Vale’s second-quarter buoyed by iron ore prices, hit by provisions

Vale presented mixed quarterly figures on Wednesday, helped by higher metal prices and strong sales but held back by rising freight costs and provisions related to the company’s coal business.

In a securities filing, Vale reported a second-quarter net income of $7.586 billion, up over 600% from the same period a year ago, but slightly below the Refinitiv consensus estimate of $7.67 billion.

Earnings before interest, taxes, depreciation and amortization, adjusted for some one-off factors, came in at $11 billion. That was up roughly 32% from the same period last year, which was heavily affected by the covid-19 pandemic, but below the Refinitiv estimate of $11.8 billion.

Related Article: Vale output disappoints in fresh blow to tight iron market

The company benefited from significant demand and increasing prices for iron ore, its main product. Vale said it realized $182.80 per tonne of iron ore fines in the second quarter, up from $88.90 in the same period last year. The strengthening of the Brazilian real currency also had a positive impact.

But Vales reported a writedown – the exact value of which was not disclosed – on its coal assets, resulting from a “lower long-term price assumption for metallurgical and thermal coal.” It also recorded $560 million in provisions related to increased resettlement costs from a deadly 2015 dam burst.

Freight expenses also hit the bottom line. Maritime freight costs came in at $17.70 per tonne in the second quarter, a $1.90 increase from the first quarter, Vale said.

Vale’s stock was trading up 3% at Wednesday’s close on the NYSE. The company has a $117 billion market capitalization.

(By Gram Slattery and Roberto Samora; Editing by Jacqueline Wong and Leslie Adler)

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