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2016 | Braskem | Annual Report 2 Summary 34 03 07 15 24 Message from the Business Sustainability Governance Financial Leader Braskem Strategy and Compliance Performance 45 55 78 99 110 Health, Safety, GRI G4 and the Content Innovation Stakeholders Environment Index Attachments 116 117 120 Corporate Glossary Information Credits 2016 | Braskem | Annual Report 3 in the Brazilian market, we Message from the also achieved record sales results. Domestic sales of basic petrochemicals were 1.8 million Business Leader tons, up 5%. Resin sales totaled G4-1, G4-2, G4-SO5 Global Compact – Principle 1 3.3 million, with a slight decrease 2016 was one of the most the United Kingdom from the of 1%. Our commercial strategy, challenging times in Braskem’s European Union and the fierce however, made it possible to history. Nevertheless, we have US presidential election. Such take advantage of opportunities much to be proud of. Our occurrences, coupled with in production sectors less Company has accomplished China’s new growth pattern, affected by the Brazilian crisis, unprecedented achievements, led to moderate growth in helping to expand our exports. the result of a consistent business international trade - below 3% In 2016, international shipments strategy based on international for the fifth consecutive year of resins from Brazil totaled 1.7 presence, diversification of - and to a reduction in global million tons, an expansion of raw materials and constant investment. 24% compared to 2015. improvement of operational efficiency, competitiveness, and In Brazil, the recession scenario Diversifying raw materials and Governance and Compliance persisted. The GDP recorded geographic presence continued standards. These pillars not a strong decrease of 3.6% to be a priority in our global only ensured us the resilience (repeating the level of the strategy. We achieved a 100% necessary to overcome the 3.8% drop in 2015), driven average utilization rate of the turbulence, but also proved that by reduced credit and the polypropylene plants in the we are on the right track towards prolonged political-institutional United States and Europe, which a promising future of sustainable crisis, which aggravated the was reflected in a 2% increase growth. effects of historical bottlenecks in sales volume in the respective of competitiveness. was the basis for achieving a historical record of 8.5 million regions compared to 2015, Scenario record EBITDA for the Company tons of basic petrochemicals, reaching a level of two million The main adversities effecting Historical Operating in both Brazilian reais (BRL 11.5 a volume 3% higher than in tons. US$ our activities in 2016 came Performance billion) and in dollars (US$ 3.3 2015, with an average cracker from the uncertainties in the In 2016, Braskem achieved good billion) at the end of 2016.* utilization rate of 92% (the 2016 marked the start of political and economic scenario, operating results thanks to the best in the historical series), an operation of the Petrochemical 3.3 both globally and in our main gains in production efficiency It is important to note that, increase of three percentage Complex in Mexico, a milestone BILLION country of operation, Brazil. and stronger integration among despite the recession in Brazil, points (p.p.) compared to the in our internationalization At the international level, we the industrial units in Brazil, in 2016 our Brazilian units previous year. Resin production process that required a US$ 5.2 billion investment, the largest in EBITDA at faced a slowdown in the pace Mexico, the United States, and of basic petrochemicals and reached 4.9 million tons, up 4%. amount ever invested by a the end of of world economic growth from Germany, and commercial offices resins recorded good operating 2016. key factors such as the exit of around the world. This formula performance. We achieved a Despite the weak demand industrial company with Brazilian * The preliminary unreview financial information by the auditors and the Fiscal Council set forth in this document is subject to adjustments and modifications. The review of the financial statements and related notes for the period ended December 31, 2016 is still in progress. Adjustments and modifications to the financial statements may be identified up to its issuance, which could result in differences from this preliminary unreview financial information. 2016 | Braskem | Annual Report 4 capital in a greenfield project which is eight times lighter than At the end of 2016, as a result abroad. In the fourth quarter, steel and ten times more durable of the full provisioning of the the average operation rate of than high density polyethylene resources established through the three polyethylene plants in (HDPE), at a competitive cost. the Global Agreement to be paid the Complex was 73%, reaching to Brazilian and international 97% in December. Polyethylene Governance and Compliance authorities in the fourth quarter US$ production in Mexico totaled Illegal acts committed by former of 2016, the Company posted a 443,000 tons in the year. members and agents of Braskem consolidated net loss of BRL 768 were confirmed in 2016, based million for the year, even after It is also important to note the on information disclosed in the retained earnings in the three 5.2 closing of the ten year contract context of Operation Lava-Jato. previous quarters. BILLION to purchase ethane imported from the United States from an As the main interested party It is important to remember that, invested in affiliate of Enterprise Products. clarifying the case, Braskem since the second quarter of 2016, the Mexican The agreement is part of a acknowledged its responsibility Braskem had already implemented Petrochemical project to modernize and make for those acts and regrets a wide revision project of its Complex flexible the use of raw material past conduct. The internal Corporate Governance structure, of the petrochemical plant in investigation process culminated which aimed to implement a new Bahia, which predominantly in the global agreement signed Compliance Program in order to operates using naphtha. The with authorities in Brazil, the strengthen the responsible area initiative, with an investment United States, and Switzerland, with direct report to Braskem’s of BRL 380 million, will enable announced in December. Through Board of Directors and significantly the production of up to 15% of the Global Agreement, Braskem reduce the possibility of any ethylene using ethane as raw agrees to pay the amount of deviation of a similar nature to material. The new operation is BRL 3.1 billion as a fine and those identified. In addition to the expected to begin in the second indemnity, and implement initiatives already implemented “A” half of 2017. improvements in its compliance in 2016, the program presents LIST and internal control systems. This almost a hundred initiatives that The prospects are promising commitment will be accompanied will also be carried out throughout after we commissioned the by external monitors, appointed the course of 2017. of CDP Ultra High Molecular Weight by the Department of Justice Investor, Polyethylene (UHMWPE) plant in (DOJ), the Securities and Sustainable Development international La Porte, Texas, USA, in 2016, to Exchange Commission (SEC), Braskem maintains a consistent seal recognizes enable better customer service in and the Federal Public Prosecutor course of action to promote companies North America and Europe. The (MPF - Ministério Público Federal) sustainable development. We with standards plant was built from Braskem’s for up to three years, to ensure are proud to be the first industry of excellence own technologies, enabling compliance with the terms of the in Brazil to join the “A” List in carbon management. production of this product, agreement. of CDP Investor in 2016, an 2016 | Braskem | Annual Report 5 international seal that recognizes which aims to foster businesses companies with excellent carbon and initiatives for appreciation of management standards. This recovery, reinforcing Braskem’s achievement is in line with commitment to the plastic chain our engagement in different in Brazil. national and global forums linked to promoting sustainable Innovation development such as UN Global Our Company’s contribution to Compact, of which we have been a sustainable world is supported a signatory since 2007, as well by regular investments in as supporting its outstanding research and development of participation in lists such as innovative solutions capable the Dow Jones Sustainability of providing high levels of Emerging Markets Index (DJSI) productivity and reducing and the Corporate Sustainability impacts on the environment. Index (ISE) of the Brazilian Stock Innovation initiatives are the Exchange (BM&FBOVESPA). result of the joint efforts of our Technology and Innovation Among the most important Centers located at the Triunfo initiatives in 2016 is the petrochemical complex in Rio Movimento Menos Perda Grande do Sul, Brazil, and Mais Água (Less Loss More in Pittsburgh, United States, Water Movement), a water as well as our laboratories in management project aligned with Campinas, in São Paulo, Brazil, the UN Sustainable Development focused on biotechnology. In Goals initiated by the Brazilian addition, in 2016 we expanded Network of the Global Compact, our innovation structure which has Braskem and SANASA with the inauguration of the as leaders. European Technical Center, located at the Wesseling plant With a focus on generating in