Iron-Ore Producer Vale Sees Earnings Plunge--Update

By Paul Kiernan Features Dow Jones Newswires

Brazilian mining giant Vale SA reported a sharp drop in its earnings during the second quarter despite record iron-ore production, as asset write-downs, higher costs and financial losses weighed on its bottom line.

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Vale, the world's largest iron-ore producer, said its net profit fell to $16 million, down from $1.11 billion in the second-quarter of 2016.

"I think we can all agree that the result was weaker than expected," Chief Executive Officer Fabio Schvartsman said in a conference call with analysts.

The company's revenue rose 17% in the quarter to $7.24 billion amid higher prices for iron ore and increased sales of other minerals like copper and coal. Adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda, rose 16% to $2.73 billion, Vale said.

But Vale, which is located thousands of miles away from its main iron-ore market in China, suffered from sharply higher freight costs in the April-to-June period. Its derivatives on commodities, currencies and interest rates, after bringing in a hefty profit a year earlier, produced a loss in the second quarter, as did currency fluctuations.

Vale also recorded asset write-downs of $414 million related to discontinued operations, such as fertilizer assets sold in December in exchange for shares of The Mosaic Co., which fell during the second quarter.

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The company's preferred shares traded in São Paulo were recently up 0.6% at 28.12 Brazilian reais ($8.91).

Mr. Schvartsman said he expects better results from Vale in the third quarter, as iron ore prices so far have exceeded the $62.90-per-ton average in the second quarter. In addition, Vale has shifted its production away from lower-grade ores, which eroded its sales prices between April and June.

"The sum of these circumstances will very probably produce a quarter much better than the second," Mr. Schvartsman said.

Write to Paul Kiernan at paul.kiernan@wsj.com

(END) Dow Jones Newswires

July 27, 2017 12:13 ET (16:13 GMT)