Analysis Of Vale S. A. Vale
Vale S.A.
Vale reported pretty mediocre financial numbers on Thursday, 22nd October for its third quarter 2015 performance. Its gross operating revenues for the three months ended 30th Sep, 2015 were down 6.6 % to 6.6 billion from 7 billion in the second quarter. The lower realized prices of the various commodities sold by the company remained the reason behind this erosion in operating revenue. The contribution of lower prices of these commodities in depressing the revenues was $ 281 million of iron ore fines, $ 136 million of nickel, $ 98 million of copper and $ 74 million of pellets. Higher volumes of iron ore fines had a positive effect of $ 167 million on the company’s revenue.
53.6 % of the total gross revenue came from Asia out of which China represents more than 70 %. Similarly, 25.7 % of the revenue came from sales to the Americas and Brazil represents more than 70 % of that. Europe and Middle East contributed 16.8 % and 3.4 % of the gross revenue. Among the segments, the Ferrous …show more content…
A record production of iron ore with improved quality was one of them. Further, the increased production has also led to a lower cost to produce the high quality ore which sells at premium. The weak Real has also helped to keep the costs down but the same has increased the cost of serving debt. Therefore, Vale has worked well with internal operating matters.
Now, Vale investors must be hoping for an improvement in commodity prices especially iron ore. However, iron ore is continuing the downtrend due to oversupply and hitting record production is only going to make things worse for companies like Vale. There is no indication of an increase in demand from China even as the government is trying to stimulate growth by rate cuts. Hence, although Vale is still in a relatively healthy state, it is not operating in a very kind environment, and so it is not a favourite for a short term
Vale reported pretty mediocre financial numbers on Thursday, 22nd October for its third quarter 2015 performance. Its gross operating revenues for the three months ended 30th Sep, 2015 were down 6.6 % to 6.6 billion from 7 billion in the second quarter. The lower realized prices of the various commodities sold by the company remained the reason behind this erosion in operating revenue. The contribution of lower prices of these commodities in depressing the revenues was $ 281 million of iron ore fines, $ 136 million of nickel, $ 98 million of copper and $ 74 million of pellets. Higher volumes of iron ore fines had a positive effect of $ 167 million on the company’s revenue.
53.6 % of the total gross revenue came from Asia out of which China represents more than 70 %. Similarly, 25.7 % of the revenue came from sales to the Americas and Brazil represents more than 70 % of that. Europe and Middle East contributed 16.8 % and 3.4 % of the gross revenue. Among the segments, the Ferrous …show more content…
A record production of iron ore with improved quality was one of them. Further, the increased production has also led to a lower cost to produce the high quality ore which sells at premium. The weak Real has also helped to keep the costs down but the same has increased the cost of serving debt. Therefore, Vale has worked well with internal operating matters.
Now, Vale investors must be hoping for an improvement in commodity prices especially iron ore. However, iron ore is continuing the downtrend due to oversupply and hitting record production is only going to make things worse for companies like Vale. There is no indication of an increase in demand from China even as the government is trying to stimulate growth by rate cuts. Hence, although Vale is still in a relatively healthy state, it is not operating in a very kind environment, and so it is not a favourite for a short term