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Vale SA reports 78.2% earnings slump amid weak demand

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2023-07-28

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Brazilian iron ore giant, miner Vale SA, has confirmed the negative impact of weak demand and pricing in the three months to June with a 78.2% slump in net earnings for the period.

Vale, one of the world's largest iron ore miners after Rio Tinto and BHP, posted net income of $US892 million, while analysts had forecast a profit of $US2.21 billion. That was less than 50% of the $US1.837 billion net reported for the March quarter.

The latest profit of $US892 million was a fraction of the $US4.093 billion reported for the June 2022 quarter.

Directors blamed lower iron ore and nickel prices for the fall, as well as weaker nickel production.

The company reported revenue of $US8.44 billion for the three months to June, down 22.7% on a year ago and well under market forecasts of $US8.79 billion.

Adjusted EBITDA of $US3.69 billion was also weaker than a year ago's $US6.55 billion and well below market forecasts of $US4.49 billion.

The Brazilian miner produced 66.8 million tons (Mt) of iron ore in 1Q23, up nearly 6% on a year earlier but under forecasts of 67.7 million tonnes.

(That put it well behind Rio Tinto).

Copper production jumped more than 18% to 67,000 tonnes in the quarter, but nickel output fell 10.5% to 41,000 tonnes for the three months.

Although Vale management reaffirmed its FY23 production guidance, analysts seemed to be concerned by the negatively offsetting impacts of weaker iron ore prices with the Chinese economic recovery having faded badly.

The company repurchased $US763 million worth of shares in the quarter and paid $US1.80 billion in dividends, bringing total capital returned to shareholders in the quarter to $US2.56 billion, or 4.3% of the company's market value at June 30.

Vale also said on Thursday it reached two separate agreements to sell a 13% stake in its nickel and copper business for $US3.4 billion.

Under the deal, a joint venture formed by Saudi Arabian Mining Co (Ma'aden) and the country's Public Investment Fund (PIF) will own 10% of Vale's base metal unit, while investment firm Engine No. 1 will own 3%.

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