Vale SA, the world’s largest iron- ore producer, said fourth-quarter profit almost quadrupled, beating analysts’ estimates, because of surging prices for the raw material used to make steel.
Net income climbed to $5.92 billion, or $1.12 a share, from $1.52 billion, or 28 cents, a year earlier, Rio de Janeiro-based Vale said late yesterday in a statement. Vale was expected to post per-share profit of $1.01 on an adjusted basis, according to the average estimate of 11 analysts in a Bloomberg survey.
The company plans to invest $24 billion this year, more than rivals BHP Billiton Ltd. and Rio Tinto Group, to expand its output capacity to 522 million metric tons of iron ore by 2015, enough to supply about 10 months of China’s demand. Iron-ore prices rose to the highest since at least 2008 last week on rising Chinese consumption and speculation that India, the world’s third-largest exporter, will further curtail supplies.
“Vale will continue to post impressive financial figures as commodity prices, particularly for iron ore, have risen dramatically,” Jonathan Brandt, an equity analyst at HSBC Holdings Plc in New York, said today in a note to clients. The company should have a “robust” year as it brings on additional capacity through new projects, he said.
Revenue Doubling
Revenue more than doubled to $15.2 billion from $6.54 billion in the fourth quarter. Vale sold its iron ore for an average of about $121 a ton, up from about $56 a year earlier.
The price of ore with 62 percent iron content delivered to China fell 0.4 percent to $184.10 a metric ton yesterday, according to Steel Business Briefing Commodities Research.
Vale shipped 81.9 million tons of iron ore and pellets in the period, up 17 percent from a year earlier, the company said yesterday in the filing. Quarterly profit fell short of a previous record of $6.04 billion in last year’s third quarter.
“The performance of iron-ore and pellet prices over the year shows the imbalance between global demand and supply,” according to the company. The imbalance “was the main reason for the significant revenue increase.”
Annual iron-ore production reached 307.8 million tons last year, a record for the miner and 29 percent higher than in 2009, Vale said. The company expects “a robust expansion” of the world economy this year, “supportive of a strong demand for minerals and metals,” it said.
$80 Billion
BHP plans to spend $80 billion by the end of the 2015 financial year to expand and develop its mines, including coking coal and iron-ore projects, of which $15 billion will be invested during 2011. Rio Tinto said Feb. 10 that it expects to invest about $13 billion during this year.
Melbourne-based BHP is the world’s largest mining company and Rio Tinto is the third largest by market value.
“We are doubling the capacity of the company and probably the demand for this expansion will come from Asia,” Guilherme Cavalcanti, Vale’s chief financial officer, said in an interview Dec. 8. “We are very bullish on the region.”
Vale said its nickel output more than doubled from a year earlier to 65,000 metric tons, while copper production climbed to 76,000 tons from 32,000 tons.