What to Expect From Vale’s Fourth Quarter Results

Vale (NYSE:VALE) will release its Q4 2017 and full-year 2017 results on Feb 27 and conduct a conference call with analysts the following day. Lower shipment volume is likely to result in lower year-on-year (Y-o-Y) revenue and earnings in Q4 2017, despite an environment for higher commodity prices. The below graph represents our expectations for the company’s upcoming results.

Vale reported its Q4 2017 and full-year 2017 production and sales performance results in the third week of February displaying a 5% rise in  iron ore production volumes for full-year 2017, however sales volume remained ~1% lower than 2016 levels. Q4 2017 iron ore sales volume was ~3% lower compared to the same period last year. Lower sales volume could be a resultant impact of China’s steel curtailment initiatives which were significantly stringent in the last quarter of the year. Sales volumes for other commodities such as nickel and copper also remained weak in the fourth quarter. Lower sales volume is likely to negatively impact revenues and consequently earnings in the company’s fourth quarter results.

However, higher commodity prices in Q4 is likely to provide some support to revenue in the upcoming results. Vale’s access to high-grade iron ore has remained beneficial for the company throughout 2017 which has allowed it to enjoy a significant premium over lower-grade ores. China had shifted its demand to high-grade iron ore in the later part of 2017, in-line with its environmental policies. This, in turn, has created a lucrative pricing environment for high-grade iron-ore producers. Additionally, Vale’s ramp-up of S11D and its the reduction of lower grade ore production resulted in the company’s average Fe content in Q4 ’17 to be 64.3%, moderately higher than 64.1% in 3Q17 which should continue to remain beneficial for Vale.

Additionally, prices for both nickel and copper are expected to be favorable in Q4 ’17 compared to the same period last year. Copper and nickel have had a great performance in 2017 owing to China’s production restrictions coupled with an increased demand for these commodities due to a greater consumer preference for Electric Vehicles (EVs). We have summarized our key expectations from the upcoming results in our interactive dashboard.

Have more questions about Vale? See the links below.

• Vale Full-Year 2017 Production Review: S11D Ramp-Up Propels Iron Ore Output To Record High
• How Sensitive Is Vale To Its EBITDA Margin?