Vale Q3 profit doubles on higher iron ore sales, prices

Reuters

By Jeb Blount and Sabrina Lorenzi

RIO DE JANEIRO, Nov 6 (Reuters) - Brazil's Vale SA, the world's second-largest mining company, reportedon Wednesday that its third-quarter net income more than doubledfrom a year earlier, beating analysts' expectations as iron oreprices and sales volumes rose.

Net income for the three months ended Sept. 30 soared 114percent to $3.50 billion from $1.64 billion in the same period ayear earlier, the company said. The result was 6 percent higherthan the $3.3 billion average profit estimate of seven analystssurveyed by Reuters.

Iron ore prices averaged about a fifth higher in the thirdquarter of this year than in the same quarter of 2012, accordingto Thomson Reuters.

Net sales, or total sales minus sales taxes, rose 11 percentfrom a year earlier to $12.7 billion, beating the averageanalyst estimate of $12.5 billion. The volume of iron ore salesrose 11 percent to 73.4 million tonnes.

"We expected strong volumes, given the robust Brazilian ironore export figures for July-September, but shipments stillexceeded our expectations," mining analysts Garrett S. Nelson,Mark A. Levin and Nathan P. Martin of BB&T capital markets inRichmond, Virginia said in a report to investors.

"Vale's results were largely a reflection of iron ore pricesthat have remained 'higher for longer' in the face of widespreadoversupply concerns," they added.

Vale's preferred shares, the company's most-traded class ofstock, closed at an eight-month high of 34.44 reais in Sao Pauloon Wednesday before the results were announced.

The result comes a year after Vale moved to sharply cutcosts and refocus expansion on its main iron-ore business. Thespending diet came in the face of flagging demand and plungingprices in China for the raw material, the main ingredient insteel. China was responsible for 50.2 percent of Vale iron-oresales in the period.

China is the world's biggest steel producer and largestimporter of iron ore. Vale is the world's largest producer ofthe mineral, accounting for between a quarter and a third ofworld's seaborne iron ore exports. It is also the No. 2 producerof nickel and a major miner of copper, gold, coal and potash.

While iron ore prices have recovered from the three-yearlows of August 2012, executives of Vale and its main rivals, Australia's BHP Billiton Ltd and Rio Tinto Ltd, have said that a decade-long, China-led commoditiesboom is likely over. Resulting lower growth expectationsprompted them to rein in investment and prospecting budgets.

The effort led to the mothballing or cancelling of newprojects, the closing of money-losing mines and sale of assetsor stakes in existing businesses. Investment in the first ninemonths of 2013 was $11 billion, 9.8 percent less than in thesame period of 2012.

China's strong housing market, though, is keeping demand forsteel and iron ore strong, Vale said in the statement. It willkeep it strong in the near term as steelmakers and distributorshave cut their stocks in the face of China's otherwise slowingeconomy.

"The Chinese economy should grow more moderately than it didin the third quarter, but despite this we expect the price ofiron ore to remain stable," Vale said. It added that iron oreshould average about $130 a tonne in the coming months.

On Wednesday, iron ore rose 0.2 percent inthe Chinese spot market to $137.10 a tonne, 58 percent above theAugust 2012 lows that prompted Vale's cost-cutting efforts.

ACROSS THE BOARD COST CUTS

That retrenchment helped boost results even more. Vale cutcosts across the board in the quarter. Sales, general andadministrative costs fell 39 percent to 315 million reais whileresearch and development fell 43 percent to 205 million.

The cost of goods sold, a category that includes salariesand equipment used to mine Vale's products, fell 3.4 percent to$6.55 billion despite rising output and sales.

This helped boost adjusted earnings before interest, taxes,depreciation and amortization (EBITDA) by 37 percent to $5.88billion, beating the average analyst's estimate of $5.71billion. EBITDA is a measure of a company's ability to generatecash profits from operations.

Lower costs, though were also aided by a 10 percent declinein the value of Brazil's real against the U.S. dollar in thethird quarter compared to the same quarter in 2012.

The weaker real meant that each 100 reais of Vale'sBrazilian expenses cost $5.16 dollars less in the quarter thisyear than last year.

While its main mines and operations are in Brazil, nearlyall of Vale's sales are in dollars and most of its expenses arein reais.

Most other products sold by Vale also saw increases in salesvolumes.

Metallurgical coal output jumped 51 percent to 1.73 milliontonnes. Nickel output rose 13 percent to 62,000 tonnes. Copperjumped 17 percent to 103,000 tonnes. Gold output surged 77percent to 85,000 ounces while silver output rose 18 percent to483,000 ounces.

Rates

View Comments (0)

Recommended for You

  • Tycoon buys 30 Rolls-Royces for Macau hotel

    A Hong Kong tycoon has placed the biggest ever order for Rolls-Royce cars, agreeing to buy 30 Phantoms to chauffeur guests at a luxury resort he's building in the global gambling capital of Macau. Stephen Hung's $20 million purchase surpasses the 14 Phantoms bought by Hong Kong's Peninsula Hotel in…

    Associated Press
  • 1 Tip To Lose Belly Fat

    It's Hollywood's Hottest Diet And Gets Rid Of Stubborn Fat Areas Like Nothing Else.

    AdChoicesagoodcooksSponsored
  • Before You Buy Alibaba, Check Out 4 Top China Stocks

    Before You Buy Alibaba, Check Out 4 Top China Stocks While investors gear up for Alibaba Group 's (BABA) hotly anticipated initial public offering, don't forget about other Chinese stocks that are worth keeping an eye on. Today's Young Guns Screen of

    Investor's Business Daily
  • Tycoon's arrest sends shock wave through Russia

    Tycoon's arrest sends shock wave through Russia MOSCOW (AP) — The arrest of a Russian telecoms and oil tycoon has sent shock waves through the country's business community, with some fearing a return to the dark days of a decade ago, when the Kremlin asserted its power by imprisoning the country's…

    Associated Press
  • "The Retiree Next Door": How successful retirees stretch their savings

    "The Retiree Next Door": How successful retirees stretch their savingsBy the time she hit her late 40s, Toni Eugenia wasn’t sure she would ever be able to retire. Eugenia, 56, a pharmacy technician who lived in Houston, was nearly $200,000 in debt and

    Yahoo Finance
  • Costco Stores in Canada to Stop Taking American Express

    “The credit card relationship between American Express and Costco Wholesale Canada will not be renewed when it expires” on Dec. 31, the company said today in an e-mail to Canadian customers. The message was attributed to Lorelle Gilpin, vice president of marketing and membership for Costco…

    Bloomberg
  • CNBC Anchor Calls Out Fed-Hater Bill Fleckenstein In Startling Shouting Match

    CNBC Bill Fleckenstein of Fleckenstein Capital appeared on CNBC's Futures Now program on Tuesday. Futures Now host Jackie DeAngelis came out swinging, asking Fleckenstein right at the top if he was willing to admit that he had misunderstood monetary policy. Sounding taken aback, Fleckenstein…

    Business Insider
  • Beanie Babies creator's sentence debated in court

    Beanie Babies creator's sentence debated in court CHICAGO (AP) — Federal prosecutors seeking to put the billionaire creator of Beanie Babies in prison for hiding millions in Swiss bank accounts told appellate court judges Wednesday that the toymaker's sentence of probation threatens to erode the…

    Associated Press
  • Play

    Citi, Bank of America Offer Discounted Mortgages

    Citigroup and Bank of America will offer mortgages at discounted interest rates to help borrowers with low incomes or subprime credit. AnnaMaria Andriotis joins MoneyBeat. Photo: Getty.

    WSJ Live
  • Apple to unveil new iPads, operating system on Oct. 21 : report

    The company plans to unveil the sixth generation of its iPad and the third edition of the iPad mini, as well as its operating system OS X Yosemite, which has undergone a complete visual overhaul, the Internet news website said. Trudy Muller, a spokeswoman for Apple, declined to comment. The iPad is…

    Reuters
  • Gilead Stock Is Falling On These Drug Setbacks

    Gilead Stock Is Falling On These Drug Setbacks Gilead Sciences (GILD) shares are backsliding Wednesday on news that the patient drop-out rate for hepatitis C drug Sovaldi is quadruple that of clinical trials. In addition, the biotech's Phase 2 study results

    Investor's Business Daily
  • Margaritaville casino owners seek bankruptcy

    The owner of Biloxi's Margaritaville casino has filed for Chapter 11 bankruptcy protection Tuesday, only hours before a hearing where the landlord aimed to seize the property. The filing by MVB Holding LLC in U.S. Don Dornan, a lawyer for landlord Clay Point LLC, said the company had planned to ask…

    Associated Press
  • Play

    Hilsenrath: Fed Still Sees 2015 for Rate Increase

    WSJ's Jon Hilsenrath discusses the Federal Reserve's decision to hold steady on interest rates, but the central bank foresees a rate increase by early 2015. Photo: Getty.

    WSJ Live
  • Venture Capitalist Makes Case Against 'Shark Tank'

    If you watch the TV show "Shark Tank" as entertainment and not to obtain a startup education, you will be benignly inspired by fellow entrepreneurs. "Shark Tank" is a reality competition show that features entrepreneurs pitching business ideas to a panel of potential investors, referred to as…

    The Wall Street Journal
  • Wondering How You Could Save on Home Insurance?

    Get a quote from Farmers Insurance and discover how you could save. Speak with an agent to get the knowledge you need to make an informed decision.

    AdChoicesFarmers InsuranceSponsored
  • Don't care about Alibaba? Here's why it may matter

    When the Alibaba Group Holding prices its initial public offering Thursday, small businesses in particular will be watching. Founder Jack Ma -the former English-teacher-turned-dot-com billionaire-has touted his e-commerce platform as a way for smaller merchants to expand their international…

    CNBC
  • Here's What Mark Cuban Wishes He Knew About Money In His 20s

    Cuban is the owner of the Dallas Mavericks basketball team. Billionaire investor and entrepreneur Mark Cuban is generous with his advice. When we asked him what he wishes he'd known about money in his 20s, he said:

    Business Insider
  • Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More

    Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More Stocks were firm on Wednesday morning ahead of the FOMC meeting outcome. Tuesday’s rally may have sparked higher interest again, and investors are looking for bargains

    24/7 Wall St.
  • SHOE COMPANY: Our CEO Just Disappeared And Most Of The Money Is Gone

    "and like that: he's gone." This is an actual headline from a company press release: "CEO and COO disappeared, most of the company's cash missing." (Via FastFT) In a statement, German-based shoe company Ultrasonic said its CFO,  Chi Kwong Clifford Chan, has been unable to reach the company's CEO,…

    Business Insider
  • Boeing may have outfoxed Musk, but it could have bigger problems

    Elon Musk is arguably one of the greatest entrepreneurial minds of the 21st Century, but he was outsized an old school aerospace giant. Boeing won the bulk of NASA’s contract for a space taxi.  One of the other companies vying for the deal is SpaceX, the company headed by Tesla’s Musk, will get a…

    Talking Numbers
  • Billionaire Investor Says Chinese People Work Harder And Western Companies Could Face Deep Trouble After Alibaba IPO

    Michael Moritz, the chairman of VC firm Sequoia Capital, is a huge fan of Chinese internet companies and reiterated his enthusiasm for the Chinese market in an interview with The Wall Street Journal Wednesday. The billionaire investor described the Alibaba IPO as a “major landmark event” that is as…

    Business Insider
  • Best Womens Wrinkle Creams 2014

    Mom reveals simple wrinkle solution that has researchers very excited. Try this free solution today to look and feel years younger.

    AdChoicesBellaLabs.comSponsored
  • Play

    Top Starter Funds for Investors on a Shoestring

    Morningstar's Christine Benz highlights some of her favorite ETFs and low-minimum-investment funds for new investors.

    Morningstar