Petrobras: new policy reduces dividends by BRL 5 billion – 08/03/2023 – Market

The new remuneration policy for Petrobras shareholders reduced the amount of dividends distributed in the second quarter by around R$ 5 billion, according to a calculation by Ineep (Institute for Strategic Studies on Petroleum, Natural Gas and Biofuels).

The state-owned company announced that it will pay R$ 15 billion for the result for the period, already in accordance with the policy that guarantees shareholders 45% of free cash flow, the difference between cash generation and investments made by the company in the quarter.

The previous policy provided for the payment of 60% of this indicator. Ineep calculates that, if maintained, it would generate dividends of almost R$ 20 billion. The largest shareholder in the state-owned company, the government also lost dividends: it would have been entitled to R$5.7 billion in the previous policy and will end up with R$4.3 billion.

In the first quarter of 2023, still with the old remuneration policy and profit 24.6% higher, the company distributed BRL 24.7 billion.

“The lower amount distributed in the form of dividends in the second quarter reflects, firstly, the drop in barrel prices on the international market and of derivatives on the domestic market, which affected the company’s revenue and, secondly, the change in shareholder remuneration policy”, said the technical director of Ineep, Mahatma dos Santos.

A campaign promise by President Luiz Inácio Lula da Silva (PT), the change in Petrobras’ dividends was confirmed at a meeting of the company’s board of directors on Friday (28).

The board proposed a percentage between 40% and 50% of free cash flow and faced resistance from representatives of minority shareholders, who were against the change. Finally, the intermediate value was reached.

The change, however, was well received by the financial market, which understands that the established rule guarantees predictability to investors, while not drastically reducing remuneration.

“The market always prices the worst, but very little has changed,” said investment adviser Gabriel Meira, from Valor Investimentos, the next day. “The value of dividends is still very large and the government is also a shareholder. If there is a drastic reduction, the government also stops collecting.”

With the new policy, Petrobras approaches international competitors that use the cash flow indicator as a parameter and, according to a survey by Goldman Sachs, distribute between 25% and 40% of the indicator.

The PT management defends that a greater part of the cash generation be destined to new investments in segments abandoned by previous administrations, such as renewable energies and petrochemicals.

Therefore, the state-owned company included in the new policy the possibility of accounting as investments the acquisition of stakes in other companies, indicating a willingness to grow through acquisitions after years of high divestments.

The current rule was created at the beginning of the Jair Bolsonaro (PL) administration and led the company to acquire the status of “cash cow”, as good dividend payers are called. In 2022, Petrobras was the second largest dividend payer in the world, according to manager Janus Henderson.