09/05/2014
SÃO PAULO—Brazil’s Petroleo Brasileiro SA said Friday profit declined in the first quarter as it took a one-time charge for an early-retirement incentive program.
Net profit fell 30% to 5.39 billion Brazilian reais ($2.43 billion) in the quarter from the same period a year earlier, the third consecutive decline. The early-retirement program slashed profit for the quarter by 1.6 billion Brazilian reais, Chief Executive Graça Foster said in a letter to shareholders.
Petrobras, as the company is known, has been struggling to cut costs and boost profit. The heavily indebted company has been borrowing to fund a massive investment program to develop Brazil’s offshore oil fields while losing money on fuel sales because of a government mandate to sell gasoline and diesel fuel at subsidized prices.
Brazil’s refineries don’t have the production capacity to meet demand for those fuels, forcing Petrobras to buy supplies abroad and resell at home at prices controlled by the government, which is trying to keep inflation under control.
The company’s cash flow should improve in coming months because of rising production, less dependence on imported fuels and gradual increases to fuel prices, Ms. Foster said in the letter.
Ms. Foster pointed out that the company still has easy access to capital markets and raised a total of 53.9 billion Brazilian reais in the first quarter, mostly through bond sales in Europe and the U.S. Petrobras ended the quarter with 78.5 billion Brazilian reais in cash and cash equivalents, giving it enough cash to finance the company’s investments in 2014.
Petrobras said earlier this week that it cut its workforce by 12.4% through a voluntary separation program launched in January to save costs. The company, which bought out 8,298 employees, expects to save at least 13 billion Brazilian reais in the 2014-18 period thanks to the program.
