In recent days, one of the most talked about topics in the market is the price increase received by Petrobras (PETR3; PETR4). Under scrutiny by a range of classes, the readjustment was essential to reduce the lagwhich in Gasoline was close to 45%, the highest percentage since the implementation of the price parity policyto 4%, which can be considered a technical parity.
Many of those who criticize the price parity policy, a fundamental pillar in the financial recovery plan that Petrobras has been carrying out since 2017, are based on the fact that Brazil produces Petroleum in an amount greater than what you consume, which is true.
However, the country is not in a position to process all the oil produced internally due to the technical characteristics of our refineries and, even if it could, the entire chain (contracts, etc.) is linked to the dollar and to oil pricethat is, even if the oil is extracted here, a good part of its operating cost is in dollars, not counting the financial structure with banks, which, in large part, are also carried out with foreign institutions.
In general, the price of gasoline at the peak is the result of the price at the refineries, the dollar, the costs of ethanolFrom taxes and the gains of distributors. A conjunctural improvement in the final price involves a tax reformthe revitalization of the refining segment (such as privatization sector) and the maintenance of stability by the country that makes the exchangethe result of a series of exogenous variables to the activity oil & gasmore stable.
Given the impossibility of achieving such practices in the short term, I believe that the best way to find a balance between the external increases caused by external shocks and Petrobras’ financial health is through a discussion with society about the allocation of resources from the dividends of the company.
In addition, other measures that do not change the company’s structure and do not mean the end of the price parity policy in line with the international politicsthe optimized management of capital allocation and its ability to adequately remunerate its shareholders would also take the pressure off the company’s performance and would not harm its health, unlike more extreme measures, such as an eventual price freeze.
Petrobras adjustment stuck to the fundamentals
Historically, Petrobras has played an important role in our economy with its investments. This intensified in the 2010s but, as we later learned with the revelations of Operation Car Washthese investments did not generate financial returns for the state-owned company and the account later ended up appearing.
Currently, the company generates Cashierhas investments with high returns and its indebtedness is at a healthy level, so interference in its management can reverse this situation negatively.
The topic is obviously sensitive and involves a number of stakeholders in the country. In fact, any short-term solution to the issue involves a high dose of complexity, and in an election year, tempers tend to be even more exacerbated.
What is important for the investor to realize is that, with the price increase carried out on March 11, Petrobras just stuck to the fundamentals and complied with what its current pricing policy governs. Although the next steps are somewhat unpredictable, the signal sent by the company’s management was positive, which unfortunately, does not mean that the next chapters of the story will be too.
This explains why we still prefer to stay out of state peers and why Petrobras continues to trade at a discount against peers, despite delivering excellent financial results over the last few quarters. In short, when it comes to Petrobras, fear of the future speaks louder than the results achieved so far.
Pedro Serra He is Research Manager at Ativa Investimentos and has more than ten years of experience in the financial market, having worked at Petros and Fundação Real Grandeza. He holds a degree in Economics from Universidade Candido Mendes, an MBA from Ibmec and CNPI certification.
Source: Moneytimes
I am an author at Global happenings and I mostly cover automobile news. In my time working in the automotive industry, I have developed a keen interest in the latest developments and trends. My writing skills have also allowed me to share my knowledge with others through articles and blog posts.
