Brazil's Vale Profit Surges to Three-Year High on Rise in Iron-Ore Prices

By Paul Kiernan Features Dow Jones Newswires

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.

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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.

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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)