Vale Reports Loss in Q4 due to Strong Dollar and Low Prices

Mining giant Vale S.A. VALE reported weak results for fourth-quarter 20Array5. The company suffered a loss of 20 cents per share for the quarter, missing the Zacks Consensus Earnings Estimate of 2 cents per share of earnings. The quarterly loss per share was wider than the loss of 5 cents per share recorded a year ago.

 

For full-year 20Array5, the company reported loss per share of 33 cents as against earnings of 86 cents per share recorded at 20Array4-end.

Depreciation of the Brazilian currency with respect to the U.S. dollar and unfavorable product prices were primarily responsible for Vale’s dismal performance in fourth-quarter 20Array5.

Revenues

Net operating revenue dropped 35% year over year and 9.3% sequentially to $5.9 billion. The top line also lagged the Zacks Consensus Estimate of $7.3 billion. Of total gross revenue, sales of ferrous minerals accounted for 64.9%; coal Array.8%; base metals 24.3%; fertilizer nutrients 8.6%; and the remaining 0.4% was sourced miscellaneously.

Geographically, Array6.Array% of revenues were generated from South America, 53.3% from Asia, 7.5% from North America, Array9.Array% from Europe, 2.8% from the Middle East and Array.2% from Rest of the World.

For full-year 20Array5, net operating revenue came in at $25.6 billion compared with $37.5 billion generated at 20Array4-end.

Expenses

In the fourth quarter, cost of goods sold totaled $5.Array billion, down 25.7% year over year. Selling, general and administrative expenditure was $Array67 million, while research and development expenses amounted to $ArrayArray9 million; down 45.4% and 49.4% year over year, respectively.

Balance Sheet/Cash Flow

Exiting fourth-quarter 20Array5, Vale had cash and cash equivalents of $3.6 billion compared with $4 billion recorded in the year-ago period. Non-current liabilities came in at $42.2 billion, down from $49.4 billion recorded a year ago.
Net cash generated from operating activities totaled $Array.3 billion compared with $Array.2 billion in the year-ago quarter. Capital spending totaled $2.2 billion compared with $3.4 billion in third-quarter 20Array4.

Outlook

Vale expects to improve its business with the help of specialized cost-saving plans, productivity enhancement schemes, growth projects and superior yield from the N4WS mine, going forward. Moreover, supported by efficient disinvestment programs and suitable capital-deployment strategies, the company aims to stabilize its absolute debt level in the coming quarters.

Stocks to Consider

Vale presently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Cliffs Natural Resources Inc. CLF, AK Steel Holding Corporation AKS and American Vanguard Corp. AVD. All three stocks currently hold a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
AMER VANGUARD (AVD): Free Stock Analysis Report
 
CLIFFS NATURAL (CLF): Free Stock Analysis Report
 
VALE SA (VALE): Free Stock Analysis Report
 
AK STEEL HLDG (AKS): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research
VALE Research -- Mutual Funds Top 10 Holdings include "VALE"
CLF Research -- Mutual Funds Top 10 Holdings include "CLF"
AKS Research -- Mutual Funds Top 10 Holdings include "AKS"
AVD Research -- Mutual Funds Top 10 Holdings include "AVD"