Vale Announces Fourth Quarter Results
RIO DE JANEIRO, Feb. 11 /PRNewswire-FirstCall/ -- Vale (NYSE: VALE) would like to announce the highlights of its Webcast Conference, led today in Rio de Janeiro, Brazil, which included the participation of Fabio Barbosa, CFO of Vale; Jose Carlos Martins, Executive Director for Ferrous Minerals; and Eduardo Bartolomeo, Executive Director of Logistics, Project Management and Sustainability.
Main highlights of Vale's performance in 4Q09: (http://www.vale.com/vale/cgi/cgilua.exe/sys/start.htm?sid=121)
The main highlights of Vale's performance in 2009 were:
-- Operating income of U.S. $ 6.5 billion in 4Q09, totaling U.S. $ 23.9 billion in 2009
-- Operating profit, measured by adjusted EBIT (earnings before interest and taxes) of U.S. $ 1.1 billion in 4Q09 and U.S. $ 6.1 billion in 2009.
-- Operating margin, as measured by adjusted EBIT margin, in 2009 of 26.0%. In 4Q09, adjusted EBIT margin of 17.4%.
-- Cash generation, measured by adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of U.S. $ 9.2 billion in 2009. EBITDA reached U.S. $ 2.1 billion in 4Q09.
-- Investments in organic growth and maintenance of existing operations reached U.S. $ 9.0 billion in 2009.
-- Investments of U.S. $ 796 million in corporate social responsibility in 2009, of which U.S. $ 580 million was spent on protecting and conserving the environment and U.S. $ 216 million on social projects.
-- Dividend of U.S. $ 2.75 billion in 2009.
-- Strong financial position, supported by significant cash of U.S. $ 11.0 billion, availability of credit lines for medium and long-term debt and low risk.
The main issues discussed in the conference call include:
Innovation for Growth
Vale undertook a series of corporate restructurings to offer more efficient support to business areas of the company in response to an environment of recession. To further reduce company costs, Vale also accelerated the globalization of a shared service center. The cost of shared services was U.S. $70 million, following the same full value of 3Q09, which had been at U.S. $68 million.
Although aimed at reducing costs, Vale increased its competitive advantage through various activities undertaken during the period, among them low cost of production of world-class assets, disciplined allocation of resources and leveraging of a highly qualified and motivated labor force and entrepreneurial spirit among employees. All employees were invited to assist the company with creative and innovative ideas that would help to reduce the expenses of the company and increase the efficiency of internal processes.
"Despite what the numbers show, we implemented many measures to face the crisis. We are fostering innovation, we asked our employees for suggestions on how to improve the business, and we received 7,000 suggestions, which we will evaluate, and we are looking to incorporate these suggestions (...) We are working hard to increase logistics capabilities, with the aim of a more efficient long-term structure," stated Barbosa.
Global Demand Gaining Momentum
Vale expects the growth in global industrial production will continue over the coming quarters, reflecting the scenario of strong demand and inventory dynamics, thereby continuing to pressure demand for minerals and metals. "There has been record demand in China for iron ore; last year we sold a record amount of 140 million tons. Through pragmatic and objective marketing policies, we were able to reach a record," said Barbosa.
"Global demand is gaining momentum; we are seeing a clear recovery path (mainly with emerging markets) and we are clearly seeing recovery on the ground. This is a positive indication and we are enhancing our prospective of future sales," said Barbosa.
Past experience shows that supply adjustment is not a short-term phenomenon, and usually extends for almost a year. Sales are growing, although at a slower rate, and supplies continue to fall, which requires increased production to normalize the relationship between inventories and sales. "In the global iron ore market we are seeing an excess of demand and severe supply constraints. The market is demanding more than we can ship," Barbosa explained.
"Europe is recovering faster than expected, Japan is at pre-crisis levels, and China has more demand than it did before the crisis," Executive Director for Ferrous Minerals, Jose Carlos Martins, added.
Commenting on the market situation, Martins said that Vale is much better prepared to work in any scenario and noted that clients will have to accept a different price reality. "If our customers want to keep the benchmark, they will have to accept something: first, closer to the level of spot today and secondly, some changes that keep some kind of flexibility on the pricing system. Today the spot is a bigger market than the benchmark. We may stick to the benchmark system but we need to have some kind of flexibility. We need to define a system that could have some flexibility to cope with these variations," he said, referring to the difference between the spot and benchmark prices.
New Projects and Delivery Expected in 2010
This year Vale will start several important projects. One is the Bayovar Project, a greenfield project and one of the largest phosphate initiatives in Peru. Bayovar is one of world's most cost efficient phosphate rock mines and involves an open-pit mine in the district of Sechura, Province of Piura, with nominal production capacity of 3.9 Mtpy of concentrate phosphoric and a maritime terminal. Completion is planned for the second half of 2010. In the first half of this year, the Tres Valles Project, in the Coquimbo region of Chile, will also be delivered. It will have an estimated nominal production capacity of 18,000 metric tpy of copper cathode.
Most recently, Vale acquired potash assets in the provinces of Mendonza and Neuquen (Projeto Potassio Rio Colorado) in Argentina. The project includes the development of a mine with initial rated capacity of 2.4 million metric tons of potassium (KCl), with potential expansion to 4.35 million metric tons, construction of a 350 km railway branch line, port installation and power plant. This project is subject to Board approval and start-up is estimated for the second half of 2013.
Fertilizers: A New Global Leadership Goal for Vale
Vale has 18 years of successful experience in potash mining and is one of the leading providers of logistics for the fertilizer industry in Brazil. The company is negotiating the acquisition of fertilizer assets in Brazil, aiming to create a solid asset base to achieve a global leadership position in the coming years.
The company already has an attractive pipeline of projects in South America, North America and Africa for potash and phosphate rock, which gives Vale a strong position in terms of cost, quality and geographic positioning. Last month, Vale acquired the fertilizer assets of Bunge Brazil and Fosfertil, a very strategic move for the company. It aims to be one of the largest producers of fertilizer nutrients in the world by 2017.
"This is a major investment considering what we have in our pipeline and what we are paying for the assets. But the rationale for allocating money to this business is virtually the same that we had to invest in other mineral segments, as the drivers are very similar," Barbosa said.
For more information, please access Vale's Press Office (http://www.vale.com/saladeimprensa/en/home/imprensa.asp).
To watch the webcast of this press conference and previous events, please go to www.vale.com.
About Vale
Vale is the world's second largest diversified mining company in market capitalization. Present in more than 30 countries, Vale is the world's largest producer of iron ore and pellets, key raw materials for the steel industry, and one of the largest producers of nickel, which is used to produce stainless steel, batteries, special alloys, chemicals and other products. The company also produces copper, manganese, ferroalloys, bauxite, alumina, aluminum and coal, among other raw materials important to the global industrial sector and present in people's daily lives. For more information, please access www.vale.com/pressoffice.
SOURCE Vale
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