Brazil's Vale Profit Surges to Three-Year High on Rise in Iron-Ore Prices
April 27 2017 - 12:48PM
Dow Jones News
By Paul Kiernan
RIO DE JANEIRO -- Brazilian mining giant Vale SA reported its
biggest net profit in three years Thursday as prices for iron ore
surged in the first quarter to their highest levels since 2014.
Vale, the world's largest iron-ore producer, said net profit
rose 40% in the January-to-March period from a year earlier, to
$2.49 billion.
Though it came in lower than some analysts had expected, the
result reinforced a turnaround in Vale's business since iron-ore
prices began to emerge from a two-year slump about six months
ago.
American depositary receipts recently traded down 4.7% to
$8.32.
"Despite today's result, we continue to like Vale, as we believe
that we have reached an inflection point for the company,"
Bernstein analyst Paul Gait said in a research note.
Vale's revenues, three-fourths of which come from iron-ore
sales, rose 60% in the first quarter from a year earlier to $8.52
billion. Adjusted earnings before interest, taxes, depreciation and
amortization, or Ebitda, more than doubled in year-over-year terms
to $4.31 billion.
Economic growth in China, the world's largest steelmaker and
importer of iron ore, has picked up in the past two quarters after
slowing to its lowest rate in a quarter-century last year. A
rebound in manufacturing, infrastructure and real-estate investment
led to record steel production in the first quarter, Vale said,
driving iron-ore prices as high as $95 a metric ton in
February.
Though Vale executives have expressed optimism about the
iron-ore market, arguing that less new supply is set to come online
this year than in 2016, prices have since receded to as low as
$61.50 on April 19.
Some economists say the recent uptick in Chinese growth was
likely temporary, as policy makers are expected to tighten credit
and attempt to cool the real-estate market over the remainder of
2017.
"The spike in iron-ore prices earlier this year appeared to be
speculative in nature," Capital Economics said in a note Wednesday.
"Prices have already plummeted, but we think they could fall
further to $50 per ton by end-2017."
Write to Paul Kiernan at paul.kiernan@wsj.com
(END) Dow Jones Newswires
April 27, 2017 12:33 ET (16:33 GMT)
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