Vale Swings to Profit in Third Quarter -- Update
October 27 2016 - 12:36PM
Dow Jones News
By Benjamin Parkin and Rogerio Jelmayer
SÃO PAULO -- Brazilian mining company Vale SA swung to a net
profit in the third quarter, helped by a combination of increased
revenue and lower costs from derivatives operations.
The company reported Thursday a net profit of $575 million,
compared with a net loss of $2.12 billion in the third quarter of
2015. Net operating revenue picked up 13% in the period to $7.3
billion.
"We're proud to say we had another quarter of very good
operational and financial performances," said Vale Chief Executive
Murilo Ferreira in a conference call.
Vale's shares rose 0.5% to 21.88 reais ($7.05) on the São Paulo
stock exchange in midday trading, while Brazil's benchmark stocks
index, the Ibovespa, was up 0.8%.
Earnings before interest, taxes, depreciation and amortization
increased 61% to $3.02 billion in the period, the company said.
Vale reported a smaller loss in its financial result, which
consists of financial services such as debt service management and
derivative operations, of $1.04 billion compared with a loss of
$7.1 billion a year ago.
The increase in revenue came as iron ore prices have risen,
reaching an average $65.50 per metric ton in the third quarter,
versus $62.11 in the same period last year, Vale said, citing Metal
Bulletin Index.
An upgraded project at Vale's Carajás mine in northern Brazil is
expected to begin operating in late 2016 and shipping iron ore in
early 2017. The high-efficiency operation should contribute toward
the company's long-term goal of delivering iron ore to China at a
cost of $25 a ton, Mr. Ferreira said.
Doubts about the sustainability of current iron ore price
levels, given potentially wavering Chinese demand and other
factors, raise some concerns about Vale's long-term outlook,
according to Ivano Westin, an analyst at Credit Suisse.
Vale's efforts to reduce costs and deliver on key projects have
been "extraordinary and very welcome," Mr. Westin said, adding he
isn't optimistic about the company's share price because "our view
is that (the price of) iron ore has to go down."
Vale's net debt ended the period at $25.96 billion, up from
$24.21 billion in the third quarter a year ago. The ratio of total
gross debt over adjusted Ebitda fell, however, to 3.6 from 4.2 in
the previous quarter.
Mr. Ferreira said the company couldn't say when it would next
pay dividends, because the budget for 2017 hasn't been completed.
The company last paid a dividend in 2015.
Vale invested $1.26 billion in its operations in the third
quarter, down from $1.88 billion a year earlier.
Write to Rogerio Jelmayer at rogerio.jelmayer@wsj.com
(END) Dow Jones Newswires
October 27, 2016 12:21 ET (16:21 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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