PETR4 Petroleo Brasileiro S.A. Petrobras

By Jeffrey T. Lewis and Luciana Magalhaes 

SÃO PAULO -- Brazil's Petróleo Brasileiro SA, or Petrobras, said Thursday it lost money last year as the state-controlled oil company continues to suffer from the side effects of the Car Wash corruption scandal.

Rio de Janeiro-based Petrobras reported a net loss of 446 million reais ($136 million) for the full year, after a loss of 14.8 billion reais in 2016. Petrobras said it would have had a net profit of 7.1 billion reais in 2017 if not for some extraordinary items, including one for $3.4 billion to settle a class-action suit in the U.S. Petrobras reported a loss of 5.5 billion reais in the fourth quarter.

Petrobras is recovering from the damage done by the corruption scheme known as Car Wash, in which suppliers overcharged it and funneled part of the money to politicians and their parties. Petrobras in 2015 wrote off 6.2 billion reais due to the graft and another 44.6 billion reais for overvalued assets, including refineries, because of the scam.

The stock market reacted negatively to Thursday's numbers, with the company's preferred shares down 4.2% in late afternoon trading. Petrobras's operating results have improved, but the impact of the settlement and another extraordinary item of 10.4 billion reais related to a tax payment were a problem, according to Pedro Paulo Silveira, chief economist at the Nova Futura brokerage in São Paulo.

"There was good news in the report, but not enough to outweigh the hit from the extraordinaries," he said.

The company announced at the start of this year an agreement to settle the class-action suit filed by disgruntled shareholders, who calculated the corruption scheme helped erase about $271 billion, or almost 90%, from Petrobras's market value between 2009 and 2015.

The earnings figures show that "Petrobras is turning the page on problems related to Car Wash," said Shin Lai, an investment strategist at São Paulo-based research company Upside Investor. "The change is happening and it's consistent."

Petrobras has been working to cut costs throughout its operations, and its efforts are starting to show results. General and administrative expenses fell 19% in 2017 to 9.3 billion reais, mostly because of lower personnel costs, after Petrobras cut staff through employee buyouts.

The company cut its net debt to $84.9 billion at the end of 2017, the lowest level for the figure since 2012, lengthened the average life of the debt to 8.6 years from 7.5 years and reduced the average interest rate to 5.9% from 6.2%. Those changes helped cut full-year debt payments to 22.3 billion reais, from 25.6 billion reais in 2016, Petrobras said.

Write to Jeffrey T. Lewis at jeffrey.lewis@wsj.com and Luciana Magalhaes at Luciana.Magalhaes@wsj.com

(END) Dow Jones Newswires

March 15, 2018 16:14 ET (20:14 GMT)

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