Written by Marta Nogueira and Fabio Teixeira
RIO DE JANEIRO (Reuters) – Investor dissatisfaction with a meager dividend from Brazil's state oil company Petrobras led to a decline in the company's market capitalization on Friday after government-appointed board members rejected a more generous dividend. More than 50 billion reais ($14 billion) disappeared.
The nearly 10% drop in share prices reflects investors' biggest dissatisfaction to date with Chief Executive Jean-Paul Prathes, who is trying to balance the interests of minority shareholders with a left-wing government seeking to boost capital spending. It reflects.
Petrobras has become a big cash cow for shareholders, including Brazil's government, in recent years, and its previous management paid out a dividend that far exceeded that of its Western oil major peers.
Under new management chosen by President Luiz Inacio Lula da Silva, the company cut its dividend, but the market still widely expected an abnormal payout.
The company's management on Thursday proposed paying 50% of the fourth-quarter special dividend allowed by the company's articles of incorporation. Mr. Prathes said he proposed an additional dividend but abstained from the board vote after a government-backed board member voted against it.
Petrobras said in its fourth-quarter earnings report that it would pay only 14.2 billion reais ($2.9 billion) in regular dividends to shareholders and that an additional 43.9 billion reais would be set aside in a fund for “capital compensation.”
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.
Chief Financial Officer Sergio Caetano sought to allay concerns that increased reserves earmarked for “capital compensation” would be used for investments.
“It raises some questions about whether it can be used for investments. It cannot be used for investments. The purpose of this reserve is to distribute dividends,” he said on a conference call with analysts.
Cayetano added that there is no deadline for releasing these funds, but they could be released at any time. We will continue to decide on the implementation of special dividends at the end of each fiscal year.
Petrobras' preferred shares pared some of their early losses after his remarks, but still plunged 9% to 36.66 reais in Friday afternoon trading in São Paulo, trailing the benchmark Bovespa stock index by 0.7%. This caused the decline.
Petrobras reported a 6.3% drop 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 and Peter Frontini in São Paulo; Editing by Gabriel Araujo, Brad Haynes and Jonathan Ortiz)
