VALE, the world’s largest iron ore miner, said that first-quarter profit fell by nearly half from a year earlier because rains limited exports, prices for its main products fell and spending on new mining projects rose.
Net income in the three months ended 31 March fell 44 per cent to $3.83bn (£2.3bn) compared with $6.83bn a year ago, the Rio de Janeiro-based company said yesterday in a filing.
Analysts expected net income to fall to $3.8bn, 45 per cent less than the year-earlier period and 19.4 per cent less than in the fourth quarter.
“This year, the strong rain volumes in Brazil deepened the seasonal effect on sales and costs, that along with lower prices for iron-ore and pellets cut our operating margins and profit,” the firm said.
Profit was 18 per cent lower than in the fourth quarter of 2011.
The drop in profit comes as chief executive Murilo Ferreira boosts investment to keep up with strong demand for iron ore, nickel, copper and coal from China and other Asian markets. The high demand comes as output from existing mines falls.
Additionally, heavy rains and a railway bridge accident limited exports even as prices for iron-ore, nickel and copper fell, said Marcelo Aguiar, metals and mining analyst with Goldman Sachs in Sao Paulo.
The new projects include expansion of Vale’s giant Carajas iron-ore mine in the Brazilian Amazon and expansion of the Moatize coal mine in Mozambique. The company spent $3.7bn on new projects in the first quarter, 37 per cent more than a year earlier.
City A.M. Reporter