Bloomberg News

Vale Drops to Two-Week Low After Net Misses Estimates: Rio Mover

February 17, 2012

Feb. 16 (Bloomberg) -- Vale SA, the world’s second-largest mining company, dropped to a two-week low after earnings missed estimates because of declining metal prices.

Vale fell 1.3 percent to 41.55 reais in Sao Paulo at 2:45 p.m. Earlier it declined to 41.38 reais, the lowest since Jan. 30. Before today it gained 11 percent this year. Larger rival BHP Billiton Ltd., the world’s biggest mining company, gained 4.6 percent in Melbourne during the same period.

“The highly uncertain situation in Europe affected nickel and copper prices during the fourth quarter,” Rafael Weber, who helps manage about 7 billion reais ($4.05 billion) at Geracao Futuro Corretora in Porto Alegre, Brazil, said by telephone. “We also had some of the main customers on stand-by mode, just consuming their inventories without replenishing them.”

Earnings at the iron-ore and nickel producer missed estimates for the third straight quarter after the sovereign debt crisis in Europe sapped demand for metals, pushing down prices.

Fourth-quarter net income fell to $4.67 billion, or 90 cents a share, from $5.92 billion, or $1.12, a year earlier, Rio de Janeiro-based Vale said late yesterday. Analysts expected per-share profit of 95 cents excluding some items, according to the average of 12 estimates compiled by Bloomberg.

Net sales fell 3.4 percent to $14.4 billion in the quarter, after average selling prices for nickel fell about 20 percent and copper prices dropped 16 percent. Vale sold iron ore at $121.4 per metric ton on average, little changed compared with last year and 19 percent less than in the prior quarter.

Europe Shipments

Shipments of iron-ore and pellets to Europe, which account for about 16 percent of Vale’s total, fell 25 percent to 12.9 million metric tons, while volumes sold to Brazil declined 11 percent. Sales to Chinese steelmakers, Vale’s biggest customers accounting for about 47 percent of shipments, rose 7.3 percent.

“The recession in Europe has had a negative impact on the global demand for iron ore and pellets,” Vale said in the statement, released after the close of regular trading hours. “Despite the economic downturn in Europe, we expect a tight global market for iron ore this year, as Chinese demand continues to grow and supply expansion becomes constrained.”

Vale said fourth-quarter iron-ore output rose 3.3 percent to 82.9 million metric tons, after Carajas, the world’s biggest iron-ore mine, produced 30.2 million metric tons. Annual production gained 4.8 percent during 2011 to a record 322.6 million metric tons, the company said. Vale also reached annual record output for pellets and coal, while production of base metals gained to the highest level since 2008, it said.

Nickel Output

Nickel production climbed 5.7 percent to 69,000 tons in the fourth quarter, while copper output rose 13 percent to 85,000 tons, the company said. Potash production rose 6.6 percent to 180,000 tons, it said.

“We expect iron-ore prices to stabilize at around $140 per ton this year, away from the peaks of about $180 that we saw during 2011, and that means somewhat lower profits,” Jonathan Brandt, an analyst at HSBC Holdings Plc, said in a telephone interview before the report was released.

The company sold iron ore at $121.38 a ton in the quarter, little changed from $121.34 a year earlier.

Net income reached a record $22.9 billion last year. The company’s total debt as of Dec. 31 was little changed at $23.1 billion from $23 billion at the end of the previous quarter.

Vale invested a record $18 billion excluding acquisitions last year, the company said, less than its initial $24 billion spending plan. Vale plans to invest $21.4 billion in 2012, it said Nov. 28.

--Editors: Carlos Caminada, Dale Crofts

To contact the reporter on this story: Juan Pablo Spinetto in Rio de Janeiro at

To contact the editor responsible for this story: Dale Crofts at

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