Seeking Alpha

Vale's Q4 loss more than doubles but core results solid, shares +0.6% AH

  • Vale (VALE) says its Q4 net loss more than doubled Y/Y, as a massive tax settlement and impairment charges undercut a relatively strong performance by its core operations.
  • Vale's net loss of $6.45B was more than double the $2.65B loss posted in the year-ago quarter, as it had agreed in November to pay 22.3B reais ($9.36B) to the Brazilian government to settle a dispute over back taxes it allegedly owed for profits on its overseas operations; the company also booked impairment charges of $2.3B, mainly related to the suspended Rio Colorado potash project in Argentina.
  • However, Q4 adjusted EBITDA rose 50% Y/Y to $6.64B, and sales rose 8.5% to $13.61B as Vale's average realized price for iron ore rose 13% to $112.97/metric ton and the price received for iron-ore pellets rose 16% to $150.17.
  • Shares +0.6% AH.
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Comments (6)
  • Berliner
    , contributor
    Comments (47) | Send Message
     
    There is no indication the 6% dividend is at risk. I doubt panic selling is going to play any long term role in pricing. I bought more on the latest dip, and can see a conservative target price of 17 not out of the question in the coming months. Any guess what this will be worth in 5 years? All the best.
    26 Feb 2014, 11:21 PM Reply Like
  • Brian Sanders
    , contributor
    Comments (1015) | Send Message
     
    I hate to beat a dead horse but I've been a buyer below $14 a share. They have a strong balance sheet and the dividend is secure. Interestingly enough, a very successful money manager I know took a position between $13-14, and says the stock has the potential to reach $20-25 within the next couple years. Some simple math, 14 to 20 is a 21% annualized return YoY...many investors would be content with that. If iron prices are maintained, their expansion projects successful, and they begin to cut expenses? Well then we may see a share price similar to 2011...perhaps high 20s. But hey, everyone hates the industry despite the valuations. Time will tell.
    27 Feb 2014, 12:37 AM Reply Like
  • huxzilla
    , contributor
    Comment (1) | Send Message
     
    Really like $VALE, I wouldn't worry about the near term price, as I am sure it will swing up and down, but this should be a great play 2H14 and beyond.

     

    Pretty impressive CAPEX reduction, in their last investor presentation they were shooting for $14.6B (not including R&D) and came in at $14.2B (coincidentally NI was $548M).

     

    In addition, I would suspect that we won't see the impairment issues of the past two years (smart management team taking their losses in lumps). With the impairment losses in 2012 and 2013, DTA's were created, thereby reducing income tax in the future.

     

    The Brazil tax issue will cost them (crude calculation) around $475M a year going forward. Thus, if they minimize impairments (which is up to management's discretion in the first place), marginally increase revenue, and marginally reduce costs, they will be in a very good place.

     

    I don't see near term the stock price doing much of anything. Based on the negative and somewhat misleading headlines, your average joe investor will not be buying stock; however, now is the time for a savvy investor to take advantage of lows, and net themselves some gains in rather quick fashion.

     

    *I am not a CFA, and do own stock in $VALE.
    27 Feb 2014, 02:18 AM Reply Like
  • thefuture007
    , contributor
    Comments (33) | Send Message
     
    Howdy no position in Vale no will I initiate one next 72 hours.I did go over the a after hours numbers/Report and did some technical checking.Upon seeing some postings here this morning did a news search,here from yesterday's Buisness recorder site,gives serious numbers,facts as to WHY a Drop in iron ore in china is taking place as we speak with a mention of Vale,BHP,RTP.Link.
    http://bit.ly/1eopRdm

     

    It shows iron ore is heading down and why,seriously down not really, but $10-15/TN ,which given the tonnage needed to be more/profitable makes a difference in the Earnings,Bottomline,Stock prices for Valuation purposes,should one choose to do so. a Few excerpts shows,"Tuesday, 25 February 2014 13:10
    Posted by Shoaib-ur-Rehman Siddiqui

     

    1] SINGAPORE: Iron ore sagged to its lowest level since July, hammered by sliding steel prices in top consumer China where mills are either seeking deeper discounts on spot ore cargoes or staying away from the market in anticipation of further price declines.

     

    2] Spot iron ore, China's top import commodity by volume, has fallen nearly 11 percent this year, potentially cutting profit margins of global miners Vale, Rio Tinto and BHP Billiton , which consider the raw material their biggest business.

     

    3] Iron ore for immediate delivery to China <.IO62-CNI=SI> slid 2 percent to $119.90 a tonne on Monday, its lowest since July 2, according to data provider Steel Index.

     

    Weaker steel prices, lending curbs, plentiful supply of iron ore in the spot market and huge stockpiles at home have combined to drag down prices, said an iron ore trader in China's eastern Shandong province who sees the price falling further to either $115 or $110

     

    4] Vale sold a cargo of 64.22-percent grade Brazilian Carajas iron ore fines at $127 a tonne at a tender on Monday, down more than $4 from the sale of a similar grade last week, traders said.

     

    Ok if your still reading great,to me the article points they have an oversupply of steel factories,hmmm so why if that's the case is Iron Ore then going down.?

     

    A check on Iron ore pricing,long Term,shows it's at a median of High/low past
    http://bit.ly/NJkuEs
    Great site for variety of Commodities/overall but not too technical..etc.

     

    So the Idea that VALE currently is BUY.? I'll respectfully disagree,the 200,100 currently @ $13.75, w/50DMA just overhead,with two previous bottoms for possible support/ of those @$13.Trendline est..3 months from now.With the Falling Trendline above,is it on the "C" move now into that trend line..my guess YES,with the Facts I put forth in the opening, it makes sense,Falling Iron ore prices = Downward Trend/stock price to some point.So if you BUY now,to me you "might" make money long-term but if you wait 1 month or so,see where the Technicals and IRON ORE Settles,you'd get a Better ROI of your own Money.

     

    I'll add this, UUP and Mexico OIL Exploration and BDI/Dry Bulk index.

     

    BDI great site here.
    http://bit.ly/1bx1aW9
    Currently FLAT/Down a little,though has rebounded from lows.

     

    The UUP,quick check on that show it goes up some,Vale goes down some,is the Currency market technical's positive/Negative for VALE when your investing there?

     

    Currently to me the Dollar,though a little weak,is rebounding where as EUR/possible interest rate cuts,dropped a lot yesterday,see next weeks news on that.But will that Spur more Demand as the G-20 seeks @ 2% Inflation,amid unrest/high unemployment in..whew.. Ukraine,Turkey,Syria,A... alone ITALY/Greece.?

     

    Then as a Kicker, VALE ,needs to payoff the Brazilian government.You Crunch those numbers and give a Timeline for payback...but figure in @10% less /TN Iron ore shipped,pls...for foreseeable Future,3-6 months.?

     

    Have a great day,thanks for your time and I'm sure a few comments.Happy Trails
    27 Feb 2014, 04:40 AM Reply Like
  • Berliner
    , contributor
    Comments (47) | Send Message
     
    I thought VALE took the hit and paid the government in a lump sum last quarter...a discounted amount through a settlement. No?
    8 Mar 2014, 09:40 AM Reply Like
  • thefuture007
    , contributor
    Comments (33) | Send Message
     
    Follow on to my lower price Comment,from today 3/11/2014.I am not sure how that " Settlement" will be paid back,I'm thinking installments over some period of time,thus that affects things with Vale.As I mentioned,waitign 30 days or so to see where IRON ORE prices went ala china/some global weakness,which then affects Vale bottomline,BHP..etc and payback of said DEBT.

     

    Off of Seeking alpha 7:20am," SPY" notes.

     

    Futures flat along with most global markets
    Stock index futures are flat, taking a cue from most major global markets which are little-changed. The 10-year Treasury yield is up one basis point at 2.78% and gold is up 0.5% to $1,348 per ounce.

     

    Addressing the slowdown in China and Monday's troubling plunge in iron ore prices was BHP's iron ore chief Jimmy Wilson: "You have this credit issue in China, you have reasonably high iron ore stocks, traders have a view that prices are going to go down, so they do everything they can to hold back ... That’s why these fluctuations tend to amplify.”
    If you Click on the Troubling plunge you find this....

     

    Iron ore plunge hits Brazil
    Mar 10 2014, 10:45 ET
    The 8.3% dive in the price of iron ore to $104.70 per ton is the 2nd largest one-day decline on record, and came following weekend data showing an 18.1% Y/Y slump in Chinese exports in February (a gain of 7.5% was expected). While miners like BHP and RIO remain optimistic about supply/demand dynamics (though dour on price prospects), Goldman - picking one analyst team - sees the market moving into surplus in H2 and prices falling below $100 per ton.
    The Shanghai Composite fell 2.9% overnight and Brazil's Bovespa is down 2% in the early-going. Australia (EWA) declined 0.9% and the aussie (FXA) is off 0.6% to $0.9017.
    The steelmaking ingredient is off 22% YTD and at its lowest price since October 2012.
    In the meantime, the rumors are flying, including speculation a mill in China's Shanxi province defaulted on Friday and shut five to six furnaces. There's also chatter about banks looking to call in 20% of loans to private steel companies

     

    That to me says,Wait to BUY,$13 maynot be near-term bottom,my "guess" between $10.50 - $12.Say what you want but that calling in 20% of loans part says to me others may Default/or not BUY too much iron ore to stockpile vs Cash to spend.Add in a still unresolved Ukraine/Russia,and some other areas of Global weakness vs strong growth as we've seen recently.And until Vale can give "FIRM" Guidance on their own monetary DEBT payment schedule,including this newer $104-$100 Iron ore price scenario,do you BUY now or Wait.?
    11 Mar 2014, 07:57 AM Reply Like
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