RIO DE JANEIRO, BRAZIL – Brazilian mining company Vale S.A., the largest producer of iron ore and nickel in the world, recorded a net income of US$7.586 billion in the second quarter, up from US$995 million a year earlier, with a strong rise in iron ore prices amid firm demand from China, according to the company’s financial report published on Wednesday (28).
The result, which was close to analysts’ estimate of US$7.67 billion, according to Refinitiv data, also grew from the prior quarter, when the company reported US$5.546 billion net income.
Asset impairment charges from the coal business and an additional provision related to the Renova Foundation of US$560 million partially offset the positive effects.
One of the largest global producers of iron ore, the company had adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda) of US$11.038 billion between April and June, up from US$3.371 billion a year earlier.
Vale pointed out that the ferrous minerals unit was one of the main factors for the profit. The segment’s adjusted Ebitda totaling US$10.679 billion, US$2.868 billion higher than in the first quarter, mainly due to higher realized sales prices and higher volumes.
The company’s sales revenue totaled US$16.675 billion in the second quarter, more than double that recorded in the same period of 2020 of US$7.518 billion.
Vale produced 75.7 million tons of iron ore in the second quarter, up 12% from the same period last year, advancing its operational recovery plan and stabilization plan. Vale’s average iron ore price in the second quarter was US$182.8 per ton, increasing US$27.3 per ton versus the first quarter. In the same period last year, the company’s effective value of the commodity stood at US$88.9/ton.
The mining company pointed out that continued “tight supply” of iron ore and “powerful” economic activity in China kept the market “undersupplied,” driving prices above US$200 per ton.
However, for the second half of the year, the company anticipates an increase in ore supply, while demand may be impacted by production cuts due to environmental restrictions in China.
Total investment was US$1.139 billion in the second quarter, up US$130 million from the previous quarter, due to accelerated investment in the Voisey’s Bay mine expansion projects, the Cerrado Sun solar power plant, and the 120,000 ton per year Serra Sul.
The company generated an operating free cash flow of US$6.527 billion between April and June, being US$680 million above the previous quarter.
The company ended the quarter with gross debt of US$12.154 billion, in line with the previous quarter. Net debt totaled US$738 million in the same period, with net debt expanded tp US$11.448 billion.