Petrobras' Safety Net Explained
05/30/08 - 01:02 PM EDT
Knowledge @Wharton
However, the market is still limited. Together, alcohol and biodiesel represent less than 3% of world consumption for transport. Politically correct, the so-called "clean fuel" is important as a strategic alternative and for the development of the internal economy. "Biodiesel makes sense as a regional policy... sugar cane as well. But biodiesel for the whole country doesn't make sense," Moutinho points out.
In the 10 Biggest The numbers show Petrobrás to be solid. Net profits in the first trimester of 2008 were 6,925 million reales [Brazil's currency] ($4.3 billion), up 68% from the 2007 figure. The company's investments in the period amounted to 10,800 million reales ($6.75 billion), which is up 23% over the figure for the same period the year before. However, the most significant figure is the increase of 69% in market value
over the last 12 months. With a market value of 300,000 million reales (187,000 million dollars), the company is among the world's elite.
Using data from May 2008, two consultancy firms confirm this position. According to Bloomberg, Petrobrás is the sixth largest company in the world in terms of market value, whereas it was in eleventh position at the end of last year. Economática places it at number three in the Americas, behind only Exxon Mobil (X Quote - Cramer on X - Stock Picks) and General Electric (GE Quote - Cramer on GE - Stock Picks).
According to the Petrobrás director of finance and investor relations, Almir Barbassa, the main differentiating factor of the company is its investment in new technologies, which provided it with the new finds. "The growth in the market value of Petrobrás reflects the market's recognition of its excellent operating and financial returns, its perspectives for growth, its capacity to operate in ultra-deep waters, the discoveries of oil and gas in the pre-salt layers, as well as a greater demand for oil and its revaluation on international markets, he states.
As far as Barbassa is concerned, the proof is in the evolution of Petrobrás's preference shares, reflected by the ADR (American Depositary Receipt) in the New York Stock Exchange: From October 1966 to April 2008, the shares were revalued by 1,500%. Since August 2000, ordinary shares have also been traded in the North American market: By April 2008, they had been revalued by 912% in dollar terms.
The executive adds that "the performance of Petrobrás shares and the recognition of the market can be confirmed by the increase in the shareholder base of the company as well as the increase in the liquidity of its shares and ADRs traded on the stock exchanges of São Paolo and New York."
The success of Petrobrás is crucial for the country. The discoveries of reserves have placed it on the scale of an exporter, according to the experts. They are willing to bet that the exploitation of this wealth is the ingredient necessary to ensure vigorous and consistent growth over the coming decades. "When you find such wealth", says Moutinho, "it is possible to invest in the future. We can firmly state that the Brazilian economy is going to take an important leap. While maybe not reaching the numbers of China, it is possible that sustained equilibrium growth could reach 8% over the next 20 years."
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