Vale Q4 profit rises but misses estimates on costs, forex

28th February 2018 By: Reuters

RIO DE JANEIRO – Brazilian iron-ore miner Vale SA's quarterly net income jumped by 47% but still badly missed analyst estimates, depressed by rising costs and foreign exchange related losses.

In a securities filing on Tuesday, the world's largest iron-ore producer said net income totaled $771-million in the quarter, well below a consensus estimate of $2.54-billion but still above the $525-million in profit during the same period last year.

Costs rose 11% to $6.26-billion, while net operating revenue slipped 1% to $9.167-billion.

Vale said a loss of $1.287-billion from its financial operations was due to non-cash exchange rate variations, losses on currency derivatives and other instruments, mainly stemming from a 4.2% depreciation in the real currency in the quarter.

That compares with a financial loss of $603-million in the fourth quarter of 2016.

The results were also crimped by a slide in prices for iron-ore fines, used to make pellets and later steel, which fell to $63.10/t in the fourth quarter from $67.17 in the third quarter and $69.40 in the same period last year.

However, base metals boasted their best quarterly showing since 2011, thanks to higher prices and lower costs.

Cash flow increased to $2.744-billion in the quarter, helping Vale to cut net debt by 14% on a sequential basis to $18.14-billion.

Vale has said it expects to slash debt to $10-billion by mid-2018.

Adjusted earnings before interest, taxes, depreciation and amortisation fell 13% to $4.109-billion, still exceeding a consensus estimate of $3.86-billion compiled by Thomson Reuters.