Annual and Sustainability Report - Elekeiroz...This Annual Sustainability Report contains...

01 A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T

Annual and Sustainability Report

2015

03 A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T02 E L E K E I R O Z 2 0 1 5

Table of Contents

About this Report 4Main indicators 8Message from management 10Mission, Vision and Values 14Profile 16Timeline 20

1. Business management 221.1. Innovation and sustainable solutions 231.2. Value creation 241.3. Strategy 271.4. Intangible assets 281.5. Risk management 301.6. Environmental management 34

2. Corporate governance 402.1. Differentiated practices 412.2. Governance structure 422.3. Principles and policies 46

3. Relationships 483.1. Internal stakeholders 493.2. Suppliers 563.3. Customers 563.4. Society – communities and government 58

4. Business performance 604.1. Economic and industry situation 614.2. Economic and financial performance 624.3. Value added statement – VAS 67

Annex – Additional GRI-G4 indicators 68GRI-G4 Content index 72Corporate information 76Credits 77


About this ReportG4-13 | G4-17 | G4-18 | G4-19 | G4-22 | G4-23 | G4-28 | G4-29 | G4-30 |

G4-31 | G4-32 | G4-33

This Annual Sustainability Report contains information about the operations and economic and financial performance of Elekeiroz S.A. between January 1st and December 31st, 2015. It also provides information about management, corporate governance practices and sustainability issues, and address prospects and business plans for the coming years.

Published every year since 2009, this Report has been prepared ‘In accordance’ with GRI’s G4 Guidelines’ Core option.

The economic and financial data follow the International Financial Reporting Standards (IFRS) and have been audited by PricewaterhouseCoopers (PwC). Elekeiroz is a publicly-held corporation; as a result, its information is filed with CVM (Comissão de Valores Mobiliários, or Brazilian Securities Commission)and BM&FBOVESPA (Bolsa de Valores, Mercadorias & Futuros, or Brazilian Securities, Commodities & Futures Exchange). There is no external assurance for the social and environmental data.

We had to revise data about energy consumption in previous years when we prepared the 2015 Annual and Sustainability Report. Whenever applicable, we indicate data has been revised. The final document was approved by the Management Committee. Please contact us at [email protected] for further information, suggestions or questions about this Report.


Significant6 Biodiversity

22 Customers' health and safety4 Mechanisms for grievances and complaints

related to impacts on stakeholders21 Assessment of suppliers in terms of buying

practices23 Labelling of products and services13 Training and education

Considerable10 Transport impacts17 Investment management14 Diversity and equal opportunity18 Non-discrimination16 Traditional and local communities

and implemented programs20 Actions against child labor and slavery15 Presence in the market19 Freedom of association and right

to collective bargaining

Priority1 Economic performance

11 Employment and labor relations8 Energy and efficiency

Important3 Anti-corruption and against anti-

-competitive behavior actions2 Public policies, compliance and assessment

12 Employees' health and safety7 Use of resources and waste generated9 Emissions5 Water

Inf u

ence

on

stake

hold

er a

sses

smen

ts an

d decisio

ns X Signif c

ance of economic, environmental and social impacts

15

14

10

1716

20

18

21

22 4

13

23

81

2312

79

5

11

6

19

Materiality MatrixG4-24 | G4-25 | G4-26 | G4-27

Elekeiroz created a new materiality matrix, a tool that allows us to highlight the sustainability topics of greatest interest to our stakeholders graphically and helps us prepare this report. The first step in creating the Materiality Matrix was based on the GRI-G4 guidelines, information obtained through the Company’s communication channels with stakeholders, documents from the petrochemical industry and our main competitors’ reports.

We analyzed those materials and found 23 potentially relevant topics, which were ranked in

order of priority based on our assessment of their influence

on stakeholders’ evaluations and decisions, as well as each one’s economic, environmental and social impact. Finally, we created a matrix with two axes.

The influence axis describes the relevance

assigned to each topic based on the information we obtained

from the Company’s relationship channels with internal and external stakeholders, from industry publications and from industry peers. Each of those three reference sources was given a weight of 33 percent.

The impact axis highlights the topics that may have a significant – positive or negative – economic, social and/or environmental impact on the Company. We used two bases, each with a weight of 50 percent, to put each of the 23 topics on the impact axis: (i) a survey into the facts attracting the most media coverage and (ii) an analysis of Elekeiroz’s corporate strategy and policies.

The materiality matrix in our 2015 Annual and Sustainability Report comprises those two axes.

The third step was dividing the materiality matrix into quadrants and establishing the following four relevance levels: three priority topics, six important topics, six significant topics and eight considerable topics.

We decided to address the first nine topics of greatest relevance, considered material, in this report.

Prioritization of aspects based on the assessment of their influence on stakeholders’ evaluations and decisions, as well as each one’s economic, environmental and social impact.

Material aspects

Other aspects


G4-9G4-9

Main indicators

Corporate Indicators 2015 2014 2013 2012 2011

# of employees 658 724 767 755 796

Male 552 609 659 644 693

Female 106 115 108 111 103

Education and training

Investments (R$ thousand) 289.9 479.1 324.3 352.3 353.4

Hours 28,812 43,314 39,954 49,888 62,993

Social and Environmental IndicatorsEffluents discharged (m3) 516,055 548,004 504,544 481,195 619,777

Energy consumption (GJ) 2,180,483 1,729,735 1,792,821 2,118,067 2,143,363

Energy intensity (GJ/ton) 3.56 3.45 3.35 3.93 4.27

Economic and Financial Indicators – R$ million 2015 2014 2013 2012 2011

Net operating revenue 894.3 935.0 1,004.1 899.8 776,7

EBITDA 45.5 6.7 80.5 38.4 27.0

EBITDA margin (%) 5.1% 0.7% 8.0% 4.3% 3.5%

Net income/loss -11.0 -32.3 39.4 0.5 14.8

Net margin (%) -1.2% -3.5% 3.9% 0.1% 1.9%

CAPEX 82.8 64.2 37.3 38.4 63.5

Net debt 158.1 100.0 27.8 43.2 30.3

EBITDA / Net debt (times) 0.3 0.1 2.9 0.9 0.9

Net debt / Shareholders’ equity (%) 34.7% 21.5% 5.5% 9.1% 6.4%

Operating Indicators – thousand tonsTotal shipments 410 448 471 463 443

Organic chemicals 192 217 236 244 222

Domestic market 166 183 204 196 190

Exports 26 34 32 48 32

Inorganic chemicals 218 231 235 219 221


Message from managementG4-1

2015 was a very challenging year for business. The Brazilian economy shrank due to a slowdown, coupled with the political crisis. Gross Domestic Product (GDP) fell by 3.8% in 2015, dragged by an 8.3% drop in industrial output.

The domestic demand for chemical products, as measured by the domestic apparent consumption, declined by 6.4% year-over-year, according to Abiquim (Associação Brasileira da Indústria Química, or Brazilian Chemical Industry Association). Imports slumped by 21.6% and domestic sales fell by 5.2% owing to the depreciation of the Brazilian real and the sharp slowdown. Only exports increased – by 10.6% – , reflecting the effort of chemical industries to maintain output levels.

Due to this situation, Elekeiroz's net revenue dropped by 4% year-over-year to R$ 894.3 million in 2015. Domestic sales and exports decreased by 2% and 24% respectively.

Tapping into our tradition and the reputation we garnered in over 120 years of history, we did our homework despite the turbulent business environment. We worked to ensure the initiatives in the strategic

plan we put in place in 2014 followed their course. We adjusted our product portfolio to demand, with more competitive items in line with our customers’ sustainability challenges. We sought to reposition ourselves, which will allow us to provide solutions much more than products. Those measures are designed to preparing the Company for Brazil’s new cycle of growth.

Rodolfo Villela MarinoChairman of the Board of Directors

Marcos Antonio De MarchiChief Executive Officer

012 E L E K E I R O Z 2 0 1 5 013 A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T

We invested R$ 82.8 million in 2015. We interconnected and adapted the industrial gas plant to our complex in Camaçari, Bahia State, which made us self-sufficient in steam generation and more competitive in the oxo alcohols and plasticizers markets. In addition, we increased our sulfuric acid production capacity in Várzea Paulista, São Paulo State, which led to substantial rise in our internal energy generation. Both projects, already completed, helped improve Elekeiroz's results in 2H15.

To serve our customers more efficiently, we improved our supply and distribution chain by forming a long-term partnership with one of Brazil's largest companies specializing in chemicals logistics, which has been in charge of our logistics operations in the Várzea Paulista plant since then.

We are committed to creating value for Elekeiroz. With this in mind, we reviewed our work processes throughout the year to boost efficiency and adjust the Company to a more competitive, challenging environment. We also intensified our initiatives for Health and Safety, a priority issue in our decisions.

Concerning corporate governance, the Board of Directors’ advisory committees, which focus on issues related to People and Governance, Strategy and Innovation, and Audit and Risk Management, were very active in discussing relevant management aspects. It is

We are committed to creating value for Elekeiroz.

worth noting the creation of the Crisis Committee and the development of an antitrust policy, widely circulated in the organization, in 2015.

Our management system is increasingly effective, which allows us to make projections and anticipate market trends. Our teams are increasingly prepared and committed, and working well together, as a result of intensive training and more modern management. Our employees are at the forefront of our attention.

Elekeiroz is undergoing changes. Internally, we see a readiness to get things done. Our teams are engaged, united and taking responsibilities. New ideas come up every day, and we have energy to make things happen. We know what we want, and we will continue working to achieve our goals. The Company’s future depends on this attitude of commitment and engagement.

We thank all our employees, customers, suppliers, business partners, shareholders and other stakeholders very much for their support and trust in our management.

Rodolfo Villela MarinoChairman of the Board of Directors

Marcos Antonio De MarchiChief Executive Officer


MissionTo provide a portfolio of solutions for customers in the chemical market while seeking excellence and innovation continuously in business with and through people, respecting and acting in accordance with our values, thus creating sustainable value for our shareholders and stakeholders.

Values• Safety & Responsibility• Excellence & Customers• Commitment & A Passion for Performance• Innovation & Entrepreneurship• Learning & People• Ethics & Sustainability

VisionTo be the regional leader in our business segments, participate in the diversification of Brazil’s chemical industry and create solutions for the challenges faced by our customers and society.

Mission, Vision and Values

014 E L E K E I R O Z 2 0 1 5

G4-56


as plasticizers, anhydrides, resins, formaldehyde and sulfuric acid. In turn, the Camaçari plants are connected by pipelines to each other and to other companies in the Petrochemical Complex, and produce alcohols, phthalic anhydride and plasticizers, as well as oxo gas (used to produce alcohols),

CO2 and H2 at the Gas plant.Elekeiroz is a publicly-

held corporation controlled by the holding company Itaúsa – Investimentos Itaú S.A. Its shares are traded on BM&FBOVESPA (Bolsa de Valores, Mercadorias & Futuros, or Brazilian Securities, Commodities & Futures Exchange).

Ownership structure

ITAÚSA

ELEKEIROZ

FREE FLOAT

98.3% ON95.0% PN96.5% Total

1.7% ON5.0% PN3.5% Total

ProfileG4-3 | G4-6 | G4-7 | G4-8

With over 120 years of history, Elekeiroz is South America’s only integrated producer of oxo-derivatives (octanol, butanol, iso-butanol, and 2-ethyl hexanoic acid), phthalic and maleic anhydrides, and various types of plasticizers. We also produce other chemicals such as sulfuric acid, formaldehyde, urea formaldehyde concentrate and polyester resin. We have an integrated portfolio and use different raw materials from petroleum, natural gas and mining products. Following

a B2B (business to business) model, we provide goods and solutions for the paints and coatings, civil construction, clothing, footwear, agrochemical, home and personal care, and chemical industries.

We have three industrial units: a Chemical plant in in Várzea Paulista, São Paulo State, where the Company is also headquartered; and a Chemical and a Gas plant in the Camaçari Industrial Complex, Bahia State. In Várzea Paulista, we produce basic raw materials, such

Integrated portfolio of products, using different raw materials derived from petroleum, natural gas and mining products.

ON - common sharesPN - preferred shares


Production unitsG4-8

• Acquired from Air Products in 2013

• Integration with the Camaçari Chemical Unit

• Products: synthesis gas, hydrogen, carbon monoxide, carbon dioxide and industrial utilities

• Close to Brazil’s largest consumer market

• Easy access to major highways in the State of São Paulo

• Connected by rail to the Port of Santos.

• Products: Sulfuric acid, plasticizers, resins, formaldehyde, UFC, anhydrides and organic acids

Salvador

Camaçari

São PauloVárzea Paulista

SP

BA

• Located in Brazil’s largest petrochemical complex

• Easy access to the Aratu and Salvador ports

• Modal integration: road, rail and pipeline

• Products: oxo alcohols, anhydrides, organic acids and plasticizers

Chemical plant in Várzea Paulista

Industrial gas plant in Camaçari (PGE)Chemical plant in Camaçari

Ports of Aratu and Salvador

Port of Santos

Products/Solutions and applications

G4-4

Category Products Application

Anhydrides and organic acidsPhthalic Anhydride, Maleic Anhydride, Fumaric Acid, 2-Ethyl Hexanoic Acid and Butyric Acid

Polyester, alkyd and phenolic resins, elastomers, essences and fragrances, animal feed and animal feed additives

Formaldehyde & UFC50% and 37% Formaldehyde; 70% and 85% UFC

Wooden boards, glues, adhesives and bactericidal agents

Industrial Gases Synthesis Gas, H2 and Steam** Industrial chemistry

Oxo alcohols 2EH, NBA, IBA, INA* and 2PH* Plasticizers, paint and coatings industry, acetates and acrylates

PlasticizersDOCH, DOP, DINP, DIBP, DBP, TOTM, DOA, DOM, DPHP and EKFLEX Line

Footwear, laminated and flat films, hoses, power wires and cables, tarpaulins and vinyl flooring systems

ResinsOrthophthalic, Terephthalic, Isophthalic, DCPD and EcoPoli resins

Autoindustry, reservoirs, water tanks, pipes, swimming pools, synthetic marble, buttons and tiles

Inorganic products Sulphuric Acid and Liquid SulfurFertilizers, detergents, pulp and paper, mineral oils, metallurgy and electroplating

Markets

Sector Products and Solutions

Painting & CoatingsProducts and solutions for solvents, acrylates, driers, emulsifiers, alkyd resins, acetates, ethers, paints and coatings

Clothing and footwearProducts and formulations for footwear (adults and children), sandals, flats, synthetic leather, laminated and flat films

Industrial chemistryA comprehensive portfolio of chemicals for the lubricant, transportation, shipping, metallurgy and electroplating industries among others

Civil constructionProducts for swimming pools, bathtubs, finishes, water tanks, MDF panels, glues, tanks, vinyl flooring systems, power wires and cables

Home & Personal CareProducts for surfactant, detergent, cosmetic, acidulant, flavor and fragrance production

AgrochemicalsBasic inputs for producing pesticides, fertilizers and surfactants. Elekeiroz is also in the ethanol, pulp and paper industries

Elekeiroz is South America’s only integrated producer of oxo-derivatives (octanol, butanol, iso-butanol, and 2-ethyl hexanoic acid), phthalic and maleic anhydrides, and various types of plasticizers.

*Resale only**Internal use

1987

2002

2005

2013

2015

Elekeiroz acquires a controlling interest in Ciquine

Companhia Petroquímica, in Camaçari, Bahia State.

Elekeiroz acquires the assets of Air Products’ gas unit in

Camaçari.

The sulfuric acid plant, with a capacity of 700 tons/day, is opened in Várzea Paulista.

The production of 2-ethyl hexanoic acid starts in the Camaçari complex.

The upgrade and integration of the Camaçari gas unit through pipelines is completed.The first hydrogenated plasticizer (DOCH) is launched.

Timeline

1894

1910

1923

1954

1960

1972

The first sulfuric acid plant in South America

is built.

Brazil’s first phthalic anhydride plant is opened

in Várzea Paulista.

The production of phthalic plasticizers starts

in Elekeiroz do Nordeste.

The Company is founded when pharmacist Luiz M. Pinto de Queiroz creates the pharmaceutical laboratory Queiroz Moura e Cia.

The land in Várzea Paulista, where one of the sites of the Company’s industrial complex is currently located, is acquired.

The first octanol plant in South America, in Elekeiroz do Nordeste, is opened.



Elekeiroz has pioneered the development of several products for the Brazilian chemical industry throughout its history. True to its tradition, we launched new solutions in 2015 by tapping into the Elekeiroz product chain as raw material and making the most of its current assets.

Some of those new launches were the high performance plasticizer DOCH, free from regulatory constraints, and the EKFLEX line. We also included hydrogen in our portfolio and started producing butyric acid, used to produce essences, fragrances and animal feed. Therefore, we became the first manufacturer of that product in the Southern Cone, a market previously served only by imports. Our R&D team spent a whole year developing butyric acid internally and was also responsible for designing the industrial process.

We included industrial gases in our product portfolio as well, an opportunity identified after we acquired Air Products’ plant, in Camaçari, in 2013. In addition to using those gases ourselves, we supply them to clients in the Camaçari Petrochemical Complex.

Partnerships with research institutesWe have an R&D department whose team,

composed of managers and technicians, develops products and processes. Our R&D department responds directly to the CEO owing to its strategic role.

Our innovation and development efforts, especially those designed for portfolio renewal, include partnerships with research institutions and customers. Two of those joint projects were completed in 2015. One

1.1. Innovation and sustainable solutions

of them, with Embrapii [Empresa Brasileira de Pesquisa e Inovação Industrial, or Brazilian Company for Industrial Research and Innovation], involved developing a production process with a renewable route, and the other was intended to boost competitiveness in Camaçari by using process simulations and statistical evaluations. The former will lead to a patent application, in line with our innovation strategy.

Furthermore, we developed closer ties with Senai [Serviço Nacional de Aprendizagem Industrial, or Brazilian National Service for Industrial Training] in Rio Grande do Sul State, SENAI Inovação, which specializes in compounds and is going to develop a joint project with Elekeiroz to create plasticizers for the rubber industry.

Innovation PortalElekeiroz has a portal dedicated to innovation. It

is used as a management tool, so access is restricted to the R&D department and Senior Management. It brings together all the documents and other details of the projects, and allows users to monitor all the project phases: products at the laboratory, comparative performance tests, industrial tests, approval by customers, provisional industrialization, plant adjustments and final industrialization.

About 30 projects were developed and implemented in 2015, which improved our competitiveness and results. The share of products developed by the R&D department in Elekeiroz’s contribution margin increased from 0.5% in 2014 to 6.9% in 2015. The competitiveness gains of our production units, in turn, rose from 1% in 2014 to 4.5% in 2015 (percentage of variable costs).


Business management

A pioneering path marked by the development of several products for the Brazilian chemical industry throughout its history.

G4-4

022 E L E K E I R O Z 2 0 1 5


1.2. Value creation

CAPEXOur investments in

production units focused mainly on boosting the competitiveness of our production chains in 2015 to make the operations even more sustainable. CAPEX totaled R$ 82.8 million in 2015.

Part of those investments went to upgrading and integrating the Industrial Gas Unit, acquired in 2013, to Elekeiroz’s Industrial Chemical Unit, in the Petrochemical Complex in Camaçari, Bahia State. With this project completed, we are able to produce those industrial gases, inputs essential to the production of that site, in a more flexible and efficient manner. In addition, once the utility structures of both plants are interconnected, we can sell the surplus hydrogen we produce to other companies in the Petrochemical Complex. In turn, we achieved environmental gains by upgrading the unit since we can reuse CO2 and reduce our emissions.

Another initiative that led

to environmental gains was a joint project with one of our largest customers, undertaken in Camaçari – in our alcohol unit – throughout the year. The goal was to provide alcohol through a pipeline, thus allowing us to reduce logistics costs since there was no need to use trucks. Moreover, the project is in line with Elekeiroz’s strategy: building closer ties with customers by offering them something beyond products – solutions.

In response to the booming demand for sulfuric acid, Elekeiroz expanded its production capacity of this input by 11% in Várzea Paulista, São Paulo State. As a result, total output rose from 269 thousand to 290 thousand tons per year. Steam, a by-product of producing sulfuric acid, is converted by a turbine into electric power, which is used to run the industrial plant in Várzea Paulista. Therefore, the project allowed us to expand production and gave us greater power autonomy. Indeed, Elekeiroz is now 80% energy self-sufficient.

R$ 82.8 million in investments focused on boosting the competitiveness of our production chains, in order to make operations even more sustainable.

Process-based managementElekeiroz made organizational changes in 2015 to

modernize management by placing greater emphasis on merit, agility, a passion for performance and a sense of urgency, key elements to implement the Company’s strategy.

Those changes have a direct impact on business management and day-to-day activities at all Company levels, both in administrative and operational terms.

As a result, we started extensive process improvements in 2015. We mapped and trained our teams, and identified 36 processes, 12 of which we will be focusing on initially, in the first semester of 2016. We will be redesigning the other processes in the second half of 2016 and in 2017. These initiatives are based on Fundação Nacional de Qualidade’s [Brazilian National Foundation for Quality] Management Excellence Model (MEM).

We also continued restructuring our departments, a project that started in 2014 and led to adjustments in different teams. For example, we conducted, with the help of a consulting firm, a thorough diagnostic assessment of the sales department that led to changes in our sales management model. We introduced segmentation, pricing and sales management strategies, and hired a new Chief Sales Officer.

We also restructured the procurement department and adopted a new methodology and standards for all purchases. The new procurement model increased the department’s agility and led to savings of about 15% in 2015.

LogisticsWe formed a long-term

partnership with one of Brazil's largest companies specializing in chemicals logistics to improve our supply and distribution chain. We have outsourced all logistics operations at the plant in Várzea Paulista. The first steps of this process took place in October 2015 and the new model went into full operation in December, when we also started managing truck loading waiting times and other indicators

to improve efficiency. Near the Várzea Paulista

unit, it's also being built a logistics complex (dry port) that will provide logistics support in a safe and efficient manner. The complex, which will be built in an area of 120,000 sq. m., will comprise warehouses, a mechanic garage for trucks, a yard, railroad connection for containers and scales, as well as a cafeteria and locker room for employees. The contractor will be solely responsible for investing in

the project, which is scheduled to be completed in 2016.

The deal also stipulates that all our former employees directly involved in logistics operations be hired.

We are already reaping efficiency and quality gains from outsourcing our logistics operations and should reap even more when this investment project is completed. We also raised capital by selling the land, which was not needed for our core business.

In 2015, Elekeiroz had four major scheduled plant maintenance shutdowns.

1.3. StrategyOur ongoing search for people and process

excellence, responsible business practices, innovation and entrepreneurship are the pillars of our sustainable growth and stakeholder value creation. Our decisions in 2015 were all based on our Strategic Plan, which establishes three growth strategies: turning Elekeiroz into a solutions provider, making it more competitive and maximizing its energy efficiency.

In line with those goals, we underwent a transition in 2015, in response to the business environment, competition and the prevailing market conditions. Among the changes we introduced, we adjusted our line of plasticizers, production capacity and workforce to the current situation, and restructured the sales department. Our strategy involves offering solutions to customers, based on unique, innovative and more competitive products. This allows us to avoid regulatory restrictions in some markets and seize new business opportunities.

In parallel, we revised our sales management model and strengthened our partnerships with customers in line with our new strategy of becoming a solution provider (further information in Value Creation and Process-Based Management).

We also created the Market Intelligence and M&A department. It has the strategic function of monitoring the market and its players continuously to assess opportunities for Elekeiroz to grow either organically – by exploiting new markets and/or products – or through mergers, joint ventures or acquisitions. This perspective is essential for successful business planning and is in line with the more proactive stance that we have been adopting.

We review Elekeiroz’s business strategy every two years. In 2016, we will be reassessing the prevailing market conditions and determining the adjustments we need to make in our strategy.


Main services performed in during the scheduled shutdowns:Alcohol Unit: safety inspections, preventive maintenance, connection

with the gas unit and catalyzer replacement in one of the production lines.Elekeiroz Gas Unit (PGE): technological upgrade, safety inspections,

preventive maintenance, completion of the connection with the chemical unit and production capacity expansion.

Phthalic Anhydride Unit: catalyzer replacement and preventive maintenance.

Sulfuric Acid Unit: safety inspections, preventive maintenance and completion of the capacity expansion project.

026 E L E K E I R O Z 2 0 1 5

Production haltsIn 2015, Elekeiroz had

four major plant maintenance shutdowns, which occur regularly. For the first time ever in the Company’s history, three units – the alcohol, gas and phthalic anhydride units, in Camaçari – were shut down at the same time. The fourth plant shut down for maintenance was the sulfuric acid unit, in Várzea Paulista.

Plants are shut down for inspection and maintenance in

compliance with safety standards, of utmost importance for the chemical industry. Each plant was shut down for about 40 days, during which we were able to fulfill the regulatory requirements and inspected machinery and equipment voluntarily.

Major shutdowns are complex projects since they involve over 1,000 professionals from our plants and have a direct impact on operations because production is halted. As a result,

they require careful planning, in terms of both production and inventory management, so that we can continue supplying products to our customers. The simultaneous shutdowns in Camaçari occurred in March and lasted 40 days. They were also part of the project to connect the gas plant to our other plants. The sulfuric acid plant, in Várzea Paulista, shut down for 45 days starting in May. We invested over R$ 20 million in those operations.


Internal power generationWe have had a state-of-the-

art power generation system based on the heat resulting from the chemical reactions of our production processes since 1987, reflecting our concern about environmental preservation and the rational use of natural resources. This system allows us to generate about 80% of all the power consumed in the Várzea Paulista plant. In addition, we save money since we have to purchase less energy and create intangible value for all stakeholders owing to our greater energy independence – even in case of energy rationing – and the preservation of natural resources.

Safety processes G4-LA5

Elekeiroz’s whole workforce (both direct employees and contractors) participates in different formal health and safety committees, both internal (CIPA [Comissão Interna de Prevenção de Acidentes, or Internal Commission for the Prevention of Accidents]) and external, mainly at Abiquim and Cofic [Comitê de Fomento Industrial de Camaçari, or Camaçari Industrial Development Committee]. Those committees consist of 60 members (among employees, contractors and interns comprising 6.0% of all our associates) who represent the whole workforce.

PeoplePeople are Elekeiroz’s main

asset. We seek to attract, develop and retain talents by providing an environment in which ethics and transparent communication are valued. In 2015, we focused mainly on improving our communication channels with those stakeholders, as well as training and developing leaderships. We also strengthened our merit-based culture, both among executives and their teams, as a strategy to provide ongoing improvement for our employees.

Certifications (quality, ISO)

Elekeiroz’s sales, procurement and technical support departments; plasticizer and polyester resin development activities; alcohol (ethyl 2-hexanol, iso-butanol and normal-butanol), 2-ethylhexanoic acid, plasticizer, maleic anhydride, phthalic anhydride, fumaric acid, formaldehyde, urea formaldehyde concentrate, sulfuric acid and polyester resin production processes are all ISO 9001 certified.

The Company is constantly audited by internal and independent professionals to check for compliance with the system, as well as renew and revalidate its certificate.

Reliability and soundnessElekeiroz is recognized as a reliable supplier of

chemical and petrochemical products in both domestic and the international market. It exports to over 30 countries, including markets with stringent regulatory constraints, such as some European Union countries. Trust in our products, our strong tradition, professional attitude and ethical business practices are values intrinsic to the Company and recognized by the market.

InnovationInnovation is one of the strategies in our

business plan. We have a Research, Development and Innovation department dedicated to developing high-performance sustainable products and solutions to boost competitiveness. Some of our main projects in 2015 were:

1.4. Intangible assetsOur 120-year history is proof of our reliability and soundness,

attributes we achieved through different initiatives, strategies and decisions we made along all those years. Among these points, Elekeiroz has always stood out in terms of innovation, its people and safety practices.

Elekeiroz’s corporate governance structure comprises a Strategy and Innovation Committee (further information in Governance Structure, Advisory Committees) pledged to the precautionary principle, applied to developing, manufacturing and distributing products. Accordingly, we systematically assess the hazards to, and the potential impact on, the environment and human health of each initiative before introducing new production technologies or using new sources of raw materials.

• Developing new industrial processes.

• Launching DOCH (EKFLEX 882), a high-performance versatile non-phthalate plasticizer that meets the most rigorous requirements of international markets.

• Launching the new EKFLEX 1000 line of non-phthalate plasticizers, with the right performance and competitiveness for general purposes.

• Launching the new EKFLEX 2000 and EKFLEX 2200 lines of non-phthalate plasticizers, with the right performance and competitiveness, as well as the right combination of re-newable and conventional products for applications in which non-phthalates are needed.


Considering the features of the business and our risk assessment, we did not rank human rights issues as having a high impact when we developed the matrix. However, Elekeiroz rejects all forms of discrimination, whether based on race, color, gender, religion, age, social class, sexual orientation, disability, nationality, etc. The Company clearly expresses in its Code of Ethics and Conduct how it expects each of its employees,

regardless of his or her position or function, to behave toward shareholders, customers, suppliers, competitors, co-workers, public authorities, media outlets, local communities, partners and capital markets. Non-compliance with the code may be reported directly to the CEO through the proper channels: E-mail: [email protected]; Phone: (55 11) 3179-7711 and Mail: Avenida Paulista, 1938, 5º andar, Cerqueira César – CEP: 01310-942 –

São Paulo-SP, Brasil. (Read about our Code of Ethics and Conduct in the Corporate governance section, in Principles and policies).

Comprehensive information about Elekeiroz’s risk factors can be found in the Reference Form (Chapter 4), available on the Company’s website (www.elekeiroz.com.br) and on CVM’s (Comissão de Valores Mobiliários, or Brazilian Securities Commission) and BMF&BOVESPA’s websites.

The main risks to which the Company is exposed are:

Strategic risksRestrictions on using its products: Some countries, mostly in Europe,

restrict the use of products containing phthalates (toys and packaging, for example). There are, however, no conclusive studies on the effects of this type of plasticizer on human health. To avoid this risk, Elekeiroz has developed new products not subject to those restrictions, such as DOA and DOCH.

Operational risksDependence on suppliers: Natural gas and raw materials are supplied

to the Camaçari plant by the local petrochemical company through pipelines. Any failures or interruptions that may occur in our suppliers’ units may lead to a lack of raw materials, thus affecting production. To mitigate those risks, we have contracts that ensure a steady supply and determine the production chain be managed jointly with our main suppliers.

Accidents with products and processes: Chemical companies are subject to fires, explosions and leakages of raw materials. To minimize both the exposure of its employees to those accidents and the risk of material losses, we adopt different preventive measures in our routines. Those measures include those set out in Abiquim’s Programa Atuação Responsável [Responsible Operations Program], as well as the Hazard and Operability Studies (HAZOP) methodology, which helps identify vulnerabilities in operational processes and prescribes measures to address them.

92%of the 232 developed action plans based on the risk matrix have been adopted.

We have mapped all the main risks and developed a matrix with the help of an external consulting firm, based on interviews with executives, as well as assessments of our operations and structure. This risk matrix has allowed us to monitor

1.5. Risk managementG4-DMA-Assessment | G4-DMA-Compliance | G4-14

OPERATIONAL• Processes• Personnel

• IT• Environment

FINANCIAL• Credit

• Market• Liquidity

REGULATORY• Effects of changes

or new legal measures

63 issues over the past five years, divided into four major categories: strategic, operational, financial and regulatory risks. Afterwards, we developed 232 action plans, 92% of which have been adopted. The remaining 8% are in progress.

STRATEGICAL• Corporate governance

• Business model• Political and

economic issues

RISK MATRIX 63 monitored

aspects

Elekeiroz is subjected to risks that may affect its results and shareholder value creation. Therefore, we constantly monitor the factors that may cause negative impacts and adopt measures and tools to avoid or minimize their effects.


In our routines at Elekeiroz, we adopt different preventive measures against accidents with products and processes.

In addition, we only hire carriers that have Abiquim’s SASSMAQ (Sistema de Avaliação de Segurança, Saúde, Meio Ambiente e Qualidade, or Safety, Health, Environmental and Quality Assessment System) certificate and inspect all the vehicles that carry our products. There were five minor accidents with vehicles carrying our products (with no environmental impact) in 2015.

All our products are labeled and have chemical MSDSs (Material Safety Data Sheets), in compliance with ABNT’s [Associação Brasileira de Normas Técnicas, or Brazilian National Standards Organization] standards. MSDSs provide information about different aspects of chemical products (substances or mixtures) related to safety, health and the environment. They also contain recommendations about dangers, possible risks considering the intended use of the products, protective measures and emergency measures.

Financial risksExchange rate changes:

The Company exports its products and imports raw materials, so it is exposed to exchange rate changes of some currencies, especially the U.S. dollar. We seek to prevent great discrepancies between the exposures of our assets and liabilities denominated in foreign currency, connected basically with imports and exports, so that the impact of abrupt exchange rate changes remain at acceptable levels.

Competition and prices: Most of our products are priced in international markets. Mismatches between supply and demand may also lead to price changes. Fiercer competition from local and foreign producers may also force us to lower prices, thus affecting our results. Increased competition, however, encourages us to continue innovating and developing new products.

Credit: We have a Credit Policy establishing practices and procedures we observe whenever we grant loans and advances to customers, including limits, guaranties and credit scoring by position level. The Credit Committee, which consists of the Executive Financial Manager, the Chief Commercial Officer and the Executive Finance and IT Manager,

meets regularly to issue opinions about granting credit limits. This Committee also analyses all transactions involving credit risks before we commit ourselves to providing goods or services for third parties.

Elekeiroz’s internal audit team routinely checks compliance with our policies and work procedures. It also monitors the efficiency, safety and operation of our systems and reports any possible risks related to them. No human rights violations were

recorded or reported in 2015. The Audit and Risk Management Committee, which advises the Board of Directors, discusses all risks identified (further information in Governance Structure, Advisory Committees). It met eight times in 2015 to address issues such as internal audit, risk management and compliance (with laws, regulations, and external and internal standards).

The Committee also reviewed our Information Technology structure during

the year. We contracted a new external backup system to be used alongside with the Company’s own datacenter. This will mitigate the risk of disruptions to data access even more. In addition, we made some adjustments in the ERP (Enterprise Resource Planning) integrated management system, installed in 2014, to continue improving our management support tools.


Energy and energy efficiencyG4-DMA-Energy | G4-EN3 | G4-EN5

In 2015, 23% of all the power we consumed was generated by steam from our own production processes, far above the national average of 8%.

Energy self-sufficiency is one of our long-term goals. Accordingly, the Várzea Paulista plant achieved 80% self-sufficiency in 2015 since steam, a by-product of sulfuric acid, is used to generate electric power and we increased our sulfuric acid production capacity during the year.

In Camaçari, we use waste oil to generate thermal power, which accounted for 12.9% of our total power consumption in 2015. In addition, we became self-sufficient in steam generation by

integrating the gas plant and the chemical unit, thus eliminating the need to purchase steam from this third parties. Additionally, the Camaçari unit started purchasing electric power from Coelba (Companhia de Eletricidade do Estado da Bahia, or Electrical Company of Bahia State).

Elekeiroz’s total power consumption amounted to 2,180.5 thousand GJ, 15.8% of which from renewable sources, in 2015. Total consumption rose by 26.1% year-over-year because the refurbishments were completed. In addition, the Camaçari gas unit went online, so its energy consumption is now considered in the Company’s total consumption. In turn, our energy intensity (GJ/ton of product) stood at 3.56.

ENERGY CONSUMPTION (GJ)-NON-RENEWABLE SOURCES 1

Energy source Supplier 20153 20142 20132 20122 20112

Electricity CPFL 21,066 17,635 11,606 9,286 8,373

Electricity Braskem 241,101 230,450 218,730 233,345 232,904

Natural gas Comgás 83,275 64,258 73,698 65,642 78,465

Auto diesel oil Petrobras 929 1,161 663 839 772

Diesel oil (Electricity) Petrobras 8,720 3,256 2,585 1,573 5,724

Waste oil Elekeiroz 281,572 396,705 301,398 325,817 300,520

Natural gas Bahiagas 1,081,253 212,451 401,242 563,347 504,062

Steam Braskem 118,938 446,362 418,526 526,679 653,380

Total GJ 1,836,854 1,372,278 1,428,448 1,726,528 1,784,200

1. Source: Data from ONS (Operador Nacional do Sistema Elétrico, or Brazilian National Electrical System Operator) (Power Generation - SIN (Sistema Interligado Nacional, or Interconnected National System) - MW measured).

2. Braskem’s electricity data from 2011 to 2014 have been corrected.3. The year-over-year increase from 2014 resulted from the inclusion of data from the Camaçari gas plant acquired in

2014 (PGE), which was refurbished and went online in 2015.

ENERGY CONSUMPTION (GJ) - RENEWABLE SOURCES 1

Energy source Supplier 20153 20142 20132 20122 20112

Electricity CPFL 62,068 50,717 45,060 59,400 90,949

Electricity Internal generation 139,962 171,397 190,852 195,095 131,429

Electricity Braskem 141,599 135,343 128,461 137,044 136,785

Total GJ 343,629 357,457 364,373 391,539 359,163

ENERGY INTENSITY (TOTAL ENERGY/TOTAL PRODUCTION)

2015 2014 2013 2012 2011

Production (tons) 612,131 500,775 535,122 539,326 501,437

Total energy (GJ) 2,180,483 1,729,735 1,792,821 2,118,067 2,143,363

Energy intensity (GJ/ton) 3.56 3.45 3.35 3.93 4.27

1. Source: Data from ONS (Operador Nacional do Sistema Elétrico, or Brazilian National Electrical System Operator) (Power Generation - SIN (Sistema Interligado Nacional, or Interconnected National System) - MW measured).

2. Braskem’s electricity data from 2011 to 2014 have been corrected.3. The year-over-year increase from 2014 resulted from the inclusion of data from the Camaçari gas plant acquired in

2014 (PGE), which was refurbished and went online in 2015.

1.6. Environmental managementG4-DMA-Compliance | G4-DM -Products and Services | G4-15 | G4-EN27

Eco-efficiency indicatorsWe monitor our environmental performance by means of eco-

efficiency indicators that allow us to compare our performance with those of other Abiquim member companies. Those indicators focus on the following aspects:

• Internal power generation and consumption.

All Elekeiroz’s activities –from operations to the definition of its portfolio of products and solutions – are governed by the principles of sustainability. We constantly seek to improve our production processes and minimize their environmental impacts. In this regard, we replaced equipment by

more energy-efficient alternatives and use natural resources in a responsible manner. We also adopt good practices to reduce waste, effluents and gas emissions, and treat them properly. For example, introducing catalytic incinerators in production processes (maleic anhydride and formaldehyde)

allowed us to reduce the impact of our air emissions significantly; as a result, we received recognition from CETESB (Companhia Ambiental do Estado de São Paulo, or São Paulo State Environmental Agency) for the P+L (Produção Mais Limpa, or Cleaner Production) project. We are also alert to climate change.

• Reducing steam consumption at the Alcohol plant in Camaçari by using PGE steam.

• Reducing process CO2 emissions at PGE, in Camaçari, through the recycling project.

• Replacing transformer oil by insulating vegetable oil – which produces environmental gains and improves fire safety – at the 88 kV substation, in Várzea Paulista.

• Using waste sulfuric acid in Várzea Paulista as raw material to produce fertilizers.

All the decisions designed to promote sustainable management are based on the principles of Abiquim’s Responsible Care Program and on strict compliance with environmental legislation.

Elekeiroz was audited in 2015 by DQS (Deutsche Gesellschaft zur Zertifizierung von Managementsystemen, or German Society for Quality) to meet the requirements of the Together

for Sustainability (TSF) initiative, created in 2011 by six multinational chemical companies to encourage all industry peers to adopt sustainable practices in their supply chains.

• Waste generation and disposal.

• Effluent emissions.

• Intensity of CO2 emissions.

• Water consumed by products and processes.

• Inspecting all the vehicles that carry our products thoroughly before transportation.

Some of the initiatives we undertook in this regard in 2015 were:


WASTE GENERATED IN 2015 (T)

Hazardous Non-HazardousVárzea Paulista 909 937

Camaçari 599 367

Industrial Gas Unit (PGE) 6 62

Total 1,514 1,366

By unitVárzea Paulista Camaçari Industrial Gas Unit (PGE)

By typeHazardous Non-Hazardous

64.1%52.6%

47.4%33.5%

2.4%

Waste generated in 2015 – 2,880 tons

WASTE DISPOSAL (TONS)

2015 2014 2013 2012 2011

Reuse 726 685 0 0 0

Recycling 156 97 127 124 301

Recovery, including energy recovery 1,514 2,029 2,025 2,226 1,925

Landfill 484 487 1,314 1,311 1,535

Total waste 2,880 3,298 3,466 3,661 3,761

WasteG4–DMA-Effluents and waste |

G4-EN23

Total waste generated by Elekeiroz has been decreasing each year. The three company units put together generated 2,880 tons of waste in 2015, 12.7% less than in 2014. Of that amount, 83.2% was reused, recycled or recovered. Only 16.8% went to landfills.

Household and industrial wastes are collected and disposed of properly in compliance with the environmental legislation. Hazardous waste, which account for 52.6% of total waste generated by Elekeiroz in

Waste generated (tons)

3,76

12011

3,66

1

3,46

6

3,29

8

2,88

0

2015201420132012

2015, is co-processed, with energy recovery. Waste is co-processed in cement kilns at the Várzea Paulista plant and in ceramic kilns at the Camaçari plant.

In 2015, we started recycling dregs from sulfur filtration and using them as raw material for fertilizers. Material recycling also accounts for part of the energy generated at the Várzea Paulista unit. An example is the catalytic control system for organic compounds installed at the maleic anhydride unit.

The production units have participatory Recycling Committees.

036 E L E K E I R O Z 2 0 1 5

EffluentsG4 –DMA-Effluents and waste |

G4-EN22

Elekeiroz does not discharge effluents directly in water bodies. All effluents are treated by specialized

companies. The Várzea Paulista unit sends its effluents to Companhia de Saneamento de Jundiaí [Jundiaí Sanitation Company] whereas the Camaçari units send theirs to the effluent treatment center of the

Camaçari Petrochemical Complex. Total effluents discharged amounted to 516,055 m3 in 2015, down 5.8% from 2014, mainly due to the maintenance shutdowns during the year.

EFFLUENT DISCHARGED (M3)

Unit Treatment Method Reuse Final

disposal 2015 2014 2013 2012 2011

Camaçari Activated sludge No Ocean 410,818 439,793 420,170 387,371 526,612

Várzea Paulista Aerobic biological No Jundiaí River 105,237 108,211 84,374 93,824 93,165

Total effluents discharged

516,055 548,004 504,544 481,195 619,777

In 2015, 83.2% of total waste generated by Elekeiroz was reused, recycled or recovered.


WaterG4-DMA - Water | G4-EN8 | G4-EN10

Different plants use different water sources. In Camaçari, all water is provided by petrochemical center itself, which distributes it to the

whole industrial complex. In Várzea Paulista, we have a treatment plant authorized to withdraw water from the Jundiaí River, which is not located in a protected area. We also collect groundwater from two artesian wells

RECYCLED WATER (M3)

Source 2015 2014 2013 2012 2011Process effluent 0 0 0 0 8

Rainwater 1,587 725 968 1,475 1,542

Total recycled water 1,587 725 968 1,475 1,550

Recycled water / total consumption 0.08% 0.04% 0.05% 0.07% 0.08%

TOTAL WATER WITHDRAWAL BY SOURCE (M3)

20151 2014 2013 2012 2011

Jundiaí River 830,870 864,178 925,558 912,600 822,294

Well (groundwater) 32,472 28,353 28,936 21,487 25,291

Municipal water supplies 2,773 3,449 3,601 3,870 2,042

Rainwater 1,587 717 968 1,475 1,542

Braskem 1,183,207 805,534 983,211 1,059,370 1,169,291

Total 2,050,909 1,702,231 1,942,274 1,998,802 2,020,460

1 The year-over-year increase from 2014 resulted from the inclusion of data from the Camaçari gas plant acquired in 2014 (PGE), which was refurbished and went online in 2015.

We have an Internal Water Saving Committee, which was restructured in 2015. In addition, we undertook several initiatives to save water:

InputsG4-DMA - Materials | G4-EN1

Raw materials from petroleum, natural gas and mining, except water, are the inputs we use in our production processes. Most of them

are not recycled and non-renewable due to the industry’s features. Our products are, in turn, used as raw material by other chemical industries, so they require little packing material. We usually send them to customers

in tank trucks or metal barrels, or through pipelines.

The full list of inputs we used in 2015 can be found in Annex I to this Report.

• Upgrading the system for producing demineralized water, used to produce steam at the Várzea Paulista plant, leading to a 15% drop in water used for this purpose.

• Reducing industrial water consumption by 70% in two plasticizer production lines in Várzea Paulista by optimizing the process.

• Raising awareness of the responsible use of water through talks given in industrial areas.

on the site, and use rainwater stored locally, and municipal water supplies.

We effectively withdraw only 50% of our total concession rights for the use of hydro resources. We developed even closer ties with the City Department of the Environment due to the drought, which worsened in São Paulo State in 2015, to follow the discussions about the measures that could possibly be adopted to deal with the situation.

• Monitoring water and steam leakages.

• Collecting rainwater.

EmissionsG4-DMA - Emissions | G4-EN15 |

G4-EN16 | G4-EN17| G4-EN18 | G4-

EN27

The Camaçari plant’s CO2 emissions decreased sharply mainly because the gas unit was upgraded. We invested R$ 36 million in adapting and integrating this unit, acquired by Elekeiroz in 2013. The

steam purchased, travel, waste and moving sources carrying goods and raw materials.

BSI, a certification company, has been verifying all Elekeiroz’s measurements of GHG emissions of all scopes since 2011.

Scope 1: Emissions from organic production processes (phthalic anhydride, maleic anhydride, and oxo alcohols and gases, etc.); Stationary sources (fuel-powered thermal fluid heaters and boilers); Moving sources (own vehicles and fuel consumed by them); Fugitive emissions (CO2 fire extinguishers).

Data from the Camaçari gas unit (PGE) have been considered since 2014.

Scope 2: electricity acquired from third-Parties. We purchase electricity mainly from power utilities (grid), but the Camaçari units also purchase it from a local petrochemical company. Only the Camaçari unit acquires steam. The Várzea Paulista unit has no need to purchase steam; in addition, it generates energy from its own production process.

Scope 3: Third-party moving sources (transportation of products, raw materials and waste); Waste sent to landfills; Business travel of Elekeiroz’s employees by air.

process involved replacing the two-line superheater and compressor. As a result, the industrial process gained efficiency.

The new compressor allows us to reuse CO2, previously released into the atmosphere, in the plant. This process breaks the gas molecules and reuses carbon dioxide, thus reducing CO2 emissions. This also allowed us to purchase less CH4 (methane), which led to lower production costs. In turn, the superheater installed allows us to recover part of the Greenhouse Gases (GHG) generated in the production process. We now sell steam, previously released into the atmosphere, to another company in the Petrochemical Complex and deliver it through a pipeline. The emissions reduction we achieved at the Camaçari gas unit was a condition for us to obtain an environmental license for that unit, which we did in 2015.

Regarding vehicle emissions, we conduct previous inspections at the carriers of our products, all of which we require to monitor emissions regularly and meet the transportation safety requirements. We have had third-party verifications, as part of the CONPET Program (Programa Nacional da Racionalização do Uso de Derivados de Petróleo, or Brazilian National Program for the Rational Use of Petroleum Products), of the vehicles carrying products at Elekeiroz. We also produce an annual GHG Emissions Inventory following the guidelines set by the Greenhouse Gas (GHG) Protocol and the Intergovernmental Panel on Climate Change (IPCC). It covers stationary and moving sources, process emissions, electricity and

CO2 emission intensity(kg CO2 eq./ton of product)

231

2011

235

204

189

370

2015201420132012

EmissionsScope 1 Scope 2 Scope 3

157,41769.5%

51,30022.7%

17,7187.8%

*Gas included in the basis of calculation: CO2,CH4, N20, HFCs, SF6 and PFCs

Greenhouse gas emissions in 2015 (tons of CO2e)

Corporate governance

Elekeiroz has always valued management excellence highly and adopted good corporate governance practices.

040 E L E K E I R O Z 2 0 1 5 041 A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T

Elekeiroz has always valued management excellence highly and adopted good corporate governance practices throughout its over 120 years of history. It follows in its routines principles that go

beyond the requirements of the Brazilian Corporations Act (Law 6404/76), to which it is subjected as a publicly-held company.

2.1. Differentiated practices

• Risk management policy.

• Antitrust policy.

• Code of ethics.

CORPORATE GOVERNANCEExamples of good practices adopted in addition to those required by Brazilian corporate laws

• Members of the Board of Directors do not take on executive positions.

• 29% of members of the Board of Directors are independent.


General Meeting of Shareholders

People and Governance Committee

Strategy and Innovation Committee

Audit and Risk Management Committee

Disclosure Committee

Our corporate governance structure comprises two main bodies: the Board of Directors and the Executive Committee. The Board is assisted by four non-statutory committees: People and Governance, Strategy and Innovation, Audit and Risk Management, and Disclosure.

2.2. Governance structure

IndustrialComercial

Innovation

Strategy

Finance and IT

HR, Legal and EHS

Executive Committee

Internal and independent audit

CEO

Advisory CommitteesBoard of Directors

Corporate governance structure is comprised by two main bodies: the Board of Directors and the Executive Committee.

Board of DirectorsIt is Elekeiroz’s top corporate governance body. It is composed of seven

members, one of whom is independent. Its duty is to ensure the Company’s longevity so that it can create long-term value through sustainable and professional management.

No members of the Board of Directors sit on the Executive Committee. The Directors are elected for a one-year term and may be re-elected. The Board develops business plans, appoints Executive Officers and oversees both their activities and the proper execution of the Company’s strategy.

There were 12 monthly meetings of the Board of Directors in 2015.

COMPOSITION OF THE BOARD OF DIRECTORS – 12.31.2015

Name PositionRodolfo Villela Marino Chairman

Olavo Egydio Setubal Júnior Deputy Chairman

Henri Penchas Director

César Suaki dos Santos Independent Director

Ricardo Egydio Setubal Director

Ricardo Villela Marino Alternate Director

Alfredo Egydio Setubal Alternate Director

Executive CommitteeThe Executive Committee responds to and is supervised by the Board of

Directors. It executes the Company’s short-, medium- and long-term strategic plan in the respective areas by following the guidelines set by the Board of Directors, always in compliance with the economic, environmental and social principles. The Executive Committee consists of three statutory Officers and four executive managers. The Officers are elected by the Board for a one-year term and may be re-elected.

COMPOSITION OF THE EXECUTIVE COMMITTEE – 12.31.2015

Name PositionMarcos Antonio De Marchi Chief Executive Officer and Investor Relations Officer

Ricardo Craveiro Massari Chief Commercial Officer

Elder Antonio Martini Chief Industrial Officer

Rafael Pellicciotta Executive Research, Development and Innovation Manager

Ricardo Garcia de Souza Executive Finance and IT Manager

Paulo de Tarso Araújo Sobrinho Executive HR, Legal and HSE Manager

Daniel Lopes Franco Executive Strategy Manager

G4-34

044 E L E K E I R O Z 2 0 1 5

Advisory committeesG4-14

The Advisory Committees work in preparation for the discussions of the Board of Directors. In fact, they help the Board perform its duties by offering the Directors studies, details and arguments so they can make their decisions. They are established by the Internal Rules and Regulations of the Board of Directors – not by the Company’s Bylaws – and have, in turn, their own internal rules and regulations. Each Committee is composed of three to six members, who may be the Directors themselves, Company executives, auditors or market professionals with expertise in the respective field.

Advisory Committees help the Board of Directors to perform its duties.

People and GovernanceThe People and Governance Committee looks after

the Company’s ethical principles and values by studying the profile of professionals who have the potential to join the Board of Directors and setting guidelines to achieve the Company’s targets. It also develops and conducts regular performance assessments, and it also submits compensation policy proposals to the Board. It manages the Company’s Code of Ethics, as well, and monitors the results of climate surveys and leadership styles. The Committee met six times during 2015.

Strategy and InnovationThe Strategy and Innovation develops measures

and initiatives to increase shareholder value. Composed of professionals and experts with extensive experience in the chemical industry, it monitors and examines market trends, as well as industry technology trends, both in Brazil and worldwide, assesses their impacts on business and identifies opportunities for acquisitions, mergers and product development. The Strategy and Innovation Committee had five meetings in 2015.

Audit and Risk ManagementThe Audit and Risk Management Committee’s

main duties are to assess the effectiveness of the internal control and risk management systems; review the quarterly and annual financial statements and the respective independent auditors’ reports; and examine the internal audit reports. The Audit and Risk Management Committee met nine times in 2015.

DisclosureElekeiroz also has a Disclosure Committee

that evaluates the guidelines and procedures for disclosing any material act or fact and protecting the confidentiality of that information.

The Committee examines the quarterly and annual earnings reports, as well as releases and other documents to be published to the market. In addition, it advises the Chief Executive Officer, who is also the Investor Relations Officer. The Disclosure Committee had four meetings during 2015.



Code of ethics and conduct

We have a Code of Ethics and Conduct geared mainly to internal stakeholders, but to suppliers as well. Elekeiroz’s Code of Ethics and Conduct establishes rules for attitudes in the workplace, performance of duties, relationship with stakeholders and activities involving public authorities, as well as environmental preservation and responsible practices in relation to local communities at the

2.3. Principles and policiesG4-DMA - Anti-corruption | G4-DMA - Compliance | G4-DMA - Anti-competitive behavior | G4-DMA - Public policy | G4-56

| G4-SO4 | G4-SO5 | G4-SO6 | G4-SO7

Company’s locations of operations. It is based on the principles of integrity; legality; respect for the human being; rejection of any form of discrimination; encouragement to personal and professional development; teamwork; and social, environmental and cultural responsibility.

Developed based on the Company’s values and ethical principles, the Code of Ethics and Conduct was revised in 2015. It sets out the standards of conduct expected from employees, who are jointly responsible with executives for disseminating Elekeiroz’s values and are supposed to follow those standards in their activities. In addition, it addresses issues

related to anti-competitive behavior, anti-trust or

monopoly practices, and was updated

in compliance with the Anti-Corruption Act (Law # 12,846). It is worth noting we had lectures

about those issues, attended

by all Officers, throughout 2015. No

incidents of corruption were recorded, nor were any

financial contributions made to politicians or their parties in 2015. Likewise, no legal actions regarding

anti-competitive behavior and anti-trust or monopoly practices were filed in 2015.

We announced to the Executive Officers and employees the Code of Ethics and Conduct had been updated at the communication sessions with the CEO in Várzea Paulista and Camaçari. The document is also available on Elekeiroz’s website (www.elekeiroz.com.br/a-elekeiroz/governanca-e-sustentabilidade/codigo-de-etica-e-conduta-da-elekeiroz). Every new employee must read it and sign it as soon as he/she is hired.

The People and Governance Committee manages the Code and monitors compliance with it. Ethics-related conflicts, incidents of misconduct and any incidents of non-compliance with the Code should be reported to the Chief Executive Officer by e-mail to [email protected]; phone number at (55 11) 3179-7711; or mail to Av. Paulista, 1938 – 5º andar, Cerqueira César, CEP 01310-942, São Paulo-SP, Brazil.

Whistleblowers may or may not identify themselves in any of those grievance channels. The secrecy and confidentiality are guaranteed. Any person-to-person contact that may be requested will occur in a private location.

Information transparencyElekeiroz is a publicly-

held company with shares listed on BM&FBOVESPA. Therefore, it follows the disclosure requirements established by the Brazilian Corporations Law and the CVM (Comissão de Valores Mobiliários, or Brazilian Securities Commission) instructions. The CEO is also the Investor Relations Officer, so he is formally responsible for all disclosures.

The Company’s results, presented on a quarterly basis, and other communications are available on our Investor Relations website (www.elekeiroz.com.br/

The Company’s Code of Ethics and Conduct was revised in 2015.

investidores) and on the CVM’s website. We hold an annual public presentation for investors, jointly with the other Itaúsa companies.

Our Disclosure Policy places a heavy emphasis on disclosing data and information in a fair and timely manner. It establishes mandatory internal guidelines and procedures, and ensures the confidentiality of information not yet disclosed. Moreover, it formally establishes the Disclosure Committee, intended to assist the Investor Relations Officer in dealing with all the relevant issues.

Relationships

Human resources management focusing mainly on improving the Company’s communication channels by integrating people and departments more closely, as well as training and developing leaderships.

048 E L E K E I R O Z 2 0 1 5

Elekeiroz underwent a transition involving both its portfolio of products and solutions, and its operations in 2015. Human resources management has been focusing mainly on improving the Company’s communication channels by integrating people and departments more closely, as well as training and developing leaderships, to prepare stakeholders for the new situation.

Consequently, our people management policy and HR initiatives, designed to renew our internal culture, are key to the success of our strategy. Our goals are to keep the strengths of the previous model and increasingly foster a dynamic environment, challenge people, integrate, build and, above all, arouse a passion for strong performance and a sense of urgency in our whole team.

We have been strengthening our merit-based system, introduced in 2013, so that it becomes an integral part of our internal culture. All employees undergo a performance evaluation in an interview with their immediate superiors. In the last two years, we have been focusing on enriching these conversations by having employees and their leaders give each other honest constructive feedback.

3.1. Internal stakeholdersWe have been emphasizing among our employees

the importance of this performance evaluation model for their personal and professional growth since it helps them identify their strengths and weaknesses, thus providing a basis for establishing personal development plans and the Company’s Succession Plan.

Business PartnerThe new people management model led us

to restructure our Human Resources department as well. As a result, we introduced the position of Business Partner, HR professionals that provides support for the business departments, in 2015. Their mission is to gain an understanding of each department’s people management needs, propose solutions and anticipate problems, thus contributing positively to the Company’s results. The idea is to narrow the gap between different position levels at Elekeiroz and streamline processes.

Launched as a pilot project in all the departments of the Camaçari unit and in the sales department of the Várzea Paulista unit, the Business Partner model is intended to align HR support with each department’s strategic demands and specific needs.



Each member of the workforce attended 44 hours of training on average in 2015.

050 E L E K E I R O Z 2 0 1 5

Workforce profileG4-10

Elekeiroz had a 997 workforce – including direct employees, contractors and interns –, consisting of 835 males and 162 females. Direct employees are contracted in accordance with CLT [Consolidação das Leis do Trabalho, or Brazilian Labor Act].

2015

2015

Full-time employees (indefinite term)

Part-time apprentices (fixed term)

Total

Region Male Female Male Female Male Female Total

Southeast 282 71 4 0 286 71 357

Northeast 257 33 9 2 266 35 301

Total 539 104 13 2 552 106 658

Contractors Interns Total workforce (employees + contractors + interns)

Region Male Female Male Female Male Female Total

Southeast 131 33 9 1 426 105 531

Northeast 137 18 6 4 409 57 466

Total 268 51 15 5 835 162 997

Total workforce on 12.31.2015: 997(including employees, contractors and interns)

By unitVárzea Paulista – 531 Camaçari – 466

53.3%

46.7%

By genderMen – 835 Women – 162

83.8%

16.2%

Training and developmentOur initiatives throughout

the year focused on workforce from different departments. Each member of the workforce attended 44 hours of training on average in 2015. We offered leadership development programs, general knowledge courses and elementary education to employees from operational areas. We invested about R$ 300 thousand in training programs intended to strengthen in Elekeiroz’s culture two aspects emphasized in our current strategic plan: A Passion for Strong Performance and A Sense of Urgency.

A Passion for Strong Performance highlights the importance of achieving corporate and individual targets, and makes self-development and ongoing improvement major goals. In turn, the idea of A Sense of Urgency is meant to discourage procrastination; raise awareness of the need to achieve consistent and sustainable results as soon as possible; and place a heavy emphasis on quality and safety so that each initiative is undertaken at the right time.

We also launched an e-learning project in 2015, thus providing greater flexibility in our employees’ learning and development process. We offered the following programs during the year:

Leadership development – a passion for strong performance – a people management program designed to enable employees to fulfill their potentials to the fullest. We offered managers and coordinators the Leader Coach and Feedback module jointly with an external consulting firm in 2015. The purpose was to improve leaders’ management skills in connection with our teams’ performance evaluation programs. A total of 45 leaders completed those programs.

Total Productive Maintenance (TPM) – a training program targeted at operational teams – maintenance and production employees – with a focus on reducing waste and boosting efficiency.

Six Sigma – We offered training programs in the Camaçari unit throughout the year in preparation for the possible adoption of Six Sigma, a management tool intended to improve a company’s processes systematically. We introduced the methodology to 23 employees.


i360. Our intranet was restructured to become a more interactive communication platform in 2015. It now has a specific section named SSMA Expresso

[HSE Express] for Health, Safety and Environmental issues.

It brings together news about important HSE

initiatives or facts. i360 also comprises Blog do Presidente [CEO’s Blog], in which the Company’s top executive shares his ideas directly with

all members of the workforce.

Lunch with the Executive Committee. This

event was held once or twice a month throughout the year. On these occasions, two members from the Company’s top executive body have lunch in a separate room with eight to ten employees from different departments and positions to establish a direct line of communication and reinforce Elekeiroz’s values and priorities.

Ombudsman. The Disque-Denúncia [Grievance Hotline] channel was restructured and gave rise to our Ombudsman’s office, intended to play an expanded role and receive not only grievances and complaints, but also comments about our activities, products

and management, as well as our employees’ relationship with internal and other stakeholders.

Contacting the CEO. There is a form on Elekeiroz’s website and intranet that allows contacting the CEO directly (www.elekeiroz.com.br/investidores/fale-com-o-dri/)

There are also four information meetings – at which the CEO presents the Company’s results, priority projects and plans to staff from all levels – during the year. This initiative is designed to bring management closer to employees and provide a more general overview of the business. The new model adopted in 2015, with attendees divided into groups for questions and suggestions, encourages employees to participate more actively in the event and interact more. The answers are posted on the intranet later.

We provide for the whole workforce information about matters of general interest, such as benefits, pay raises, performance evaluations and shift workers’ monthly schedules, among others. Communications are made within the time frames set out in Annex II to this Report.

i360Our intranet was restructured in 2015 to become a more interactive communication platform.

Communication channelsG4-LA4

To bring operational teams and executives closer, Elekeiroz has been creating channels that allow them to interact and exchange information more often, such as:

Integration eventsWe celebrate holidays and encourage our

employees to exchange experiences and socialize to foster a welcoming work environment. We believe the Company is an important part of our employees’ lives. We also offer more informal integration opportunities by respecting regional traditions as well. For example, we have a June Festival for employees and their families in Camaçari every year, during the period of major celebrations in Northeastern Brazil. In 2015, the event, which features typical dishes, games and songs, drew about 210 people. We also have year-end parties for all employees and their families in Camaçari and Várzea Paulista. In 2015, about 1,100 people attended the events.

By sharing knowledge and learning about different topics, in addition to being together at the Company every day, employees are able to develop personally and

bond with one another. Elekeiroz’s Learning Mornings initiative encourages employees to present and share with their peers experiences that they had outside of Elekeiroz and may be somehow related to aspects of the corporate world. There were six events in Várzea Paulista and one in Camaçari, with a total of 100 participants, in 2015. The topics addressed were Creative Entrepreneurship, Learning from Bees, Meditation, The Future of Composites and Innovation.

Career lecture is another initiative intended to integrate employees and advance knowledge internally. It is a learning opportunity – mainly for younger professionals – in which employees share their own career paths with their peers. One event was held in Várzea Paulista, with a total of 15 participants, in 2015.

Compensation and benefitsG4-DMA - Employment | G4-11 |

G4-LA2

Collective wage agreements, negotiated between the Company and the unions representing all the categories in the workforce, cover all employees. We comply with the provisions of all labor laws in force.

Executive pay, upward from the position of Coordinator, comprises a variable portion – profit-sharing – based on the earnings results and individual targets achieved. The idea is to attract, reward and encourage executives to conduct the business and help the Company achieve its strategic goals. This compensation model is in line with the merit-based culture, which we want to strengthen at the Company. The variable portion was

not paid in 2015 because Elekeiroz had poor results due to the market conditions.

In 2015, the total compensation for the highest-paid position was 7.3 times the median total compensation for the other employees. The percentage increase in compensation for the highest-paid individual was the same as that in compensation for all employees.

All employees also have benefits such as health plan, life insurance and supplementary retirement plan. Annex III to this Report contains a table describing all the benefits the Company offers to its employees in Várzea Paulista and Camaçari units.

We encourage our employees to exchange experiences and socialize to foster a welcoming work environment.


Private Pension FundAll employees can join a

defined contribution pension plan voluntarily. We started offering three options in 2015 – previously only one – depending on each investor’s profile: conservative, moderate, or bold.

The plans are managed by Fundação Itaúsa Industrial, a privately-held not-for-profit organization that creates and manages private pension plans supplementing Social Security.

Health and safetyG4-DMA – Occupational Health and

Safety | G4-LA5 | G4-LA6

Elekeiroz is firmly committed to its employees’ safety and health. Its activities – storing, processing and selling chemicals, both as raw material and finished products – expose its employees to different health and safety risks. Accordingly, Elekeiroz believes those issues cannot be comprised on. In fact, they are always the first ones addressed at the Information Meetings with the CEO and the Meetings of the Board of Directors.

Elekeiroz’s direct employees and contractors participate in different formal health and safety committees, both internal (CIPA) and external, mainly at Abiquim (in São Paulo State) and Cofic (in Bahia State). Currently, 60 (or 6.0% of all Elekeiroz’s employees and contractors), representing the Company’s entire workforce, from both Várzea Paulista and Camaçari, participate in those committees. All employees and contractors, regardless of their positions, can participate in the health and safety committees. However, the committees related to the CIPA and COFIC are mostly comprised of employees with a vocational

Occupational accidents

With lost workdays

7

2011

4

2 3 3

2015201420132012

3.3

2.01.0 1.5 1.4

Without lost workdays

24

2011

18 19

15

19

2015201420132012

11.3

8.8 9.57.3 8.6

certificate or college degree whereas Abiquim’s committees are mostly comprised of executives (coordinators, managers and Officers).

There were three occupational accidents with lost workdays – none of which was severe or with injuries – in the Company’s three units in 2015, the same number as in 2014.

International studies indicate over 90% of personnel, process, environmental or material losses are caused by behavioral problems. Therefore, we started focusing more closely on those aspects in 2015 and introduced safety programs. This is an innovative approach since we basically provided safe working conditions before that. This change is related to our Health and Safety Policy, introduced in 2013 and available for both employees and contractors. The main purpose of this new policy is to offer proper

ABSENTEEISM AND LOST DAYS

2015 2014 2013 2012 2011Absenteeism (%)* 1.1 2.8 3.5 4.1 3.5

Lost workdays** 148 25 87 93 99

*% of hours of absenteeism in relation to the total hours contracted**Resulting from lost time accidents in Várzea Paulista and Camaçari

OCCUPATIONAL ACCIDENTS – 2015 BY REGION AND GENDER

2015 Southeast Northeast

Region Male Female Male Female

Lost time accidents 1 1 1 0

Accidents without lost time 5 1 12 1

Frequency rate (FR) 7,7 10,3 12,0 7,0

Lost workdays* 63 77 8 0

*Resulting from lost time accidents

the Process Safety Department carries out process safety studies at the current units by analyzing hypothetical problems in process controls in relation to the safety barriers in place. This type of study allows us to identify risks at production units systematically and eliminate those which are unacceptable. Investment projects in new units are also assessed by using the same methodology.

We use the following tools to minimize or eliminate the health and safety risks to which employees are exposed:

RDCI (Registro de Desvio Comportamental, Condição Insegura e Incidente, or Record of Behavior Problems, Unsafe Conditions and Incidents) – introduced in 2015 to map behavior problems, unsafe conditions and incidents.

Safety Dialogues – meetings held in all departments to raise awareness of occupational safety and accident prevention.

Cause Tree – a methodology that helps identify the cause of a particular event. It is based on research about the origin of incidents to prevent them from happening again, correct major flaws and adopt preventive measures.

HAZOP – (Hazard and Operability Studies) – This tool is used to identify vulnerabilities in operational processes to adopt measures to eliminate them. The HAZOP tool is used both in new projects and in the regular inspection of our plants to identify risks and reduce the probability of accidents.

VSH (Visita de Segurança da Hierarquia, or Hierarchy Safety Visit) – Officers and executive managers go to each unit to talk to employees about safety and the environment. During these meetings, we raise awareness of the importance of adopting safety measures in all activities, hear about employees’ challenges and receive suggestions for improvements. We had 15 VSHs in the Camaçari and Várzea Paulista plants and received over 50 recommendations for improvement in 2015.

Our Health and Safety initiatives planned for 2016 will focus on prevention. We are planning to adopt tools such as Diálogo Comportamental [Behavioral Dialogue], Inspeções Planejadas de SSMA [Scheduled HSE Inspections] and Observação Planejada de Trabalho [Scheduled Work Observation] among others.

health and safety conditions, preserve the environment and promote a harmonious relationship with neighboring communities.

All those initiatives are also in line with the Responsible Care Initiative, of which Elekeiroz is a member. The International Council of Chemical Associations is responsible for the Initiative worldwide whereas Abiquim is responsible for it in Brazil.

Elekeiroz is also a member of the Cofic [Comitê de Fomento Industrial de Camaçari, or Camaçari Industrial Development Committee], an association of companies in the Petrochemical Complex focused on health and safety, among other issues. The Committee’s initiatives are based on the Camaçari Health & Safety and Responsible Care Guide.

The Company set up a Process Safety Department in 2015. Subordinated to the Processes and Engineering Department,

Number of accidents

Frequency rate*

* Number of accidents per person-hours of exposition to risk.


Elekeiroz is essentially a producer of second and third generation petrochemical intermediates. As a result, its main raw materials are purchased from petrochemical plants.

For example, the Camaçari unit receives all raw materials and ancillary inputs, such as electricity, industrial gases and water, through pipelines connected to the petrochemical plant. The Company is located close to its suppliers, in the Petrochemical

Complex itself; as a result, its production chain is more competitive.

The Várzea Paulista unit, in turn, is strategically located near the railroad network; therefore, it can receive raw materials easily by rail. We purchase our main inputs by means of long-term contracts to ensure a steady supply. It is our policy to have close ties with our largest suppliers and seek alternatives to boost the competitiveness of our

production chain.We undertook several

projects to increase the Company’s competitiveness in 2015, such as changing suppliers of imported raw materials to minimize shipping costs. In turn, maximizing profits from contracts in force and other initiatives was discussed at several internal meetings.

3.2. SuppliersG4-12

3.3. CustomersElekeiroz celebrated a

milestone anniversary in 2015. Few companies in Brazil make it to 120 years successfully, having experienced so many and such varied economic and market conditions. The Chairman of the Board of Directors, its Members, the Executive Committee and many other employees dealing directly with customers and suppliers celebrated this important date by welcoming those stakeholders at a cocktail during which an institutional video cramming Elekeiroz’s history into a few minutes was shown. In addition, an economist spoke about Brazil’s

economic history in the last 120 years, thus allowing the audience to view Brazil’s current troubles from a different perspective. In addition, the event was essential to strengthen the ties with Elekeiroz’s business partners.

Concerning management, a new executive took over the sales department, responsible for interacting with customers every day, in 2015. We focused mainly on promoting the new products (further information in the Business Management section) and seeking different opportunities.

Aware that constant renewal is essential to build a successful

Elekeiroz is essentially a producer of second and third generation petrochemical intermediates.

history of so many years, Elekeiroz started exploring new activities. For example, we started selling hydrogen through the Camaçari Gas Unit and reselling products we import for purely commercial purposes. We have been able to offer our customers products at attractive prices by tapping into our logistics structure. In this new business, we worked with two types of alcohol in 2015 and will be testing new products in 2016.

We are a medium-sized company – with a natural inclination for the B2B model – that serves chemical companies of different sizes, mainly in the South

and Southeast Regions of Brazil. Having close relationship with customers, adopting an ethical partnering stance and providing excellent customer service are key elements of our culture. We communicate with customers by visiting them and participating in events. In 2015, we participated in Feiplastic [Feira Internacional do Plástico, or International Plastic Fair], during which we launched the EKFLEX plasticizer line, with the new products EKFLEX 882 (DOCH) and Extended Line (EKFLEX 1000 and 2000 series). We also had a booth at Abrafati, an event organized by Brazilian Paint Association.

This allows us to get to know our customers’ needs and be open to new business opportunities.

The launch of DOCH was an excellent example of our partnering stance. The product – strategic for Elekeiroz – was developed jointly with a customer that believed its exports to Europe were at risk since it used phthalate plasticizers. We remained in close contact with this customer throughout the research and development process and tested the new product jointly, which brought benefits for both parties.

The Várzea Paulista unit is strategically located near the railroad network; therefore, it can receive raw materials easily by rail.


3.4. Society – communities and government

Directed at the communities in the vicinity of our locations of operation, our social and environmental initiatives focus on educating adolescents and young people and promoting active citizenship through health, cultural, educational and leisure activities, as well as sports.

We also encourage our employees and contractors to volunteer. In fact, we believe we have to maintain a close relationship with local communities since we are aware we play a major role in those locations, just as those stakeholders and their well-being are important to the Company. Accordingly, we seek to establish a dialogue with local communities through the initiatives we undertake or participate in to improve the quality of life and promote social and economic development locally.

Some of the initiatives we developed in 2015 were:

Programa Portas Abertas [Open Doors Program]: Students from college and vocational chemistry programs visit our plants regularly to get to know the routine of a chemical company. The Program was also extended to employees’ family members.

Elekeiroz Comunidade [Elekeiroz Community]: Students from Tibúrcio E. Siqueira High School, in Várzea Paulista, visited the Company’s facilities, an initiative that led the participants to create

posters with the theme “Elekeiroz – 120 years of History, Sustainability and Innovation”.

Ver de Dentro [Seeing from Inside]: In 2015, 80 people visited the Company as part of a joint project with Cofic. The purpose was to implement an open-door policy, bring neighboring communities closer and share experiences with schools, universities and people interested in Elekeiroz.

Conselho Consultivo Comunitário [Community Advisory Board]: The Camaçari Unit is involved in community-oriented initiatives through Cofic.

Sponsoring the town of Várzea Paulista’s environmental primer in partnership with IBAMA: We were one of the sponsors of the Empresas Amigas do Meio Ambiente [Environment-friendly Companies] project, an

initiative designed to promote the sustainable development of the Várzea Paulista community through the educational primer.

Polo de Cidadania [Active Citizenship Center]: This event offered health, educational, cultural, sports and leisure services to the communities neighboring the Camaçari Petrochemical Complex. Elekeiroz was one of the sponsors.

Volunteering initiatives: These initiatives, undertaken jointly with employees, involve donating clothes and toys to charities. We had coat drives in the Camaçari and Várzea Paulista units in 2015. The clothes collected were given to organizations located close to those units.

We constantly monitor any possible social and environmental impacts our activities may cause on the neighboring communities due to the nature of our operations and the risks inherent in them. Therefore, we monitor air emissions, liquid effluents, fire hazards in production processes and accidents occurring while our products are being transported. We look into any incidents or accidents by using proper techniques (Cause Tree, Ishikawa, etc.) and take appropriate action. Any grievances the community may have are recorded, examined and resolved when identified.

Our social and environmental initiatives focus on educating adolescents and young people and promoting active citizenship.

Institutional representationG4-15 | G4-16

We participate actively in civil society initiatives by contributing our effort and taking on commitments related to the advancement of the chemical industry, ethics and environmental issues. We also cooperate with local governments to help boost the social, environmental and economic development of the areas in which our industrial units are located.

Some of the initiatives we are involved in are:We are a member of Abiquim, participate in all its theme

committees to promote the sustainable development of the industry and have a representative on the organization’s Board of Directors.

We are a member of the International Council of Chemical Associations’ Responsible Care Initiative, managed by Abiquim in Brazil and designed to show members’ voluntary commitment to improving the chemical industry’s health, safety and environmental performance continuously.

We are a member of the Managing Council of Almaco [Associação Latino-Americana de Materiais Compósitos, or Latin American Composite Materials Association], whose mission is to represent, promote and strengthen the development of the market of composites, materials used in the automotive, ship, civil sectors among others.

We are members of Anpei [Associação Nacional de Pesquisa e Desenvolvimento das Empresas Inovadoras, or Brazilian National Association for Research and Development of Innovative Companies], in which we have two representatives.

We are members of Pacto Empresarial para o Programa Na Mão Certa [Business Pact for the On the Right Way Program], designed to fight child prostitution on Brazil’s highways by training, and providing information for, professional drivers. It is a joint initiative of Childhood Brasil and Instituto Ethos de Empresas e Responsabilidade Social [Ethos Institute for Business and Social Responsibility].

Active participation in civil society initiatives by contributing our effort and taking on commitments related to the advancement of the chemical industry, ethics and environmental issues.

We also sit on the following committees: Cofic [Comitê de Fomento Industrial de Camaçari, or Camaçari Industrial Development Committee].PAM [Plano de Auxílio Mútuo, or Mutual Assistance Plan].Cosima [Comissão de Segurança Industrial e Meio Ambiente, or Committee on Industrial Safety and the Environment].Usuport [Associação de Usuários dos Portos da Bahia, or Bahia State Port Users Association].CBHRN [Comitê de Bacias Hidrográficas do Recôncavo Norte, or Committee for the Recôncavo Norte River Basins].

Business Performance

060 E L E K E I R O Z 2 0 1 5

Brazil is still suffering the heavy cost of the unfolding political and economic crisis. Gross Domestic Product (GDP), which measures the wealth generated by the country, shrank in the four quarters of 2015 and had fallen by 3.8% by the close of the year, the worst performance since the beginning of the historical series, based on the calculation methodology adopted by IBGE [Instituto Brasileiro de Geografia e Estatística, or Brazilian Institute of Geography and Statistics] since 1996. As a result, the Brazilian economy returned to the same level of early 2011. The industrial sector performed the worst, recording a 6.2% downturn, after decreasing by 0.9% in 2014. Therefore, its share in the Brazilian economy fell for the fifth straight year.

The economic situation deteriorated significantly. Brazil faces serious fiscal problems, and the main rating agencies downgraded it below investment grade. In addition, interest rates, unemployment and inflation all rose. The situation affected consumers’ and the business community’s level of confidence, thus leading to a drop in demand and private investment. Household spending fell by 4% in 2015 – the sharpest drop since 1996 – whereas investments slumped by 14.1%, after declining by 4.5% in 2014.

4.1. Economic and industry situation

The chemical industry followed the overall trend. Abiquim data show domestic sales shrank by 5.4% whereas the domestic demand for industrial chemicals, as measured by the Apparent National Consumption, decreased by 6.8%. Imports, affected by the depreciation of the Brazilian real, plummeted by 21.6% in 2015. Only exports increased – by 10.6% – in the year, reflecting the chemical industries’ effort to find alternatives to sustain production levels and the capacity utilization rate, which slid by 1.0 p.p. year-over-year to 78% in 2015.

We decided to face this adverse situation by renewing the company and its processes to boost efficiency and profitability, and thus create the conditions to increase returns for shareholders, both in adverse times like this and in the upcoming recovery. We completed the integration and upgraded the equipment of the Camaçari Gas Unit, and expanded the sulfuric acid capacity of the Várzea Paulista plant in 2015. We also continued revising our management models and business processes, with a focus on research and development of products and production processes and sound management of costs and expenses. We started observing promising results from the second half of the year.


G4-DMA – Economic Performance

We are renewing the company and its processes to boost efficiency and profitability, and thus create the conditions to increase returns for shareholders.

Operating performanceElekeiroz’s shipments totaled

410.3 thousand tons in 2015, down 8.4% year-over-year. This performance is explained by the adverse market conditions, resulting in a flagging demand, but mainly by the scheduled maintenance shutdowns in four plants in the first half of the year. Shipping recovered in 2H15, rising by 41.2% when compared with 1H15, since operations were resumed and the production capacity of our sulfuric acid plant was expanded.

4.2. Economic and financial performance

Total shipments (thousand tons)Annual 2015 – half-yearly

222

221

2011

244

219

236

235

217

231

192

218

2015 2nd

semester2014 1st

semester20132012

443 46

3

471

448

170

410

240

+41.2%

Organic products

Inorganic products

062 E L E K E I R O Z 2 0 1 5

Net operating revenueSales led to net revenue of

R$ 894.3 million in 2015, 4.4% down on 2014, led by decreased product shipping in the year. However, revenue decreased less than the sales volume despite the unfavorable economic environment. This performance shows our efforts to redesign our product portfolio, mainly by launching DOCH, a unique plasticizer in the Brazilian market, in 4Q15.

Revenue picked up during 2H15 since we resumed industrial operations at our plants after the maintenance shutdowns and launched new products. Net operating revenue rose by 19.8% in 2H15 vs. 1Q15.

Net operating revenue (R$ million)Annual 2015 – half-yearly

681.

395

.4

2011

749.

515

0.3

890.

011

4.1

815.

811

9.2

803.

590

.8

2015 2nd

semester2014 1st

semester20132012

776.

7 899.

8 1,00

4.1

935.

0

406.

8

894.

3

487.

5

+19.8%

Internal market Exports


064 E L E K E I R O Z 2 0 1 5

Operating expensesG4-EC4

Operating expenses came to R$ 65.7 million in 2015, down 29.6% from R$ 93.3 million in 2014. This fall resulted partly from the 20.4% (R$ 9.5 million) decrease in selling expenses during the year. In turn, general and administrative expenses amounted to R$ 68.9 million in 2015, 14.0% (R$ 8.5 million) up year-over-year, impacted by high inflation in the period.

The greatest changes in relation to 2014 were recorded in the “Other Operating Revenue/Expenses” account. The year-on-year increase of R$ 28.3 million

resulted mainly from non-recurring events: (i) gain on the sale of land not used in operations in Várzea Paulista (R$ 18.4 million); (ii) reversal of excess provisions related to legal actions concluded during the year (R$ 3.4 million); and (iii) recognition of tax credits arising from a lawsuit (R$ 6.5 million). PIS [Programa de Integração Social, or Brazilian Social Integration Program]/COFINS [Contribuição para o Financiamento da Seguridade Social, or Tax for Social Security Financing] credits on raw materials, connected with Law # 12,859/2013, which granted tax incentives to the chemical

industry through presumed credit and lower PIS/COFINS rates on input purchases, are also recorded under Other Operating Income. Those credits amounted to R$ 26.9 million in 2015, against R$ 36.4 million in 2014.

The 2015 performance was also positively impacted by the fact that the basis for comparison – FY 2014 – was negatively affected by extraordinary events: expenses written off in connection with the construction of a new plant, a project temporarily suspended, and a provision for civil contingencies, totaling non-recurring expenses of R$ 18.6 million.

Cost of goods sold and gross margin

Despite a difficult year for the Brazilian economy and a drop in sales, gross margin recovered after the loss recorded in 2014 because we completed the operational improvement and cost reduction projects – designed to boost efficiency – in 1H15. Cost of goods sold amounted to R$ 833.1 million in 2015, falling by 6.3% year-over-year – more sharply than net operating revenues, which declined by 4.4% in the same period.

Therefore, gross profit increased by 33.7% year-over-year, to R$ 61.1 million. Gross margin was 6.8%, up 1.9 p.p. from 2014.

Gross profit (R$ million) and gross margin (%)Annual 2015 – half-yearly

2011 2015 2nd semester

2014 1st semester

20132012

89.6 96

.2 104.

9

45.7

61.1

20.4 40

.8

11.5%10.7% 10.4%

4.9%6.8% 4.2%

8.4%


EBITDA (R$ million) and EBITDA margin (%)

2011 2015201420132012

27.0

38.4

80.5

-6.7

45.5

3.5%4.3%

8.0%

-0.7%

5.0%

Adjusted Ebitda*R$17.2 million

* Excludes R$ 28.3 million related to the three extraordinary events of 2015.

This rise reflects higher sales volumes in 2H15, after the maintenance shutdowns and the expansion of the production capacity of the sulfuric acid unit, in addition to the efficiency gains obtained from the investments we made in the industrial gas unit. Other contributing factors were the drop in cost of goods sold and operating expenses, and the gain from extraordinary events, as previously mentioned. Had it not been for non-operating income from non-recurring events, EBITDA would have come to R$ 17.2 million, with 1.9% margin, in 2015.

EBITDAOperating cash generation

as measured by EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) came to R$ 45.5 million in 2015, with 5.0% margin, up from a negative operating cash flow of R$ 6.7 million in 2014.

Sales and profitability recovery in the second semester 2015.

Gross profit

Gross margin

066 E L E K E I R O Z 2 0 1 5

Financial resultWe had a net financial loss

of R$ 13.1 million in 2015, vs. net financial income of R$ 1.5 million in 2014. This result is mainly explained by higher interest expenses, paid on financing loans obtained in connection with the investments we made. The financial result was also negatively affected by exchange rate changes, a net impact of R$ 3.1 million (vs. R$ 0.2 in 2014) due to the impact of the depreciation of the Real on assets and liabilities denominated in foreign currency.

Net income/lossWe have started observing

the first results of our investments in upgrading and integrating the industrial gas unit in Camaçari and expanding the sulfuric acid production capacity in Várzea Paulista, as well as the products launched and the new management model adopted – with a new business strategy, a redesigned logistics process and strict expense management. In fact, our operating performance improved in 2H15 as a result of those changes.

We still recorded a net loss of R$ 11.0 million in 2015, lower, however, than the R$ 32.3 million net loss recorded in 2014.

Debt profile

MaturityNet debt* on 12.31.2015: R$ 158.1 millionShort term Long term

51.5%

48.5%

CurrencyGross debt on 12.31.2015: R$ 195.7 millionForeign currencies Local currency

20.2%

79.8%

* R$ 37.6 million registered as Cash and Cash Equivalents in Dec. 31st, 2015, were reduced from the short-term debt.


Elekeiroz added to society through its operations the total value of R$ 108.1 million in 2015, up 175.1% from R$ 39.3 million distributed in 2014.

In the past five years, the Company has distributed R$ 376 million to employees as wages and benefits, thus creating value from its operation regardless of whether it recorded net income. In the same period, it distributed R$ 34 million to Federal, State and Municipal governments as taxes and fees.

4.3. Value added statement – VAS

G4-EC1

VALUE ADDED STATEMENT (VAS)

R$ million 2015 2014 2013 2012 2011Gross Value Added 108 39 163 69 88

Revenues 1,129 1,168 1,260 1,121 976

COGS -999 -1,107 -1,085 -1,036 -891

Depreciation, amortization and depletion -44 -39 -38 -38 -26

Financial income 22 18 26 22 28

Value Added Distribution (R$ million)

2011 2015201420132012

61 68 80 80 87

5

-6

34

-32

-11

6 7

10

-15

1615 0.5

39

7

16

69

4087

163

108

Interest on capital

Government

Return on third-party capital

Personnel

Upgrade and integration of the industrial gas unit in Camaçari.

DebtElekeiroz obtained working capital loans and financing loans to expand

and upgrade its industrial facilities, including the acquisition of the gas unit in Camaçari in 2013. Net debt amounted to R$ 158.1 million on December 31, 2015, vs. R$ 100.0 million on December 31, 2014.

The Company has a long-term line of credit of R$ 123.7 million with BNDES, valid until June 2017. By the close of FY 2015, R$ 99.3 million had been released. It also has a line of credit with Finep [Financiadora de Estudos e Projetos, or Funding Authority for Studies and Projects] of R$ 22.7 million, of which R$ 12.5 million had been released by 12.31.2015, to fund research and technological innovation projects.

In December 2015, Elekeiroz also obtained from Banco do Nordeste a R$ 28.0 million loan that should be released in 1H16, by using funds from FNE [Fundo Constitucional de Financiamento do Nordeste, or Northeast Financing Constitutional Fund] specifically to upgrade the gas plant in Camaçari.

068 E L E K E I R O Z 2 0 1 5

Annex – Additional GRI-G4 indicators

ANNEX IMaterials used in the production process – 2015

G4-EN1

G4-EN1


G4-EN1

INPUT Amount/Number Recycled Non-renewable

Catalyst (tons) 29 X

Filtration aid (tons) 12 X

Activated carbon (tons) 73 X

MSA - methanesulfonic acid (tons) 2 X

Hydrogen peroxide (tons) 33 X

PTSA - p-toluenesulfonic acid (tons) 205 X

Sodium hydroxide 50% (tons) 1,267 X

Dry sodium hydroxide (tons) 144 X

Titanate (tons) 28 X

Fuel gas (m3) 460,605 X

Liquid nitrogen (thousand Nm3) 1,375

Production nitrogen (thousand Nm3) 2,146

Metal unloading valve (un.) 1 X

PACKAGING MATERIALS Amount/Number Recycled Non-renewable

Plastic reel (tons) 28 X

Plastic reel (un.) 47,608 X

Plastic drum (un.) 424 X

Big-bag (un.) 4,555 X

Box/bag (un.) 88 X

Pallets (un.) 40,146 X

Sewn paper bag (un.) 324,150 X

Sanbags (un.) 6,414 X

Steel barrels (un.) 6,229 X

Metal barrels for resins/st/plasticizers (un.) 29,727 X

Coated barrels for 2-ethyl hexanoic acid (un.) 1,482 X

Raw materials Amount/Number Recycled Non-renewable

Aldehyde (tons) 96,431 X

Benzene (tons) 13,207 X

Sulfur (tons) 70,566 X

Methanol (tons) 21,619 X

Naphthalene (tons) 5,223 X

Ortho-xylene (tons) 30,487 X

Urea (t) 3,563 X

Grade B PET - grains, crystal flakes or colorless to brown powder (tons) 563 X X

Grade C PET - grains, flakes or green brown powder (tons) 92 X X

Styrene monomer (tons) 3,439 X

Water (tons) 620,477

2-propyl heptanol (tons) 610 X

2EH-2-ethyl hexanol (tons) 19,129 X

Sulfuric acid (tons) 153 X

AD-adipic acid (tons) 2,203 X

Phthalic anhydride (tons) 16,561 X

Maleic anhydride (tons) 1,547 X

Benzoguanamine (tons) 3 X

BNT-benathix (tons) 32 X

DCPD-dicyclopentadiene (tons) 1,007 X

DEG-diethylene glycol (t) 418 X

DOP (tons) 6,292 X

IBA-isobutanol (tons) 3,757 X

INA-isonanol (tons) 7,833 X

IPA-isophthalic acid (tons) 76 X

MEG-monoethylene glycol (tons) 51 X

Mix-glycol mixture (tons) 409 X

PGI-propylene glycol (tons) 694 X

TMA-trimellitic anhydride (tons) 271 X

TNBA-trinormalbutilamine (tons) 5 X

Hydrogen gas (thousand Nm3) 35,368 X

Natural gas (m3) 881,088 X


ANNEX IIIEmployee benefits

G4-LA2

The monthly schedules of shift workers, as well as any information about benefits and collective wage increases, are posted at least one week in advance in compliance with Elekeiroz’s policies and employment

contracts. In turn, performance evaluations are announced at least four weeks in advance.

Collective bargaining agreements do not set minimum notice periods for the profit sharing plan or the annual collective

agreement, so the Company follows the usual periods of four and two weeks respectively. Concerning the collective agreement for shift work, the notice period is eight weeks in compliance with local legislation.

1 – Usual notice period not set out in the collective bargaining agreement2 – Period needed for legal reasons

ANNEX IIMinimum notice periods regarding operational changes, including whether these are specified in collective agreementsG4-DMA – Labor/Management Relations | G4-LA4

Notice periods (in weeks) 1 2 4 8

Policies and standardized contracts

Individual employment contract X

Monthly shif work schedule X

Changes in benefits X

Announcements of collective wage increases X

Performance evaluations X

General wage agreement

Profit sharing plan1 X

Shift work collective agreement2 X

Annual collective agreement1 X

Várzea Paulista, São Paulo State

Camaçari, Bahia State

Dental care X

Company car (executives and leaders of business units) X X

Education aid X

Special needs child allowance X

Monthly staples baskets X

Supplementary illness benefit X X

Pension fund X X

Parental leave X X

Health care X X

Day care reimbursement X X

Restaurant X X

Life insurance X X

Chartered transportation X X

Transit passes X


GRI-G4 Content index

GENERAL STANDARD DISCLOSURES

General Standard Disclosures Page External Assurance

STRATEGY AND ANALYSIS

G4-1 10 -

Organizational profile

G4-3 16 -

G4-4 18 and 22 -

G4-5 76 -

G4-6 16 -

G4-7 16 -

G4-8 16 and 19 -

G4-9 8 and 9 -

G4-10 50 6

G4-11 53 3

G4-12 56 -

G4-13 4 -

G4-14 30 and 44 -

G4-15 34 and 59 -

G4-16 59 -

Identified material aspects and boundaries

G4-17 4 -

G4-18 4 -

G4-19 4 -

G4-20 74 and 75 -

G4-21 74 and 75 -

G4-22 4 -

G4-23 4 -

Stakeholder engagement

G4-24 6 -

G4-25 6 -

G4-26 6 -

G4-27 6 -

Report profile

G4-28 4 -

G4-29 4 -

G4-30 4 -

G4-31 4 -

G4-32 4 and 73 -

G4-33 4 -

Governance

G4-34 42 -

Ethics and integreity

G4-56 14 and 46 10

GRI-G4 Content index “In accordance” - Core G4-32


SPECIFIC STANDARD DISCLOSURES

Material Aspects(As in G4-19)List identified materialAspects.

DMA and Indicators Page Omissions

External Assurance(G4-20 | G4-21) UN Global

Compact (principles)

Whithin the

company

Outside the

companyCategory: economic X

Economic performance

G4-DMA 61 - -

G4-EC1 67 - -

G4-EC4 64

Category: environmental

MaterialsG4-DMA 39 - X X -

G4-EN1 68 and 69 - 7 | 8

Energy

G4-DMA 35 - X -

G4-EN3 35 - 7 | 8

G4-EN5 35 8

Water

G4-DMA 39 - X X -

G4-EN8 39 - 7 | 8

G4-EN10 39 - 8

Emissions

G4-DMA 38 - X X -

G4-EN15 38 - 7 | 8

G4-EN16 38 - 8

G4-EN17 38 - 7 | 8

G4-EN18 38 -

Effluents and Waste

G4-DMA 36 - X X -

G4-EN22 37 - 8

G4-EN23 36 - 8

Products and ServicesG4-DMA 34 - X X -

G4-EN27 34 and 38 - 8

Compliance

G4-DMA 34 - X -

G4-EN29There were no significant

environmental fines in 2015

- 8

Category: social

Labor practices and decent work

EmploymentG4-DMA 53 - X -

G4-LA2 53 and 71 - -

Labor/Management Relations

G4-DMA 70 - X X -

G4-LA4 52 and 70 - 3

Occupational Health and Safety

G4-DMA 54 - X -

G4-LA5 29 and 54 - -

G4-LA6 54 - -

Material Aspects(As in G4-19)List identified materialAspects.

DMA and Indicators Page Omissions

External Assurance(G4-20 | G4-21) UN Global

Compact (principles)

Whithin the

company

Outside the

companyHuman rights

Assessment

G4-DMA 30 - X -

G4-HR9

There were no transactions that could

impact the human rights violations in 2015

- 1

Society

Anti-corruption

G4-DMA 46 - X X -

G4-SO4 46 - 10

G4-SO5 46 10

Public PolicyG4-DMA 46 - X X -

G4-SO6 46 - 10

Anti-competitive BehaviorG4-DMA 46 - X X -

G4-SO7 46 - -

Compliance

G4-DMA 46 - X X -

G4-SO8

There were no significant fines related

to accounting fraud, discrimination in the

workplace or corruption in 2015

- -

Product responsibility

Compliance

G4-DMA 46 - X -

G4-PR9There were no significant fines related to products

in 2015-


G4-5

Elekeiroz S.A.

São PauloAv. Paulista, 1938CEP: 01310-942 São Paulo, SP, Brazil

Várzea PaulistaRua Dr. Edgardo de Azevedo Soares, 392CEP 13224-030 Várzea Paulista – SP, BrazilPhone number: +55 11 4596-8800

Camaçari (Camaçari Petrochemical Complex)Rua João Úrsulo, 1261CEP: 42810-030 Camaçari, Bahia, BrazilPhone number: +55 71 3632-7700

Camaçari (Camaçari Petrochemical Complex)Rua Hidrogênio, 3076-ACEP: 42810-210 Camaçari, Bahia, BrazilPhone number: +55 71 3649-5894

Email for contact: [email protected]

Website: www.elekeiroz.com.br

Corporate information

076 E L E K E I R O Z 2 0 1 5

Internal coordinationRicardo Garcia de Souza – CFOLarissa MeirelesTalissa Vidal M. Martin

Planning, coordination, text and English version | Development, production and graphic design | Sustainability consultancyglobalRI

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Annual and Sustainability Report

2015

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