Murilo Ferreira, the CEO of Vale SA (ADR)(NYSE:VALE) said that it is planning to reduce its debt to $15 billion to $17 billion by the end of FY2017. The company is also moving its focus to expanding profit margins over higher production. The update comes as a slight revision to 3Q2016 results, in which company posted its net debt had reduced by $1.5 billion from 2Q2016 to $26 billion and released a guidance of net debt cut to $15 billion by mid-2017, mainly through asset sales.
Ferreira said that they can minimize the size of the divestments as they are more confident about the nickel price and iron ore price. The company is quite far from seeing a thrilled market like recorded during the super cycle. The margins can prove to be extremely interesting for miners with efficient operations and high quality assets.
The performance
Vale posted its 3Q2016 financial report, which showed a positive surprise. Comparatively stable exchange rate of USD/RBL, higher commodities prices and production levels and lower production costs helped company to record improved results compared to 2Q2016, let alone 3Q2015. The production of iron ore reached 92.1 million tonnes, largely due to mounting production in Carajas.
Vale’s nickel, copper, gold and iron ore production figures are up by 6.1%, 12.2%, 18% and 1.5%, respectively, YoY. Net operating revenues surged to $7.324 billion, up 10.25% compared to 2Q2016 and 12.6% higher against 3Q2015. The adjusted EBITDA surged to $3 billion, which shows a 27% growth QoQ and 61% growth YoY. This growth in EBITDA was fueled by a considerably improved performance of the coal, base metals and ferrous metals divisions.
The 3Q2016 net income came at $575 million, a drop of 48% compared to 2Q2016 following negative foreign exchange rate. On contrary it represents a considerable improvement against the loss of $2.117 billion seen in 3Q2015. What is more significant, the underlying earnings jumped to $954 million, up 35% compared to 2Q2016. The earnings also came better against the underlying loss of $961 million posted in 3Q2015.
