April 24, 2008 / 11:14 PM / in 10 years

UPDATE 2-Brazil miner Vale's profit falls on nickel, forex

(Adds analyst, more production data, company outlook)

By Andrei Khalip

RIO DE JANEIRO, April 24 (Reuters) - Brazil’s Vale, one of the world’s top three miners, said on Thursday first-quarter net profit fell 9 percent from a year ago to $2.02 billion, as a drop in nickel prices and a strong local currency weighed on revenues.

Vale VALE5.SARIO.N, the world’s biggest iron ore producer, also said that earnings before interest, taxes, depreciation and amortization (EBITDA) -- a key measure of cash flow -- rose to $3.7 billion from $3.2 billion a year earlier under U.S. Generally Accepted Accounting Principles (US GAAP).

Analysts surveyed by Reuters had expected, on average, net profit of around $2.2 billion under US GAAP and EBITDA of $3.6 billion for the first quarter.

Reaction to the decline in profit may be muted, analysts said, as the average for Vale’s results was pushed up by one high forecast. Most of the forecasts were in line with the company’s result.

“It doesn’t look bad. The net profit came very much in line with what we expected and certain things, like the EBITDA margin, beat expectations, which is pretty good,” said an analyst with a big foreign bank who did not want to be named. “Revenue was weaker than expected though, so we need to look deeper into the details.”

Vale stocks fell 2.8 percent on Thursday before the results were announced, while the broader market shed 0.57 percent. Traders attributed the fall mostly to a drop in copper prices.

Analysts generally have a positive view on Vale, expecting a major improvement in its earnings in the second quarter when a hefty 65 percent to 71 percent price hike for iron ore agreed with clients in February kicks in.

Net revenue rose to over $7.8 billion from around $7.5 billion a year earlier. Analysts had forecast a net revenue of $8.1 billion.

In terms of output, Vale boosted iron ore production 10.6 percent in the quarter from a year earlier to 74.5 million tonnes, while pellets production edged up 1.9 percent to 8.7 million tonnes.

Nickel output slipped 1 percent to around 60,800 tonnes, which Vale, one of the world’s leading nickel producers, attributed to some redirected shipments of sintered nickel oxide to a new refinery in Dalian, China. The refinery starts operating this month, Vale said.

Copper output fell 5.5 percent to 73,300 tonnes as Vale’s Copper Cliff Smelter in Canada was halted for maintenance.

The company boosted manganese production 31.9 percent to 541,000 tonnes after resuming operations at its Azul mine in Carajas.

Bauxite output jumped 42 percent to 2.5 million tonnes, alumina rose 8.2 percent to around 1.06 million tonnes. Primary aluminum production fell 3.4 percent to 132,000 tonnes as Valesul smelter had to save energy due to high spot prices in the electricity market, the company said.

Output of nickel subproducts in Vale’s operations -- cobalt, platinum palladium and gold -- rose, while silver output fell 18.8 percent.

The company said that although the U.S. credit crisis was taking its toll on the world economy, global economic growth was dominated by emerging economies like China, which also boosted their share in world trade.

That, it said, makes Vale “well-positioned to benefit from continuity in the mining and metals cycle” given the variety of its capacity expansion projects. China is the most important single destination for Vale’s iron ore output. (Reporting by Andrei Khalip; editing by Marguerita Choy)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below