Vale Delivering More Profits on Reduced Costs: Corporate Brazil – by Juan Pablo Spinetto (Business Week – November 04, 2013)

Vale SA (VALE5) is poised to deliver its first quarterly profit increase in more than two years after costs declined and iron-ore prices beat analysts’ forecasts.

The world’s largest iron-ore producer on Nov. 6 will post third-quarter net income of $2.8 billion, data (VALE:US) compiled by Bloomberg show. That would be 70 percent more than a year earlier and the first increase since the second quarter of 2011. Vale’s 96 percent estimated increase in year-on-year earnings per share is the most among 14 global peers, according to Bloomberg Industries.

Vale, a supplier of iron-ore for steelmakers from ArcelorMittal to China Steel Corp., cut $1.65 billion of costs in the first half and is benefiting from rising demand from steel mills in Asia. Iron-ore prices averaged $132.5 a ton in the third quarter, 18 percent more than last year and above the $121 a ton forecast expected by analysts when 2013 started.

“There are better realized prices and an improved performance in terms of costs,” Goldman Sachs Group Inc. analyst Marcelo Aguiar said by telephone from Sao Paulo. “We expect an increase in the production of the company’s three main businesses: iron-ore, nickel and copper.”

Shares in Vale, the world’s third-largest mining company, have lost 18 percent in Sao Paulo trading this year before today, underperforming its biggest rivals BHP Billiton Ltd. and Rio Tinto Group. While Melbourne-based BHP gained 1.2 percent, Rio Tinto lost 9.3 percent in London.

Vale advanced 2.3 percent to 34.22 reais in Sao Paulo today to close at its highest level since March 12.

Vale, based in Rio de Janeiro, probably will report that third-quarter earnings per share excluding extraordinary items increased to 61.8 cents from 31.5 cents a year earlier, according to the average (VALE:US) estimate of 13 analysts in a Bloomberg survey. Vale will release earnings after the close of regular trading hours.

For the full year, Vale’s net income will total $11 billion, according to the average of 15 analyst estimates compiled by Bloomberg. That would be double last year’s profit. Rio Tinto (RIO) is forecast to post $7.51 billion net income in 2013 while BHP’s fiscal-year profit is estimated at $14.4 billion, according to the analysts.

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