Agencies/Sao Paulo

Scandal-plagued Brazilian oil giant Petrobras announced incomplete, long-delayed third quarter 2014 results yesterday that showed profits down 9% compared to the previous year.
The news sent Petrobras shares plunging 11.31% by early afternoon.
It was the firm’s second earnings report since a massive scandal broke in March exposing alleged kickbacks by contractors and payoffs to politicians estimated at up to $4bn.
In its twice delayed report, Petrobras said it earned 3.097bn reales in the third quarter, a 38% drop from the second quarter of 2014.
The oil giant gave no details on the loss in the value of assets resulting from the graft scandal, saying it could not quantify the depreciation.
Moreover, the results—which were originally supposed to be released in November—were not signed off by the company’s external auditors PricewaterhouseCoopers.
Petrobras said it had a duty to shareholders to release the results, even if incomplete and not externally approved.  
“The company understands it will be necessary to make adjustments to the accounts to make modifications to the value of fixed assets affected by fraudulent contracts,” Petrobras said in a statement.
The firm added it considered it “impossible” to calculate “correctly, completely and definitively” the extent of asset depreciation resulting from the corruption scandal.
Market analysts estimate the depreciation at between $10 and $20bn.
“The reaction is the market is understandable as we just don’t know the value,” Eduardo Velho, chief economist with Invx Global consultants, told AFP.
The uncertainty leaves Petrobras facing a possible credit downgrade from ratings agencies.  
Last October, Moody’s downgraded the firm to two levels above speculative debt and maintained a negative outlook.
Petrobras blamed the poor results on a drop in oil production, a fall in the value of the real against the dollar and the suspension of work on two refineries.
Brazil’s biggest company has been beset for months by a widening probe into alleged kickbacks to politicians, mainly allies of the government of president Dilma Rousseff, a former Petrobras chair.
A total of 39 people—former executives from the company itself and representatives of construction companies—are under investigation.
A detained former Petrobras director, Paulo Roberto Costa, says dozens of politicians benefited from hundreds of millions of dollars of kickbacks from inflated Petrobras contracts over a decade.
Under the alleged corruption scheme, companies won contracts that were inflated to include illicit surcharges.
The cash was then allegedly passed on to intermediary companies that drew up bogus service and consultancy contracts, allowing the money to be laundered through these firms.
Police say the graft ring moved $4bn over the past decade.
No one has been formally charged, but one suspect has implicated 28 politicians, some of them close to Rousseff herself, who denies all knowledge of the scam.
After a cabinet meeting Tuesday, Rousseff demanded an end to corruption as she seeks to revitalise an economy struggling for investment with its reputation dented by the Petrobras affair.
“We must punish but not destroy firms that are essential to Brazil. We must close the door on corruption,” Rousseff said.
In the current circumstances, Petrobras, already facing a mammoth debt pile, hopes to limit as far as possible the need to seek external finance in the coming months.
Petrobras chair Graca Foster said recently the company would not be passing on the recent falls in crude prices when pricing fuel, “which in the current situation will very much favour the coffers.”
According to America Economia the scandal could threaten President Dilma Rousseff’s ability to govern.
For almost a year now, magistrates have investigated an increasingly complex web of fraudulent contracts, fake bills, bribes and money laundering that began years before, and have turned Petrobras into an informal bank of sorts, passing money from firms onto prominent members of the country’s parliamentary, executive and party elite.
The scandal exploded when federal police arrested one of the firm’s directors (Costa), who began to name alleged accomplices in return for clemency. The names included those of the top directors of six of the country’s engineering and construction firms — contracting firms routinely working with Petrobras — and 30 or so senior or former state officials, mostly from Rousseff’s Workers’ Party (PT).
It turns out that the corruption began under the previous president Luis Inacio Lula da Silva, when Rousseff was energy minister and effectively responsible for goings-on in Petrobras. Indeed as minister in 2009, she rejected investigators’ indications of possible corruption in Petrobras.
The scandal is proving to be as financially damaging as it is noisy. Petrobras shares lost 65% of their value since September 2014, infuriating minority stockholders who include institutions and foreign funds. One of these, the city of Providence, Rhode Island, is taking action with courts in New York and the Securities and Exchange Commission (SEC), to check if Petrobras broke US laws.
The expanding list of charges and revelations is creating problems for any and all sectors it touches. Building firms accused of involvement are finding it difficult to finance themselves on the money markets.