Iron-Ore Producer Vale Sees Earnings Plunge
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.
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.
Write to Paul Kiernan at paul.kiernan@wsj.com
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)