Petrobras appoints Vale head Ferreira as chairman

JUAN PABLO SPINETTO and SABRINA VALLE

RIO DE JANEIRO (Bloomberg) -- If guiding the biggest iron-ore miner through the worst price rout in a decade wasn’t enough, Murilo Ferreira is taking on a new job.

And it’s not just any job.

On Wednesday, the 61-year-old chief executive officer of Vale SA also became chairman of Petroleo Brasileiro SA, the most indebted oil producer in the world, which is struggling to emerge from Brazil’s biggest corruption scandal. The appointment, together with the selection of 10 board members, comes a week after Petrobras disclosed a 44.6 billion-real ($15.2 billion) impairment, mainly from overpriced and unfinished refinery projects, and a 6.2 billion-real graft- linked writedown.

The board overhaul is the latest move by the state-run producer to contain losses and reduce a 351 billion-real debt load with crude prices near a six-year low. Ferreira’s selection, which breaks a tradition of political appointees for the position, also builds a bridge between Petrobras and Vale, Brazil’s two largest exporters, as the country grapples with the end of the commodities super-cycle.

“At Vale, Ferreira corrected a very serious problem of capital allocation, prioritizing the company’s core projects and dis-investing non-core ones,” Marcel Kussaba, an equity analyst at asset manager Quantitas Gestao de Recursos SA, which oversees about 16 billion reais, said from Porto Alegre. “It would be great if he can replicate this story in Petrobras.”

Vale declined to comment for this article.

More Professional

Ferreira, who was nominated by the government, was chosen to replace Luciano Coutinho during a shareholders meeting at the company’s headquarters in Rio de Janeiro on Wednesday, April 29. Previously, the position was occupied by former Finance Minister Guido Mantega and President Dilma Rousseff during the government of her predecessor Luiz Inacio Lula da Silva.

The government wants a more professional board for Petrobras, without government officials, CEO Aldemir Bendine said.

“We’ve received from the government the prerogative to work with a board that’s more geared toward the market, with more technical market experience and without the participation of members of the federal government,” he told senators in Brasilia during a congressional hearing on Tuesday.

Minority Investors

Seven of the 10 board members are appointed by the government, which controls the company through a majority of voting shares. Minority investors elect two members and another is chosen by company employees.

The other government-appointed directors are CEO Bendine, Luiz Navarro, Segen Estefen, Luiz Nelson Guedes de Carvalho and Roberto Castello Branco, while Coutinho remains as a director.

Minority holders of ordinary shares elected Walter Mendes while minority holders of preferential shares chose Guilherme Ferreira. Deyvid Bacelar will represent company employees.

For Vale, the growing responsibilities of its CEO come at a time the company faces the lowest revenue since the global financial crisis after iron-ore prices collapsed on excess supply. The company is scheduled to post first-quarter results on April 30, with analysts forecasting earnings before interest, taxes, depreciation and amortization to fall to $1.55 billion, the lowest since the second quarter of 2009, according to data compiled by Bloomberg.

Availability Question

“Ferreira is a very competent professional, but the expectation was to have board members who can dedicate themselves to the company, and follow the day-to-day activities,” said Adelmo Emerenciano, a specialist in corporate law and partner at Sao Paulo-based Emerenciano, Baggio & Associados. “You can’t have a board of good names without any availability.”

The first test of Ferreira’s independence as chairman will come on May 15 when Petrobras is scheduled to release first- quarter financial results, Emerenciano said. In the past, board members have approved results without much input from the representatives elected by minority shareholders, he said.

The 2014 results that included record impairments were approved by the seven government representatives without support from the minority members of the board.

Naming Ferreira as Petrobras chairman while he continues to run Vale represents a conflict of interest given the two companies are both involved in a potassium plant, Fernando Siqueira, representing Petrobras engineering association Aepet, said at Wednesday’s shareholder meeting.

Francisco da Costa e Silva, a former securities regulator hired by Petrobras to preside over the shareholders meeting, said the matter was analyzed by Petrobras’s legal team, and Ferreira signed declarations saying there was no conflict.