Vale’s results better than they appear: Prof – by Carol Mulligan (Sudbury Star – March 12, 2013)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

Vale SA may have had its worst fourth-quarter in a decade, losing $2.65 billion from October to December last year, but a Sudbury economist says the company still made $5.5 billion in 2012, a healthy profit.

That’s despite the fact Vale earnings fell from $4.67 billion in the fourth quarter of 2011, and that this was the company’s first quarterly loss since the third quarter of 2002.

Jean-Charles Cachon teaches in the faculty of management at Laurentian University and is chair of the Small Business Research Group at the university. Cachon said he found it strange that a company “that’s flush with money would report a loss. So, I wanted to go to the bottom of things, and I did.”

He read Vale’s fourth-quarter report thoroughly and determined its results are not all doom and gloom. When a company’s operations aren’t as profitable as expected, it’s allowed to take impairment charges. Those charges don’t “cost you a penny,” said Cachon, but they allowed Vale to write off about $5.6 billion.

It’s a complicated formula for many to understand, but the bottom line is Vale still made billions in 2012 and was still able to give “a hefty dividend to their shareholders,” said Cachon.

When asked if Vale was still doing well, Cachon said, “absolutely. All being said, it was not a stellar year, but still a good one.”

Its $5.5 billion made on $46.4 billion in sales is a profit of almost 12%, said the economist.

“Not many businesses in Sudbury make that,” he said.

Vale cut expenses in many areas worldwide, while watching if the trend to lower iron ore prices continues.

Still, the company has what Cachon called “a very ambitious plan” to invest $17 billion in its worldwide operations.

“Don’t forget,” said Cachon, “this is a company that has $132 billion in assets — it’s a huge thing — and out of that, only $30 billion in debt, so they have almost no debt.”

For the rest of this article, please go to the Sudbury Star website: http://www.thesudburystar.com/2013/03/12/vales-results-better-than-they-appear-prof