Petrobras Earnings in Focus as Ibovespa Erases Weekly Decline

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Petroleo Brasileiro SA, the oil producer embroiled in Brazil’s largest corruption probe, rose before its earnings report and helped erase a weekly drop for the Ibovespa.

Petrobras, which had a record loss in 2014, will post a profit for the first quarter amid declining sales, according to analysts’ estimates compiled by Bloomberg. As Chief Executive Officer Aldemir Bendine seeks to contain damage from the scandal -- a decade of alleged kickbacks and inflated construction contracts -- he’s also grappling with a plunge in oil.

The Ibovespa rose 1 percent to 57,248.63 at the close of trading in Sao Paulo and was up 0.2 percent for the week. Petrobras gained 1.2 percent to 14.06 reais after slumping as much as 2 percent earlier on Friday.

“We still expect high volatility in the company’s share price and recommend that investors steer clear,” Auro Rozenbaum, an analyst at Bradesco BBI, wrote in a preview of the results. “There is no single solution for Petrobras’s difficulties, and an array of challenging actions will be imperative to tackle the ongoing imbroglio.”

The state-run oil producer has surged 72 percent from its low in January, helping to send the Ibovespa into a bull market last month, as the company avoided an acceleration of its debt payments when it published audited results before an end-of-April deadline. Petrobras opted not to pay dividends to preserve cash and reduced its 2016 investment budget by 37 percent.

‘Massive Reversal’

“We had a massive reversal in the performance of Petrobras as tragedy was averted,” Kathryn Langridge, the head of global emerging markets equity at Manulife Asset Management, said in an interview in New York. Her firm oversees $302 billion of assets. “Is Petrobras a better company? No, it’s not. The underlying drivers of returns within Petrobras are still not visible.”

The company will probably report first-quarter net income of 2.76 billion reais ($923 million), according to analysts’ estimates tracked by Bloomberg. Petrobras had a net loss of 21.6 billion reais for 2014 amid graft-related costs. Sales are projected to drop 5 percent from a year earlier.

Fibria Celulose SA slumped 1.5 percent to 42.74 reais after saying it will invest 7.7 billion reais in a new pulp plant in Brazil.

BM&FBovespa SA jumped 2.2 percent to 12.31 reais. The exchange operator had “a decent quarter,” with recurring expenses being a positive surprise, Itau BBA analysts including Alexandre Spada wrote in a research note.

Trading volume of equities in Sao Paulo was 6.69 billion reais, according to data compiled by Bloomberg. That compares with a daily average of 6.98 billion reais.

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