Braskem (BAK) has been a turbulent stock, to say the least. The Brazilian petrochemical giant has faced a perfect storm in recent years, from macroeconomic headwinds to operational challenges and a lingering corruption scandal. This has all been reflected in BAK's stock price, which has languished well below its historical highs. However, a deeper dive into the company's recent financial data reveals a potential glimmer of hope, a subtle shift in the numbers that might signal a nascent turnaround.

While most analysts are focused on the continued negative earnings per share (EPS) and the seemingly concerning net debt levels, a crucial detail has been overlooked: the change in working capital. This often-ignored metric reflects the efficiency with which a company manages its short-term assets and liabilities. A positive change in working capital, as seen in Braskem's latest quarterly data, suggests the company is becoming more adept at converting its short-term assets into cash, ultimately improving liquidity and financial flexibility.

In the first quarter of 2024, Braskem posted a substantial positive change in working capital of BRL 695,192,000. This signifies an improved ability to manage inventory, receivables, and payables, effectively squeezing more cash from its operations. This is a stark contrast to the previous year, where working capital fluctuations were erratic, even showing a significant decrease in the second quarter of 2022.

The significance of this positive change in working capital cannot be overstated. It underpins a fundamental shift in Braskem's operational efficiency, suggesting a move away from the chaotic working capital management of the past. This, in turn, can contribute to a faster path towards positive EPS and a reduction of the company's net debt.

Hypothesis: Is Working Capital the Key to Unlocking Braskem's Potential?

The hypothesis here is straightforward: a sustained positive change in working capital will act as a catalyst for Braskem's turnaround. This hypothesis can be tested by observing the trend in working capital in the coming quarters. If Braskem maintains this positive momentum, it suggests a genuine improvement in operational efficiency, which should subsequently translate into improved earnings and a more robust balance sheet.

Putting the Numbers to the Test:

Continued Positive Working Capital Change: Look for a consistent positive change in working capital in the subsequent quarterly reports. This would indicate a sustained effort by Braskem to streamline its operations and optimize cash flow.Improved Earnings: A positive change in working capital should ultimately contribute to improved earnings. Monitor the EPS trend for movement towards profitability.Net Debt Reduction: Increased cash flow from efficient working capital management should allow Braskem to start deleveraging. Watch for a gradual decrease in net debt levels in the coming quarters.

Braskem's Working Capital Trend

Braskem's EPS Trend

Conclusion:

While there are still challenges ahead for Braskem, the recent positive change in working capital presents a compelling and often overlooked signal. It suggests a potential inflection point, a turning tide in the company's financial performance. Investors who are willing to look beyond the immediate headlines and dig deeper into the numbers might be rewarded as Braskem embarks on what could be a compelling turnaround story.

"Fun Fact: Did you know that Braskem is the largest petrochemical company in Latin America and a global leader in biopolymers? Their "I'm green™ polyethylene" is made from sugarcane, a renewable resource, contributing to a more sustainable future."