Unipar Carbocloro S.A. ($UNIP6)

Welcome to the earnings conference call for the fourth quarter 2025 and the full year of 2025 of Unipar. Joining us today, we have Rodrigo Cannaval, CEO; Alexandre Jerussalmy, CFO and Investor Relations Officer; and the IR team. Please note that this event is being recorded and translated simultaneously. The translation is available by clicking on the interpretation button. [Operator Instructions] The presentation is available for download on the platform and on the company's website at ri.unipar.com. [Operator Instructions] Before proceeding, we would like to clarify that any forward-looking statements that may be made during this conference call regarding Unipar's business prospects, financial and operational projections and goals constitute beliefs and assumptions of the company's management as well as information currently available to Unipar. Forward-looking statements are no guarantee of performance as they involve risks, uncertainties and assumptions since they refer to future events and therefore, depend on circumstances that may or may not occur. Investors and analysts should understand that general economic conditions, industry conditions and other operating factors may affect Unipar's future results and could cause actual results to differ materially from those expressed in such forward-looking statements. I would now like to turn the floor over to Alexandre Jerussalmy, who will begin the presentation. You may proceed, sir.

Hello, everyone. Welcome to our earnings call for the fourth quarter of 2025 and the full year 2025. Please note that the figures presented in this call have been adjusted to exclude the effects of IAS 29, the accounting standard applicable to hyperinflationary economies as is still the case in Argentina. And let's start with operational highlights for 2025, which included achievements that undoubtedly strengthened the resilience of our business model. We delivered another year of operational excellence, achieving an average electrolysis utilization rate of 80%. This year, our highlight is our Santo Andre plant and also our new plant in Camacari, which is already operating at full capacity. We achieved record sales of sodium hypochlorite and liquid caustic soda, reinforcing our focus on chlorine-derived products that are not exposed to the petrochemical cycles where Unipar benefits from scale and differentiated delivery capabilities to our clients. In 2025, we also achieved the highest level of consumption of self-produced renewable energy in Brazil, which represents one of our key pillars of competitiveness in accessing strategic inputs. From a CapEx perspective, our Bahia plant delivered in December 2024, is already operating at full capacity, as previously mentioned. And within the context of our technological modernization project in Cubatao, we discontinued our mercury-based electrolysis operation in December 2025, and we paved the way for the start of operations using the new technology as of March. With this, we concluded the largest CapEx cycle in the company's history. So this was a very important hallmark for the company as to CapEx cycle. As you can see, in 2025, we maintained our focus in increasing our competitiveness through more efficient technologies and the use of more competitive energy through sales concentrated in our local market, both in Brazil and Argentina, where we are recognized as offering a differentiated solution to our clients due to proximity to production, scale and reliability of supply. And we also maximized the sale of chlorinated products, capturing opportunities arising from investments in the sanitation industry, for example. And this is a strategy to face external challenges beyond Unipar's control, which is basically -- are basically the petrochemical cycle, which brings persistently low margins, a high volume of PVC imports, which reached record levels in Brazil in 2025 and the PVC market in Argentina, which remains weak as a consequence of the country's macroeconomic reforms. Moving on to the next slide. We can see the economic and financial highlights for 2025. We achieved a recurring adjusted EBITDA of BRL 1.109 billion, 16% higher than in 2024 with a margin of 22%. We achieved a net profit of BRL 482 million for the year, and we had an operating cash flow of BRL 1.248 billion. Our cash position ended the year at BRL 1.078 billion, accounting for a coverage of 26 months of debt amortization and our leverage closed the year at 2.2x, which is a very comfortable level considering that our debt has an average maturity of 73 months with 90% maturing only from 2029 onwards, and we have practically no debt with commercial banks. These solid results in 2025 were marked by initiatives aimed at reduced fixed costs. We generated a reduction of approximately BRL 67 million in 2025 when compared to 2024. I will provide more details about this during my presentation. With the completion of the largest CapEx cycle in the company's history, as previously mentioned, which eliminates a factor of leverage pressure and also the improvement of our debt profile, which gives us comfort for the coming years. Our vision remains long term, aiming for ever greater resilience to face external challenges such as the persistent petrochemical downturn. On the next slide, we present the highlights of the fourth quarter of 2025. During the quarter, we had an electrolysis utilization rate of 79% with Santo Andre and Camacari plants standing out. Sales volume reflected the seasonal effects typical of the last quarter of the year in addition to the pressure of Brazilian PVC market with chlorinated PVC sales in line with the previous quarter and reduced sales both of PVC and caustic soda. We saw an increase in the volume of electricity from self-produced to renewable sources in Brazil, which accounted for 68% of consumption in the quarter when compared to the 63% in the previous quarter. From an economic results perspective. Our recurring EBITDA was BRL 182 million in the fourth quarter of 2025 with a margin of 16% lower than the EBITDA of the third quarter, mainly due to the drop in international prices of caustic soda and PVC in the fourth quarter of 5% and 10%, respectively. And this recurring EBITDA of the fourth quarter was adjusted by excluding some nonrecurring expenses incurred in the fourth quarter of 2025, which were the accounting provision for negative margin of PVC inventory, which may be reversed depending on the dynamics of future prices of PVC. And several other expenses were related to the completion of the technological modernization of Cubatao such as expenses for the discontinuation of mercury-based electrolysis and the write-off of spare equipment inventories related to the technologies, which are being replaced. As to operating cash generation, we ended the quarter with a generation of BRL 296 million. The following slide shows the evolution of electrolysis utilization rates in Brazil and Argentina and shows a consistently consolidated rate at around 80%, which we consider quite healthy. We also saw a positive growth in the volume of self-produced energy in Brazil, reaching on average 60% in 2025 despite the curtailment of 20% for the year and 68% on average for the quarter with curtailment at 13%. This shows that from a production capacity standpoint, we already have technical conditions to reach 80% of self-produced energy in Brazil without the need for additional investments. On Slide 8, we show the evolution of our net revenue, both on an annual and on a quarterly basis. For the year, we had a 1% increase in revenue with the effect of lower PVC sales, offset by higher sales of chlorinated products and record sales of caustic soda as I mentioned, reach those levels. We also had an impact of the 13% reduction on average in international PVC prices, partially offset by the 7% increase in the average international prices of caustic soda. In the fourth quarter of 2025, our net revenue fell by 11% compared to the previous quarter. And this was driven by the drop in international prices, both for caustic soda and PVC, the effect of seasonality, which typically drag down sales volume during this period in addition to the PVC market, which remains pressured by the imported PVC coming especially from Colombia and Egypt as we have seen in the previous months. We also felt the impact of sales of chlorinated compounds, which remained stable from one quarter to the next. But bearing in mind that our focus continues to be on maximizing the volumes of production and sales of chlorinated compounds and on our capacity to offer differentiated solutions and scale to our clients as well as the fact that this segment is not exposed to the effect of the petrochemical cycles. Regarding costs, as shown in Slide 9, the year's performance was quite interesting and highlights how we have used cost reduction initiatives as a tool to strengthen the resilience of our business. We experienced a 4% year-over-year increase in our cost of goods sold, or our COGS, impacted by the higher cost of ethylene being consumed by Unipar, which was influenced due to the appreciation of the euro against the real during the period. And conversely, there was a positive impact on the COGS related to some improved technical coefficients and the greater share of self-produced energy in Brazil. In the quarter, our COGS was 6% lower when compared to Q3 2025, mainly due to the lower sales volume of caustic soda and PVC during the quarter, the reduction in the average price of ethylene consumed by Unipar and also as a result of the increase in the volume of self-produced energy in Brazil. And when we add, looking at the graph to the right on your slide, when we add the fixed costs embedded in the cost of goods sold to the general and administrative expenses, when we compare 2025 and 2024, we see a 5% reduction year-on-year, equivalent to BRL 67 million. This positive result in terms of fixed costs was the result of an outcome of a series of efforts and initiatives focused primarily on reorganizing teams, consolidating senior positions, fewer positions at the company. In other words, we concentrated positions in fewer executives. And we also reviewed the processes and adopted a number of initiatives to promote automations. Automations applied in some industrial routines as well as some corporate routines. So this cost reduction initiative undoubtedly generates greater resilience and recurring gains for the future of the company as we have been disclosing to you in the previous quarter, and this is a major effort we have been making throughout time. And as a result, on Slide 10, we see the evolution of EBITDA on both annual and quarterly basis. So year-on-year, our recurring EBITDA increased by 16% in 2025, reaching BRL 1.109 billion and a margin of 22%. This is a result of higher sales of chlorinated products and soda despite the lower sales volume of PVC as well as initiatives to reduce fixed costs. The positive effect of the 4% devaluation on average of the real versus the U.S. dollar and the higher volume of self-produced energy. During the year, we had the impact of the movements in international prices with an increase in the international price of caustic soda and a decrease in the price of PVC, as I previously mentioned. When nonrecurring gains for the year are added, which had a net effect of BRL 57 million, the adjusted EBITDA for 2025 reached BRL 1.166 billion with a margin of 23%. On a quarterly basis, our recurring EBITDA for the fourth quarter of 2025 represented a 32% decrease when compared to the third quarter with a margin of 16%. And this result reflected the drop in sales volume of caustic soda and PVC in the quarter, driven in part by the seasonality of the period and also the drop in international prices for both caustic soda and PVC, as I previously mentioned as well. And I will mention some nonrecurring effects. So when we add the nonrecurring effects in the quarter that reached BRL 39 million in expenses, as when I mentioned, the provision of negative margin related to PVC inventory and also the expenses associated with the phaseout of the mercury-based technology. So when you add those nonrecurring expenses of BRL 39 million, we come to an adjusted EBITDA of BRL 143 million now in the fourth quarter with a margin of 12%. Moving on to Slide 11, we can see the evolution of the cash balance, both on annual and quarterly basis. During the year, we had an operating cash generation of BRL 1.248 billion, a CapEx of BRL 1.1 billion, net inflows of BRL 1.2 billion, notably the disbursement from the financing -- from BNDES and the financing guaranteed by ECA, Euler Hermes, the German unit for the Cubatao project and those from the Banco do Nordeste for the plant built in Bahia and recently inaugurated in the end of 2024, in addition to BRL 1.4 billion related to dividends and share buybacks. As a reminder, the completion of this CapEx cycle, which was the largest in our history, represents a milestone for Unipar and eliminated a [ factor ] putting pressure on our leverage. In relation to dividend distributions, you can notice that we distributed dividends a little bit above the average this year, but our debt profile remained extended and the credit profile remains very healthy when it comes to year-end results. In the quarter, we had an operating cash flow of BRL 296 million, which although positive reflects the tight margins in caustic sodas and PVC in the quarter as previously mentioned. On Slide 12, we detail our debt profile. So we ended the year with 26 months of cash coverage in relation to our debt amortization. We ended with 90% of the debt due from 2029 onwards and with an average maturity period a little over 6 years. So in fact, between '26 and '28, there is no pressure and no concentration of debts concentrated in the 3-year period. Our debt is primarily comprised of debentures and development banks, which characterizes our fluid access to capital markets without significant exposure to commercial banks. This is a very important point to be mentioned. In December, our rating outlook for Fitch was changed from neutral to positive. And we have already disbursed at the end of the year, equivalent of 81% of the BNDES financing to the Cubatao project. So we had some disbursements along the quarter as well. So in other words, our debt profile is quite healthy with no concentration of obligations in the next 3 years, and we have no overdraft from the commercial banks that would represent a more expressive, more relevant amount. And this is it, I now pass the floor to Cannaval, who will comment a bit on our strategic projects. Thank you all. I'll be back with you again in the Q&A session. Over to you, Cannaval.

Thank you. Good afternoon. Thank you, Alexandre, for presenting the results. And I thank everyone who is joining us for this teleconference. Before opening for the questions, I would like to add a brief note. It's important to highlight our commitment to the future. We always approach the short term with discipline but always keeping our long-term vision in mind. So in this context, in 2025, we executed the largest investment cycle in Unipar's history with CapEx exceeding BRL 1 billion. We directed resources towards strategic projects that further strengthen our competitiveness and advance our sustainability agenda. Certainly, the technological modernization of Cubatao is one of the main examples that confirms our directions. It represents expansion through efficiency, contributes to operational excellence, reduces carbon emissions and strengthens the company's competitiveness. We launched our modernized operations this month, opening a new chapter in Unipar's history. In 2026, we'll continue with new strategic projects. In Santo Andre, we have 2 important investments, expanding our chlorine capacity gives us more competitiveness and flexibility. And we also have another project to increase PVC Emulsion capacity with a higher added value, a project supported by the tax incentive promoted by the special regime, REIQ. I would also like to highlight the progress of our factory in Camacari. We are working at full capacity, and we have begun the second phase with the goal of serving the agribusiness sector. Along the same lines, we have renewable energy projects, which continue to perform very well, as already mentioned, but we continue to move forward, and we have just announced a new partnership with Casa dos Ventos for a new solar park in Mato Grosso do Sul, another project focused on competitiveness and sustainability. These are important examples from our long-term agenda. In conclusion, I believe we closed the 2025 cycle with a solid result that reflects the resilience of our business. The complex scenario that we have been experiencing since mid-2023 has repeated itself. This produced an environment marked by high volatility and the continuation of the petrochemical downturn cycle. In this context, our EBITDA -- adjusted EBITDA recurring revenue grew by 16%, and our margin grew 3 percentage points from 19% to 22%. When we look at the sector, we continue to believe in the fundamentals of the chemical industry. This is a essential industry for various production chains from sanitation to agribusiness, construction to infrastructure and one that should benefit from the gradual recovery of global cycles over the next few years. Unipar remains committed to an agenda focused on implementation, execution, efficiency and sustainable generation of value for all its stakeholders. Thank you very much. I will now hand the floor over to Raquel, who will open the Q&A section.

Thank you, Cannaval. We'll now open the Q&A session. [Operator Instructions] Our first question comes from Nicole Alonso with Santander.

I have 2 questions on my side. I have one about the dynamics of margin. How do you see margin considering the current scenario? Considering the PVC market price, has it been high enough to offset the price of ethylene? So how is it going to play out in terms of indexation? And the other one is in relation to the leverage. So how do you see the trajectory of leverage and the distribution of dividends?

Thank you, Nicole. Jerussalmy speaking on the side. I'm going to start from the last question, and then Cannaval will make comments about the first question, okay? In relation to the leverage, this is something that was to be discussed internally in terms of what would be our ideal leverage after the CapEx cycle is completed, as we said the largest in history, we consider it to be natural that a more intense CapEx cycle, we should have an increase in the leverage. On the other hand, we have a debt profile, which we have been working in the past few years, which is a very comfortable debt profile with the average maturity of over 6 years. As we said in the presentation, this leverage is not a concern for us. But on the other hand, we are going to continue working on the reduction of this leverage, especially in relation to the CapEx of last year. in terms of dividend, we have a very clear dividend policy with minimum levels for distribution, which is 20% of our net results. And whatever excels the 25% will be discussed at Unipar, and we are going to evaluate what would be the impact of the leverage on the liquidity levels. So in fact, we cannot provide any guidance in terms of how we are going to go about with our dividend policy. What we can say is that we are implementing a number of initiatives focused on reducing the leverage that reached the peak as a result of our CapEx cycle. I turn the floor to Cannaval so that he can make comments about the dynamics.

Thank you, Nicole, for the question. We would like to mention that first Unipar has part of the business exposed to sanitation. And this provides us with a certain level of resilience considering downturn cycles in the petrochemical industry. And this has been the reason for our success. What we noticed in the beginning of the year was a slight recovery of prices with a slight recovery of margins. And to see -- today, we see a high volatility situation. We have already increased the PVC prices, we saw an increase in prices of caustic soda in the international market. And we also saw an increase in international freights. And somehow, those are elements that would contribute in a positive way to Unipar. But on the other hand, considering the increase of natural gas, we also see the price trends of ethylene and now needs to know how to navigate in this volatility environment so that we can capture better margins even with increase in prices, observing all the market opportunities that we see considering the war.

Our next question comes from Regis Cardoso with XP.

If we could continue from the previous question and go into details about the effect and impact considering this context since the Iran conflict started. I understand the moving parts that you have already mentioned related to freight, of energy, gas, naphtha. But I don't know if we can go deeper into detail to talk about the spreads because the difficulty that I've been having is to understand what grows the fastest, the revenues or the costs considering that both have to be included in the inflationary calculations. So this is the first question. The second one, Jerussalmy, if you could disclose the effect of the write-off and the inventories and how you intend to do the recognition of those items in the results longer term. So in the future results, will those costs be repositioned, all the costs that have been written off?

Regis, thank you very much for the question. As you mentioned, I agree with you. It's been very hard to understand the behavior of the margins considering the volatility at play. What we see is we have to observe the demand aspect, Regis, at this time around and also the inventories at the chain. I'm not going to be very precise in my answer about what -- which will happen first. Both will happen, but we are still to see what the pace will be because somehow we have a demand of PVC in Brazil that has -- is weak, considering that civil construction is also weak, and we are going to see a global downturn. So we saw some announcements from major Chinese producers. So these dynamics and a drop in offer will make the inventories equalized. So this is the expectation for me to have a clear snapshot of this scenario so that I can provide a more precise answer in the future. But thank you for the question.

Regis, this is Jerussalmy. I'm going to answer your second question. So in relation to the effects of inventory, the impairment to be precise. We -- in fact, at the end of the year, we closed the year with a higher level than usual of inventory levels, especially PVC inventories. And this was a decision we made internally because the market at that time was very pressed. So we decided to keep the PVC at the company because we have no cash pressure to get this PVC to have an adequate margin. So this is a strategy that we adopted because we want to sell products at healthy level in search of profitability. And because of this, we had to do the accounting impairment of this PVC inventory at the end of the year, which is an accounting methodology. We have the position of inventories at the end of the year. You look 3 months ahead of you and you project what you expect in terms of prices for the next 3 months and then you make a comparison with the cost that you would have in maintaining the product in inventory if the price is higher or considering what you plan to sell and then you do the impairment. So what we have seen is that the projections, not ours only, but the market at large were very different from what is happening. And this is what Cannaval mentioned. We have seen a high level of volatility in prices in relation to PVC prices. We have seen a significant increase. As you said, we have to pay a lot of attention to what will be the increase in the inputs so that we can understand what will be the effect on the spread. But it includes a provision of negative margin inventories. It will affect the price of PVC, only that. So at the end of the March, we will need to look at the price at the end of March and for the next months and evaluate if we have accounting possibilities to revert this provision that we recognize at the end of the year. This is with the NYMEX we adopt. And this is why from the viewpoint of recurring items, we exclude this effect of inventory impairment because we do not consider that this effect is aligned with the result that we posted for the fourth quarter. So it's an accounting effect that we look into the future in terms of price reduction. And depending on the price dynamics, we can reverse this provision.

Our next question comes from Santiago [ Guacio ] What's the reduction percentage in the sales that we can expect considering the stop of operations in Cubatao.

Thank you, Santiago, for the question. So this is what happened. We got ready during some months to get to the moment, which is very close when we are going to start using the new technology. So all this time started with inventory management and then we discontinued the mercury based electrolysis process, and that started in December last year. And it also included the discontinuation of the diaphragm technology. And together with that, we did a very good inventory management so that the clients will be supplied. In relation to your specific question, which would be the effect on the sales, we will not have a relevant effect because together with that, we did the inventory management that was part of the preparation for the replacement of technologies. It's important to mention that there was no stop in the production because we continue using the membrane technology in Cubatao. So it was an adjustment in the pacing for us to start using the new technology.

Another question by Santiago [ Guacio ]. What would be impact to Unipar as a result of the law that has just been approved that reduced the taxes for the petrochemical and chemical industry.

Thank you for the question. In fact, there's going to be an impact on our company. It's a positive impact. We're going to be favored by this government decision, especially when it comes to consumption of the imports in Brazil, especially ethylene. So that means that as to ethylene consumption for the PIS and COFINS taxes, the payment will be lower than in the past. And we will be able to capture this benefit as of March.

[Operator Instructions] We have 2 questions, one from [ Renaldo Kramer ] and another from [ Luciana Alexander ] Citi related to the CapEx for 2026 and about the new technology in the results of the first half of 2026.

Thank you very much for the question. In relation to the CapEx for the year, unfortunately, we do not provide guidance about the CapEx projection. But what I can disclose to you is that it's going to be significantly lower than the CapEx that we had in 2025 because the expenses related to the main project that we have, which is Cubatao project have been concluded. In relation to Cubatao project, the modernization of the plant. If we start up the project now in March, we are going to start since March. So we're going to get some benefits from the go-live of this project. And in the following 9 months after the beginning of the operation, we will have the full benefit offered by the project. So we are going to have a technology, which is new, membrane, state-of-the-art, modern. We already know this technology because it's the same that we use in Santo Andre and Camacari plants. So we are familiar with this plant. We have executed the ramp-up of this technology in the new Camacari plant, which was very successful. It's a technology that will maintain the nominal capacity of the plant, and we will also be able to produce chlorine and caustic soda consuming less energy. If you look at Cubatao plant as a whole, the consumption will be 18% lower in general in addition to the fact that CO2 will be avoided to be emitted. So -- and we're going to reduce the volume of solid waste 150 tonnes a year will be reduced. So it's critical technology because it will bring economic benefits. The EBITDA will be positively impacted because we're going to consume fewer inputs, and we will have the positive effect on the environment that help us in this journey of using clean technologies at the company and becoming ever more sustainable. So this is a technology that benefits both sides. And this is the reason why we managed to have this differentiated loan from BNDES because it affects both the modernization and also the sustainability, and this will replace the previous obsolete technologies. We have another question from [ Vidal Morato ]. Camacari plant in Bahia will be able to meet the need of chlorine and soda in the Northeast region in the next years, considering there are many investments in sanitation companies in that region or will there be the need for expansion in the plant?

Without a doubt, the sanitation law is an opportunity for Unipar to develop. The new project in Camacari took into consideration the future market growth, and this is a very important fact. And there is also something new we would like to share with you related to Camacari plant. The third quarter of this year, we are going to start to supply liquid chlorine in the region of Camacari, but we are also going to meet the needs of the agribusiness needs. So we are prepared to absorb the agribusiness demands as well as the future demands from the sanitation.

We have now closed the Q&A session. I would like to turn the floor over to Jerussalmy for his final remarks.

Thank you, Raquel. First of all, thank you very much for attending this call, for taking part in the call. Thank you very much for the questions. In the fourth quarter, we had some impacts and some of them were driven from the petrochemical sector. Others were also related to our phaseout of our Cubatao plant. But we also had a cash operating, which was very solid in the quarter. And for the year, what we saw was an excellent year in terms of results, the highest result in terms of cash generation and recurring EBITDA when compared to 2025. We implemented a number of new measures this year to improve our processes, to automate to organize our company. All the measures will have a recurring impact on our results. We also had the capacity to improve our debt profile. So the debt is much more elongated and the format is very satisfactory, very competitive in terms of profit and competition. And there's also something that we pointed out, which was related to the CapEx cycle. We were dare enough to make this technological modernization in Cubatao plant. And we also brought in this new plant of Camacari that started operating in 2024. And we also brought some strategic projects that was mentioned by Cannaval during his presentation. And we also established this results pathway because as the projects are completed, all this will be brought into the company in terms of benefits. So the company becomes ever more resilient to face the up and down the petrochemical cycles and also to use the opportunities and capture the segment of chlorinated products such as those related to the sanitation loss. So we are watching all the opportunities very closely so that we can take advantage of all of them. So we completed 2025 much better than we ended the previous year of 2024, and we are ready to face the challenges of 2026. Thank you very much. And I would like to give an invitation for you to take part in our conference call in May, and have a nice afternoon, everyone. [Statements in English on this transcript were spoken by an interpreter present on the live call.]