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Vale's net income climbs in Q4

Standfirst: Brazilian mining giant Vale benefited from foreign exchange gains in the fourth quarter of 2021. The company's net income climbed to US$5.43 billion, which was up from US$739 million a year earlier and from US$3.89 billion in the third quarter. 

Nathan Richardson
Vale's net income climbs in Q4

"In a year still marked by the persistent effects of the COVID-19 pandemic and market volatility, we were able to deliver significant achievements in creating sustainable value to all our stakeholders," Vale's CEO Eduardo Bartolomeo said. 

Vale explained that the quarter-on-quarter increase of US$1.5 billion was mainly due to the reclassification of cumulative foreign exchange variation in equity.

The positive effects were partially offset by higher expenses due to Brumadinho and additional provisions related to the Renova Foundation - both a result of to the 2019 Córrego do Feijão iron ore mine tailings collapse. 

The Brumadinho provision of US$1.7 billion related to de-characterisation of upstream dams, Vale said. 

 "In our view these financials take lots to unpack, and although the underlying numbers appear to have beaten consensus, the one-offs will weigh. A key question will be how much additional cash leakage will come to consensus forecasts in 2022 from these new provisions," RBC Capital Markets analyst Tyler Broda said. 

Vale's net income beat RBC's forecast by 12%, and was 38% higher than consensus, RBC noted. 

The company reported adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of US$6.96 billion in the fourth quarter, which was down from US$9.1 billion a year earlier and weaker than the US$7.11 billion in the third quarter. 

The Q4 EBITDA was pretty well in line with RBC's forecast. 

"We think adjusted ‘pro-forma' cons EBITDA would be approximately US$6.5 billion, so the underlying result was a beat," Broda said. 

Vale said its outlook for iron ore remains positive, given the recovery of the global economy from the pandemic. 

"We believe world steel production will grow slightly in 2022 as [the] global economy is strengthened by the reduction in supply-chain bottlenecks, the continued pent-up demand in the past year and rising business and consumer confidence," the company said. 

"Rising inflation and deceleration in China are drivers that may counterbalance and increase the risk to the recovery momentum," Vale added. 

The company made no changes to its 2022 guidance ranges. 

"We continue to see Vale's preferable value proposition and higher volume growth as providing a preferred exposure to other global iron ore diversified miners, however [we] continue to take a cautious approach to iron ore exposure on the whole into what we fear could be an air pocket of demand from China in Q2 onwards," Broda said. 

Vale also announced the distribution of dividends to shareholders of R$3.7018 per share, which was equivalent to US$0.73 per share and was due to be made on March 16. 

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