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Petrobras Boosts Dividends as Brazil’s Cash Cow Beats Estimates

·2 min read

(Bloomberg) -- Lofty oil prices and robust sales delivered Petrobras another quarter of blockbuster results, which President Jair Bolsonaro has previously bashed as he contends with costly fuel ahead of presidential elections in October.

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The board of the Rio de Janeiro-based company approved dividends of 6.732 reais a share Thursday, or 87.8 billion reais ($17 billion), to be paid in 2022. The state-owned company has approved a total of 136.3 billion reais in dividends for the first half of this year, already surpassing the record reached last year.

Petrobras Board Eyes Fuel-Price Control Amid Political Pressure

With Brazil’s inflation running in double digits annually, Petrobras is under mounting political pressure to shield consumers from rising costs. Bolsonaro, who seeks re-election in October, has ousted three of the firm’s chief executive officers for tracking international fuel price levels rather than subsidizing gasoline.

Despite calling the oil producer’s profits in the last quarter “abusive,” the federal government, as the firm’s majority investor, depends on them for cash. The government recently requested state-run giants including Petrobras bring forward dividend payments as a way of offsetting increased social spending ahead of the elections, local newspapers reported.

Latin America’s biggest oil producer reported 54.33 billion reais of net income for the second quarter, beating analysts’ estimates of 35.72 billion reais. Sales came in at 170.96 billion reais, higher than estimates of 162.78 billion reais.

Under new CEO Caio Paes de Andrade, who took the helm in late June, Petrobras reduced gasoline prices for the first time this year. The company cut prices twice since last week as a plunge in oil raised the pressure to tame pain at the pump. There’s growing concern among investors of potential political interference on the company’s pricing policy as oil hovers above $100 a barrel.

Petrobras Cuts Fuel Price as Oil Drop Boosts Political Heat

Investors see the political noise as Petrobras’s Achilles heel, despite its attractive valuation and dividend yields. The election of a new board of directors scheduled for August 19, just four months after the current members joined, is the latest attempt by the federal governmentto align the state-run company’s decision-making with its own agenda.

The government’s insistence on appointing two names barred by Petrobras’s Eligibility Committee caused uneasiness among investors last week. Brazil’s main oil union, known as FUP, and minority holders association, Anapetro, pledged to contest it in court.

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