(vervolg)
KW3 2014 - EARNINGS REPORT
"The business plan revision is only one of the three “immediate missions” that Mr. Bendine has to face at this moment. The others are “giving the market, in the shortest time possible and with security, the correct numbers of the company in 2014, audited,” and “making profound changes” in the governance standards of the company.
For Mr. Bendine, the release of the audited earnings report is crucial, "so life can continue" from there. The risk that the state-controlled company runs at this point is missing the deadline: if the audited earnings report is not published until June, creditors may require the acceleration of the maturity of the company’s debts.
AFWAARDERING
In this context, the announcement by the previous Petrobras’s board that there would be R$88.6 billion in overvalued assets in the 2014 third-quarter financial statements did not help. There is a belief within Petrobras and even shared by Mr. Bendine that the number was calculated with the wrong methodology. The value would be quite inflated. The problem is that, when corrected by the new management, it will face questioning from the market, which could accuse Mr. Bendine of yielding to political pressures in order to minimize damage from the corruption scandal that hit Petrobras.
"There was a confusion about the figures released because they simply picked a cash flow variation on some assets. And in the metrics that were being adopted, the methodology was not the most appropriate; actually, that was confirmed to us by other sources consulted,” he pondered. "There were mistakes in the impairment tests [to assess if the value of an asset is less than its carrying value]."
To Mr. Bendine, the R$88.6 billion are "a somewhat random number." "It does say virtually nothing," he argues. The write-down that the new board will book in the balance sheet, already taking into account the misappropriation of funds uncovered by the Federal Police investigations under the Operation Car Wash, will be "realistic." "With no doubt it will be well below these R$88.6 billion," Mr. Bendine said.
The new Petrobras CEO assured that it is "absurd" to say that the corruption process at Petrobras has generated all that loss. "It will be difficult to have this perception of what the value is that a misconduct process may have influenced in a write-down. It may be that perhaps we never will see exactly what it is."
Mr. Bendine added that the third-quarter earnings report of 2014 will be released "well before June," deadline that entitles creditors to demand the acceleration of their receivables from Petrobras. "The market will understand what we will do," the executive believes.
Mr. Bendine explained that, in the earnings report, Petrobras would make provision for losses caused by the corruption case involving the state-run oil giant. He explained that investigations are ongoing and it will take time to know exactly the embezzled amount and the damage caused to the company. What is done now, under the point of view of estimated losses, will be to deal with future penalties.
"Based on the claim of the first director [Paulo Roberto Costa], that there was a 3% commission on all contracts made in the ‘X period’, what did the company look at? How many contracts were made with those listed companies? There were millions of contracts. We’ll apply 3% on the top of that and make a provision,” said Mr. Bendine, adding that this would lead to a provision of about R$4 billion (3% on contracts totaling R$128 billion). "There’s this calculation. It could even be a metric to be applied on the financial statement. This has nothing to do with impairment test."
GOVERNANCE
At Banco do Brasil, a state lender subject, like all others, to political interference, Mr. Bendine helped give the bank the maximum degree of governance on the Brazilian market, which allowed it to be part of the Novo Mercado, BM&FBovespa’s stricter corporate governance segment. Ahead of Petrobras, he intends to radically change the company’s governance. One idea is to decentralize decision-making processes, taking advantage of existing synergies among departments and allow collective decisions to be taken from now on.
"We will create committees that have the capacity to make decisions," he said. "It is possible, for example, that some loans do not have to go through numerous instances until they reach the board," he added.
Petrobras’s engineering department does not worry Mr. Bendine, who pointed out the company is the most awarded of the Offshore Technology Conference (OTC). "The largest asset of Petrobras is its workforce," he said. "What Petrobras needs right now is management and financial approach."
The executive assured that appointments during his management would not follow political criteria. "I only know how to work with technicians," he said. "It was so in Banco do Brasil and it will be here." He also revealed that changes in the company’s board of directors are expected to take place before the April meeting."