Braskem SA 6-K 2005
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16
OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934
For the month of March, 2005
(Exact Name as Specified in its Charter)
(Translation of registrant's name into English)
Rua Eteno, 1561, Polo Petroquimico de Camacari
Camacari, Bahia - CEP 42810-000 Brazil
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ___X___ Form 40-F ______
Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(1). _____
Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(7). _____
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- _____.
(A free translation of the original in Portuguese)
(A free translation of the original in Portuguese)
Report of Independent Auditors
To the Board of
Directors and Shareholders
1 We have audited the accompanying balance sheets of Odebrecht Química S.A. as of December 31, 2004 and 2003, and the related statements of income, of changes in shareholdersequity and of changes in financial position for the years then ended. These financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these financial statements.
2 We conducted our audits in accordance with approved Brazilian auditing standards, which require that we perform the audit to obtain reasonable assurance about whether the financial statements are fairly presented in all material respects. Accordingly, our work included, among other procedures: (a) planning our audit taking into consideration the significance of balances, the volume of transactions and the accounting and internal control systems of the Company, (b) examining, on a test basis, evidence and records supporting the amounts and disclosures in the financial statements, and (c) assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
3 In our opinion the financial statements audited by us present fairly, in all material respects, the financial position of Odebrecht Química S.A. at December 31, 2004 and 2003, and the results of operations, the changes in shareholders equity and the changes in financial position for the years then ended, in conformity with accounting practices adopted in Brazil.
4 The Company belongs to a group of companies comprising the Braskem Group and carries out financial and commercial transactions, in significant amounts, with its subsidiaries and other Group companies, under the conditions described in Note 4 to the financial statements.
5 As described in Note 1(b) to the financial statements, Odebrecht Química S.A. and in particular its Parent Company Braskem S.A., are involved in a broad business and corporate restructuring process, as part of the overall restructuring of the Brazilian petrochemical industry, intended to give the industry a more adequate capital structure, greater profitability, competitiveness and economies of scale. New stages of this corporate restructuring process are currently in progress. The Company may be economically and/or corporately affected because of such process. The completion of this petrochemical restructuring will determine the continuity of the Companys operations.
Salvador, February 10, 2005
Marco Aurélio de
Castro e Melo
The Company may be economically and/or corporately affected by the completion of the corporate restructuring process.
2 Presentation of the Financial Statements
The financial statements were prepared in accordance with the accounting practices adopted in Brazil and also in compliance with the standards and procedures determined by the Brazilian Securities Commission (CVM).
The comparison between the financial statements as of and for the year ended December 31, 2004 of the Company must take into account the corporate restructuring mentioned in Note 1(b).
3 Main Accounting Practices
In the preparation of the financial statements, it is necessary to use estimates to record certain assets, liabilities and transactions. The financial statements of the Company and its subsidiaries include, therefore, various estimates regarding the selection of the useful lives of property, plant and equipment, as well as provisions for contingencies, income tax and other similar amounts.
Results of operations are determined on the accrual basis of accounting.
Assets are shown at realizable values, including, where applicable, accrued income and monetary variations.
These assets are stated at cost plus restatements for inflation through December 31, 1995 considering the following:
These liabilities are stated at known or estimated amounts, including accrued charges and monetary and exchange adjustments.
4 Related Parties
The balance receivable from Braskem, in the amount of R$ 1,095,808 (2003 R$ 1,109,096, R$ 693,641 in current assets and R$ 415,455 in long-term receivables), will be settled according to the schedule defined agreed by the parties, maturing up to June 2005.
The amount stated in long-term receivables, R$ 342,289, refers to the non-interest-bearing current account between the Company and Braskem.
The current accounts are used to centralize available cash in a central pool for settlement of their obligations and are handled by parent company Braskem and its direct and indirect subsidiaries.
(i) Merged in November
2004 (Note 1(b)).
(b) Investment activity in subsidiaries
(c) Investment activity in associated companies
(d) Information on investees
COPESUL is engaged in the manufacture, sale, import and export of chemical, petrochemical and fuel products and the production and supply of utilities, as well as providing various services used by the companies in the Triunfo Petrochemical Complex in the State of Rio Grande do Sul and management of logistic services related to its waterway and terrestrial terminals. Goodwill on this investment, based on future profitability, will be amortized up to November de 2011.
OPE Investimentos used to engage in the exploitation in Brazil and abroad of the production and sales business of petrochemical products, including polyethylene and raw materials for the productions of polyethylene; provision of technical assistance and management services related to the mentioned businesses; representing local and foreign companies; operations directly or indirectly linked or related with this companys objects, including import and export, and holdings in the capital of other companies, either as a partner or shareholder.
In March 2003, Braskem increased the capital of Odequi in the amount of R$ 151,954, with a contribution of OPE Investimentos shares. This capital increase was based on the financial statements at February 28, 2003 and was based on future profitability of the Copesul investment, in the amount of R$ 36,071.
In November 2004, the merger of the company was approved (Note 1(b)). As a result of this merger, the mentioned goodwill as transferred to the Copesul investment.
Trikem used to engage engaged in research, extraction and manufacture of chemical mineral products and plastics in general; production of caustic soda, chlorine and ethylene dichloride; sales of the company's own products and third-party products, as well as the importation and exportation of chemical products and participation in other companies. Trikem's activities are conducted at industrial plants located in Camaçari, Bahia; São Paulo, São Paulo; and Maceió and Marechal Deodoro, Alagoas.
In March 2003, Braskem subscribed a capital increase in the capital of Odequi in the amount of R$ 1,042,145, with the contribution of its shares in Trikem. This capital increase was based on the February 28, 2003 financial statements and includes the goodwill of R$ 894,943, R$ 340,884 of which is based of fixed assets appreciation, where the amortization is tied to the realization of the assets by depreciation, and R$ 554,059 is based on future profitability, with amortization over 10 years.
In January 2004, it was approved the partial spin-off of the Company with assignment of the spun-off portion to Braskem. The spun-off portion consists of the entire interest in Trikem, corresponding to 64.43% of voting capital and 41.02% of total capital (Note 1(b)).
6 Loans and Financing
The balance of R$ 196,992 in current liabilities, obtained from merged company OPE Investimentos, refers to raw material import financing, the settlement of which is scheduled for August 2005. In addition to US dollar fluctuation, this financing bears interest of 0.52% to 2.98% above LIBOR.
The Company issued promissory notes secured by parent company Braskem as guarantee of this financing.
7 Taxes Payable - Long-term Liabilities
The Company has brought legal actions challenging certain alterations in the tax law. The amounts related to these claims are being, in accordance with the law that gave rise to them, conservatively recorded in liabilities, shown as follows:
8 Income Tax and Social Contribution on Net Income
In accordance with the requirements of CVM Deliberation 273/98, the Company decided not to recognize deferred income tax and social contribution on the balances of tax losses and temporary differences at December 31, 2004 and 2003. These tax loss carryforwards are not subject to statute of limitations and can be offset against future taxable incomes, as shown below:
9 Shareholders Equity
At December 31, 2004, subscribed and paid-up capital is R$ 1,276,547 represented by 13,042,276 shares, comprising 12,527,954 common shares and 514,322 preferred shares.
The Extraordinary General Meeting held on March 31, 2003, approved the partial spin-off of the Company with assignment of the spun-off portion to parent company Braskem. It also approved the decrease in the capital of the Company in the amount of R$ 8,911 to R$ 12,056 from R$ 20,967, with the cancellation of 8,672,609 common shares held by Braskem, and paid-up capital decreased to 11,733,749 shares from 20,406,358 shares, comprising 11,406,086 common shares and 327,663 preferred shares, all without par value. Because of this spin-off, the Companys net equity decrease by R$ 849,657, comprised of R$ 1,774 in revenues reserves, R$ 688 in retained earning, R$ 838,284 in the capital reserve and R$ 8,911 in capital.
On the same date the following increases in capital were approved: (i) R$ 1,194,099, through the contribution of the holdings in Trikem and the holdings in OPE Investimentos evaluated pursuant to Certification Report, increasing capital to R$ 1,206,155 from R$ 12,056, the issue of 12,188,382 common shares, all registered without par value, increasing capital to 23,922,131 shares from 11,733,749 shares, comprising 23,594,468 common shares and 327,663 preferred shares, and: (ii) capital increase without the issue of new shares, in the amount of R$ 1,134,171 through the capitalization of goodwill reserve in the same amount, increasing capital to R$ 2,340,326 from R$ 1,206,155.
The Extraordinary General Meeting held on January 2004, approved the partial spin-off of the Company net equity with assignment to Braskem. The spun-off portion consists of the entire interest in Trikem, corresponding to 64.43% of voting capital and 41.02% of total capital. As a result of this spin-off, the capital of the Company was decreased by R$ 1,082,648 to R$ 1,257,678 from R$ 2,340,326 with cancellation of 11,066,514 common shares of the Company held by Braskem.
In November 2004, as a result of the merger of OPE Investimentos (Note 1(b)), the capital of the Company increased by R$ 18,869 to R$ 1,276,547, through the issue of 186,659 preferred shares.
(b) Share rights
Common - each common share is entitled to one vote in decisions of the General Meeting.
Preferred - do not carry voting rights, but are ensured the following rights:
Because of the corporate restructuring events, (Note 1(a)), Company management is proposing the non-distribution of dividends on the results of operations for 2004. As prescribed by Article 192 of Corporate Law, this decision will be submitted to the approval of the Annual General Meeting to be held on April 30, 2005.
10 Financial Instruments
The Company is involved in transaction with financial instruments used to manage the cash availability for its operations, as well as to provide for the need of possible cash requirements. The management of the risks deriving from such transactions is made using financial market mechanisms that minimize the exposure of Company assets and liabilities, thus protecting the Companys equity. At December 31, 2004, the book value of financial instruments relating to Company assets and liabilities approximates its market value. It is not Company policy to use financial derivatives.
* * *
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 21, 2005