) recently released improved financial results for third-quarter
2013. In the quarter, underlying earnings per ADR (American
Depositary Receipt) came in at 72 cents (on a fully-diluted
basis), up 58.8% year over year and 12.9% sequentially.
Results beat the Zacks Consensus Estimate of 64 cents per ADR
by 12.5%. Improvement in the company's revenues and cost
structure was responsible for the boost in earnings.
: Operating revenues rose 10.8% year over year and 14.5%
sequentially to $12.9 billion. Revenues were in line with the
Zacks Consensus Estimate of $12.9 billion. The year-over-year
increase in revenues was attributable to higher production
volumes and prices, mainly of iron ore.
Of Vale's total revenue, sales of ferrous minerals accounted
for 73.5%; coal sales 1.6%; base metals sales 14.4%; fertilizer
nutrients sales 6.3%; logistics services sales 3.1%; and the
remaining 1.1% came from the sale of miscellaneous sources.
On a geographic basis, 18.2% of revenues were generated from
South America, 56.5% from Asia, 4.2% from North America, 17.4%
from Europe, 2.5% from the Middle East and 1.2% from Rest of the
: In the third quarter of 2013, Vale experienced record
production volumes of copper, coal, phosphate rock and gold. Gold
production soared to 76,000 ounces, increasing 66.2% year over
year. Coal production was 2.4 million tons, flat with the
previous quarter, which had reached an all-time high. While the
production of iron ore, phosphate rock, gold, coal, nickel and
copper improved; potash, pellets, ferroalloys and manganese ore
experienced a year-over-year decline.
: In the third quarter, cost of goods sold totaled $6.6 billion,
down 3.4% year over year. Selling, general and administrative
(SG&A) expenditures were $315.0 million, while Research and
Development (R&D) expenses were $205.0 million; declining
39.3% and 43.1% year over year, respectively. Vale's efforts to
initiate the divestiture of unproductive projects by reducing its
geographical presence, led to this decline.
Balance Sheet/Cash Flow
: Exiting the third quarter of 2013, Vale's cash and cash
equivalents were recorded at $7.1 billion versus $5.9 billion in
the previous quarter. Long-term liabilities were flat
sequentially at $43.7 billion.
In the reported quarter, net cash generated from operating
activities was $4.3 billion compared with $5.6 billion in the
year-ago quarter, while capital spending came in at $3.1 billion
versus $5.0 billion in the third quarter of 2012.
Post the quarter-end, the company entered into an agreement to
sell 35.9% of its stake in VLI S.A.
: In the coming quarters, management expects to increase
production volumes with enhanced mining operations in Carajas.
Also, Vale's cost-saving strategies are expected to succeed,
which in turn will increase the company's earnings.
Other Stocks to Consider
Vale currently carries a Zacks Rank #2 (Buy). Other stocks
worth considering in the industry include
Cliffs Natural Resources Inc.
Alderon Iron Ore Corp.
Denison Mines Corp.
). All these hold a Zacks Rank #2.
ALDERON IRON (AXX): Free Stock Analysis
CLIFFS NATURAL (CLF): Free Stock Analysis
DENISON MINES (DNN): Free Stock Analysis
VALE SA (VALE): Free Stock Analysis Report
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