Petrobras shares plummet 30%, and the state-owned company loses R$ 91 billion in market value.

Infomoney - The Ibovespa had a session of strong decline this Monday (9), with Petrobras (PETR3;PETR4), OK (VALE3Banks and other businesses are collapsing as oil prices plummeted by as much as 31%, after Saudi Arabia cut commodity prices and with projections of further declines.It's $20 a barrel.B3 once had the circuit breakers Triggered at the start of the session, following a drop of more than 10% in the Ibovespa. The end of the morning was relatively calm for the index, but then the losses intensified and the benchmark stock market closed down 12,17%.

On the New York Mercantile Exchange (Nymex), WTI crude oil for April delivery closed the session down 24,58%, or $10,15, bringing the price per barrel to $31,13. On the Intercontinental Exchange (ICE), Brent crude oil for May delivery tumbled 24,10%, or $10,91, to $34,36 per barrel, the lowest value in four years. This confirmed the largest daily drop since the Gulf War in 1991.

Petrobras shares plummeted almost 30%, with a 29,68% drop for ON shares and a 29,70% drop for PN shares. As a result, the state-owned company's market value fell from R$ 306,96 billion to R$ 215,84 billion, a loss of approximately R$ 91,12 billion. Vale fell 15,24%, and banks also registered declines of up to 11%. No Ibovespa stock advanced, and several stocks fell by more than 10%. Besides Petrobras and Vale, shares of steel companies such as CSN (CSNA3, a decrease of 24,57%), Usiminas (USIM5, a drop of 14,61%) and Gerdau (GGBR4, a drop of 17,52%) also had double-digit declines.

Papers from meatpacking companies like Marfrig (MRFG3, down 23%), JBS (JBSS3, a drop of 14,33%) and BRF (BRFS3, with a drop of up to 13,46%) have experienced a sharp decline, as have retailers, most notably Via Varejo (VVAR3), which fell by 17,13%, also amid fears about the impact of the coronavirus on the economy.

The Saudi decision, which was interpreted as a price war, came after the Organization of the Petroleum Exporting Countries (OPEC) and its OPEC+ allies failed to reach an agreement last Friday (06) to further cut the group's production, as part of a strategy to deal with the economic impact of the coronavirus. Russia, the informal leader of OPEC+, did not accept an OPEC proposal to reduce collective supply by a further 1,5 million barrels per day.

Revisions to recommendations have already begun, most notably with Bradesco BBI cutting its recommendation for Petrobras shares to neutral.

Even airline stocks are falling sharply amid market risk aversion. Companies could benefit from the drop in oil prices, since kerosene used as fuel is derived from the commodity and accounted for 32,6% of airlines' operating costs in 2019; however, with global risk aversion and the rising dollar, airlines like Gol (GOLL4) and Blue (BLUE4), recorded a session of heavy losses, of around 17%. They are also impacted by fears of a drop in global tourism as the coronavirus spreads around the world.

The smallest declines in the session are seen in the shares of the electricity company Taesa (TAEE11), with a decrease of 3,30%, while Ambev (ABEV3), which has recorded a sharp decline this year, saw its assets fall by 4,24%.

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Petrobras (PETR3;PETR4)

Petrobras had its recommendation downgraded from buy equivalent to neutral by Bradesco BBI amid the bank's revision of oil prices. Analysts believe a price war is ahead and that the Saudis' surprising move could be an attempt to bring Russia back to the negotiating table. However, they do not believe this power struggle will be resolved quickly. Thus, it is difficult to know when this imbroglio will end, but it is expected to have negative consequences.

As a result, analysts have lowered their Brent crude oil forecast from $65 to $35 a barrel this year, gradually moving towards $55 a barrel in the long term. The target price for Petrobras was cut from $18 to $11 per ADR (or from R$38 to R$23,50 per preferred share).

Amid the commodity price collapse, the company said it is monitoring the situation and that it is premature to project the impacts of the oil price drop on its operations, and gave no indication of changes in fuel prices.

Eneva (ENEV3) 

Eneva Energia reported that it sent a letter to AES Tietê (TIET11), which on the first day of the month announced its intention to merge the two companies. Eneva stated that it maintains its interest in the negotiation and decided to send the letter because "given the lack of contact from AES Tietê to date, it reaffirms the willingness of its management, as well as its financial and legal advisors, to engage in negotiations."

Eneva understands that “the action is corroborated both by its shareholders and by those of AES Tietê, whose shares appreciated by 8,4% and 23,6%, respectively, on the day the interest in the merger was announced”. AES Tietê also published a letter on Sunday night, in which it states that its legal and financial advisors are analyzing Eneva's offer. AES also informed that it has scheduled an Extraordinary General Meeting for Friday (13) to discuss the matter.

Hypera (HYPE3) 

Hypera, the largest pharmaceutical company in Brazil, released its financial results and reported a net profit of R$ 246,7 million in the fourth quarter of 2019, a 20% decrease compared to the same period in 2018. However, recurring net profit for the entire year reached R$ 1,18 billion, a 4,7% increase over 2018.

The company reported that the improvement in the consolidated result for the year occurred because it received tax credits of R$ 91,8 million. Earnings before interest, taxes, depreciation, and amortization (EBITDA) were R$ 224,2 million in the fourth quarter, a decrease of 3175% compared to the same period of the previous year. Consolidated EBITDA for 2019 fell 8,5% compared to 2018, to R$ 1,2 billion.

According to Hypera, the decline occurred because the company invested more in research and development. The pharmaceutical company's net revenue was R$ 928,6 million in the fourth quarter, practically stable compared to the same quarter of the previous year.

Bradesco BBI assessed that the pharmaceutical company Hypera's results were slightly weaker than expected in the fourth quarter of 2019. According to the bank, the plant's production in Anápolis (GO) was affected by the depreciation of the Brazilian currency against the dollar and by higher expenses.

Although revenue was impacted at the end of 2019, BBI assesses that Hypera projects a return to normal production in March and the second quarter, which should offset the negative effects of the fourth quarter. During this period, the company purchased 18 medications from the Japanese company Takeda, adding them to its portfolio.

“We updated our projections, based on the acquisition of the Buscopan drug, Takeda's assets, and the recovery of R$ 50 million in sales that were negatively impacted by the drought in Anápolis,” the bank commented. Because the market environment is highly competitive, this prevents an improvement in projections, but BBI maintained its neutral recommendation for the stock and increased the target price from R$ 36,00 to R$ 43,00. On March 6th, HYPE3 closed at R$ 39,62 on the B3.

M. Dias Branco (MDIA3)

M. Dias Branco reported a net profit of R$ 264,9 million in the last quarter of last year, an increase of 89,5% compared to the R$ 139,8 million recorded in the same period of 2018. Meanwhile, net revenue increased by 7,2%, to R$ 1,694 billion.

EBITDA (earnings before interest, taxes, depreciation, and amortization) was R$ 289,2 million, a 52,3% increase compared to the same period in 2018.

Itaú BBA gave a positive assessment of the balance sheet of the food industry and wheat milling company M. Dias Branco, and raised the company's rating to Market Average – previously it was classified as "underperform" (below average).

According to BBA, earnings before interest, taxes, depreciation, and amortization (EBITDA) were 30% above the bank's projections, and strong sales volumes of biscuits and pasta helped dilute costs in the fourth quarter.

BBA assesses that the scenario is better for M. Dias Branco at the beginning of this year. “We believe that M. Dias is one of the companies in our coverage that will suffer the least impact from the coronavirus. Its products are less dependent on long global supply chains and are consumed in homes. On the negative side, we believe that the appreciation of the dollar may have effects on second-quarter results due to the price of wheat,” comments BBA.

Blue (BLUE4)

Azul announced its February traffic results today. According to the airline, consolidated passenger traffic (RPK) increased by 25,1% compared to February 2019, with a similar increase in capacity (ASK). Load factor on flights grew by 0,1% to 81,2%. The domestic load factor was 81,6%, while the international load factor was 79,9%. Azul's CEO, John Rodgerson, commented that the company ended the month with 40 Airbus A320neo and four Embraer E2 aircraft, "the main drivers of our margin expansion going forward."

Taesa (TAEE11)

Taesa, a subsidiary of the state-owned electricity company Cemig (CMIG3), completed the acquisition of the energy transmission company Rialma, which operates in the state of Rio Grande do Norte, last week. Taesa paid R$ 56,7 million for the transmission company from Rio Grande do Norte. Taesa's objective is to expand its operations in the Northeast of the country.

Steel mills

During a dinner with Jair Bolsonaro, US President Donald Trump said he would not postpone the imposition of further tariffs on Brazil. In December, Trump said he would reinstate steel tariffs on Brazil and Argentina. Days later, the president's economic advisor, Larry Kudlow, said there was still no decision on the matter.

IRB (IRBR3)

According to Valor, IRB is expected to announce Antonio Cassio as its new chairman of the board. Cassio has been CEO of Generali for the Americas since 2015 and is expected to resign. Currently, Pedro Guimarães is the interim chairman of the board, a position he assumed after Ivan Monteiro's resignation on February 28.