Iron-Ore Producer Vale Sees Earnings Plunge--Update
July 27 2017 - 11:28AM
Dow Jones News
By Paul Kiernan
RIO DE JANEIRO -- Brazilian mining giant Vale SA reported a
sharp drop in its earnings during the second quarter despite record
iron-ore production, as asset write-downs, higher costs and
financial losses weighed on its bottom line.
Vale, the world's largest iron-ore producer, said its net profit
fell to $16 million, down from $1.11 billion in the second-quarter
of 2016.
"I think we can all agree that the result was weaker than
expected," Chief Executive Officer Fabio Schvartsman said in a
conference call with analysts.
The company's revenue rose 17% in the quarter to $7.24 billion
amid higher prices for iron ore and increased sales of other
minerals like copper and coal. Adjusted earnings before interest,
taxes, depreciation and amortization, or Ebitda, rose 16% to $2.73
billion, Vale said.
But Vale, which is located thousands of miles away from its main
iron-ore market in China, suffered from sharply higher freight
costs in the April-to-June period. Its derivatives on commodities,
currencies and interest rates, after bringing in a hefty profit a
year earlier, produced a loss in the second quarter, as did
currency fluctuations.
Vale also recorded asset write-downs of $414 million related to
discontinued operations, such as fertilizer assets sold in December
in exchange for shares of The Mosaic Co., which fell during the
second quarter.
The company's preferred shares traded in São Paulo were recently
up 0.6% at 28.12 Brazilian reais ($8.91).
Mr. Schvartsman said he expects better results from Vale in the
third quarter, as iron ore prices so far have exceeded the
$62.90-per-ton average in the second quarter. In addition, Vale has
shifted its production away from lower-grade ores, which eroded its
sales prices between April and June.
"The sum of these circumstances will very probably produce a
quarter much better than the second," Mr. Schvartsman said.
Write to Paul Kiernan at paul.kiernan@wsj.com
(END) Dow Jones Newswires
July 27, 2017 12:13 ET (16:13 GMT)
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