Vale S.A. (VALE) recently announced that the company’s new giant bulk carriers will be manufactured in China and South Korea as the domestic market is already working at full capacity. The company has booked 19 Valemaxes and already received delivery of one carrier.
The Brazilian company intends to strengthen its Logistics Services business by reducing the freight costs between Brazil and China, the largest iron ore importer. Moreover, the company's shipping strategy will improvise its competitiveness against rival companies Rio Tinto (RIO) and BHP Billiton (BHP).
Vale S.A is the world's largest producer and exporter of iron ore and pellets. The company primarily engages in the mining and production of ferrous and non-ferrous metals, and aluminum-related operations, primarily in Brazil.
The company delivered satisfactory performance during the first quarter of 2011; reporting earnings per ADS of $1.29 compared with only 30 cents in the year-ago quarter. Results also surpassed the Zacks Consensus Estimate of $1.16.
The outperformance can be ascribed chiefly to worldwide industrial expansion, rising demand for metals and minerals and a high price realization influencing margins.
Operating revenue in the quarter grew 97.8% year over year but registered a sequential decline of 10.9%, primarily due to lower sales volume, which was partially offset by higher product prices.
The company's Logistics Services business provides its customers with various forms of transportation and related support services, such as warehouse, port, and terminal services. The segment accounted for 2.4% of the quarter’s total revenue compared with 2.2% in the previous quarter.
We currently maintain a Neutral recommendation on the stock.
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