Vale tops forecasts with US$3.5b profit

PUBLISHED : Friday, 08 November, 2013, 1:58am
UPDATED : Friday, 08 November, 2013, 2:39am

Vale, the world's largest iron ore producer, saw profit rise for the first time in more than two years in the third quarter, beating analysts' estimates, as Chinese demand for the steelmaking material pushed up prices.

Net income more than doubled to US$3.5 billion, or 68 US cents a share, from US$1.64 billion, or 32 US cents, a year earlier, Vale said on Wednesday. That was the first year-on-year profit increase since the second quarter of 2011. Analysts had expected Vale to earn 60 US cents a share.

The world's third-largest mining company is delivering higher profit as rising purchases from steel mills in China, the biggest buyer of metals, follow the company's cost cuts and asset sales in past quarters.

"We knew their volumes were going to be strong but the shipments even came in above our estimates," said Garrett Nelson, an equity analyst at BB&T Capital Markets. "It was a very strong release."

Net sales climbed 11 per cent to US$12.7 billion after Vale sold its iron ore at an average US$105.58 a tonne, an increase from US$93.90 last year. Nickel's average sales price declined 16 per cent and copper slid 3.2 per cent, the company said.

The company sold about 50 per cent of its iron ore and pellet shipments to Chinese customers in the third quarter, up from 49 per cent a year earlier. Europe's share of the sales fell to about 17 per cent from 18 per cent. China accounted for more than 40 per cent of Vale's operating revenue in the quarter, up from a third a year earlier.

Iron ore entered a bull market in July as users in China replenished stockpiles, which shrank in March to the lowest level since 2009.

The prices had "surprised on the upside" because of low inventories and stronger demand for steel in China, Vale said, adding that mainland mills were likely to build up stockpiles in coming months.