Vale said it will reward investors with payouts and a new share buyback program as the Brazilian iron-ore and nickel giant vies to appease shareholders concerned by softening Chinese demand.
The board of the Rio de Janeiro-based company approved a total of 10.57-billion reais ($2.1-billion) in dividends and interest on capital, according to a filing Thursday. Added to the buyback, which can reach as many as 150-million shares, the total reward to investors will likely top $4-billion, given the current stock price.
Shares of Vale extended gains on the back of the news, and closed up 2.1% at 65.30 reais in Sao Paulo.
The move comes after Vale, the world’s No.2 iron-ore supplier, reported a year-over-year drop in iron ore output earlier this month. At the same time, iron ore prices have fallen sharply from highs in mid-March amid concerns over consumption in China, the world’s top buyer. The demand malaise helped to send shares down more than 25% this year, and traders are concerned that steel mills will curb output despite efforts from Beijing to shore up the economy and the property sector.
OUTPUT ISSUES
Production was driven lower last quarter by declines in Paraopeba and Serra Norte, as well as a one-time conveyor belt failure at the S11D mine. The Brazilian company is trading at a discount to its main peers as it struggles to bring output back to levels seen before a 2019 tailings dam collapse.
The payout plan is the result of improving cash generation and the funds expected from the sale of a stake in Vale’s base metals unit, according to people familiar with the matter. Vale has said it expects that transaction with Saudi Arabia’s sovereign wealth fund to be approved in the first quarter of 2024.
The final amount for the investor-reward program will be based on profits for the period ended September 30. The payment will be made on December 1. The board approved payments to shareholders of 1.566 real per share as dividends and 0.766 real per share as interest on capital, the company said. In July, Vale announced the distribution of 8.3-billion reais in interest on capital that was paid in September.
Vale late Thursday reported adjusted earnings before items of $4.5 billion for the last quarter, 12% above the year-ago period, and also up from the previous quarter.