Bloomberg News

Bovespa Sinks as Petrobras Earnings Decline More Than Forecast

February 13, 2012

Feb. 10 (Bloomberg) -- The Bovespa index sank, sending Brazil’s benchmark measure to its first weekly drop this year, as energy stocks tumbled after Petroleo Brasileiro SA reported profit that missed estimates and MPX Energia SA said it would delay $4 billion of investment.

Petrobras, as the state-controlled oil company is known, fell the most in three years. The producer’s preferred and common shares have an 11 percent weighting on the Bovespa, the second-biggest after Vale SA. MPX, the energy company controlled by billionaire Eike Batista, dropped the most in a week on plans to postpone investments in a Colombian coal project by more than a year amid price declines for the fuel.

The index retreated 2.3 percent to 63,997.86 at the close of trading in Sao Paulo. Forty-nine stocks dropped on the gauge, while 17 advanced. The measure tumbled 1.9 percent this week. The real fell 0.3 percent to 1.7224 per U.S. dollar today.

“Petrobras’s earnings disappointed, and while I don’t think that reflects the overall sentiment about corporate earnings this quarter, the shares’ plunge dragged the Bovespa down,” Pedro Galdi, head strategist at brokerage firm SLW Corretora, said by phone from Sao Paulo. “Greece’s problems are still weighing on the market. Global stocks and commodities are falling.”

Petrobras slumped 7.8 percent to 23.50 reais, the most since December 2008. The MSCI Brazil/Energy Index led declines among 10 industry gauges, sinking 7.2 percent.

Petrobras’s fourth-quarter net income dropped to 5.05 billion reais ($2.93 billion), or 39 centavos a share, from 10.6 billion reais, or 1.07 reais, a year earlier, according to a regulatory filing yesterday. Analysts had forecast the company would earn 69 centavos a share excluding some items, according to the average of six estimates compiled by Bloomberg.

Earnings Reports

The decline in Petrobras’s profit reflects higher costs for drilling in deep waters and shouldn’t be taken as a sign that economic growth is faltering in Brazil or that corporate earnings in general are deteriorating, Galdi said.

At least four other companies on the Bovespa index reported fourth-quarter earnings this week, either matching or beating analysts’ estimates. Sugar-cane processor Cosan SA Industria e Comercio, card-payment processor Cielo SA and retailer Lojas Renner SA outperformed the gauge yesterday after releasing their earnings reports.

Itau Unibanco Holding SA, Latin America’s biggest bank by market value, said in a regulatory filing on Feb. 7 its adjusted net income, which excludes one-time charges, increased 10 percent to 3.75 billion reais. That matched the average estimate among eight analysts surveyed by Bloomberg.

Multiplus Gains

Multiplus SA, the frequent-flyer unit of Brazilian airline Tam SA, gained 1 percent to 31.10 reais. The company reported fourth-quarter net income of 70.9 million reais, according to a filing yesterday. That compares to an average forecast of 51.6 million reais among four analysts surveyed by Bloomberg.

MPX fell 1.9 percent to 47.69 reais.

Cia. Siderurgica Nacional SA, Brazil’s third-biggest steelmaker, declined 3.1 percent to 17.88 reais. CSN, as the company is known, was cut to “underweight” from “neutral” at JPMorgan Chase & Co.

Global stocks tumbled today, with the MSCI All-Country World index sinking as much as 1.5 percent, amid concern that plans to help Greece avoid default were unraveling.

Greek Prime Minister Lucas Papademos told members of his government they must back deeper budget cuts needed to prevent financial collapse or quit, as political dissension threatened to unwind the country’s second bailout. German Finance Minister Wolfgang Schaeuble told lawmakers in Berlin that Greece was missing deficit targets.

Eletrobras Jumps

Centrais Eletricas Brasileiras SA, Latin America’s largest publicly traded utility, jumped 4.1 percent to 18.99 reais, the most in one month, after Valor Economico reported Brazil is close to extending concessions of hydro power generators, electricity distributors and operators of transmission lines that expire in 2015 for 30 years. The Sao Paulo-based newspaper cited a government official it didn’t identify.

The Ministry of Mines and Energy declined to comment on Valor’s story, according to an official at the MME’s communications office, who asked not to be identified in accordance with internal policy.

The Bovespa has advanced 13 percent this year, after slumping 18 percent in 2011, buoyed by Brazil’s interest-rate cuts, signs of growth in the U.S. and renewed optimism Europe may be closer to solving its debt crisis. The gauge trades at 10.4 times analysts’ earnings estimates, in line with the ratio for MSCI Inc.’s measure of 21 developing nations’ equities, weekly data compiled by Bloomberg show.

Traders moved 9.11 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average of 6.53 billion reais this year through Feb. 3, according to data from the exchange.

--Editors: Brendan Walsh, David Papadopoulos

To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos in New York at papadopoulos@bloomberg.net


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