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Vale’s Q4 Results: Why Analysts’ Sentiments Are Trending Down

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Vale’s fourth-quarter results

Vale (VALE) released its fourth-quarter and 2018 results on March 27. In 2018, it reported a net profit of $6.86 billion and EPS of $1.32. Its bottom line was a slight miss, as analysts had been expecting EPS of $1.38.

Vale’s revenue for 2018 came in at $36.57 billion, an increase of 7.7% YoY (year-over-year). The contribution of each of Vale’s major commodity groups to its revenue was as follows:

  • ferrous minerals: 76.4%
  • coal: 4.5%
  • base metals: 18.3%
  • others: 0.8%

Write-offs and provisions

The company also talked about the Brumadinho dam breach on January 25, due to which close to 300 people either were killed or are still missing. Read Will Vale’s Second Dam Burst Overshadow Positive Catalysts? to learn more. In November 2015, a dam jointly owned by Vale and BHP Billiton (BHP) burst and killed 19 people.

The company reported a series of write-offs and provisions in connection with the dam’s rupture, including a $124 million write-down from the assets at the affected mine. The company also said that it’s still evaluating the potential liabilities that may arise from the dam breach.

Vale’s price performance

Since the disaster on January 25, Vale stock has fallen 13.5% as of March 27. During the same period, the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) have risen 6.1% and 4.3%, respectively.

Supply tightness due to dam breach and the consequent capacity closures have led to a perceived shortage of iron ore in the market, driving up commodity prices. This price increase has been acting as a positive tailwind for Vale’s peers (XME) BHP Billiton (BHP), Rio Tinto (RIO), and Cleveland Cliffs (CLF), which are up 15.5%, 20.6%, and 7.0%, respectively, since the dam breached on January 25.

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