(Repeats without change to text or headline)
* Vale profit hurt by slowing economy, iron ore price
* Net income in quarter worse than expectations
* Vale puts Simandou mine project in Guinea on hold
By Jeb Blount
RIO DE JANEIRO, Oct 24 Brazil's Vale SA
, the world's No. 2 mining company, said on Wednesday
that third-quarter profit fell 66 percent compared with a year
earlier after the price of iron ore dropped to three-year lows.
The result was slightly worse than the average of analysts'
expectations and the company's earnings release included plans
to put capital-intensive projects on hold.
Net income in the three months ending Sept. 30 was $1.67
billion, compared with $4.94 billion a year earlier, Vale said
in a statement. Vale is the world's largest producer of iron
ore, the main ingredient in steel.
The average profit estimate of 19 analysts surveyed by
Reuters was $1.92 billion. Profit fell 37 percent compared with
the second quarter.
"Vale's performance in the third quarter reflected the
challenges resulting from volatility of falling prices that
happened as a result of the slowing of growth in the world
economy," the company said in the statement.
Falling prices and weak demand in China, Vale's largest
market, have led the Rio de Janeiro-based company to delay
spending, close operations and consider cuts to investments and
dividends. The third-quarter result was the worst in nearly
Net sales, or total sales minus sales taxes, fell 34
percent to $10.7 billion. The average net sales estimate in the
survey was $10.4 billion.
Iron ore .IO62-CNI=SI, responsible for about 90 percent of
Vale profit, averaged $112.12 a tonne in the quarter, 36 percent
less than a year earlier. The price of iron ore, the main steel
ingredient, fell to a three-year low of $86.70 a tonne on Sept.
5. Vale iron ore output fell 4.5 percent from the third quarter
The expected sales drop hurt the outlook for earnings before
interest, taxes, depreciation and amortization, or EBITDA, a
gauge of operational profitability. EBITDA adjusted for
non-recurring items fell 62 percent to 3.74 billion reais, the
statement said, more than analysts expected.
The average analyst estimate was for EBITDA to fall 58
EBITDA as a percentage of sales fell to 35 percent from 59
percent a year ago.
GUINEA MINE ON HOLD
The impact of the company's weak sales and operational
profitability could be large when a review of investment plans
is announced in December.
Chief Executive Murilo Ferreira has already put investments
in Canada and Brazil on hold. On Oct. 4 the company said it
suspended operations at three Brazilian iron ore pellet plants.
On Wednesday, the company's earnings report added the giant
Simandou high-grade iron ore deposit in the West African nation
of Guinea to the list of projects moved to the bottom of the
Vale said in July that the $1.3 billion Zogota mine in the
Simandou area was to have started output by the end of 2012. Its
latest earnings statement said that the Zogota mine's scope and
timetable are now under review. It gave no date for a startup.
Reuters reported on Sept. 26 that the company might suspend
Profit was also hurt by the company's decision to set aside
about $542 million for the possible payment of back royalties in
a dispute with Brazil's government.
Vale preferred shares, the company's most-traded class of
stock, fell 0.8 percent to 34.29 on the Sao Paulo BM&FBovespa
exchange on Wednesday before the results were announced.
(Reporting by Jeb Blount and Sabrina Lorenzi; Editing by Jim
Marshall, Gary Hill)