ISS Rejected Petrobras Financial Results For 2014
The article discusses why Institutional Shareholder Services Inc. is rejecting the 2014 financial results of the Brazilian state run company Petrobras.
Institutional Shareholder Services Inc., which provides an inventory advisory service, has rejected the financial results of FY2014 for the Brazilian oil companies. The ISS pointed out the procedure used by Petrobras, in computing the write down amount which curtail from the corruption scandal.
Last year, Petroleo Brasileiro Petrobras inflated the contract values as well as Pasadena refinery, with various construction companies. In 2014, the company delayed its earnings results for FY14, as it was not able to estimate the accurate amount of write downs. After extreme criticism, Petrobras managed to issue its annual audited results for FY14 last month, which includes $16.7 billion in asset write down.
However, only 7 out of 11 board members approved the results issued by the company. The remaining four members not agreeing with the results were fired, while interrogation against those who passed the results is still going on, which is being conducted by Brazilian Securities Regulator. As per ISS report, board members are being investigated for breaking in their duty, Bloomberg stated.
As per ISS report, the marginal representatives in the board of Petrobras were controlled from favoring the financial results. Minority shareholders from fiscal council were also not happy with the method used by the oil company in computing its losses. These shareholders said that the company approach was too conservative, when finding out the write down amount.
If Petrobras is proven guilty, then its directors will also be dismissed. The company’s stocks were trading in March at $5. The surge in the stock price came after the company announced its financial results. On Friday, May 22 Petrobras shares were red by 0.74% to $9.49. The recent news could be damaging for the company, as there is a possibility that its shareholders might lose confidence. If this happened then it is most likely that that the company’ share will follow a huge downward trend.
There were reported that the oil company may be pushed to publish its first quarter fiscal year 2015 results. As per Reuters, the company had already incorporated a $433 million worth of contract with the state utilities company, Electrobras. This contract was finalized earlier this month after the first quarter.
The latest report by ISS together with 1Q reporting error is going to bring more difficulties for the oil company. The company would have faced a technical evasion if it hasn’t released the results till May. Petrobras currently has over $120 billion of debt levels, which makes it the most indebted energy company of the world. Allegations like these can be damaging for both, the company and State economy.
