Brazil’s Vale – one of the largest mining companies in the world – reported a loss of $694m in the 4th quarter. This is a reversal of its $2.4b profit in the previous period, due primarily to the drop in iron ore and other nonrecurring effects.
Analysts predicted a profit around $1.95 billion.
It made $2.4 billion in profit during the same period the year before.
Vale’s fourth-quarter net revenue was $10.12bn, while adjusted EBITDA came in at $3.79bn (down by 41% compared to last year).
Iron ore prices have fallen due to several factors.
Vale has been under pressure due to a fall in the price of commodities such as iron ore as a result of increased supply by competing producers and loss of demand on main markets.
Vale reported a $1.4billion impairment loss related its operations within the Thompson Nickel Belt, and $540mil impairment for the Voisey’s Bay Mine Extension.
The company’s net income for the third quarter was $872 millions, a decline of 64% from the previous year.
What is the reason for Vale’s stock increase today?
Vale’s stock has risen as a direct result of Vale’s strategic initiatives aimed at increasing shareholder confidence in spite of its challenging financial performance.
Vale announced that it would pay a dividend per share of up to 2.14 reals and announce a buyback plan for 120 million of its shares. This represents 3% of the outstanding stock. The program will be implemented over a period of 18 months.
Stocks gained momentum Thursday after the moves.
In a conference call held with investors on Thursday, this firm showed its confidence that it will generate a substantial cash flow by 2025.
Vale’s focus on a disciplined approach to capital allocation that balances capital expense optimization with accretive and profitable growth while delivering excellent returns for shareholders boosts investor trust.
The minutes from the meeting show that the company made significant progress with its strategic plans, such as the acquisition of 15% of Minas-Rio, and the beginning of construction of a concentrator plant in Sohar in Oman. This is scheduled to become operational by 2027.
Vale reported that its iron ore production had reached 328 millions tons. This is the highest output in 2018 and exceeds initial expectations.
Earnings and reaction of Brazilians in the broadest sense
The focus is on the wider implications for the Brazilian Market, particularly after other major companies’ results have been announced.
Gerdau reported a fourth quarter net profit of R$666m, a decrease of 9% compared to the same period the year before and below the market expectation.
Banco do Brasil, on the other hand, reported net profits of R$9.5bn, an increase of only 1.5% over last year, in line with analyst expectations.
Investors are awaiting the start of trading to see how they will react.
There is uncertainty on the commodities and mining markets, which has created a difficult economic environment.
The post Vale’s shares still strong despite Q4 losses: What is driving investor confidence? This post Vale shares hold strong despite Q4 loss: what’s driving investor optimism?
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