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Vale Posts Wider-than-Expected Loss in Q3, Lags Revenues

Mining giant Vale S.A.VALE reported weak results for third-quarter 2015. The company suffered a loss per share of 19 cents for the quarter, wider than the Zacks Consensus Estimate of a loss of 7 cents. The company had reported earnings of 13 cents per share in the year-ago quarter.

Depreciation of the Brazilian currency with respect to the U.S. dollar and unfavorable product prices were the primary reasons behind Vale's dismal performance in third-quarter 2015.

Revenues

Gross operating revenue dropped 28.4% year over year and 6.6% sequentially to $6.6 billion. The top line also lagged the Zacks Consensus Estimate of $8.1 billion. Of total gross revenue, sales of ferrous minerals accounted for 66%; coal 1.9%; base metals 20.5%; fertilizer nutrients 11.3%; and the remaining 0.3% was sourced miscellaneously.

Geographically, 19.5% of revenues were generated from South America, 53.6% from Asia, 6.2% from North America, 16.8% from Europe, 3.4% from the Middle East and 0.4% from Rest of the World.

Expenses

In third quarter, cost of goods sold totaled $5 billion, down 22.5% year over year. Selling, general and administrative expenditure was $131 million, while research and development expenses amounted to $121 million; declining 52.2% and 37.6% year over year, respectively.

Balance Sheet/Cash Flow

Exiting third-quarter 2015, Vale had cash and cash equivalents of $4.4 billion compared with $7.9 billion recorded in the year-ago period. Non-current liabilities came in at $44.3 billion, down from $49.1 billion recorded a year ago.

Net cash generated from operating activities totaled $1.6 billion compared with $2.9 billion in the year-ago quarter. Capital spending totaled $1.9 billion versus $3.3 billion in third-quarter 2014.

Outlook

Vale expects to improve its business with the help of specialized cost-saving plans, productivity enhancement schemes, growth projects and superior yield 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.

Other Stocks to Consider

Vale currently carries a Zacks Rank #2 (Buy). Other well-ranked stocks in the industry include Atlas Iron Limited AGODY , Fortescue Metals Group Limited FSUGY and AK Steel Holding Corporation AKS . All three stocks hold the same Zacks Rank as Vale.

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VALE SA (VALE): Free Stock Analysis Report

AK STEEL HLDG (AKS): Free Stock Analysis Report

FORTESCUE METAL (FSUGY): Free Stock Analysis Report

ATLAS IRON LTD (AGODY): 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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