SBM Offshore

SBM Offshore

14 June 2017Reading time: 3 minutes

SBM Offshore suffered for years from the problems in Brazil, but seemed to recover from this slowly. However the Brazilian problems have become worse again after possible bribes that were approved by the president, something which investors have anticipated on.

Brazil

SBM Offshore realizes a major part of their revenue in the Brazilian oil sector. Since the beginning of this decade the Brazilian economy flourished and the maritime service provider maintained close connections with Petrobras. The Brazilian government owns 55% of the Brazilian oil company which represents approximately 10% of the Gross National Product. Therefore it plays a major role in the Brazilian economy.   

However employees of Petrobras may have taken bribes during the period of 2004-2012 from suppliers in exchange for assignments. One of those suppliers would have been SBM Offshore. The Court of Brazil has conducted an investigation about this. In the meantime SBM Offshore can participate in tenders but cannot get Brazilian contracts. The maritime service provider have been seeking for a settlement with the Court of Brazil for a long time. Also the whistleblower who brought attention to the bribe scandal of SBM Offshore, wants the top management of the company to be heard under oath. This will probably makes sure that the case cannot be left behind.

Investors seemed to have left behind these Brazilian problems of SBM Offshore but the stock price was again pressurized in May when the political turmoil arose in Brazil. President Michel Temer would have given his approval to a smear payment. So far the president has denied this but nevertheless the Brazilian currency value has dropped dramatically.

Declining revenue

Early May SBM Offshore published a trading update regarding the first quarter. The maritime service provider witnessed how their revenue dropped with 5% to USD 420 million and therefore met the management and market expectations. The revenue fall was limited by the Lease and Operate division, which closed long-term contracts for the delivery and exploitation of oil production platforms. The revenue of this division rose with 29% to USD 378 million on an annual basis.

SBM Offshore maintained the expectation of reaching a total revenue of USD 1,7 billion and a EBITDA around USD 750 million throughout 2017. Furthermore SBM Offshore announced that they want to raise the dividend with 2 dollar cents, what makes for a total of USD 0,23 per stock on an annual basis.

As a result of the negative messages from Brazil the stock price of SBM Offshore declined over the past period, although the first quarter results met the market expectations. This fall could however offer a nice entry point for investors, although it remains uncertain if and if so when SBM Offshore reaches a settlement with Brazil. Also the outcome of the possible bribe affair by the Brazilian president is unclear for now.

Vontobel products are tradable at DEGIRO.

Important legal information:

This information does not constitute a financial analysis, but product advertisement. Thus it does not meet the legal requirements to ensure the impartiality of financial analysis and is not subject to trade prohibition before the publication of a financial analysis.

Fordetailed information, particularly regarding the structure and the risks associated with an investment in the derivative financial instruments, prospective investors should read the Base Prospectus, which is available together with the Final Terms and any supplement to the Base Prospectus in electronic form on the issuer’s website: http://beursproducten.vontobel.com. Additionally, the Base Prospectus, anysupplements to the Base Prospectus and the Final Terms are available inprinted form, free of charge, at the registered office of the issuer: Vontobel Europe AG, Bockenheimer Landstrasse 24, 60323
Frankfurt am Main, Germany.


Investors should consider the applicable selling restrictions.
Companies of the Vontobel group may directly or indirectly pay commissions in varying amounts to third parties (e.g. brokers) in connection with the public offer and the distribution of the derivative financial instruments. Further information is available upon request from your distribution partner.

 

17/06/2019 15:14:10