Brazilian Vale profit slumps on rain, seasonality

26 April 2012 20:05  [Source: ICIS news]

HOUSTON (ICIS)--Brazilian iron-ore miner and fertilizer producer Vale saw first-quarter net profits slump 44% to $3.83bn (€2.91bn) from the $6.83bn in the year-earlier period, the company said in a conference call on Thursday.

Earnings before interest, tax, depreciation and amortisation (EBITDA) were $3.9bn, down 35% against $6bn in fourth quarter 2011.

The results are primarily a result of heavy rains limiting shipments, iron ore prices sinking on China's growth slowdown, and seasonality, the company said in a conference call.

“Seasonality usually makes the first quarter the one with the weakest operational and financial performance in the year,” the company’s media representative said.

“This year, the abnormal rainfall in Brazil has magnified the seasonal effect on revenues and costs, which, combined with the reduction in iron ore and pellet prices, led to narrower operating margins and lower than expected earnings and cash flow,” Vale said.

The impact of heavy rains on Vale's mines and railways forced the company to declare force majeure on iron ore in January. The rains cut iron ore shipments by 2.3% from fourth quarter.

The company said that despite the weak results, it will not be changing its forecast for the year and it is just a matter of time before things improve.

“The rainy season in the Southern Hemisphere is past, iron ore shipments surged in March and we are confident of delivering the volumes planned for this year,” Vale said.

The drop in profit comes as Vale boosts investment in Brazil to reduce the country’s dependence on imports of fertilizers.

The company added that a diversified portfolio of assets, by business bulk materials, base metals and fertilizers, is ramping up.

Author: Heather Doyle

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