STXNEWS LATAM-UBS says Petrobras' accounting changes may boost dividends

Thu Jul 11, 2013 8:15am EDT

According to UBS Securities analyst Lilyanna Yang, a decision by Brazil's state-run oil company Petrobras to set aside a significant amount of export proceeds to help cushion earnings from sudden currency changes could help increase dividend payments for holders of common stock.

"This practice better reflects the company's economic and operating reality - dollarized revenues in the long run - but rationale in our view was to show 2013 earnings growth on a year-on-year basis, as opposed to a decline, and pay higher taxes plus dividends to Brazil's National Treasury as owner of 58 percent of the voting shares," Yang wrote in a note. Brazil's federal government is the largest holder of PetrĂ³leo Brasileiro SA's common shares.

The so-called hedge accounting could imply an upside in UBS' earnings estimates for Petrobras between 3 billion reais and 5 billion reais ($1.3 billion and $2.2 billion) a year for the 2013-2014 period, Yang added. Such an increase could translate into a rise of 0.06 reais to 0.09 reais in dividends per common shares, she added.