Vale S.A.
(
VALE
) released its financial results for the third quarter 2012, on
October 24, 2012. Results weakened in the quarter with earnings
per ADR falling 66% year over year and 38% sequentially to
US$0.32 per ADR (on a fully diluted basis).
Results also failed to meet the Zacks Consensus Estimate of 52
cents per ADR. Weak macro conditions severely impacted demands
that in turn hurt results.
Revenue:
Operating revenue plunged 34.5% year over year to $10,963 million
and also lagged behind the Zacks Revenue Estimate of $12,240
million. Revenue also registered sequential decline of 9.8%.
Of the total revenue, sales of ferrous minerals accounted for
67%; coal sales 2.1%; base metals 16.1%; fertilizer nutrients
10.0%; logistics services 4.1%; and the remaining 0.8% came from
miscellaneous sources.
Geographically, 23.0% of revenue was generated from South
America, 52.3% from Asia, 4.3% from North America, 18.0% from
Europe, 1.3% from the Middle East and 1.1% from Rest of the
World.
Margins:
In the third quarter, cost of goods sold totaled $6,128 million
compared with $6,252 million recorded in the year-ago quarter.
SG&A and R&D expenses were $519 million and $360 million
compared with $654 million and $440 million in the year-ago
quarter, respectively.
Operating income measured by adjusted EBIT was $3,189 million
compared with $8,373 million in the prior-year comparable
quarter. Operating margin, as measured by adjusted EBIT margin
was 29.1% in the third quarter 2012 (excluding non-recurring
losses.), down from 50.0% in the previous year quarter. Adjusted
EBITDA was $4,280 million in the quarter, down from $9,631
million in the prior-year quarter.
Balance Sheet/Cash Flow:
Exiting the third quarter of 2012, Vale's cash and cash
equivalents were recorded at $7,951 million versus $4,083 million
in the previous quarter. Long-term debt increased to $42,392
million as compared with $38,429 million in the previous
quarter.
Net cash generated from operating activities was $5,669
million versus $4,211 million in the year-ago quarter while
capital spending came in at $4,984 million versus $3,711 million
in the third quarter 2011.
Vale S.A. is one of the world's largest producers and
exporters of iron ore and pellets. The company keeps improving
its competitiveness against rival companies, such as
Rio Tinto plc
(
RIO
) and
BHP Billiton Ltd.
(
BHP
).
We are maintaining our long-term 'Underperform' recommendation on
the stock. Vale holds a Zacks #5 Rank, which translates into a
short-term (1-3 months) 'strong Sell' rating.
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