On February 15, Vale S.A (VALE) released its financial results for the fourth quarter and financial 2011. The company’s net earnings in the quarter were 90 cents per ADR, on a fully diluted basis, down drastically from $1.12 per ADR in the year-ago quarter, missing the Zacks Consensus Estimate of $1.08 per ADR. The earnings suffered a negative effect of currency depreciation of the Brazilian real, against the US dollars.
For FY11, Vale’s diluted earnings per share increased 34.2% to $4.36compared with diluted earnings per share of $3.25in the year-ago comparable period.
Revenue
Gross Operating revenue inched down 3% year over year to $14,755 million and registered a sequential decline of 11.9%. The recorded revenue however surpassed the Zacks Revenue Estimate of $13,783 million.
Of the total revenue, sales of ferrous minerals accounted for 72.0%; coal sales 2.5%; base metals 16.0%; fertilizer nutrients 5.8%; logistics services 2.8%; and the rest 0.9% came from miscellaneous sources.
Sales volume of iron ore shipments amounted to 69.9 million metric tons in the reported quarter. Sales volume was in line with the volume recorded a year ago and up 4.3% sequentially. Geographically, 18.6% of revenue was generated from South America, 55.2% from Asia, 5.1% from North America, 17.4% from Europe, 2.0% from Middle East and 1.6% from the Rest of the World.
Conversely, for FY11, the company reported total revenue of $60,389 million, up 29.9% y/y, primarily due to the effect of higher prices of metals and minerals.
Margins
In the fourth quarter, cost of goods sold totaled $6,025 million, down slightly from $6,040 million in the year-ago quarter. SG&A and R&D expenses were $827 million and $529 million, up from $647 million and $301 million in the year-ago quarter.
Operating income measured by adjusted EBIT was recorded at $6,023 million, compared with $7,167 million in the prior-year comparable quarter. Operating margin, as measured by adjusted EBIT margin, was 41.7% in 4Q11, down compared with 51.2% in the previous year quarter. Adjusted EBITDA was $7,396 million in the quarter, down compared with $8,869 million in the previous year quarter.
For FY11, the company’s operating income measured by adjusted EBIT came in at $ 28,599 million (Excluding the non-recurring gain of $ 1,513 million from the sale of aluminum assets in 1Q11) compared with $21,695 million a year ago. Adjusted EBITDA was $ 33,759 million (Excluding the non-recurring gain of $ 1,513 million from the sale of aluminum assets in 1Q11) in FY11 compared with $26,116 million in the previous year.
Balance Sheet/Cash Flow
Exiting the fourth quarter of 2011, Vale’s cash and cash equivalents were down 53.4% year over year and 53.3% sequentially to $3,531 million. Long-term debt decreased sequentially to $214 million from $479 million in the previous quarter.
Net cash provided by operating activities was $7,512 million, down from $7,708 million in the year-ago comparable quarter.
Brazil-based Vale S.A. is one of the world’s largest producers and exporters of iron ore and pellets. The company keeps improvising its competitiveness against rival companies like Rio Tinto plc (RIO) and BHP Billiton Ltd (BHP).
We currently maintain a long-term Neutral recommendation on the stock. Vale has a Zacks # 3 Rank, which translates into a short-term Hold rating (1-3 months).
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