Petrobras releases 2014 3rd quarter results; profits drop 9 per cent

SAO PAULO – Brazil’s scandal-plagued state-run oil company Wednesday released its third quarter report for 2014, showing that profits dropped 9 per cent compared to the same period in 2013.

Petrobras’ quarterly results were released two months late amid ongoing investigations into a massive corruption scandal.

Third quarter profits totalled 3.1 billion reals ($1.2 billion), down 38 per cent from those posted in the second quarter of 2014.

In a letter to investors and shareholders, chief executive Maria das Gracas Foster said corruption-related payments were wrongly recorded in the past as legitimate costs.

She said it would be “impractical to quantify these values, given that the payments were made by outside suppliers and cannot be traced to the company’s accounting books.”

Authorities allege that top officials from Petrobras and executives from some 15 of the Brazil’s biggest construction firms operated a kickback scheme on contracts worth upward of $4 billion, with money from the inflated contracts eventually being fed back to the governing Workers’ Party and other parties for political campaigns.

The scheme is one of Brazil’s biggest corruption scandals yet uncovered, with authorizes saying they’ll seek the return of nearly $400 million from those charged.

“The poor results of the third quarter and the substantial drop in profits during the period indicate that Petrobras and the construction companies allegedly involved in the scandal will probably sharply reduce their investments,” Alessandra Ribeiro, of Sao Paulo’s Tendencias Consultancy Firm, said by phone.

She said that Petrobras and the construction companies jointly represent 5 per cent of Brazil’s gross domestic product.

“If Petrobras and the construction companies reduce their investment by 10 per cent, GDP will drop by at least one percentage point,” she said. “This is where the danger lies and this is what the third quarter results appear to be pointing to.”

“And we estimate that those investments will diminish by at least 15 per cent in 2015.”