The Stock Market harshly punishes Petrobras after deciding that it will not distribute dividends to shareholders

The Brazilian oil company Petrobras, the largest company in the country, is experiencing turbulent days after the board of directors (where the State has a majority stake) decided not to distribute extraordinary dividends to shareholders.

The financial market reacted with heavy losses on the stock market and with fears that the Government of Luiz Inácio Lula da Silva would increase interference in the company.

The president, for his part, criticized the complaints of the economic world and assured that the company has to serve, above all, the interests of Brazilian society.

It all started on March 7, when the company disclosed its 2023 results: a net profit of 124.6 billion reais (almost 23 billion euros), the second best result in its history, only surpassed by that of 2022. Despite the good data, it was a reduction of 33.8%.

The company attributed this mainly to the drop in the international price of oil.

But the jug of cold water came with the fine print.

The financial market expected the payment of extraordinary dividends, which did not happen.

The board of directors paid only the minimum dividends that the company is obliged to pay, and the rest (almost 44,000 million reais, 8,100 million euros) were placed in its reserve.

The company justified this by saying that it would save the money to guarantee payments to shareholders in years of higher expenses.

The law prevents this reserve from being dedicated to investments.

The financial market punished the decision strongly: the value of the company fell sharply: between Friday and Monday it lost 63 billion reais (11.5 billion euros).

All eyes quickly turned to the Government, which has six of the 11 seats on the board of directors.

The representatives of the Executive voted against the proposal of Petrobras management to distribute at least half of the extraordinary dividends.

On Monday, in the midst of controversy and with Petrobras losing value on the stock market at a rapid rate, Lula met with the president of the oil company, Jean Paul Prates.

They had a “serious conversation” about the direction of the company, he said as he left.

Hours later, in a television interview, he stuck out his chest at Petrobras' controversial decision: “If you only attend to the market's crying, you do nothing, because the market, I'm going to tell you something, the market is a rhinoceros, a voracious dinosaur. , he wants everything for himself and nothing for the people.

Doesn't the market feel sorry for people who are hungry?

Doesn't the market feel sorry for the 735 million people who don't have anything to eat? "He provoked.

Lula recalled his campaign promise to reduce the price of fuel and cooking gas and, as on other occasions, he once again attacked the equalization of prices with the international market.

Petrobras, Lula said, does not have to think only about the shareholders, but about the 200 million Brazilians who are owners or partners of that company.

After the setback of the first two days, Petrobras shares are recovering little by little (they rose three percent on Tuesday), while the financial market meditates on the future of the company.

A key moment will be the meeting on April 25, where it could be clear whether the oil company remains firm in its policy of not distributing extraordinary dividends.

Many analysts these days dust off like a ghost the bad memories of the policy of more interference in the company during the Government of Dilma Rousseff (2011-2016) or the monumental crisis due to the corruption scandal that Operation Lava Jato uncovered starting in 2014. In the Bolsonaro years (2019-2022) Petrobras sold many assets to reduce debt and the company focused more on oil exploitation.

The far-right leader also dismissed three presidents of the oil company because they failed to reduce fuel prices, a very sensitive issue.

For Lula, Petrobras has to recover its vocation as a national economic engine, recovering investments in refineries, oil platforms or the naval industry to be a huge lever for job creation.

The company has a prominent role in government plans, especially in the ambitious Growth Acceleration Program (PAC) and the energy transition, although ending (or at least reducing) oil exploitation is not on the horizon.

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