Braskem S A : 4Q20 - In 2020, the Recurring Operating Result was US$2,082 million, 38% higher than 2019 - Financial Statements

Braskem S.A.

Consolidated and parent company financial statements at December 31, 2020 and Independent Auditors' Report

(Free translation from the original issued in Portuguese. In the event of any discrepancies, the Portuguese language version shall prevail.)

Independent auditor's report on the individual and consolidated financial statements

To the Management, Directors and Shareholders of Braskem S.A.

Camaçari - BA

Opinion

We have audited the accompanying individual and consolidated financial statements of

Braskem S.A. (the "Company"), identified as parent and consolidated, respectively, which comprise the statement of financial position as of December 31, 2020, and the respective statements of income, of comprehensive income, of changes in equity and of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

Opinion on the individual financial statements

In our opinion, the individual financial statements referred to above present fairly, in all material respects, the financial position of Braskem S.A. as of December 31, 2020, and its financial performance and its cash flows for the year then ended, in accordance with accounting practices adopted in Brazil.

Opinion on the consolidated financial statements

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Braskem S.A. as of December 31, 2020, and its consolidated financial performance and consolidated cash flows for the year then ended, in accordance with accounting practices adopted in Brazil and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).

Basis for opinion

We conducted our audit in accordance with Brazilian and International Standards on Auditing (ISAs).

Our responsibilities under those standards are further described in the "Auditor's responsibilities for the audit of the individual and consolidated financial statements" section of our report. We are independent of the Company and its subsidiaries in accordance with the relevant ethical requirements set forth in the Code of Ethics for Professional Accountants and the professional standards issued by the Federal Accounting Council and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Emphases of matter

Investigation in progress - Braskem Idesa

We draw attention to Note 11(d) to the individual and consolidated financial statements, which states that the Company engaged an independent US law firm, in order to conduct an internal investigation, due to allegations of undue payments related to the Project "Ethylene XXI". The information was originally delivered by Mexico news media and included in the testimony of Pemex´s former CEO to the General Attorney of Mexico. The investigation is under way and, to date, the Company is not able to estimate when it will be completed. Our opinion is not modified with respect to this matter.

Class action

We draw attention to Note 24.3 to the individual and consolidated financial statements, which describes that a class action lawsuit has been filed in the United States District Court for the District of New Jersey against the Company and some of its current and former executive officers under the U.S. Securities Exchange Act of 1934 and its rules. The proceeding is at its initial stage and, on January 15, 2021, the court appointed two plaintiffs to act as the lead plaintiffs in said class action lawsuit. The Company have engaged legal advisors for its defense in that country. Our opinion is not modified with respect to this matter.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit in the current period. These matters were addressed in the context of our audit of the individual and consolidated financial statements taken as a whole and in forming our opinion on such individual and consolidated financial statements, and, therefore, we do not provide a separate opinion on these matters.

1. Provision for expenses on geological event in Alagoas - Notes 3.2.4 and 26

The Company has recorded in the individual and consolidated financial statements as of

December 31, 2020, in line item "Provision for expenses - Alagoas", a provision of approximately R$9.2 billion (recorded as current and noncurrent liabilities) to meet obligations arising from the geological event occurred in the city of Maceió, State of Alagoas, in March 2018, which was estimated based on independent, specialized technical studies engaged by the Company, considering the measures necessary to recover the areas potentially impacted by the geological event and discussions with the relevant authorities (with actions primarily targeted at closing and monitoring wells originally used in rock salt extraction activities, implementation of social and urbanistic measures and support to vacate and resettle inhabitants). Accordingly, this matter was considered in our audit for the current year as a risk area due to the uncertainty inherent in the process to determine the estimates and judgments involved in the determination of the assumptions and estimates for measuring future cash disbursements required to implement such measures, since factors such as the execution time of action plans, findings of future expert studies, changes in the structure of the wells impacting the stabilization of cavities, changes relating to the dynamics of the geological event, assessments, determinations and lawsuits initiated by relevant authorities may significantly change the provision amount.

How the matter was addressed in our audit

Our audit procedures included, among others:

•  involvement of our specialists in infrastructure for evaluation of the provision of the fronts under the Program for Financial Compensation and Support to Relocation

  ("PCF"), Major Equipments ("GE"), filling, monitoring and evaluation of the status of wells partially or fully out of the salt layer, closure of wells inside the salt layer, technical fronts, management of the program, inhabitant hub, social and urbanistic costs and agreements with the relevant authorities through independent calculations;

•  performance of in-site visit for a physical inspection of the affected area, encompassing the main work in progress, properties and major equipment affected;

•  examination of the methodology used by the Company to measure the provision, assumptions and engineering practices;

•  evaluation the objectivity and competence of internal engineers of the Company and subcontractors, which provided information and data relating to the risks identified and execution of the work;

•  verification of the normative aspects and technical studies that have guided the work;

•  evaluation of the (i) compensation of the public properties and equipment impacted by the geological event considering the unit value (m²) of the districts affected, cost of improvements by property, rental compensation and renovations, considering the average compensation for the region; (ii) provision relating to the compensation for loss of profit relating to merchants, salaries and number of employees; (iii) compensation for moral damages, legal fees and household allowance, considering the agreements executed, by applying technical assumptions;

•  identification of the scopes of the agreements and projections relating to technical consulting and independent institutions that support the Company in the action plan for remediation of the area and project management;

•  verification of the terms of the agreement that establishes actions for the social and urbanistic remediation of the affected area, such as demolition, cost on decommissioning, drainage, mobility solution, surveillance amounts, pest control, features, closure, among others;

•  analyzes the remediation plan for stabilization of wells and the technical reports for reasonableness and verification of the main assumptions used in making projections of costs relating to the wells closure and monitoring;

•  obtaining confirmation from the Company´s legal advisors, which includes their assessment of the likelihood of loss on pending litigations and estimated amounts involved;

•  evaluation if the disclosures in the notes are consistent with the information and representations obtained from management.

Based on the procedures performed, we considered that the assumptions and methodologies used by the Company to evaluate and recognize the provision for expenses on the geological event in Alagoas, and the information presented in the individual and consolidated financial statements are consistent with the information analyzed in our auditing procedures in the context of those individual and consolidated financial statements taken as a whole.

2. Impairment of cash-generating units, including intangible assets with indefinite useful life (goodwill) and recoverability of the deferred tax asset (parent and consolidated) - Notes 3.2.1, 3.2.2, 12, 13, and 22(c)

The Company has property, plant and equipment and intangible assets (consolidated) as of December 31, 2020 in the amounts of R$35.9 billion and R$2.8 billion, respectively (the latter including the value of intangible assets with an indefinite useful life), whose recoverable value should be assessed annually, in certain circumstances, as required by Technical Pronouncement CPC01(R-1) - Impairment of assets (property, plant and equipment and intangible assets, in parent, in the amounts of R$14.8 billion and R$2.5 billion as of December 31, 2020, respectively). As mentioned in said notes, the impairment test is performed annually for intangible assets with indefinite useful life while intangible assets with finite useful life are tested for impairment when there are indications that an asset might be impaired. The impairment test involves a high degree of subjectivity and judgment by management, based on the discounted cash flow method, which considers several assumptions, such as discount rate, inflation projection, economic growth, among others. Accordingly, this matter was considered an area of risk due to the uncertainty inherent in the process of determining estimates and judgments involved in preparing future cash flows to present value, in addition to factors and projections that may significantly change the realization of the assets.

Additionally, the Company and its subsidiaries have balances of deferred income tax and social contribution assets substantially related to tax losses, negative basis of social