, and as a percentage of net sales revenue, operating profit increased to 14.6% during 2015 from 7.6% during 2014;

•

operating profit of the Basic Petrochemical segment increased by 85.6% to R$3,379.6 million during 2015 from R$1,821.1 million during 2014, and the operating margin of the Basic Petrochemical segment increased to 13.9% during 2015 from 7.1% during 2014;

•

operating profit of the Polyolefins segment increased by 68.3% to R$3,169.7 million during 2015 from R$1,883.7 million during 2014, and the operating margin of the Polyolefins segment increased to 15.9% during 2015 from 10.2% during 2014;

•

operating profit of the USA and Europe segment increased to R$872.0 million during 2015 from R$75.6 million during 2014, and the operating margin of the USA and Europe segment increased to 10.6% during 2015 from 1.0% during 2014;

•

operating profit of the Vinyls segment increased to R$112.4 million during 2015 from R$10.0 million during 2014, while the operating margin of the Vinyls segment increased to 4.0% during 2015 from 0.4% during 2014; and

•

operating profit of the Chemical Distribution segment increased to R$53.6 million during 2015 from R$7.8 million during 2014, and the operating margin of the Chemical Distribution segment increased to 6.1% during 2015 from 0.9% during 2014.

Financial Expenses

Financial expenses increased by 52.0% to R$4,206.5 million during 2015 from R$2,767.8 million during 2014, primarily as a result of (1) our recording a R$1,035.0 million loss on foreign exchange variation on liabilities during 2015 compared to a R$38.9 million loss during 2014 as a result of a 47.0% appreciation in the U.S. dollar exchange rate against the real at the end of 2015 compared to a 12.7% appreciation in the end of period U.S. dollar exchange rate against the real during 2014, and (2) a 30.9% increase in interest expense to R$1,722.8 million during 2015 from R$1,315.9 million during 2014, mainly due to the impact from exchange variation on the outstanding balance of U.S. dollar-denominated debt.

Financial Income

Financial income increased by 378.1% to R$1,699.0 million during 2015 from R$355.4 million during 2014, primarily as a result of our recording a R$1,105.4 million gain on exchange variation on monetary assets during 2015 compared to a R$46.2 million loss during 2014 as a result of a 42.0% appreciation in the average U.S. dollar exchange rate against the real during 2015 compared to a 9.1% appreciation in the average U.S. dollar exchange rate against the real during 2014.

Income Tax and Social Contribution

During the Investigation, the specialized law firms identified payments for services to third parties without corresponding evidence of the services being rendered, or the Improper Commission Payments. As a result, we recognized errors in our calculation of taxes payable in prior periods, or the Tax Adjustments, determined that these errors were material, and that we would be required to restate our financial statements included in Amendment No. 1, as described in more detail in Note 34.b to our audited consolidated financial statements included in this annual report.

The composite corporate statutory income tax and social contribution rate was 34% during 2015 and 2014. Income tax and social contribution expense increased by 243.1% to R$1,670.8 million during 2015 from R$487.0 million during 2014.

The effective tax rate applicable to our profit before income tax and social contribution was 37.7% during 2015, primarily as a result of permanent adjustments caused by differences of income tax rates of investments in countries that have a lower tax rate than Brazil, which increased the effective tax rate by approximately 3.7%.

The effective tax rate applicable to our profit before income tax and social contribution was 45.7% during 2014, primarily as a result of permanent adjustments caused by differences of income tax rates of investments in countries that have a lower tax rate than Brazil, which increased the effective tax rate by approximately 9.5%, and (2) permanent adjustments caused by payments for third-party services, without proving the actual consideration which increased the effective tax rate by approximately 8.3%, the effects of which were partially offset by permanent adjustments caused by a discount on our tax installment payment, established by Law 13,043/2014, which reduced the applicable effective tax rate by 3.9%, and equity in results of investees, which reduced the applicable effective tax rate by 2.2%.

Profit

As a result of the restatements referred in items (1) and (2) in the explanatory note and the factors mentioned above, our profit increased by 377.4% to R$2,760.2 million, or 5.8% of net sales revenue, during 2015 from R$578.2 million, or 1.3% of net sales revenue, during 2014.

Year Ended December 31, 2014 Compared with Year Ended December 31, 2013

The following table sets forth consolidated financial information for the years ended December 31, 2014 and 2013.


	Year Ended December 31,
	2014 Restated			2013 Restated			% Change
	(in millions of *reais*)
Net sales revenue	R$	45,757.0		R$	40,928.9			11.8	%
Cost of products sold		(39,831.0	)		(35,794.7	)		11.3	%

Gross profit		5,926.0			5,134.2			15.4	%
Income (expenses):
Selling and distribution		(1,083.5	)		(945.2	)		14.6	%
General and administrative		(1,254.7	)		(1,078.7	)		16.3	%
Research and development		(128.1	)		(115.7	)		10.7	%
Results from equity investments		3.9			(3.2	)		n.m.
Other operating income (expenses), net		14.0			(327.4	)		(104.3	)%

Operating profit		3,477.6			2,664.0			30.5	%
Financial results:
Financial expenses		(2,767.8	)		(2,540.0	)		9.0	%
Financial income		355.4			773.1			(54.0	)%

Profit before income tax and social contribution		1,065.2			897.1			18.7	%
Income tax and social contribution		(487.0	)		(457.0	)		6.6	%

Profit	R$	578.2		R$	440.1			31.4	%

n.m.: Not meaningful

Net Sales Revenue

Net sales revenue increased by 11.8% during 2014, primarily as a result of (1) a 9.2% increase in net sales revenue of our Polyolefins segment, (2) a 17.6% increase in net sales revenue of our USA and Europe segment, and (3) a 2.2% increase in net sales revenue of our Basic Petrochemicals segment. Reclassifications and eliminations of net sales revenues of our segments in consolidation, primarily reflecting intercompany sales of basic petrochemicals by our Basic Petrochemicals segment to our other segments, declined by 10.5% during 2014.

Net Sales Revenue of Basic Petrochemicals Segment

Net sales revenue of the Basic Petrochemicals segment increased by 2.2% during 2014, primarily as a result of (1) a 7.6% increase in net sales revenue generated by sales of basic petrochemicals (excluding condensate, fuels, intermediates and utilities) to third parties to R$9,932.9 million during 2014 from R$9,227.2 million during 2013, and (2) a 1.2% increase in net sales revenue generated by sales of basic petrochemicals to our other business units to R$11,727.0 million during 2014 from R$11,378.2 million during 2013.

Net sales revenue generated by sales of:

•

naphtha, condensate and crude oil increased by 38.0% to R$3,092.3 million during 2014 from R$2,241.0 million during 2013, primarily as a result of a 43.2% increase in volume of these sales; and

•

basic chemicals (including fuels, intermediaries and utilities) increased by 9.8% to R$3,133.5 million during 2014 from R$2,853.9 million during 2013, primarily as a result of a 16.1% increase in net sales revenues from fuels.

The most significant factors contributing to the increase of net sales revenue generated by sales of basic petrochemicals to third parties were (1) a R$330.9 million, or 29.5%, increase in net sales revenue generated by sales of propylene, (2) a R$199.5 million, or 6.1%, increase in net sales revenue generated by sales of BTX products, and (3) a R$68.6 million, or 3.9%, increase in net sales revenue generated by sales of ethylene.

Sales volume of ethylene to third parties, substantially all of which is sold in the domestic market, declined by 4.5% to approximately 511,400 tons during 2014 from 535,400 tons during 2013, primarily as a result of a lower production volume due to the scheduled maintenance shutdown of one of our cracker production lines in the

Southern Complex and one of our cracker production line at our São Paulo Complex. The average prices that we realized for sales of ethylene increased primarily as a result of a 8.9% average depreciation of the real against the euro, the effect of which was partly offset by the 5.8% decline in the average Western Europe contract price of ethylene in euros, as reported by IHS.

Sales volume of propylene to third parties increased by 14.6% to approximately 445,400 tons during 2014 from approximately 389,000 tons during 2013. Domestic sales volume of propylene to third parties declined by 0.5%, principally due to reduced demand in the domestic market. Export sales volume of propylene increased by 32.2%, principally due to an oversupply of propylene in the domestic market, which led us to take advantage of demand in export markets. The average prices that we realized for sales of propylene increased primarily as a result of (1) a 3.2% increase in the average North American contract price of propylene in U.S. dollars, as reported by IHS, and (2) the effects of the average depreciation of the real against the U.S. dollar.

The principal factors leading to the increase in net sales revenue generated by sales of BTX products to third parties were (1) a 13.3% increase in net sales revenue generated by sales of benzene, and (2) a 32.6% increase in net sales revenue generated by sales of mixed xylenes. The effects of these increases were partially offset by a 27.5% decline in net sales revenue generated by sales of para-xylene.

Sales volume of benzene to third parties increased by 1.6% to approximately 667,200 tons during 2014 from approximately 656,700 tons during 2013. Domestic sales volume of benzene increased by 5.8% and export sales volume of benzene declined by 7.5%. The average prices that we realized for sales of benzene increased primarily as a result of (1) a 3.2% increase in the average North American contract market price of benzene in U.S. dollars, as reported by IHS, and (2) the effects of the average depreciation of the real against the U.S. dollar. Sales volume of mixed xylenes to third parties increased by 55.5% to approximately 130,300 tons during 2014 from approximately 83,900 tons during 2013. The average prices that we realized for sales of mixed xylenes declined primarily as a result of the decline in international prices. Sales volume of para-xylene to third parties declined by 23.1% to approximately 99,000 tons during 2014 from approximately 128,600 tons during 2013. The average prices that we realized for sales of para-xylene declined primarily as a result of the decline in international prices.

Net Sales Revenue of Polyolefins Segment

Net sales revenue of the Polyolefins segment increased by 9.2% during 2014, primarily as a result of a 6.5% increase in net sales revenue generated by sales of polyethylene and a 11.6% increase in net sales revenue generated by sales of polypropylene.

Sales volume of polyethylene declined by 6.2% to approximately 2,313,300 toms during 2014 from 2,467,300 tons during 2013. During 2014, domestic sales volume of polyethylene declined by 3.7%, principally as a result of the opportunistic entry of imported products in the fourth quarter of the year and the weak performance of the Brazilian economy. Export sales volume of polyethylene declined by 12.0%, primarily as a result of lower production volume due to the scheduled maintenance shutdown of one of our cracker production lines in the Southern Complex and one of our cracker production line at our São Paulo Complex. The average prices that we realized for sales of polyethylene increased primarily as a result of the effects of (1) the average depreciation of the real against the U.S. dollar and (2) a 8.9%, 8.9% and 8.5% increase in HDPE, LLDPE and LDPE contract prices in the North American market, respectively, according to IHS.

Sales volume of polypropylene increased by 0.7% to approximately 1,591,900 tons during 2014 from 1,580,800 tons during 2013. During 2014, domestic sales volume of polypropylene declined by 5.1%, reflecting the weak demand in the industrial and automotive sector. Export sales volume of polypropylene declined by 24.4%, primarily as a result of lower production volume due to the scheduled maintenance shutdown of one of our cracker production lines in the Southern Complex and one of our cracker production line at our São Paulo Complex. The average prices that we realized for sales of polypropylene increased primarily as a result of the effects of (1) the average depreciation of the real against the U.S. dollar and (2) a 0.1% increase in the spot prices of the Northeast Asian market, according to IHS.

Net Sales Revenue of Vinyls Segment

Net sales revenue of the Vinyls segment increased by 5.0% during 2014, primarily as a result of a 9.1% increase in net sales revenue from the sale of PVC, the effects of which were partially offset by a 7.0% decline in net sales revenue from the sale of caustic soda.

Sales volume of PVC increased by 3.6% to approximately 659,500 tons during 2014 from 636,500 tons during 2013, primarily as a result of our increased production, with the normalization of operations at our new plant in the state of Alagoas. The average prices that we realized for sales of PVC increased primarily as a result of the average depreciation of the real against the U.S. dollar and the 0.9% increase in the average Northeast Asian spot market prices of PVC in U.S. dollars, as reported by IHS.

Sales volume of caustic soda increased by 0.7% to approximately 472,200 tons during 2014 from 468,800 tons during 2013, primarily as a result of the increased production.

Net Sales Revenue of USA and Europe Segment

Net sales revenue of the USA and Europe segment, which includes our polypropylene assets in the United States and Europe, increased by 17.6% during 2014, primarily as a result of the increase in average prices of sales in the USA and Europe segment, which increased as a result of (1) the translation of the currencies of the countries in the USA and Europe segment into reais when preparing our financial statements, which resulted in foreign exchange gains attributable to fluctuations in the relative value of these currencies against the real, rather than operational gains, and (2) a 0.1% increase in the spot prices of the Northeast Asian market of polypropylene, according to IHS. Sales volume of polypropylene by our USA and Europe Unit increased by 4.0% to approximately 1,862,600 tons during 2014 from 1,790,700 tons during 2013, primarily due to recovery in the U.S. economy and the improved performance of the European economy.

Net Sales Revenue of Chemical Distribution Segment

Net sales revenue of the Chemical Distribution segment declined by 5.5% during 2014, primarily as a result of a decline in the sales volume of solvents, such as methanol.

Cost of Products Sold and Gross Profit

Cost of products sold increased by 11.3% during 2014, primarily as a result of (1) a 16.5% increase in cost of products sold in our USA and Europe segment, (2) a 6.2% increase in cost of products sold in our Polyolefins segment, and (3) a 3.1% increase in cost of products sold in our Basic Petrochemicals segment. Reclassifications and eliminations of cost of sales and services rendered of our segments in consolidation, primarily reflecting the costs of basic petrochemicals purchases by our Polyolefins and Vinyls segments from our Basic Petrochemicals segment, declined by 10.0% during 2014.

Consolidated gross profit increased by 15.4% during 2014. Gross margin (gross profit as a percentage of net sales revenue) increased to 13.0% during 2014 from 12.5% during 2013.

Cost of Products Sold of Basic Petrochemicals Segment

Cost of products sold of the Basic Petrochemicals segment increased by 3.1% during 2014, primarily as a result of the appreciation in the average U.S. dollar exchange rate against the real during the year. These were partially offset by (1) a 7.4% decline in the average Amsterdam-Rotterdam-Antwerp market price of naphtha in U.S. dollars as reported by IHS to US$837.0 per ton during 2014 from US$903.0 per ton during 2013, and (2) a 2.7% decline in sales volume of basic petrochemicals.

Gross profit of the Basic Petrochemicals segment declined by 6.2% to R$2,323.5 million during 2014 from R$2,476.6 million during 2013. and gross margin declined to 9.1% during 2014 from 9.9% in 2013.

Cost of Products Sold of Polyolefins Segment

Cost of products sold of the Polyolefins segment increased by 6.2% during 2014, primarily as a result of (1) the effects of the average depreciation of the real against the euro on the cost of raw materials of our Polyolefins Unit that are determined by reference to euro-denominated prices, and (2) the effects of the increase in the average cost of propylene, which was influenced by a 3.2% increase in the average North American contract price of propylene in U.S. dollars and a 1.9% increase in the average Western Europe contract price of propylene in euros, as reported by IHS. These factors were partially offset by (1) the effects on our average cost of ethylene, which was influenced by the 5.8% decline in the average Western Europe contract price of ethylene in euros, as reported by IHS, and (2) a 3.0% decline in sales volume of the Polyolefins segment.

Gross profit of the Polyolefins segment increased by 29.0% to R$2,902.6 million during 2014 from R$2,250.4 million during 2013, and gross margin increased to 15.7% during 2014 from 13.3% during 2013.

Cost of Products Sold of Vinyls Segment

Cost of products sold of the Vinyls segment increased by 7.0% during 2014, primarily as a result of (1) the effects of the average depreciation of the real against the euro on the cost of raw materials of our Vinyls Unit that are determined by reference to euro-denominated prices, and (2) a 2.7% increase in the total sales volume of our Vinyls Unit. These factors were partially offset by the effects on our Vinyls Unit’s average cost of ethylene of the 5.8% of decline in the average Western Europe contract price of ethylene in euros, as reported by IHS.

Gross profit of the Vinyls segment declined by 19.6% to R$158.0 million during 2014 from R$196.6 million during 2013, while gross margin declined to 5.8% during 2014 from 7.6% during 2013.

Cost of Products Sold of USA and Europe Segment

Cost of products sold of the USA and Europe segment increased by 16.5% during 2014, primarily as a result of (1) a 4.0% increase in polypropylene sales volume recorded by this segment, (2) the effects on this segment’s average cost of propylene of a 3.2% increase in the average North American contract price of propylene in U.S. dollars, as reported by IHS, together with the translation effects of a 9.1% average depreciation of the real against the U.S. dollar, and (3) the effects on this segment’s average cost of propylene of the average depreciation of the real against the euro, which were partially offset by a 5.8% decline in the average Western Europe contract price of propylene in euros, as reported by IHS.

Gross profit of the USA and Europe segment increased by 38.1% to R$453.0 million during 2014 from R$328.0 million during 2013, and gross margin increased to 5.7% during 2014 from 4.9% during 2013.

Cost of Products Sold of Chemical Distribution Segment

Cost of sales of the Chemical Distribution segment declined by 7.9% during 2014 primarily as a result of decrease in sales volume of solvents.

Gross profit of the Chemical Distribution segment increased by 8.6% to R$141.8 million during 2014 from R$130.6 million during 2013, while gross margin declined to 16.8% during 2014 from 14.6% during 2013.

Selling and Distribution Expenses

Selling and distribution expenses increased by 14.6% during 2014, primarily as a result of higher expenses related to exports, such as storage and demurrage, due to higher export sales volume. Selling and distribution expenses as a percentage of net sales revenue increased to 2.4% during 2014 from 2.3% during 2013.

General and Administrative Expenses

General and administrative expenses increased by 16.3% during 2014, primarily as a result of (1) higher personnel expenses related to wage adjustments granted under the collective bargaining agreement and to the price adjustment in the health insurance policy; and (2) sporadic expenses with institutional marketing, advertising materials and third-party services. General and administrative expenses as a percentage of net sales revenue increased to 2.7% during 2014 from 2.6% during 2013.

Research and Development Expenses

Research and development expenses increased by 10.7% during 2014. Research and development expenses as a percentage of net sales revenue remained stable at 0.3% during 2014 and 2013.

Results from Equity Investments

Results from equity investments was a gain of R$3.9 million in 2014 compared to a loss of R$3.2 million in 2013.

Other Operating Income (Expenses), Net

Other operating expenses, net was R$327.4 million during 2013, primarily consisting of (1) depreciation expenses and maintenance costs of R$110.6 million related to idle industrial plants, (2) expenses related to provisions for environmental damages of R$59.4 million, (3) payments for services to third parties without corresponding evidence of the services being rendered of R$55.5 million, and (4) extemporaneous taxes of R$33.8 million.

Operating Profit (Loss)

As a result of the foregoing:

•

operating profit on a consolidated basis increased by 30.5% during 2014. As a percentage of net sales revenue, operating profit increased to 7.6% during 2014 from 6.5% during 2013;

•

operating profit of the Basic Petrochemical segment declined by 2.8% to R$1,821.1 million during 2014 from R$1,873.9 million during 2013, and the operating margin of the Basic Petrochemical segment declined to 7.1% during 2014 for 7.5% during 2013;

•

operating profit of the Polyolefins segment increased by 37.8% to R$1,883.7 million during 2014 from R$1,367.0 million during 2013, and the operating margin of the Polyolefins segment increased to 10.2% during 2014 from 8.1% during 2013;

•

operating profit of the USA and Europe segment increased to R$75.6 million during 2014 from R$7.5 million during 2013, and the operating margin of the USA and Europe segment increased to 1.0% during 2014 from 0.1% during 2013;

•

operating profit of the Vinyls segment declined by 11.8% to R$10.0 million during 2014 from R$11.3 million during 2013, while the operating margin of the Vinyls segment remained stable at 0.4% during 2014 and 2013; and

•

operating profit of the Chemical Distribution segment declined by 71.6% to R$7.8 million during 2014 from R$27.4 million during 2013, and the operating margin of the Chemical Distribution segment declined to 0.9% during 2014 from 3.1% during 2013.

Financial Expenses

Financial expenses increased by 9.0% to R$2,767.8 million during 2014 from R$2,540.0 million during 2013, primarily as a result of (1) a 16.5% increase in interest expense to R$1,315.9 million during 2014 from R$1,130.0 million during 2013, principally due to the impact from exchange variation on the conversion of interest payable on dollar-denominated debt, and (2) a 27.4% increase in monetary variations on fiscal debts to R$222.1 million during 2014 from R$174.4 million during 2013, principally due to the restatement of the provision for the Petros Plans.

Financial Income

Financial income declined by 54.0% to R$355.4 million during 2014 from R$773.1 million during 2013, primarily as a result of our recording a R$46.2 million loss on exchange variation on monetary assets during 2014 compared to a gain of R$333.4 million during 2013 as a result of a 9.1% depreciation in the average U.S. dollar exchange rate against the real during the year.

Income Tax and Social Contribution

During the Investigation, the specialized law firms Improper Commission Payments. As a result, we recognized errors the Tax Adjustments, determined that these errors were material, and that we would be required to restate our financial statements included in Amendment No. 1, as described in more detail in Note 34.b to our audited consolidated financial statements included in this annual report.

The composite corporate statutory income tax and social contribution rate was 34% during 2014 and 2013. Income tax and social contribution expense increased by 6.6% to R$487.0 million during 2014 and R$457.0 million during 2013.

The effective tax rate applicable to our profit before income tax and social contribution was 45.7% during 2014, primarily as a result of (1) permanent adjustments caused by differences of income tax rates of investments in countries that have a lower tax rate than Brazil, which increased the effective tax rate by approximately 9.5%, and (2) permanent adjustments caused by payments for third-party services, without proving the actual consideration which increased the effective tax rate by approximately 8.3%, the effects of which were partially offset by permanent adjustments caused by a discount on our tax installment payment, established by Law 13,043/2014, which reduced the applicable effective tax rate by 3.9%, and equity in results of investees, which reduced the applicable effective tax rate by 2.2%.

The effective tax rate applicable to our profit before income tax and social contribution was 50.9% during 2013, primarily as a result of (1) permanent adjustments caused by differences of income tax rates of investments in countries that have a lower tax rate than Brazil, which increased the effective tax rate by approximately [15.7]%, and (2) permanent adjustments caused by payments for third-party services, without providing the actual consideration, which increased the effective tax rate by approximately 1.7%, the effects of which were partially offset by permanent adjustments caused by a discount on our tax installment payment, established by Law 13,043/2014, which reduced the applicable effective tax rate by 1.0%

Profit

As a result of the restatements referred in items (1), (2) and (3) in the explanatory note and the factors mentioned above, our profit increased by 31.4% to R$578.2 million, or 1.3% of net sales revenue, during 2014 from R$440.1 million, or 1.1% of net sales revenue, during 2013.

Liquidity and Capital Resources

Our principal cash requirements for 2015 consisted of the following:

•

servicing our indebtedness;

•

working capital requirements;

•

capital expenditures related to investments in operations, construction of new plant facilities, and maintenance and expansion of plant facilities; and

•

dividends on our shares, including in the form of interest attributable to shareholders’ equity.

Our principal sources of liquidity have traditionally consisted of the following:

•

cash flows from operating activities;

•

short-term and long-term borrowings; and

•

sales of debt securities in domestic and international capital markets.

During 2015, cash flow generated by operations was used primarily for investing activities, for working capital requirements and to service our outstanding debt obligations. As of December 31, 2015, our consolidated cash and cash equivalents and short-term financial investments amounted to R$7,458.2 million. As of December 31, 2015, we had net working capital (defined as (1) current assets plus non-current assets held for sale, minus (2) current liabilities plus non-current liabilities held for sale) of R$496.8 million.

Projected Sources and Uses of Cash

We anticipate that we will be required to spend approximately R$27.3 billion to meet our short-term contractual obligations and commitments and budgeted capital expenditures during 2016 (excluding equity contributions to our joint ventures in Mexico and Venezuela). We expect that we will meet these cash requirements for (1) our operations through sales of our products, and (2) our debt service through operating cash flow and new financing activities, including new debt financings and the refinancing of our existing short-term indebtedness as it becomes due.

We have commitments from several financial institutions to provide us with financing in the future, including commitments from the Brazilian National Bank for Economic and Social Development (Banco Nacional do Desenvolvimento), or BNDES, to lend us funds under our revolving stand-by credit facilities (Contrato de Abertura de Limite de Crédito), or CALC facilities, described under “—Indebtedness and Financing Strategy—Credit Facilities with BNDES.” As of December 31, 2015, the full aggregate principal amount had been disbursed under these facilities.

These commitments are subject to conditions precedent which we believe that we will be able to satisfy in connection with any amounts drawn under these facilities. We pay commitment fees to these financial institutions in connection with their commitments, other than our BNDES revolving stand-by credit facilities.

In addition, we entered into the Braskem Idesa Financing. For more information regarding this facility, see “—Capital Expenditures—Joint Venture Projects—Project Ethylene XXI.”

Cash Flows

The following discussion of our cash flows is based on our restated consolidated statements of cash flows. For further information on the restatement, see note 2.4 to our financial statements included elsewhere in this annual report.

Cash Flows Provided by Operating Activities

Net cash provided by operating activities was R$7,877.8 million during 2015, R$3,813.0 million during 2014 and R$2,411.6 million during 2013.

Net cash provided by operating activities increased by R$4,064.8 million during 2015 compared to 2014, primarily as a result of (1) our profit before income tax and social contribution of R$4,431.0 million during 2015 compared to R$1,065.2 million during 2014, and (2) an increase in non-cash interest and monetary and exchange variations, net to R$3,182.6 million during 2015 compared to R$1,566.2 million during 2014, primarily as a result of (a) the average depreciation of the real against the U.S. dollar and (b) our designation on May 1, 2013 of part of the liabilities our U.S. dollar-denominated debt instruments as a hedge for our future exports. The effects of these factors were partially offset by the R$1,518.3 million decline in accounts payable to suppliers during 2015 compared to a R$420.8 million decline during 2014, which resulted from the average depreciation of the real against the U.S. dollar, which impacted our contract to purchase certain raw materials.

Net cash provided by operating activities increased by R$1,401.4 million during 2014 compared to 2013, primarily as a result of:

•

the R$484.2 million decline in recoverable taxes during 2014 compared to a R$454.2 million increase during 2013, which principally resulted from monetization of value-added tax on sales and services (ICMS) credits that we had accumulated over the past few years arising mainly from domestic sales subject to deferred taxation and export sales;

•

a R$409.4 million decline in accounts receivable during 2014 compared to a R$474.7 million increase in accounts receivable during 2013, primarily as a result of decline in international prices of thermoplastic resins which led to a decline in revenues from polyethylene, polypropylene and PVC;

•

an increase in non-cash interest and monetary and exchange variations, net to R$1,566.2 million during 2014 compared to R$965.3 million during 2013, primarily as a result of our designation on May 1, 2013 of part of the liabilities our dollar-denominated debt instruments as a hedge for our future exports;

•

the R$499.4 million increase in inventories during 2014 compared to a R$949.5 million increase during 2013, which resulted from the increase in inventories of polyolefins at the end of the year due to weak demand;

•

an decline in cash interest payments to R$356.3 million during 2014 compared to R$710.3 million during 2013; and

•

our profit before income tax and social contribution of R$1,065.2 million during 2014 compared to R$897.1 million during 2013.

The effects of these factors were partially offset by:

•

the R$420.8 million decline in accounts payable to suppliers during 2014 compared to a R$734.3 million increase during 2013, which resulted from the average depreciation of the real against the U.S. dollar, which impacted our contract to purchase certain raw materials;

•

the R$476.6 million decline in taxes and contributions payable during 2014 compared to the R$61.1 million decline during 2013, which resulted from the prepayment of the outstanding balance of installment under the Federal Law 11,941/09 payment program;

•

the effect of a R$277.3 million non-cash gain from the divestment of Distribuidora de Águas Triunfo S.A. recorded in 2014; and

•

the R$261.9 million decline in advances from customers during 2014 compared to the R$6.3 million increase during 2013, which resulted from the settlement in 2014 of transactions in which we had collected advances from customers during 2014.

Cash Flows Used in Investing Activities

Investing activities used net cash of R$4,120.3 million during 2015, R$5,054.1 million during 2014 and R$4,954.2 million during 2013.

During 2015, investing activities for which we used cash on a consolidated basis primarily consisted of (1) investments of R$2,835 million in new capacity projects, including investments of R$2,772 million for the construction of our facilities in Mexico, of which R$1,104 million corresponds to our equity investments, (2) investments of R$516 million to perform maintenance on our plants during scheduled shutdowns, (3) investments of R$229 million in modernization, in information technology and increased reliability of our systems, (4) investments of R$281 million in equipment replacement, and (5) investments of R$213 million in productivity, safety improvements and others.

During 2014, investing activities for which we used cash on a consolidated basis primarily consisted of (1) investments of R$3,533.8 million in new capacity projects, including investments of R$3,465.6 million for the construction of our facilities in Mexico, of which R$621.8 million corresponds to our equity investments, (2) investments of R$ 1,009.1 million to perform maintenance on our plants during scheduled shutdowns, (3) investments of R$252.1 million in modernization, in information technology and increased reliability of our systems, (4) investments of R$ 322.8 million in equipment replacement, and (5) investments of R$ 215.7 million in productivity, safety improvements and others. These investments were partially offset by our receipt of R$315.0 million from the divestments of the water treatment unit in the Southern Complex.

During 2013, investing activities for which we used cash on a consolidated basis primarily consisted of (1) investments of R$4,102.1 million in new capacity projects, including investments of R$4,053.0 million for the construction of our facilities in Mexico, of which R$1,098.4 million was in the form of an equity contribution, (2) investments of R$781.0 million to perform maintenance on our plants during scheduled shutdowns, (3) investments of R$275.5 million in modernization, in information technology and increased reliability of our systems, (4) investments of R$284.7 million in equipment replacement, (5) investments of R$194.1 million in productivity and safety improvements. These investments were partially offset by our receipt of R$689.9 million from the divestments of Cetrel and Braskem Distribuidora.

Cash Flows Used in Financing Activities

Financing activities used net cash of R$97.5 million during 2015 compared to net cash provided of R$894.4 million during 2014 and R$3,614.2 million during 2013.

During 2015:

•

we entered into a revolving credit facility agreement with several international financial institutions under which we borrowed an aggregate principal amount of US$250.0 million in June and July 2015;

•

we received disbursements under a financing agreement with BNDES, in the amounts of R$72.6 million, R$48.0 million and R$292.4 million in the second, third and fourth quarter of 2015, respectively;

•

we entered into an advance on export contracts (adiantamentos sobre contatos de exportação), or ACC, with a local financial institution under which we borrowed an aggregate principal amount of US$50.0 million in October 2015; and

•

Braskem Idesa borrowed US$290.5 million and US$23.6 million from international financial institutions in connection with the financing agreements relating to Project Ethylene XXI in April 2015 and September 2015, respectively.

During 2015, we used cash:

•

to repurchase US$54.1 million, representing all principal amounts and interest outstanding under our 9.38% Notes due 2015

•

to prepay R$100.0 million, representing all principal amounts and interest outstanding under a credit facility agreement entered into in April 2015 with a local financial institution;

•

to pay R$1,009.4 million, representing aggregate principal amounts and interest outstanding under a financing agreement with BNDES; and

•

to make other scheduled payments and prepayments under various of our outstanding debt instruments.

In addition, we used cash to pay dividends in the aggregate amount of R$482.1 million.

During 2014:

•

Braskem Finance Limited issued US$750.0 million aggregate principal amount of 6.450% Notes due 2024 in February 2014 and May 2014;

•

Braskem Idesa borrowed US$465.0 million from international financial institutions in connection with the financing agreements relating to Project Ethylene XXI in April 2014;

•

we entered into a credit facility agreement with an international financial institution under which we borrowed an aggregate principal amount of US$75.0 million in January 2014;

•

we entered into a credit facility agreement with an international financial institution under which we borrowed an aggregate principal amount of US$62.5 million in August 2014;

•

we entered into a credit facility agreement with a local financial institution under which we borrowed an aggregate principal amount of R$100.0 million in September 2014; and

•

we entered into a credit facility agreement with a local financial institution under which we borrowed an aggregate principal amount of R$100.0 million in November 2014.

During 2014, we used cash:

•

to prepay US$50.3 million, representing all principal amounts and interest outstanding under a loan agreement that Braskem Netherlands entered into with an international financial institution in December 2011;

•

to prepay US$50.1 million, representing all principal amounts and interest outstanding under a loan agreement that Braskem Netherlands entered into with an international financial institution in December 2011;

•

to prepay R$299.8 million, representing all principal amounts and interest outstanding under a loan agreement that Braskem S.A. entered into with an international financial institution in October 2013;

•

to prepay US$50.0 million, representing all principal amounts and interest outstanding under three foreign exchange contracts (adiantamento sobre contrato de câmbio) that we entered into with a Brazilian financial institution in December 2013;

•

to prepay US$50.7 million, representing all principal amounts and interest outstanding under an export prepayment agreement that we entered into with a Brazilian financial institution in December 2010;

•

to repurchase US$58.1 million aggregate principal amount of our 8.00% notes due 2017, US$266.1 million aggregate principal amount of our 7.25% notes due 2018 and US$349.8 million aggregate principal amount of our 7.00% notes due 2020 pursuant to tender offers we completed in February 2014 and May 2014; and

•

to make other scheduled payments and prepayments under various of our outstanding debt instruments.

In addition, we used cash to pay dividends in the aggregate amount of R$482.1 million.

During 2013:

•

we borrowed US$200.0 million aggregate principal amount in January 2013 under an export prepayment facility that we entered into with certain international financial institutions in December 2012;

•

we entered into three credit export notes facilities with Brazilian financial institutions in the aggregate amount of R$300.0 million in February 2013;

•

we entered into a credit facility agreement with an international financial institution for an aggregate principal amount of US$90.0 million in March 2013;

•

we entered into a credit facility agreement with an international financial institution for an aggregate principal amount of US$210.0 million in June 2013;

•

Braskem Idesa borrowed US$1,483.9 million aggregate principal amount in July 2013 under the financing agreements that Braskem Idesa entered into in December 2012 to finance the Ethylene XXI project;

•

we entered into several credit export notes facilities with an international financial institution in the aggregate amount of R$163.5 million in August 2013;

•

we entered into a loan agreement with a Brazilian financial institution under which we borrowed an aggregate principal amount of US$70.0 million in September 2013;

•

we received disbursements under a financing agreement with BNDES, in the amounts of R$178.0 million, R$144.1 million and R$188.7 million in October, November and December 2013, respectively;

•

Braskem Idesa borrowed US$546.9 million aggregate principal amount in November 2013 under the financing agreements that Braskem Idesa entered into in December 2012 to finance the Project Ethylene XXI project;

•

we borrowed R$150.0 million under a credit export note facility that we entered into in December 2013 with a Brazilian financial institution; and

•

we entered into a ACC (advance payment on exchange contract) with an international financial institution for an aggregate principal amount of US$50.0 million in December 2013.

During 2013, we used cash:

•

to prepay R$512.7 million, representing all principal amounts and interest outstanding under four export credit note facilities;

•

to prepay R$452.3 million, representing all principal amounts and interest outstanding under two export prepayment facilities;

•

to prepay R$123.6 million, representing all principal amounts and interest outstanding under a financing agreement with BNDES; and

•

to make other scheduled payments and prepayments under several of our outstanding debt instruments.

Unless our board of directors deems it inconsistent with our financial position and the decision of our board of directors is ratified by our shareholders, payment of dividends is mandatory under Brazilian Corporation Law and our by-laws and also is required under agreements with two of our shareholders and, consequently, may give rise to significant cash requirements in future periods.

Share Repurchase Program

On August 13, 2012, our board of directors authorized a share repurchase program under which we were authorized to repurchase up to 13,376,161 class A preferred shares at market prices over the BM&FBOVESPA at any time and from time to time prior to August 28, 2013. Shares that were repurchased will be held in treasury and may be resold or cancelled. As of December 31, 2012, we had repurchased 262,300 class A preferred shares for an aggregate of R$3.5 million.

We did not repurchase any shares in 2013 or 2014.

On February 11, 2015, our board of directors authorized a share repurchase program under which we are authorized to repurchase up to 3,500,000 class A preferred shares at market prices over the BM&FBOVESPA. The program started in February 19, 2015, and was effective until February 18, 2016. We repurchased 80,000 class A preferred shares for an aggregate of R$0.9 million in 2015.

Contractual Commitments

The following table summarizes significant contractual obligations and commitments as of December 31, 2015 that have an impact on our liquidity:


	Payments Due by Period
	Less than one Year		One to Three Years			Three to Five Years		More than Five Years		Total
	(in millions of reais)
Loans and financings (1)		2,073.0		5,205.8			8,169.8		28,311.3		43,759.9
Braskem Idesa Financing (2)		335.3		1,720.6			2,291.0		11,963.8		16,310.7
Derivatives (3)		57.8		(6.5	)		1,191.2		—		1,242.5
Defined benefit actuarial obligation (4)		—		—			—		154.7		154.7
Other payables (5)		112.5		160.8			—		—		273.3
Project Ethylene XXI – EPC (6)		319.4		—			—		—		319.4
Purchase obligations for raw materials (7)		20,778		65,437			72,507		4,395		163,117
Purchase obligations for electric power and gas (7)		1,247		1,918			789		105		4,059

Total contractual obligations		24,923		74,435.7			84,948.0		44,929.8		229,236.5

(1)

Consists of estimated future payments of amortization amounts plus interest on our loans and financings, calculated based on interest rates and foreign exchange rates applicable as of December 31, 2015 and assuming (i) that all amortization payments and payments at maturity on our loans and financings will be made on their scheduled payment dates, and (ii) that our perpetual bonds are redeemed after 100 years.

(2)	Consists of limited recourse project finance debt, which is repaid solely from the cash generated by the project itself and shareholders provide limited guarantees. For further information, see note 15 of our consolidated financial statements elsewhere in this annual report.

(3)	Consists substantially of foreign exchange swaps that we entered into to offset the variation in the rates of export credit notes contracts. For further information, see note 16.2 of our consolidated financial statements elsewhere in this annual report.

(4)	Consists of the actuarial liabilities related to defined benefit plans Novamont, Braskem Europe and health care plan in Brazil. For further information, see note 21.2 to our consolidated financial statements elsewhere in this annual report.

(5)	Consists of amounts payable to BNDES Participações S.A. as part of the business combination with Braskem Qpar. For further information, see note 22 of our consolidated financial statements elsewhere in this annual report.

(6)

Consists of contractual commitments for the engineering, procurement and construction of Project Ethylene XXI and technology license fee regarding this project, calculated based on estimated future contractual payments and interest and based on the foreign exchange rate in effect as of December 31, 2015.

(7)

Consists of purchase commitments for raw materials and electric power and gas pursuant to binding agreements of the company that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Based upon the applicable purchase prices as of December 31, 2015.

We are also subject to potential liabilities with respect to tax, labor, distributors and other claims, for which the chances of loss are considered probable, and for which we maintain provisions of R$554.5 million as of December 31, 2015. These proceedings relate primarily to federal income taxes and VAT. See note 20 to our audited consolidated financial statements.

Indebtedness and Financing Strategy

As of December 31, 2015, our total outstanding consolidated indebtedness, net of transaction costs, was R$27,350.5 million, consisting of R$1,970.0 million of short-term indebtedness, including current portion of long-term indebtedness (7.2% of our total indebtedness), and R$25,380.5 million of long-term indebtedness (92.8% of our total indebtedness), in addition to an aggregate amount of R$12,277.4 million (US$3,144.2 million), outstanding as of December 31, 2015 in connection with the Braskem Idesa Financing and in addition to an aggregate amount of R$1,111.6 million (US$284.7 million) outstanding as of December 31, 2015 in connection with derivatives. As of December 31, 2015, we had no outstanding indebtedness to related parties on a consolidated basis. On a consolidated basis, net of transaction costs and not including derivatives, our real-denominated indebtedness as of December 31, 2015 was R$6,056.7 million (15.3% of our total indebtedness), and our foreign currency-denominated indebtedness was R$33,571.2 million (84.7% of our total indebtedness).

Our financing strategy has been to continue to extend the average maturity of our outstanding indebtedness, including by repaying short-term debt through longer-term borrowings and issuing longer-term debt securities, in order to increase our liquidity levels and improve our strategic, financial and operational flexibility. Our financing strategy over the next several years involves maintaining adequate liquidity and a debt maturity profile that is compatible with our anticipated cash flow generation and anticipated capital expenditures. In addition, we do not expect our capital expenditures to adversely affect the quality of our debt leverage ratios or our disciplined approach to capital allocation.

Short-Term Indebtedness

Our consolidated short-term debt, including current portion of long-term debt, was R$1,970.0 million as of December 31, 2015.

We maintain short-term finance lines denominated in reais with a number of financial institutions in Brazil. Although we have no committed lines of credit with these financial institutions, we believe that we will continue to be able to obtain sufficient credit to finance our working capital needs based on our relationships with these financial institutions and current market conditions. As of December 31, 2015, the consolidated outstanding balance under our short-term finance lines in reais was R$1,213.8 million.

We also obtain advances on certain export contracts from a variety of Brazilian financial institutions. These advances generally have a maturity of less than one year and relatively low interest rates. These advances on export contracts are generally secured by receivables to be generated from future export sales under those contracts. As of December 31, 2015, we did not have any consolidated outstanding advances on export contracts. See note 14 to our consolidated financial statements included in this annual report.

Long-Term Indebtedness

Our principal sources of long-term debt are:

•

fixed-rate notes issued in the international market;

•

export credit notes;

•

credit facilities with BNDES;

•

bank credit facilities;

•

project financing;

•

BNB/FINAME/FINEP/FUNDES; and

•

export prepayment facilities.

Some of these instruments also contain other covenants that could restrict, among other things, the ability of our company and most of our subsidiaries to incur liens or merge or consolidate with any other person or sell or otherwise dispose of all or substantially all of our assets. In addition, the instruments governing a substantial portion of our indebtedness contain cross-default or cross-acceleration clauses, such that the occurrence of an event of default under one of these instruments could trigger an event of default under other indebtedness or enable the creditors under other indebtedness to accelerate that indebtedness.

As of December 31, 2015, R$3,646.7 million of our real-denominated debt and R$409.1 million of our foreign currency-denominated debt was secured. In order to secure this debt, we have pledged certain of our property and equipment and certain of our accounts receivable. The security arrangements for our secured debt vary depending on the transaction.

As of December 31, 2015, all of our Braskem Idesa Financing was secured. In order to secure this debt, we have pledged our shares in Braskem Idesa, some of our rights to repayment under subordinated loans that Braskem S.A. has made to Braskem Idesa and all of the assets of Braskem Idesa.

Fixed-Rate Notes

We have issued fixed-rate debt securities in the international market. All of these securities pay interest semi-annually in arrears, except for our perpetual bonds on which interest is payable quarterly in arrears. The table below sets forth our outstanding fixed-rate debt securities, the outstanding principal amount of these securities and their maturity dates.


Security	Outstanding Principal Amount as of December 31, 2015		Final Maturity
	(in millions of U.S. dollars)
8.00% Notes due 2017		55.873		January 2017
7.250% Notes due 2018(1)		137.427		June 2018
7.00% Notes due 2020(1)		397.677		May 2020
5.75% Notes due 2021(1)		997.500		April 2021
5.375% Notes due 2022(1)		500.000		May 2022
6.45% Notes due 2024(1)		750.000		February 2024
7.125% Notes due 2041(2)		750.000		July 2041
7.375% Perpetual Bonds(1)		700.000		—

(1)	Represents notes issued by Braskem Finance Limited and guaranteed by Braskem.

(2)	Represents notes issued by Braskem America Finance and guaranteed by Braskem.

Export Credit Note Facilities

We have entered into several credit export note facilities. The table below sets forth our significant outstanding credit export note facilities, the amount outstanding under these facilities, the interest rate applicable to these facilities, the amortization schedule of these facilities and their maturity dates.


Issue Date	Outstanding Principal and Interest as of December 31, 2015		Interest Rate	Amortization Schedule	Final Maturity
	(in millions of *reais*)
November 2014		151.1	8.00%	Bullet Maturity	November 2017
September 2014		104.6	108.0% of CDI	Annual (1)	August 2020
February 2013		202.3	8.00%	Bullet Maturity	February 2016
February 2013		151.6	8.00%	Bullet Maturity	September 2017
September 2012		219.9	105.0% of CDI	Annual (2)	October 2021
August 2011		405.5	112.5% of CDI	Bullet Maturity	August 2019
April 2011		464.0	112.5% of CDI	Bullet Maturity	April 2019
February 2011		146.6	105.0% of CDI	Annual (2)	October 2021
June 2010		146.6	105.0% of CDI	Annual (2)	October 2021
January 2008(3)		603.5	7.3%	Bullet Maturity	February 2020
May 2007(3)		294.8	7.85%	Bullet Maturity	May 2019
April 2007(3)		198.8	7.87%	Bullet Maturity	March 2018
November 2006(3)		308.1	8.1%	Bullet Maturity	May 2018

(1)	Principal of this facility is due in annual payment on October of each year commencing in October 2018.

(2)	Facilities amended in October 2013 to extend maturity from February 2014 to October 2021.

(3)	Facility denominated in U.S. dollars.

Credit Facilities with BNDES

Term Loan Facilities

We have entered into a variety of credit facilities with BNDES. The proceeds of these credit facilities have been used to finance a variety of capital expenditures, including:

•

the construction of our “green” polyethylene facilities;

•

the construction of our new butadiene plant;

•

the construction of our new PVC facilities;

•

quality, productivity, environmental, health and safety projects and maintenance shutdowns at our plants.

The table below sets forth selected information with respect to our BNDES term loan credit facilities as of December 31, 2015.

Facility

Outstanding
Principal
and Interest

Interest Rate

Amortization
Schedule

Final Maturity

(in millions
of reais)

June 2009 credit facility(1)

Cesta de Moedas loans

29.4

Cesta de Moedas plus 2.58%

Monthly

July 2017

TJLP loans

119.2

TJLP plus 0% to 4.78%

Monthly

June 2017

December 2010 credit facility(2)