Petrobras shares close 9.6% higher following excellent quarterly results

RIO DE JANEIRO, BRAZIL – Petrobras shares closed Thursday, August 5, with a rise of almost 10% on the São Paulo Stock Exchange, boosted by the publication the day before of better-than-expected results for the second quarter of the year.

The Brazilian state-controlled oil company’s ordinary shares (with voting rights) reached a peak gain of 11.8% before midday, then gave some ground to finish up 9.63% at the close of trading.

The rise was not enough to contain the decline of the Ibovespa index of the main stocks, which fell 0.14%, affected mainly by the losses of steel companies.

Petrobras reported on Wednesday net profits of R$42.855 (US$8.121) billion in the second quarter, reversing a loss of R$2.713 billion (US$417 million) in the same period of 2020.

This figure far exceeded the most optimistic projections of R$33.6 billion, according to a survey conducted by the business daily Valor with five financial companies.

Petrobras had its third consecutive quarter with profits, after several other deficits caused by the global economic slowdown during the first wave of the coronavirus pandemic.

“A reduction in the company’s indebtedness, a solid cash generation, a very significant Ebitda [in the green] and, in addition, the decision to distribute dividends” in an exceptional manner encouraged investors’ enthusiasm, said Alex Agostini, from the Austin Rating consulting firm.

Thursday’s rise is the biggest since Petrobras shares plunged nearly 20% on February 22, when President Jair Bolsonaro replaced economist Roberto Castello Branco with reserve general Joaquim Silva e Luna as the company’s CEO.

The decision came in the context of strong discontent among truck drivers, one of Bolsonaro’s electoral strongholds, over the rise in diesel prices. It generated fears in the markets about government interference in Petrobras’ pricing policy.

The soaring of Petrobras shares contrasted with losses in the steel sector and other sectors, attributed by analysts to the impact of the increase of the Brazilian Central Bank’s benchmark interest rate SELIC by one percentage point (to 5.25%) to control inflation.

Vale shares fell 3.05% and those of Siderúrgica Nacional fell 3.96%. Bradespar holding, the investment division of Bradesco bank, recorded the largest drop, of 5.11%.

Petrobras plunged into a serious crisis between 2014 and 2017 after the Lava Jato investigations revealed a gigantic corruption scheme between business people, political parties, and former officials of the state-owned company to divert public resources by rigging contracts.