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Written by Lisandra Paraguas, Marta Nogueira, Fabio Teixeira
BRASILIA/RIO DE JANEIRO (Reuters) – Brazil’s government will ask state oil company Petrobras to reinvest cash set aside as dividends, two sources told Reuters. The stock price plunged 10% on Friday after the company’s board of directors announced a sudden spike in additional dividends, blinding investors. .
Petrobras CEO Jean-Paul Prates spent more than two hours on an earnings call on Friday, saying Brazil’s leftist government is shifting the company’s capital management strategy to prioritize investment over shareholder dividends. I tried to dispel those concerns.
At Thursday’s board meeting to discuss fourth-quarter profits, Plates presented a management proposal to pay 50% of the special dividend allowed by the company’s articles of incorporation, but the government-appointed directors rejected it.
The decision to withhold the payments was made by Brazilian President Luiz Inacio Lula da Silva in a meeting this week with Prates and Energy Minister Alexandre Silveira, one of the people familiar with the matter said on condition of anonymity. told.
Petrobras said in its earnings statement that it would only pay out 14.2 billion reais ($2.9 billion) in regular dividends to shareholders and that a further 43.9 billion reais would be set aside in a fund for “capital compensation.”
In a call with investors on Friday, Chief Financial Officer Sergio Caetano said the cash was being set aside for investors, not investments, and did not say when the payments would be made, saying they would not invest in repeat investments. I tried to calm the house down. Special dividends will be decided at the end of the fiscal year as usual.
“The question arose as to whether it can be used for investment. It cannot be used for investment. The purpose of this reserve is to distribute dividends,” he said.
Brazil’s government, Petrobras’ largest shareholder, wants to change the rules governing its reserves so that they can be used for reinvestment, two government officials familiar with the matter said.
That would raise concerns among investors that Mr. Lula wants to use Petrobras to boost Brazil’s economy and create jobs. Just as his Labor Party over a decade ago made capital expenditures that left the company heavily in debt.
Late on Friday, Petrobras issued a statement rejecting a report in local newspaper O Globo that Mr Plates had threatened to resign if the dividend was not paid.
The company said Mr. Prates had not tendered his resignation over “this or any other matter” and dismissed Mr. O Globo’s report that he would have briefed minority shareholders.
In recent years, Petrobras has become a cash cow for shareholders, including Brazil’s government, and its previous management paid out a dividend that far exceeded that of its Western oil major peers.
Under the new management chosen by Mr. Lula, the company cut its dividend, but the abnormal payout was still widely expected.
Goldman Sachs analysts told clients that investors are expecting a special dividend of $3 billion to $4 billion on top of the planned year-end dividend.
Analysts wondered how the company would use its growing cash reserves, and the lack of additional dividends led to a number of downgrades at Bank of America, Bradesco BBI, Santander and others.
Bank of America analysts said in a note to clients that the decision “increases the government’s influence over Petrobras’ risk perception, particularly regarding key capital allocation decisions,” Bank of America analysts said in a note to clients when downgrading the stock to neutral. I wrote this.
Petrobras reported a 6.3% decline in net current profit for the fourth quarter to 41 billion reais, beating analysts’ expectations of 35.3 billion reais compiled by LSEG.
(1 dollar = 4.9769 reais)
(Reporting by Marta Nogueira and Fabio Teixeira in Rio de Janeiro, Peter Frontini in São Paulo and Lisandra Paraguas in Brasilia; Editing by Jonathan Ortiz, Margherita Choi and Chris Reese)
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