Bloomberg News

Petrobras Cut by Bradesco on Outlook for Output, Fuel Prices

February 24, 2012

(Updates with analyst comment in third paragraph.)

Feb. 24 (Bloomberg) -- Petroleo Brasileiro SA had its rating lowered by Bradesco BBI on concern that declining output will trim earnings as the government keeps fuel prices unchanged.

Bradesco cut the state-run oil company’s rating to “market perform” from “outperform” on expectation net income will drop 9 percent this year to 30.2 billion reais ($17.7 billion), analysts Auro Rozenbaum, Bruno Varella and Gabriel Levinho said in a note to clients today. The target price was reduced to 31 reais from 35.3 reais for shares traded in Sao Paulo and to $36 from $43.4 for the company’s American Depositary Receipts.

“We expect to see – for the third year in a row – meager production performance,” the analysts said in the report.

Petrobras, as Latin America’s largest company by market value is known, reported quarterly earnings that missed estimates on Feb. 9 amid higher salary and equipment installation costs. The Rio de Janeiro-based company said a weakening currency also boosted import expenses.

Crude production will probably decline in the first three quarters of this year before rebounding, Rozenbaum and the other analysts said. Government-controlled fuel prices won’t be adjusted until early 2013, they said.

Earnings before interests, taxes, depreciation and amortization will drop 1 percent this year to 62 billion reais, the analysts said.

--Editors: Carlos Caminada, Dale Crofts

To contact the reporters on this story: Adriana Brasileiro in Rio de Janeiro at; Rodrigo Orihuela in Rio de Janeiro at

To contact the editor responsible for this story: Dale Crofts at

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