What To Expect From Vale’s Q1 Earnings

Shutterstock photo

Vale ( VALE ) will report its first-quarter results on April 25 and conduct a conference call with analysts the following day. Consensus market estimates have a mean adj-EPS estimate of $0.40 for Q1, 17% lower year-on-year (y-o-y) and mean revenue estimate of $9.26 billion , 9% higher in comparison to last year. Notably higher sales volume of premium grade iron ore is expected to boost revenue, however, higher input costs will result in some headwinds.

Vale achieved a record iron ore sales figure in Q1 in comparison to the same period last year even though production figures proved to be inferior. Total iron ore sales volume increased by 9% y-o-y, whereas iron ore production was down by 5%. Vale's iron ore production activity was interrupted by weather-related seasonal factors coupled with the management's ongoing effort to reduce its output of lower grade iron ore. Nevertheless, the company's increased flexibility and active management of its supply chain have supported its sales volume. Per the latest production report released by the company, the company's product mix has also improved substantially with an increased output from its Northern systems implying a larger share of higher-grade ore. Consequently, the company is likely to receive a premium price for a large portion of its output, increasing its average realized CFR/FOB price per ton. Thus, an increased sales volume and higher average price realization would likely result in higher revenue for the company in its first quarter.

However, the company reported lower copper and nickel output partly as a consequence of the management's decision to place non-competitive mines on care and maintenance. However, higher commodity prices are likely to enable the company to maintain its cash flow position and meet its debt reduction objective for the year. The company recently reiterated its plan to reduce debt to $10 billion by the end of 2018 and focus on its priority of ''value over volume."

The company is expected to face headwinds due to higher input costs, however, margins are expected to remain strong. Our key expectations from the company's first-quarter results are outlined in our interactive dashboard . In case you have a different outlook, you can make changes to our assumptions to arrive at your own fair price estimate for the company.

What's behind Trefis? See How it's Powering New Collaboration and What-Ifs

For CFOs and Finance Teams  | Product, R&D, and Marketing Teams

More Trefis Research

Like our charts? Explore example interactive dashboards  and create your own.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks , US Markets , Investing Ideas
Referenced Symbols: VALE , RIO , CLF

More from Trefis





Research Brokers before you trade

Want to trade FX?