High dividend generates criticism of Petrobras’ strategy

The announcement of the distribution of record dividends by Petrobras pleased the market, but raised questions about the company’s strategy, which has reduced investments and has been prioritizing using its cash to remunerate shareholders, including the government.

In a conference call to detail the profit of BRL 54.3 billion in the second half of 2022, the company’s management argued that the distribution of BRL 87.8 billion in dividends does not harm the company’s financial health. And he added that new amounts must be paid this year.

With the second quarter dividends, Petrobras will have distributed BRL 136.3 billion for performance in the first half of 2022. Needing money to pay for emergency aid and tax waivers, the government is left with almost BRL 40 billion.

The values ​​for the second quarter are “significantly above market expectations”, in the words of analysts Bruno Amorim, João Frizo and Guilherme Costa Martins, from Goldman Sachs bank. The shares of the state-owned company reacted sharply on the stock market.

Analyst Daniel Cobucci, from BB Investimentos, however, warns of the risks of this policy of prioritizing shareholder remuneration generating “implications for growth and strategic action for the long term”.

This move, he says, takes place in the midst of a process of selling assets and reducing indebtedness, “elements that would, in our opinion, allow the company to position itself in investments focused on the diversification of revenues in promising markets and focused on the energy transition. “

This view has already been raised by the company’s employee unions and by Ineep (Instituto de Estudos Estratégicos de Petróleo, Gás Natural e Biocombustíveis), linked to the FUP (Single Federation of Oil Workers).

And it finds an echo in the state-owned company’s own council. An independent member of the collegiate, lawyer Francisco Petros says that the company’s strategy does not include an integrated vision that considers the need to reduce emissions, satisfy energy users and reduce energy costs.

“Considering the strategic variables, the payment of dividends at the current level characterizes the company ‘without a project'”, he says. “Apart from the controller’s excesses against Petrobras’ governance, even in the face of an already known and painful history, we now have the use of dividends as a means of fiscal adjustment”.

The strategy was implemented in the Roberto Castello Branco administration, the first president under the Bolsonaro government, which accelerated the sale of assets, expanded the focus on the pre-salt and approved the current policy of shareholder remuneration.

It also removed the company from segments in which it had been operating for a long time, such as biofuels, and new renewable businesses, such as wind generation, on the grounds that the cash should be used to invest in the pre-salt layer.

This policy provides for the distribution of 60% of the company’s cash generation, deducting investment expenses, for each quarter in which the gross debt is below US$ 65 billion. It also allows the distribution of extraordinary dividends, as occurred in this second quarter.

For the FUP, the strategy “reduces the company’s investment capacity and represents a transfer of income for Brazilian workers amid the escalation of fuel readjustments and inflation caused by the wrong price policy.”

This Friday (29), the company’s Finance Director, Rodrigo Araújo, argued that the distribution of dividends is seen as “the best allocation of capital for the company” and that it does not impact the investment decision.

“All the investments that prove to be profitable in our price scenario were approved,” he said. “The company does not fail to make investments to distribute dividends.”