Consuming about 40 percent of the US corn crop each year, ethanol production in America is a touchy subject. While farmers are generally in favor of its production, environmentalists criticize it as a red herring considering the energy intensity of the process. Consumers also object to the effect it has on corn prices, not to mention the potentially engine-damaging effects from its addition to gasoline.

To my mind all of those criticisms are valid, but that doesn’t mean that ethanol is a bad thing in and of itself, particularly if it is being put to a better use than as a gasoline additive.

Braskem SA (NYSE: BAK) is a Brazilian petrochemical company which uses traditional feedstock to produce a wide array of products, including ethylene, benzene, gasoline, liquefied natural gas and vinyls. Those traditional operations account for about half of the company’s revenues. Most of the remainder of revenues comes from the production of “green” chemicals.

The company’s top product is green polyethylene (PE). Polyethylene is the most commonly used plastic and about 5 percent of global oil production and 2 percent of natural gas is used in the production of plastics. Braskem has developed a process by which it manufacturers PE using ethanol made from sugarcane which has the same characteristics as traditional PE. Like many of its US-based peers, the company also makes ethyl tert-butyl ether, a gasoline additive.

Braskem is also on track to begin production of about 30,000 tons of green polypropylene (PP), also made from sugarcane ethanol, and has the same properties and characteristics as the traditional product. Used to make everything from package and textiles to automotive components and medical supplies, it is the second most commonly used plastic.

As an ever growing number of consumers are becoming concerned about the state of the global environment, bioplastics such as Braskem’s green PE are becoming increasingly popular. Studies show that over the complete supply chain, Braskem’s green PE removes up to 2.5 metric tons of carbon dioxide (CO2) from the atmosphere for each ton produced while each ton of its green PP will remove 2.3 tons of CO2.

Given their environmentally friendly production, an increasing number of companies have committed to their use.
Last year Coca-Cola (NYSE: KO), Ford Motor Co (NYSE: F), Heinz, Nike (NYSE: NKE) and Procter & Gamble (NYSE: PG) pledged to form a working group to ramp up the development and use of bioplastics in their product packaging.

As far back as 2009, Coca-Cola began using bottles partially manufactured from bioplastic and Heinz soon followed suit. It’s estimated that by the end of the next decade, more than 12 million tons of bioplastics will be used annually and Braskem was one of the products pioneers.

Given the growing use of bioplastics, Braskem’s revenues have shot up from BRL17.9 billion in 2008 to BRL35.5 billion last year.

While the company isn’t consistently profitable—it has lost money in three of the last ten years, including 2011 and 2012—its net income has been consistently improving as its production of green plastics has ramped up and processes have become more efficient.

The company will also increasingly benefit from the recent depreciation of the Brazilian real, considering that about 80 percent of its costs are in US dollars. Brazil has also recently granted tax exemptions on a number of green products and pumped up its important taxes on imported plastics, yet another plus for Braskem.

As one of the leading bioplastic producers in the world with 200,000 tons of annual production capacity, short-term tailwinds and growing long-term demand will drive growth and more consistent earnings in the coming years.

Braskem SA is a new addition to the Long-Term Portfolio and rates a buy up to 20.