Key Takeaways From Vale’s Q4 2017 Results

Vale (NYSE: VALE) reported its Q4 and full-year 2017 results on 27th February. The company reported a 38% rise in year-on-year (Y-o-Y) net income for full-year 2017 largely driven by higher iron ore price realizations as the company benefited from premium pricing for its higher-grade iron ore. However, the company’s Q4 2017 did not display as much strength as its full-year performance as lower revenue and higher costs negatively weighed on the company’s earnings.  Vale’s sales volume across all its major commodities saw a decline in Q4 2017 which weighed on the company’s revenue. Total revenue in Q4 2017 was down by 5% Y-o-Y compared to the same period last year. Additionally, lower price realization from its iron ore fines exaggerated the impact on declining revenue. Although Vale has been benefiting from higher iron ore prices in 2017 due to its advantageous position of having access to premium-grade ore, iron ore prices in Q4 registered a decline of ~9% compared to the same period last year. Iron ore prices tumbled in the last quarter of 2017 as China’s steel cuts became more extensive during the winter months. However, higher copper and nickel prices provided some relief to the company’s top line.

Results were additionally impacted by higher costs due to higher commodity prices throughout 2017. Vale’s cost of goods sold (COGS) increased by ~17% (adj for depreciation) in Q4 2017, compared to Q4 2016, leading to a lower gross margin and thus negatively impacting the company’s earnings.

Vale successfully reduced its net debt to $18.4 billion in 2017 from $25.04 billion in 2016, aided by the sale of its non-core assets. Related to its debt reduction strategy, the company aims to reduce its net debt to $10 billion by mid-2018.

Key highlights from Vale’s Q4 results and the expected Q1 2018 results are outlined 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?