Back to top

Analyst Blog

Mining giant Vale S.A. (VALE - Analyst Report) 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.

Revenues: 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 World.

Production Status: 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.

Expenses: 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.

Outlook: 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. (CLF - Analyst Report), Alderon Iron Ore Corp. (AXX - Snapshot Report) and Denison Mines Corp. (DNN - Snapshot Report). All these hold a Zacks Rank #2.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
CTPARTNERS… CTP 13.33 +3.49%
SAIA INC SAIA 45.65 +1.00%
VASCO DATA… VDSI 13.57 +0.67%
AMEDISYS IN… AMED 20.18 +0.10%
FIRSTSERVIC… FSRV 55.66 -0.13%