MANAGEMENT
REPORT – 2009
SCENARIO
The Company´s businesses in 2009 were heavily affected
by two adverse and concurrent events: the global financial crisis that started
in 2008 and the onset of the slowdown that usually happens after heavy
investments in expansion in the petrochemical industry.
The governments of all countries affected promptly
responded to the financial crisis by coming to the rescue of financial entities
that struggled with poor assets quality and maintenance of general market
liquidity problems, by adopting public policies that involved massive releases
of public money. These policies
gradually contributed to restore the confidence of the economic agents, with
what a slight resumption of business activities began in the second quarter of
the year.
Especially because of temporary tax relief policies
and incentives to credit expansion, the Brazilian economy succeeded in
attracting new consumers to the market and preserving the purchasing power of
consumers in general. As a consequence,
the domestic market remained relatively hot, thus partly making up for the
decrease in investments and exports of manufactured goods.
The activity in the chemicals-for-industrial-use
industry, which was low in 2008 due to stoppages for programmed maintenance of
the main raw material centers, rose by 3.5% at the end of 2009 in terms of
volume. However, prices fell by 21.8%
and margins shrank, thereby adversely affecting the profitability of companies
from this industry.
In the international market, the average of price of
petrochemical naphta, a basic raw material which bears heavily on the prices of
end-products of this industry, was 35% lower than in 2008 (from US$ 807 against
US$ 524). This significant price fall
reflected on all the petrochemical chain products, the downward trend being
aggravated by production surplus in global markets, then
harshly stricken by the financial crisis and the usual downturn cycle.
The decrease in domestic prices of petrochemicals in
Brazilian Reais was relatively even greater, due to a drop in the international
prices and in addition,
negatively impacted by the strong appreciation of the Brazilian Real against the
US Dollar.
THE
COMPANY´S OPERATIONS
As a confirmation of the Brazilian economic recovery
against a background of global crisis, Elekeiroz´s physical volume of shipments
in 2009 - 422,6 thousand t - was only 6.4% lower than the
previous year´s. The way shipments evolved throughout 2009 clearly reflected
the economic recovery with resumption of pre-crisis figures. In
relation to the same periods in 2008, the shipments fell by 32.1% in the first
quarter, and rose by 41.2% in the 4th quarter, respectively.
The domestic market continued to be the main target of
the Company´s sales, having absorbed 90% of its total sales, against 92% in
2008. The organic and inorganic
products´ share in total sales in 2009, respectively 51% and 49% - were the
same as the previous year´s Exports, as
usual, were only of organic products.
PERFORMANCE
IN THE PERIOD
At the end of the first quarter, the Company was
affected by a substantial inventory adjustment, an extraordinary event brought
about mainly by the heavy international devaluation of sulphur, its essential
raw material for manufacturing inorganic products. This event hurt its performance for the whole
of the fiscal year, with R$ 43.4 million of pretax losses on inventories being
recorded in its “Income” account.
In the first quarter 2009, its Gross Revenue of R$
159.8 million, decreased 44.3% over the same period of 2008. However, as early
as in the 4th quarter, the decrease was reduced to only 10% in
relation to the previous year, thus showing a strong recovery.
Nevertheless, if one considers the whole of 2009, the
Gross Revenue – R$ 712.8 million – and the Net Revenue – R$ 571.2 million, fell
by 35% as compared to the 2008 figures, thus pointing to an important fall of
international prices and the Real appreciation in relation to the US Dollar,
with serious damages to the Company´s results for the year.
The result of all this was R$ 21,5
million of Operating Losses for the year (before the Equity Pickup) in 2009,
against profits of R$ 105.5 million in the previous year. The effect of these
results combined with the provision for income tax on tax losses, up to the
amount recoverable in the immediate future, was Net Income of R$ 3.8 million
(2008 – R$ 81.2 million) and a negative EBITDA of R$ 0.4 million (2008 - R$
126.2 million).
STRATEGIC
MANAGEMENT, SUSTAINABILITY AND ENVIRONMENTAL MANAGEMENT
During the whole of 2009, investments that had begun
to be reduced since the beginning of the financial crisis, were limited to R$
16.9 million. Except for funds to cover expenses incurred on completing the
expansion of Plasticizer production in Várzea Paulista by 14% of the total capacity,
a project that was in a point of no return, all resources were channeled to
maintenance of existing facilities, labor security and environmental
protection.
In 2009 Elekeiroz stood out for receiving the
Honorable Mention at the 15th edition of “Prêmio FIESP de Mérito
Ambiental” (FIESP Environmental Merit Award), for its specific actions at the
Phtalic Anhydride unit at Várzea Paulista, which enabled reduction of
greenhouse gases emission and lower energy, water and raw material
consumption. The work was presented at
the “Mostra FIESP/CIESP de Responsabilidade Social-Ambiental”
(FIESP-CIESP Exhibition of Social
and Environmental Responsibility) held in August 2009.
Despite the worldwide crisis, in-house special
sustainability programs proceeded, with the specific employee committees´
efforts directed towards reduction of water, energy consumption and effluent
generation, as well as systematic material recycling.
The Company has adhered to the International Council
of Chemical Associations´ “”Programa de Atuação Responsável” (Responsible
Performance Program), administered in Brazil by ABIQUIM – Brazilian Chemical
Industry Association.
HUMAN
RESOURCES
At the end of 2009 the Company had 683 employees,
having spent R$ 58 million on salaries, payroll taxes, meals at work site,
staples, transportation, medical care, insurance, supplementary
pension/retirement plan and training (44,335 hours).
DIVIDEND
DISTRIBUTION
Subject to ratification at the General Shareholders´
Meeting, on December 22, 2009, the Administrative Council decided to distribute
R$ 1.6 million of dividends by way of interest on own capital in the amount of
R$ 0.05082 per share. The net
withholding income tax on total dividends declared – R$ 0.04319 per share –
represents 37% of the net income used as a basis of calculation in fiscal 2009.
CVM INSTRUCTION
381
The BDO independent auditors rendered only auditing
services to the Company in 2009.
ACKNOWLEDGEMENTS
The Management thanks the shareholders, co-workers,
clients, suppliers and financial institutions for their trust in its work and
their joint efforts to rise to the new challenges faced in 2009, as a
consequence of the changes in the global economic picture.