Vale first-quarter net falls on rains, lower prices

Wed Apr 25, 2012 8:15pm EDT
 
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By Jeb Blount and Sabrina Lorenzi

RIO DE JANEIRO (Reuters) - Vale SA (VALE5.SA: Quote), the world's largest iron ore miner, said on Wednesday that first-quarter profit fell by nearly half from a year earlier because rains limited exports, prices for its main products fell and spending on new mining projects rose.

Net income in the three months ended March 31 fell 44 percent to $3.83 billion compared with $6.83 billion a year earlier, the Rio de Janeiro-based company said in a filing to Brazil's securities regulator.

Results were in line with the average estimate of six analysts surveyed by Reuters. They expected net income to fall to $3.8 billion, 45 percent less than the year-earlier period and 19.4 percent less than in the fourth quarter.

"The first quarter is generally the weakest of the year from a financial and operational perspective," the filing said. "This year, the strong rain volumes in Brazil deepened the seasonal effect on sales and costs, that along with lower prices for iron-ore and pellets cut our operating margins and profit."

Profit was 18 percent lower than in the fourth quarter of 2011.

The drop in profit comes as Chief Executive Murilo Ferreira boosts investment to keep up with strong demand for iron ore, nickel, copper and coal from China and other Asian markets. The high demand comes as output from existing mines falls.

Additionally, heavy rains and a railway bridge accident limited exports even as prices for iron-ore, nickel and copper fell, said Marcelo Aguiar, metals and mining analyst with Goldman Sachs in Sao Paulo.

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