UPDATE 2-Vale Q1 profit falls despite big cost cuts

Wed Apr 24, 2013 10:33pm EDT
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* Net profit was $3.11 bln, net sales $10.94 bln

* Cut in operating costs ahead of expectations

* Vale says still more work to do on cost structure

By Jeb Blount

RIO DE JANEIRO, April 24 (Reuters) - Brazil's Vale SA , the world's second-largest mining company, reported an 18 percent slide in first-quarter net profit as bigger-than-expected cuts in operating costs failed to offset lower sales and a hit from taxes and foreign exchange.

Despite the drop, the result beat analysts expectations and may help boost Vale's stock as the company responds to investor calls for a tighter reign on spending amid concerns over weaker metals prices as growth in China slows.

Net income of $3.11 billion in the three months ending March 31 beat the $2.71 billion average estimate of eight analysts surveyed by Reuters and reversed a fourth-quarter loss, Vale's first quarterly loss in a decade.

The result was still down on $3.79 billion a year earlier, and 25 percent below the average $4 billion quarterly profit the world's largest producer of iron ore has recorded for the previous 11 quarters.

The lackluster outcome may add to nervousness that a decade-long mining boom led by ravenous Chinese demand for steel and other metals is ending, despite a rebound in iron ore prices after a steep drop last year.   Continued...