Vale Misses on Q4 Earnings; Beats on Rev - Analyst Blog
February 27 2014 - 12:00PM
Zacks
Mining giant, Vale
S.A. (VALE) reported weak financial results for
fourth-quarter 2013. In the quarter, underlying earnings per ADR
(American Depositary Receipt) came in at 62 cents (on a
fully-diluted basis), up 72.2% year over year but down 12.7%
sequentially. Earnings missed the Zacks Consensus Estimate of 64
cents per ADR by 3.1%.
Improvement in the company’s
revenues and cost structure was responsible for the boost in
year-over-year earnings.
For 2013, Vale reported earnings
per ADR of $2.38, up 14.4% year over year and a cent higher than
the Zacks Consensus Estimate of $2.37.
Revenues:
Operating revenues rose 8.5% year over year and 5.4% sequentially
to $13.6 billion. Revenues were higher than the Zacks Consensus
Estimate of $12.6 billion. The year-over-year increase in revenues
was attributable to higher production volumes and prices, mainly of
iron ore and pellets sales.
Of Vale’s total revenue, sales of
ferrous minerals accounted for 74.8%; coal sales 2.5%; base metals
sales 13.9%; fertilizer nutrients sales 4.3%; logistics services
sales 2.5%; and the remaining 2.0% came from the sale of
miscellaneous sources.
On a geographic basis, 15.2% of
revenues were generated from South America, 57.8% from Asia, 4.5%
from North America, 17.9% from Europe, 3.4% from the Middle East
and 1.2% from Rest of the World.
For 2013, the company generated
operating revenues of $49.0 billion, up marginally from $48.8
billion recorded in 2012. Revenues also missed the Zacks Consensus
Estimate of $47.3 billion, comprehensively.
Production Status:
In the fourth quarter of 2013, Vale experienced record production
volumes of copper, coal, nickel and gold. Gold production soared to
88,000 ounces, increasing 86.2% year over year. Coal production was
2.3 million tons, increasing 15.7% year over year, a new all-time
high. While the production of iron ore, pellets, phosphate rock,
gold, silver, coal, nickel and copper improved; potash, ferroalloys
and manganese ore experienced a year-over-year decline.
Expenses: In the
fourth quarter, cost of goods sold totaled $7.0 billion, roughly
flat year over year. Selling, general and administrative
expenditures were $362.0 million, while research and development
expenses were $276.0 million; declining 37.3% and 40.0% year over
year, respectively. Vale’s efforts to divest unproductive projects
by reducing its geographical presence led to this decline.
Balance Sheet/Cash
Flow: Exiting the fourth quarter of 2013, Vale’s cash and
cash equivalents were recorded at $5.3 billion versus $7.1 billion
in the previous quarter. Long-term liabilities came in at $50.1
billion, up from $43.7 billion in the preceding quarter.
In the reported quarter, net cash
generated from operating activities was $1.7 billion compared with
$3.2 billion in the year-ago quarter, while capital spending came
in at $3.8 billion versus $4.8 billion in the fourth quarter of
2012.
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
#3 (Hold). Some better-ranked stocks worth considering in the
industry include AK Steel Holding Corporation
(AKS), Olympic Steel Inc. (ZEUS) and
United States Steel Corp. (X). All these sport a
Zacks Rank #2 (Buy).
AK STEEL HLDG (AKS): Free Stock Analysis Report
VALE SA (VALE): Free Stock Analysis Report
UTD STATES STL (X): Free Stock Analysis Report
OLYMPIC STEEL (ZEUS): Free Stock Analysis Report
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