Brazil's Stocks Fall After Petrobras Posts Disappointing Results

  • CSN, Eletrobras also decline on third-quarter earnings
  • Country is heading toward longest recession since the 1930s

Brazil’s benchmark stock index fell for a second day as state-controlled oil producer Petroleo Brasileiro SA reported disappointing quarterly results.

Petrobras, as the company is known, declined to a six-week low. The company accounts for about 7 percent of Ibovespa’s weighting. Steelmaker Cia. Siderurgica Nacional SA also dropped following third-quarter earnings that trailed analysts’ estimates. Among the 56 companies on the Ibovespa that have reported quarterly figures, half missed analysts forecasts, according to data compiled by Bloomberg.

"Petrobras is one of Brazil’s biggest companies, and its performance has been very discouraging to investors," Ari Santos, a trader at the brokerage H.Commcor, said from Sao Paulo. "That’s the biggest example of how bad the situation is for the country’s companies."

The country is in the middle of what’s expected to be the longest recession since the 1930s as the government struggles to tame a budget deficit and avoid a credit-rating downgrade. The wire service of Valor Economico newspaper reported that President Dilma Rousseff has been persuaded to replace Finance Minister Joaquim Levy. Later, a government official with knowledge of the discussions said the president doesn’t plan to remove Levy and hasn’t been persuaded to appoint former central bank chief Henrique Meirelles to the top economic job.

The benchmark Ibovespa index fell 0.8 percent to 46,517.04 at the close of trading in Sao Paulo, extending this week’s drop to 0.9 percent. Petrobras slid 4.1 percent, while CSN lost 9.6 percent.

Petrobras’s earnings before interest, taxes, depreciation and amortization was 15.5 billion reais in the three months through September, while the average estimate among four analysts surveyed by Bloomberg was of 19 billion reais.

The company’s results were "weak," analysts at Grupo BTG Pactual wrote in a note to clients, adding that Petrobras needs to be more aggressive in increasing prices, reviewing investments, controlling costs and selling assets.

After being entangled in Brazil’s biggest corruption scandal, Petrobras replaced its Chief Executive Officer in February and announced a plan to sell assets and cut costs. The producer raised fuel prices by the last time in September.

The Ibovespa also fell Friday as slowing credit growth in China fueled concern demand for commodities from Brazil’s biggest trading partner may decrease further. China’s broadest measure of new credit slumped to the lowest level in 15 months in October and came in less than half the median forecast.

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