On April 25, Vale S.A ( VALE - Analyst Report ) released its financial results for the first quarter of 2012. The company’s net earnings in the quarter were 74 cents per ADR, on a fully diluted basis, down drastically from $1.29 per ADR in the year-ago quarter. The results missed the Zacks Consensus Estimate of 79 cents per ADR. The earnings suffered a negative seasonality effect of abnormal rainfall combined with the consequences of price reduction in iron ore and pellet.

Revenue: Gross operating revenue plunged 16.3% year over year to $11,339 million, registering a sequential decline of 23.2%. The recorded revenue lagged behind the Zacks Revenue Estimate of $13,104 million.

Of the total revenue, sales of ferrous minerals accounted for 69.2%; coal sales 3.4%; base metals 15.7%; fertilizer nutrients 7.3%; logistics services 3.6%; and the rest 0.8% came from miscellaneous sources.

Geographically, 22.7% of revenue was generated from South America, 51.4% from Asia, 6.0% from North America, 16.7% from Europe, 2.4% from Middle East and 0.8% from the Rest of the World.

Margins: In the first quarter, cost of goods sold totaled $5,690 million compared with $5,576 million recorded in the year-ago quarter. SG&A and R&D expenses were $529 million and $299 million, compared with $419 million and $342 million in the year-ago quarter, respectively.

Operating income measured by adjusted EBIT was $3,850 million compared with $6,456 million (excluding the non-recurring gain from the transfer of aluminum assets in 1Q11) in the prior-year comparable quarter. Operating margin, as measured by adjusted EBIT margin, was 34.8 % in 1Q12, down from 48.9% (excluding the non-recurring gain from the transfer of aluminum assets in 1Q11) in the previous year quarter. Adjusted EBITDA was $4,965 million in the quarter, down from $7,663 million (excluding the non-recurring gain from the transfer of aluminum assets in 1Q11) in the previous year quarter.

Balance Sheet/Cash Flow: Exiting the first quarter of 2012, Vale’s cash and cash equivalents were recorded at $4,922 million, up sequentially from $3,531 million. Long-term debt increased to $1,014 million from $214 million in the previous quarter.

Brazil-based Vale S.A. is one of the world’s largest producers and exporters of iron ore and pellets. The company keeps improvising its competitiveness against rival companies, such as Rio Tinto plc ( RIO - Analyst Report ) and BHP Billiton Ltd ( BHP - Analyst Report ) .

We currently maintain a long-term ‘Neutral’ recommendation on the stock. Moreover, Vale holds a Zacks #3 Rank, which translates into a short-term (1-3 months) 'Hold' rating.