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Braskem S.A. (NYSE: BAK), a leading chemical company with annual revenues of $13.8 billion, announced today that it is reassessing its investment strategy and has decided to discontinue new investments in Oxygea, its digital transformation initiative with startups.
The decision is part of Braskem’s broader strategy to reevaluate and prioritize its assets and investments to optimize capital allocation and cash generation, particularly important given its significant debt burden of $11.87 billion.
Oxygea was established as Braskem’s vehicle for fostering digital innovation in collaboration with market startups. However, the company has clarified that innovation remains a strategic pillar and that it will continue to develop innovative solutions, products, and processes. According to InvestingPro data, Braskem’s stock has seen significant volatility, currently trading 57% below its 52-week high of $10.98, though analysis suggests the stock may be undervalued at current levels.
The move comes as Braskem focuses on strengthening its financial position and streamlining operations. The reassessment of investments is in line with Braskem’s commitment to sustainable growth and value creation for shareholders.
Despite the discontinuation of new investments in Oxygea, Braskem maintains its dedication to innovation as a core aspect of its business strategy. The company’s decision is reflective of a careful analysis of its investment portfolio and the need to prioritize projects with the highest potential for return.
With a gross profit margin of 7.82% and negative free cash flow, this strategic shift aligns with the company’s need to improve operational efficiency. InvestingPro subscribers have access to over 10 additional key insights and a comprehensive Pro Research Report that provides detailed analysis of Braskem’s financial health and future prospects.
The information is based on a press release statement from Braskem’s Investor Relations Department.
In other recent news, Braskem SA (NYSE:BAK), a leading chemical company, announced a substantial $614 million investment plan to expand its production capacity in Brazil. The funds will be allocated towards seven projects expected to increase output by approximately 139 thousand tons across various regions. This investment is part of the Petrochemical Industry Special Regime, a government initiative offering a 1.5% tax credit for capacity-expanding investments in the Brazilian chemical industry. The company’s commitment to these projects is expected to create over 2,200 jobs during the construction phase.
Additionally, Braskem SA has undergone changes in its Statutory Compliance and Audit Committee, appointing Mr. Gustavo Raldi Tancini as an independent external member and financial specialist following the resignation of a key member. The company also reported a robust Q3 performance, with a 130% year-over-year increase in recurring EBITDA, reaching $432 million, and a 35% increase from Q2. Sales volume in Brazil grew by 6%, demonstrating resilience in its operations.
In legal developments, a São Paulo court partially favored an appeal by Novonor, Braskem’s controlling shareholder, overturning a previous ruling that had awarded damages to Braskem. This decision could add complexity to Braskem’s already significant debt burden.
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