Vale (RIO-N) may have posted record quarterly shipments of iron ore to China but its net earnings still plunged to US$790 million in the second quarter from US$1.36 billion in the first quarter.
“It was too soon for the recovery in other regions of the world to be felt in our sales,” the company said in a statement announcing its financial performance. “In addition, the 2Q 2009 results were hurt by the lagged effect of iron ore negotiated prices.”
Operational profit dropped 42.1% quarter-on-quarter to US$976 million and cash generation decreased to US$1.7 billion from US$2.3 billion.
The good news is that Vale says it is confident that after three quarters of steep decline, “the global economy is very likely to have bottomed out.”
Vale’s total iron ore and pellet shipments increased 3.3% on a quarter-on-quarter basis. In the first half of the year shipments of iron ore to China surged a year-on-year 42.1%.
Looking ahead Vale says there are reasons to be optimistic about an economic recovery and points to among other things an increase of 4.7% in world crude steel production in the second quarter over the first quarter.
It also cites June statistics demonstrating production increases of steel in Brazil, the United State and the European Union — “regions where the carbon steel industry was running at the lowest rates of utilization in the world” — as a further reason for confidence.
Global stainless steel output is recovering after two years in a row of decline. (Stainless steel production jumped 23.1% in the second quarter compared with the first quarter. By contrast it dropped 6.2% quarter-on-quarter in the third quarter of 2008.)
Finally, data from China indicates its economy is starting to grow again: In June new construction advanced 12% year on year and Vale notes that property is responsible for almost 40% of Chinese steel consumption.
Be the first to comment on "Vale’s Q2 net earnings drop significantly"