In a recent development, BRASKEM S.A. (NYSE:BAK), a leading chemical and petrochemical company, announced that the Executive Management Committee of the Foreign Trade Chamber has approved a significant increase in import taxes on certain chemical products. The tax hike, from 12.6% to 20%, affects a range of products that Braskem markets, including various types of polyethylene (PE) and polypropylene (PP) resins, as well as polyvinyl chloride (PVC) resins.
This adjustment in import taxes is part of the List of Temporary Tariff Increases due to Conjunctural Trade Imbalances of Camex and is expected to have a positive impact on the Brazilian chemical and petrochemical industry. The new tax rate will be effective for one year starting from the publication date in the Brazilian Federal Official Gazette.
The products subject to the increased tax rate include PE resins such as polyethylene with a density of less than 0.94, other polyethylenes without fillers with a density greater than or equal to 0.94, copolymers of ethylene and vinyl acetate, and copolymers of ethylene and alpha-olefin with a density of less than 0.9. The PP resins affected are polypropylene without fillers and copolymers of propylene, all in primary forms.
Moreover, the PVC resins impacted by this change are poly (vinyl chloride) not mixed with other substances obtained by suspension process.
Braskem has communicated this information to its shareholders and the market, indicating that the tax increase is expected to bolster the domestic industry. Shareholders and investors seeking more information have been directed to contact Braskem's Investor Relations Department.
The notice by Braskem also contains forward-looking statements, cautioning that actual results may vary due to numerous risks and uncertainties beyond the company's control. The company's management bases these statements on current views and estimates of future conditions and financial performance. This announcement is based on the information provided in the Form 6-K filed by Braskem with the Securities and Exchange Commission.
In other recent news, Braskem S.A. has been the focus of several significant developments. UBS analyst Luiz Carvalho upgraded Braskem's rating from Neutral to Buy and raised the price target to $10.00, citing the company's stock trading at its historical low and the industry's position at the low end of its cycle as reasons for optimism. Similarly, Citi has upgraded Braskem from Neutral to Buy, despite a reduction in the price target to R$22.50 from R$23.50.
In legal news, Braskem is facing a lawsuit estimated at R$5 billion from the Public Defender's Office of the State of Alagoas (DPE-AL). The lawsuit seeks to reassess compensation for moral damages related to a geological event in Alagoas. Braskem has stated it will evaluate the situation and take appropriate legal actions, keeping its shareholders informed of significant developments.
Citi's analysis indicates a positive outlook for Braskem in the upcoming third quarter, with improved year-over-year results expected due to lower expenses and better performance in the Brazilian operation. These are the recent developments surrounding Braskem SA (NYSE:BAK).
InvestingPro Insights
In light of Braskem's recent announcement regarding import tax increases on chemical products, a closer look at the company's financial health and market performance provides additional context for investors. According to InvestingPro data, Braskem operates with a significant debt burden and has been quickly burning through cash. This financial strain is evident in the company's negative P/E ratio of -1.59, signaling that it was not profitable over the last twelve months as of Q2 2024. Moreover, the company's gross profit margin stands at a modest 5.94%, underscoring the challenges it faces in maintaining profitability.
However, despite these financial headwinds, Braskem has experienced a strong return over the last month, with a 14.67% price total return. This recent performance, juxtaposed with the company's broader financial challenges, suggests a complex investment landscape that requires careful consideration.
Investors can find additional InvestingPro Tips for Braskem, such as the company's valuation implications and analyst profitability expectations, by visiting https://www.investing.com/pro/BAK. There are currently 11 more tips available that can provide a deeper analysis and help investors make more informed decisions.
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