Investors sour on Petrobras after disappointing dividends

Photo: Joa Souza/Shutterstock

Shares of Brazilian state-controlled oil giant Petrobras plunged 11.73 percent late Friday morning. Even before the Brazilian stock exchange opened, the company’s American depositary receipts — which represent the company’s shares traded in New York — fell to 10.72 percent as the U.S. market opened.

On Thursday night, Petrobras reported a 6.3 percent drop in net profit for the fourth quarter of 2023 and a more than 24 percent decline in annual results to BRL 136 billion (USD 27.3 billion).

Following the new dividend policy, the company confirmed that it will not pay any extraordinary dividends for the last quarter of last year — since Q2 2023, Petrobras has been distributing 45 percent of its free cash flow to shareholders, down from the 60 percent earmarked under the former Jair Bolsonaro administration.

At its meeting with shareholders scheduled for April 25, Petrobras authorized its board to forward a proposal to distribute BRL 14.2 billion in dividends, an announcement that greatly disappointed investors. According to JPMorgan, analysts expected extraordinary dividend payments of up to USD 4 billion, on top of the USD 3.4 billion in minimum dividends. Instead, the company decided to withhold BRL 43.9 billion for its “capital remuneration reserve,” which was created in October last year.

The purpose of the reserve will be to ensure resources for the payment of dividends, interest on equity, advances, share buybacks, loss absorption, and, as a remaining purpose, incorporation into the share capital. It should not interfere with the dividend distribution policy, which is defined after the profit allocation decision, but that is not how investors interpret it.

Despite the drop, Petrobras’s 2023 profit was the third-biggest ever for a Brazilian company when adjusted for inflation. The BRL 124.6 billion is only below Petrobras’s 2022 and mining giant Vale’s 2023 profits. It also topped most analysts’ expectations.

This also means that investor dissatisfaction is mainly with earnings distribution rather than the company’s operational progress.

Fabiane Ziolla Menezes

Former editor-in-chief of LABS (Latin America Business Stories), Fabiane has more than 15 years of experience reporting on business, finance, innovation, and cities in Brazil. The latter recently took her back to the classroom and made her a Master in Urban Management from PUCPR. At TBR, she keeps an eye on economic policy, game-changing businesses, and people driving innovation in Latin America.