Vale Banking on Better Economy

Last week, Vale S.A. (VALE - Analyst Report) announced a strong set of operational and financial results for the third quarter of 2009, returning to growth after the impact of the global financial shock. The improved performance reflects the company's underlying earnings power based on its world-class assets and strategic position, its efforts to weather the global downturn and the broadening of the economic recovery. 

Vale continues to pursue sustainable shareholder value creation, implementing its growth strategy with tight discipline in terms of capital allocation, in line with its long-term vision for the mining industry. 

Operating revenue was $6.89 billion, down 43% from the previous year's $12.12 billion. Revenue from ferrous metals was $4.37 billion, while revenue from nonferrous minerals reached $1.99 billion. EBITDA was $3.01 billion compared to $6.37 billion in the year ago quarter. 

Vale posted a net profit of $1.68 billion compared to $4.82 billion in the third quarter of 2008. Net earnings rose from $790 million in the previous quarter as markets recovered. 

We expect the demand for imported iron ore into China to remain strong due to the steel demand fundamentals and the lack of competitiveness of local iron ore production. Strong growth in Chinese iron ore imports is being supported by the substitution of high-cost local production and increasing carbon steel output. 

Management sees the future as promising. Vale has invested more than $60 billion in the recent years and made major acquisitions, which is a significant expression of confidence in the future.