Vale bounces back from consecutive losses
After seeing losses in the last three quarters mostly on currency depreciation, Brazilian iron ore giant Vale posted net income of US$1.68bn for the second quarter, up 17.3% compared with earnings of US$1.43bn in 2Q14, the company said in an earnings release on Thursday.
"This positive performance is due to an even stronger reduction in iron ore production costs, which have been falling significantly over the company's last three results," CFO Luciano Siani said in a video posted on the company's website after the release of its Q2 results. "The cost of production, known as the FOB price, has decreased from US$18.3/t on 1Q15 to US$15.8/t in 2Q15 (excluding royalties). This is the lowest cost in Vale's history."
Vale's operating revenues in Q2 fell 29.7% year-on-year to US$7.08bn, but increased 11.4% quarter-on-quarter. The increase in sales revenues was mainly due to higher realized prices of iron ore fines and higher volumes of iron ore fines and pellets.
Adjusted Ebitda fell 46.1% to US$2.21bn compared to 2Q14, and rose 38.1% over 1Q15 mainly on lower costs and higher sales volumes in most business segments, which had positive impacts of US$236mn and US$184mn, respectively.
Vale's Q2 iron ore production from its own operations increased 7.4% year-on-year to 85.3Mt, the second highest three-month amount in the company's history and a record for the second quarter of the year.
Compared to 1Q15, production was up 14.4% from 74.5Mt. Vale's highest output ever for a quarter was 85.7Mt in 3Q14. Output from the company's largest mine, Carajás, also reached a Q2 record high of 31.6Mt in the quarter, up 7.9% from 2Q14, Vale said.
The average realized price of iron ore was US$50.62/t in 2Q15, significantly lower than the US$84.60/t in the second quarter of 2014.
Capex amounted to US$2.12bn in 2Q15 and US$4.33bn in H1, equivalent to a decrease of US$727mn when compared to 1H14.
"Vale is becoming increasingly more competitive and this will be the key issue in the coming quarters: growing results and widening margins, independent of the challenging situation in terms of prices," Siani said.
Rio de Janeiro-based Vale is the world's largest iron ore producer and exporter.
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