February 22, 2017 / 11:49 AM / a year ago

Brazil's Braskem cuts capex after fine hits earnings

SAO PAULO, Feb 22 (Reuters) - Brazil’s Braskem SA is trimming investments this year as it winds down spending on a new plant in Mexico and cuts back strategic new projects after a bribery settlement hammered earnings last year, according to a Wednesday securities filing.

Latin America’s largest petrochemical company plans to invest 1.814 billion reais ($586 million) in 2017, down from 2.975 billion reais invested last year, including 1.195 billion reais to Mexico’s Ethylene XXI.

Unaudited year-end results released on Wednesday showed a fourth-quarter net loss of 2.637 billion reais, down from a net profit of 35 million reais a year earlier, due to fines of roughly 3 billion reais in a huge graft settlement.

Braskem and shareholder Odebrecht SA agreed in December to the largest penalty ever in an international bribery case, resolving an investigation into political kickbacks at state oil company Petroleo Brasileiro SA.

The company said in the filing on Wednesday that it had pushed back a deadline for auditing its 2016 earnings until March 29, due to additional work improving internal controls after the accord with Swiss, U.S. and Brazilian authorities.

Excluding the impact of the fine, earnings before interest, taxes, depreciation and amortization, a gauge of operating profit known as EBITDA, rose 10 percent to 2.385 billion reais. The Mexican plant boosted the contribution of operations outside Brazil to 29 percent of EBITDA, from 12 percent a year ago.

“The challenges to the macroeconomic outlook in 2016 remain present in 2017,” the company said in its earnings release, a reference to a deep two-year downturn for the Brazilian economy.

Braskem said it expected new polyethylene capacity in the United States to come online in late 2017 and 2018, pressuring the profitability of polyethylene globally, which should recover starting in 2019.

The spreads for other plastic resin prices over the cost of their raw materials should be more stable, Braskem said, especially in the U.S. polyproylene market, where no new capacity is expected until the end of the decade.

$1 = 3.095 reais Reporting by Brad Haynes; Editing by Keith Weir

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