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Vale Beats Q2 Earnings, Lags Revenues; Outlook Positive - Analyst Blog

Mining giant Vale S.A.VALE reported mixed results for second-quarter 2015. Quarterly earnings came in at 19 cents per share, comfortably exceeding the Zacks Consensus Estimate of 4 cents. However, the bottom line was down 50% from the year-ago tally of 38 cents.

Depreciation of Brazilian currency with respect to the U.S. dollar and unfavorable product prices were primarily responsible for Vale's dismal revenues in second-quarter 2015.

Revenues

Gross operating revenue dropped 29.7% year over year but increased 11.4% sequentially to $7.1 billion. The top line also lagged the Zacks Consensus Estimate of $7.7 billion. Of total gross revenue, sales of ferrous minerals accounted for 65.3%; coal 2.1%; base metals 23.3%; fertilizer nutrients 8.7%; and the remaining 0.8% was sourced miscellaneously.

Geographically, 18% of revenues were generated from South America, 51.1% from Asia, 8.2% from North America, 18% from Europe, 4% from the Middle East and 0.7% from Rest of the World.

Expenses

In the second quarter, cost of goods sold totaled $5.2 billion, up a marginal 0.3% year over year. Selling, general and administrative expenditure was $159 million, while research and development expenses amounted to $118 million; declining 18.5% and 0.8% year over year, respectively.

Balance Sheet/Cash Flow

Exiting the second quarter of 2015, Vale had cash and cash equivalents of $3.2 billion versus $7.1 billion recorded in the year-ago quarter. Non-current liabilities came in at $47.1 billion, down from $50.9 billion in the year-ago comparable period.

Net cash generated from operating activities totaled $995 million compared with $4,595 million in the year-ago quarter. Capital spending was $2.1 billion versus $2.7 billion in the second quarter of 2014.

Outlook

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

Stocks to Consider

Vale currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Akzo Nobel N.V. AKZOY , Avino Silver & Gold Mines Ltd. ASM and Avalon Rare Metals Inc. AVL . All three stocks hold a Zacks Rank #2 (Buy).

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VALE SA (VALE): Free Stock Analysis Report

AVALON RARE MTL (AVL): Free Stock Analysis Report

AKZO NOBEL NV (AKZOY): Free Stock Analysis Report

AVINO SILVER&GD (ASM): Free Stock Analysis Report

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


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

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