Vale SA, the world’s largest iron- ore producer, posted second-quarter profit that rose less than analysts estimated after writing down the value of two projects and as prices for the steel ingredient slumped.
Net income climbed to $1.43 billion, or 28 cents a share, from $424 million, or 8 cents a share, a year earlier, Vale said today in a statement. The Rio de Janeiro-based company was expected to post per-share profit of 42 cents, excluding some items, the average of 13 estimates compiled by Bloomberg. Adjusted earnings before interest, tax, depreciation, and amortization, or Ebitda, fell to $4.1 billion, in line with the average estimate of 10 analysts.
Iron-ore prices entered a bear market in March and last month dropped to the lowest since September 2012 as Vale, Rio Tinto Group and BHP Billiton Ltd., the largest producers, flooded the market with additional output. Benchmark prices have stayed below $110 per ton, a level that Vale has indicated as sustainable, since April 28 as gains in supply outstrip demand.
“Vale’s strong iron-ore production could only partially offset the impact of lower prices,” Sanford C. Bernstein analysts led by Paul Gait said in a note to clients today. “Cash flows from operating activities were positively impacted by the use of tax credits.”
Vale gained 1.1 percent to 29.05 reais in Sao Paulo at 10:40 a.m. The stock’s 11 percent drop this year compares with a 1.8 percent increase by BHP’s Sydney-traded shares.
Net sales declined 7.1 percent to $9.9 billion in the quarter, beating the $9.8 billion average estimate of eight analysts compiled by Bloomberg. The company invested $5.1 billion in the first half of the year, 34 percent of the $14.8 billion budged for 2014, as project execution costs decreased.
Vale wrote down by $774 million the value of its Simandou project in Guinea and its Integra coal mine in Australia, it said in today’s statement. The miner is advancing in negotiations with the government of Guinea to receive compensation for Vale’s investments in the project.
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