Massive blow for Vale SA (ADR) (NYSE:VALE) as Profits decline by 84%
Dallas, Texas, 09/17/2013 (ustrademedia) – It’s not all well for the world’s largest iron ore mining company Vale SA (ADR) (NYSE:VALE) with second quarter results indicating a decline of profits by 84%. This was caused by the consistent decline of iron ore prices. If this goes on, Vale might report the lowest year-over year earnings as iron core business forms the base of its operations and businesses. The prices fell in the 2nd quarter due to the slow economic growth of China which is the world biggest steel producer. The decline in profits translated to a decline of 11% compared to the first three months as Vale only received $99.21for a ton of iron ore.
The company is currently engaging in an investment in the S11D mine, construction of a railway line, port and a processing plant. The S11D is of most importance to its future success as it will enable it in competing with other mega iron companies like Rio Tinto and BHP Billiton. The year begun on a high with Chinese mills company importing lots of steel thereby enabling the prices to stay high, however once restocking was over, prices started declining.
The extended rainy season in northern Brazil where Carajas mining complex is located, did no good to the 2nd quarter results, this plant on its own accounts one- third of vale’s production. In the April to June period, the profits sunk to $424million from the expected $2.68 billion. The decline in value of Brazil’s currency also contributed a lot to the decline in profits as it lost 10% of its value to the US dollar.
The depreciation in currency value resulted in a loss of $1.96 billion in net liabilities and losses of $814 million in forward swap derivatives. The good news out of Vale other than the declining profits was the reported lower operational costs and expenses in the second quarter as compared to last year.