© Reuters. FILE PHOTO: A emblem of Brazil’s state-run Petrobras oil firm is seen at their headquarters in Rio de Janeiro, Brazil October 16, 2019. REUTERS/Sergio Moraes/File Picture
By Lisandra Paraguassu, Marta Nogueira and Fabio Teixeira
BRASILIA/RIO DE JANEIRO (Reuters) -Brazil’s authorities will push state-run oil firm Petrobras to reinvest money put aside for dividends, two sources informed Reuters, after its board spiked an additional dividend, blindsiding buyers and sending shares plunging 10% on Friday.
Petrobras CEO Jean Paul Prates on Friday spent over two hours on an earnings name making an attempt to ease issues that Brazil’s leftist authorities was shifting the corporate’s capital administration technique to prioritize investments over shareholder payouts.
At a board assembly on Thursday to debate fourth-quarter earnings, Prates had introduced a administration proposal for a payout of fifty% of the extraordinary dividend allowed by its bylaws, however government-appointed board members voted it down.
The choice to withhold that fee got here from Brazilian President Luiz Inacio Lula da Silva at a gathering with Prates and Vitality Minister Alexandre Silveira this week, mentioned one of many individuals accustomed to the matter, who requested anonymity.
In its earnings launch, Petrobras mentioned it might solely pay a routine dividend of 14.2 billion reais ($2.9 billion) to shareholders, whereas 43.9 billion extra could be put aside in a fund for “capital remuneration.”
Throughout the Friday name with buyers, Chief Monetary Officer Sergio Caetano repeatedly tried to calm buyers by saying the money was put aside for buyers and never investments, with out giving a timeline for any payouts. Selections on extraordinary dividends will nonetheless come on the finish of every fiscal yr.
“Some doubts arose as as to whether it could possibly be used for investments. It can’t be used for investments, the aim of this reserve is for distributing dividends,” he mentioned.
Brazil’s authorities, the bulk shareholder at Petrobras, desires to revise the foundations governing that reserve so it may be used for reinvestment, mentioned the 2 authorities officers accustomed to the matter.
That may increase issues amongst buyers that Lula desires to make use of Petrobras to bolster Brazil’s financial system and create extra jobs, as his Employee’s Get together did over a decade in the past with a capital spending spree that left the corporate deeply indebted.
Afterward Friday, Petrobras issued an announcement dismissing a report by native newspaper O Globo that mentioned Prates threatened to step down if the dividends weren’t paid.
The agency mentioned Prates didn’t supply to step down on account of “this or another matter” and likewise dismissed O Globo’s report that he would have defined himself to minority shareholders.
In recent times, Petrobras has turn into a money cow for its shareholders, together with the Brazilian authorities, with the prior administration paying out excess of Western oil main friends.
Below new administration picked by Lula, the corporate had pared again its payouts, however a rare dividend was nonetheless extensively anticipated.
Goldman Sachs analysts informed shoppers that buyers had voiced expectations of a $3 billion to $4 billion extraordinary dividend along with the predetermined year-end payout.
The shortage of an additional dividend triggered a slew of downgrades, together with at Financial institution of America, Bradesco BBI and Santander (BME:), as analysts questioned how the agency would spend its rising money reserves.
The choice “heightens the danger notion at Petrobras, notably on the federal government affect relating to main capital allocation choices,” analysts at Financial institution of America wrote in a notice to shoppers whereas downgrading the inventory to impartial.
Petrobras reported a 6.3% drop in its fourth-quarter web recurring revenue to 41 billion reais, beating expectations of 35.3 billion reais amongst analysts polled by LSEG.
($1 = 4.9769 reais)