Earnings Cheat Sheet: Hotter than Steel, VALE Profit Up 250%

Vale S.A. (VALE) is a Brazilian based metals and mining company.  The company produces commodities such as iron ore, nickel, copper, aluminum, and thermal coal. VALE also produces precious metals such as gold and silver.  Last month, VALE also announced that it has raised its stake in its fertilizer unit to 78.9%.  After Wednesday’s closing bell, VALE announced record third quarter earnings.

Earnings: Third quarter profits were the highest in company history, rising more than 250% to $6 billion ($1.13 per share).  This was accredited to increased demand for its minerals and metals.  Iron ore prices have also increased from prior year.

Revenue: Third quarter operating revenue more than doubled to $14.5 billion, compared to $6.9 billion in the same year ago period.

Actual versus Wall Street Expectations: For the first time this year, VALE beat analyst’s estimates.  Earnings of $1.13 per share beat the average estimate of $1.03 per share.

Notable Stats: This year, VALE changed to a different iron pricing system.  Previously, iron prices were negotiated on an annual basis.  The new system is a quarterly pricing system.  This allows VALE to pass rising commodity prices onto clients quicker.

Did You Hear That? The company released the following statement, ” These are the best results that VALE has ever reported in its history, marked by record operation revenues, net profit, and cash generation.”

Commentary: VALE is positioning itself to take advantage of rising commodity prices and emerging markets.  VALE is expanding operations in Africa, focusing on the continents copper supplies.  The company is projecting a need of $26 to $28 billion over the next two years to complete existing projects around the world.  The Street is enjoying the earnings release as shares rise over 1.5% in after market trading.

Disclosure:  Long position held in VALE.