Petróleo Brasileiro S.A. (NYSE: PBR), better known as Petrobras, reported fiscal year 2016 earnings after markets closed on Tuesday afternoon. The Brazilian oil major posted a net profit of 2.5 billion reais (about $809 million), well below analysts’ expectation of 3.7 billion reais (about $1.2 billion). Sales fell 16% year over year to around $81.4 billion, and operating earnings rose to around $4.3 billion compared with a loss of $1.13 billion in 2015.
Petrobras attributed the improvement to higher margins for gasoline and diesel sales and spending cuts on imports, royalties, SG&A and net financial expenses. Operating margin rose from −1% in 2015 to 5% in 2016, and net margin, though still −6%, improved by three percentage points.
Petrobras also achieved its production target for the second year in a row, producing 2.144 million barrels per day of oil in Brazil, and in December it set a new monthly record by producing 2.9 million barrels of oil equivalent per day, including oil and gas, in Brazil and abroad.
The company’s net debt declined 20%, to $96.4 billion, due to the amortization and early payment of debts using resources from divestments and cash flow, as well as the appreciation of the Brazilian real. Debt management also enabled an increase in the average debt term, from 7.14 to 7.46 years.
In the fourth quarter of 2016, output of domestic oil products decreased by 3% to 1.81 million barrels a day. Domestic oil product sales decreased by 4% to 2.0 million barrels a day, while crude oil and oil products exports increased by 13%, reaching 634,000 barrels a day. In 2016, Petrobras became a net exporter, due to a 6% increase in exports and a 30% reduction in imports.
Petrobras’s American despositary shares closed Tuesday at $8.81 in a 52-week range of $4.91 to $12.56. They slipped about 1% to $8.90 in Wednesday’s premarket session. The 12-month consensus price target is $11.22. One American despositary share is equal to two ordinary shares.