* Vale Q1 profit falls 44 pct to $3.83 bln from year earlier
* Average analyst expectation was for profit of $3.8 bln
* Q1 net income 18 pct smaller than in Q4 2011
* Vale blames "seasonality", rains for weaker results
By Jeb Blount and Sabrina Lorenzi
RIO DE JANEIRO, April 25 Vale SA, the
world's largest iron ore miner, said on Wednesday that
first-quarter profit fell by nearly half from a year earlier
because rains limited exports, prices for its main products fell
and spending on new mining projects rose.
Net income in the three months ended March 31 fell 44
percent to $3.83 billion compared with $6.83 billion a year
earlier, the Rio de Janeiro-based company said in a filing to
Brazil's securities regulator.
Results were in line with the average estimate of six
analysts surveyed by Reuters. They expected net income to fall
to $3.8 billion, 45 percent less than the year-earlier period
and 19.4 percent less than in the fourth quarter.
"The first quarter is generally the weakest of the year from
a financial and operational perspective," the filing said. "This
year, the strong rain volumes in Brazil deepened the seasonal
effect on sales and costs, that along with lower prices for
iron-ore and pellets cut our operating margins and profit."
Profit was 18 percent lower than in the fourth quarter of
The drop in profit comes as Chief Executive Murilo Ferreira
boosts investment to keep up with strong demand for iron ore,
nickel, copper and coal from China and other Asian markets. The
high demand comes as output from existing mines falls.
Additionally, heavy rains and a railway bridge accident
limited exports even as prices for iron-ore, nickel and copper
fell, said Marcelo Aguiar, metals and mining analyst with
Goldman Sachs in Sao Paulo.
The new projects include expansion of Vale's giant Carajas
iron-ore mine in the Brazilian Amazon and expansion of the
Moatize coal mine in Mozambique. The company spent 3.7 billion
on new projects in the first quarter, 37 percent more than a
In November, Vale announced a $12.9 billion plan to expand
mines and other projects in 2012, including $2.54 billion for
Carajas, nearly double 2011 investments there. The plan also
foresaw investments of $1.19 billion for mine expansion and
related rail and port facilities in Moatize, nearly double last
year's spending. Moatize is expected to be the largest coal
project in the Southern Hemisphere.
Vale said on Wednesday that it plans to begin operating at
its Salobo copper mine in Brazil's Amazon within weeks. The mine
has a design capacity of 100,000 tonnes a year.
MINERAL PRICE DECLINE
As spending rose, the price of the company's main products
fell. The average price of iron ore on the spot market, which is
used to adjust prices on 85 percent of the company's iron ore
sales, fell by a fifth to an average of $143.46 a
tonne in the quarter from a year earlier.
Nickel fell 27 percent to an average $19,709 a tonne
and copper fell 13 percent to 8,329 a tonne.
The impact of heavy rains on Vale's mines and railways forced
the company to declare "force majeure" on Jan. 11, allowing it
to break supply contracts. The rains helped cut iron ore
shipments by 2.3 percent, or 1.6 million tonnes in the quarter,
Vale produced 54.8 million tonnes of iron ore in the first
quarter, about 5 percent less than the 57.7 million tonnes
produced in the first three months of 2011.
Net revenue, or total sales minus sales taxes, fell 16
percent year-on-year in the first quarter to $11.05 billion. The
figure was 23 percent lower than in the fourth quarter.
The average analyst estimate was for revenue to fall 3.9
percent to $12.7 billion.
Adjusted earnings before interest, taxes, depreciation and
amortization, or EBITDA, fell 35 percent to $4.7 billion. EBITDA
is a benchmark measure of a company's ability to generate cash
from operations and its ability to pay debt.
Vale adjusts its EBITDA figure to exclude currency
variations, profits from share holdings and joint ventures not
consolidated on its balance sheet and other factors.
The average estimate was for adjusted EBITDA to fall 35
percent to $5.9 billion.
Vale preferred shares, the company's most-traded class of
stock, fell 1.5 percent to 41.09 reais in Sao Paulo before the
announcement of the results. The close was the stock's lowest in
nearly two weeks.
The Bovespa index of the most traded shares on Sao Paulo's
BM&FBovespa stock exchange fell 0.36 percent.