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.
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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."
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(END) Dow Jones Newswires
April 27, 2017 12:33 ET (16:33 GMT)