Braskem plunges as Citigroup downgrades to Neutral

Shares of Braskem (NYSE:BAK [https://seekingalpha.com/symbol/BAK]) were down over 7% after Citigroup cut rating on the petrochemical company to Neutral from Buy, citing lower sales volume.

The stock was trading at $2.36 in afternoon trading on Friday.

The brokerage also cut PT to R$8 from R$11, saying it has downgraded the stock over low valuation and uncertainties on the company’s capital structure.

“We also weight our new rating on current market conditions and lack of perspectives on a petrochemicals spreads cycle improvement,” noted Citigroup analyst Gabriel Barra.
Barra also expects Braskem to post low EBITDA in the third quarter, mainly marked by the “challenging competitive dynamics and spreads that the company is facing, while the company may have lost some operational leverage due to the lower FX trend in the quarter.”

The Brazilian company is set to report third quarter earnings on November 10. Last month, Braskem said it has hired [https://seekingalpha.com/news/4499640-braskem-plunges-after-hiring-advisors-in-bid-to-boost-finances] financial and legal advisors to find ways to improve its capital structure, as the company struggles with the effects of a prolonged downturn in Brazil's chemical industry that is expected to continue for several more years.

The company has also grappled with the 2023 collapse of a salt mine in Brazil's Alagoas state that cost it its investment grade status.Seeking Alpha analysts, Wall Street and Seeking Alpha’s Quant ratings are all neutral on the company and consider it a Hold.

The stock has lost nearly 39% so far this year, underperforming the about 15% rise in the broader S&P 500 Index.

MORE ON BRASKEM S.A.

* Braskem: On The Edge [https://seekingalpha.com/article/4810826-braskem-stock-risk-reward-unattractive-now]
* Braskem taps entire $1B credit line amid debt review - Bloomberg [https://seekingalpha.com/news/4501811-braskem-taps-entire-1b-credit-line-amid-debt-review---bloomberg]
* Braskem plunges after hiring advisors in bid to boost finances [https://seekingalpha.com/news/4499640-braskem-plunges-after-hiring-advisors-in-bid-to-boost-finances]