On the face of it, Brazilian iron ore miner Vale saw its second-quarter net profit soar to US$2.77 billion in the three months to June as it boosted production and sales and took advantage of firmer iron ore and copper prices.
Net earnings were triple those recorded in the June quarter of 2023 and US$1 billion more than analysts had predicted. The result was also 65% higher than in the March quarter when the company reported net profit reaching US$1.68 billion.
But the extra US$1 billion in earnings didn't come from operations – it came from the US$1.05 billion profit resulting from the sale of PT Vale Indonesia that concluded in June. This boosted what we call in Australia the statutory profit for Vale for the quarter, and there's no lead-in for Vale's results for local investors awaiting Rio Tinto's interim results to be released on Wednesday.
Analysts said it accounted in part for the better-than-expected earnings, and without it, analysts were spot on with their forecasts.
The company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) totaled US$3.99 billion in the April-June period, slightly below an analyst estimate of US$4.06 billion.
The company said its adjusted EBIT figure of US$3.2 billion was down slightly from the US$3.219 billion in the June quarter of 2023 – a strong indication the company’s underlying profits didn’t improve much at all.
Revenue for the quarter rose 3% to US$9.9 billion.
Vale has already reported a solid rebound in its iron ore production and sales from the weakness a quarter ago and a year ago. Iron ore sales rose 7% from the year before in the June quarter.
But higher freight and maintenance costs hit proforma EBITDA, which was 6% lower than the second quarter last year, Vale said.
The average realized price for iron ore fines in the second quarter was US$98.2 per tonne (lower than Fortescue’s US$102.01 a tonne), about flat with the year before – Fortescue’s price was up around US$8 a tonne.
For the six months to June, revenue was up 2% at US$18.379 billion, but adjusted EBITDA fell 6% to US$5.924 billion. Reflecting the one-off billion-dollar boost from the Indonesian sale, net profit attributable to shareholders was up 63% at US$4.48 billion.
