Vale reports heavy losses in third quarter despite record production

Vale posted a net loss of $US2.12 billion, 47 per cent larger than its loss in the year-ago quarter. The Brazilian currency depreciated by 28% against the United States dollars in Q3. Iron ore prices were 6.1% lower in the quarter, which the company blamed on a 2.1% decline in Chinese steel production.

The exchange rate move increased the local-currency value of Vale’s foreign-currency debts and “our income statement is recording that increase as a loss”, Siani said. Jefferies Group cut their price target on shares of Vale SA to $5.50 in a report on Monday, September 14th. Vale recorded a cumulative loss of $3.560 billion over the first three quarters of 2015.

Sales to Asia represented 53.6 percent of total gross revenues in the third quarter, up from 51.1 percent, with China the main market, accounting for 38.6 percent of total gross revenues.

Adjusted Q3 EBITDA was only $1.875 billion which means a decrease by 15.3% q-o-q, and by 37.6% y-o-y.

The Brazilian miner sold its iron-ore fines at an average $46.48 a wet metric ton, down from $68.02 a year earlier. The 52-week high of the share price is $11.82 and the 52-week low is $4.03. From the trading data available, it was disclosed that a block trade of negative money flow worth $(-17.79) million occurred during the day. Vale recorded negative underlying earnings of $-961 million which means a q-o-q decline by nearly $2 billion.

Several other equities analysts also recently issued reports on VALE. Its cash position increased by $1.198 billion, to $4.462 billion.

Vale is proud to announce these results.

According to Zacks, “Vale aims to improve its fundamentals on the back of strategic cost-saving initiatives, disinvestment plans and lower debt levels”. Although the result was achieved also thanks to the steep BRL depreciation, Vale may be able to achieve similar results in the future, at stronger BRL exchange rates, as the giant S11D iron mine should help Vale to keep production costs low.

The S11D mine and mill at Para is 75% complete.

Vale is producing more higher-quality iron ore and halting a few of its most expensive output to navigate an oversupplied market that sent prices of the steel-making ingredient down more than 70 per cent from a 2011 peak – all as China’s slowdown erodes margins at its base metal business. The executive rejected the idea that Vale could be pressured to close the sale of other assets, as a result of the completion of its SD11 iron ore project.