Brazilian mining giant, Vale SA (NYSE:VALE), became the latest casualty of China's economic slowdown on Wednesday as its second-quarter profit fell almost 60% driven mainly by a weaker demand for iron ore coming from the Asian country.
Earnings for the world's largest iron ore producer in the quarter reached $2.7 billion, down 59% from $6.5 billion in the same period last year, its lowest level in more than two years and well below analysts’ average estimate of around $3 billion.
Profit, in turn, sank 30% from the first quarter, reported the company.
Vale also quoted the sharp depreciation of the Brazilian real against the US dollar as one of the causes for its negative results. The weakening of the local currency, said the miner, has raised the cost of servicing its foreign-denominated debt.
The Rio de Janeiro-based miner posted $1.69 billion in losses from foreign exchange and monetary fluctuations for the quarter, compared to a $578 million gain in 2011.
Brazil’s real depreciated about 11% in the past three months, severely affected by both a gloomy domestic and global economic outlook and interest rate cuts in the South American country.
The Q2 results came only two days after CFO Tito Martins announced he was leaving the company to join Brazilian industrial conglomerate Votorantim, marking the fifth top-level substitution in the past eight months at Vale.
Investors follow the Brazilian miner's quarterly figures more thoroughly than year-on-year reports, as the former helps them visualize operational and sales performance trends.
Vale’s shares were falling 2.15% at 9:50 ET.