Vale Q3 2024 $VALE3 (+1.06%)

Financial Performance:

In the third quarter of 2024, Vale recorded a decline in several key performance indicators. Net revenue decreased by 10 % year-on-year to USD 9.553 million, compared to USD 10.623 million in Q3 2023. Adjusted EBIT also decreased by 21 % to USD 2.867 million and adjusted EBITDA was 18 % lower year-on-year at USD 3.615 million. At USD 179 million, free cash flow was even 84% lower than in the previous year.

Balance sheet analysis:

As of September 30, 2024, Vale reported total assets of USD 88,886 million, which remained relatively stable compared to the previous year. Current assets decreased by 6% to USD 13,800 million, while non-current assets decreased slightly by 5%. However, cash and cash equivalents increased by 16% year-on-year to USD 4,596 million. Total liabilities amounted to USD 49.174 million, which corresponds to a slight decrease of 1%.

Income statement:

The income statement for the third quarter of 2024 shows a decrease in net sales and gross profit. The cost of sales ratio remained stable, resulting in a gross profit of USD 3.272 million compared to USD 4.314 million in the same quarter last year. Selling and administrative expenses fell by 7%, while research and development expenses increased by 2%.

Cash flow analysis:

Operating cash flow amounted to USD 2.757 million, a year-on-year decrease of 33 %. Net cash flow from investing activities amounted to USD -1.328 million, a reduction of 22 % compared to the previous year. Cash flow from financing activities led to a net outflow of USD 2.276 million.

Key figures and profitability:

The adjusted EBITDA margin decreased by four percentage points to 38%. Net profit attributable to Vale shareholders amounted to USD 2,412 million, a decrease of 15% year-on-year. Net debt increased to USD 9,536 million, a decrease of 5% compared to the previous quarter.

Segment analysis:

The largest division, Iron Ore Solutions, reported adjusted EBITDA of USD 3,731 million, a decrease of 21% year-on-year. The "Energy Transition Metals" division, which comprises nickel and copper, reported adjusted EBITDA of USD 248 million, a decline of 36 %.

Competitive analysis:

Vale's competitive position is challenged by falling iron ore prices and higher transportation costs. Nevertheless, the company benefits from a diversified product portfolio and improvements in the operating efficiency of its metals division.

Management forecasts and comments:

Management aims to transform Vale into a more agile and efficient company, with a strategic focus on high-value iron ore products and growth in the copper segment. The company expects to reach the lower end of its C1 cost guidance for iron ore in 2024.

Risks and opportunities:

Risks include fluctuating commodity prices, operational challenges and legal liabilities related to the Samarco dam breach. Vale sees opportunities in the expansion of its high-quality product portfolio and the increase in operating efficiency.

Conclusion and strategic implications:

Vale's financial performance in the third quarter of 2024 reflects the challenges of the current market environment, characterized by declining revenues and profitability. The company's strategic focus on operational excellence and high-quality products will be crucial for future growth. Overcoming legal liabilities and optimizing the cost structure will be key building blocks for improved financial stability and shareholder value. An interesting value for people who want to invest in the Em market.

Positive highlights:

• Iron ore production reached the highest level in the last five years, demonstrating the continued focus on operational excellence
• Pellet production is at its highest level since 2019, supporting the strategy to deliver high quality products
• Copper and nickel production showed solid progress, particularly due to operational improvements in Canada
• The average price achieved for iron ore fines was only USD 7.6/t lower quarter-on-quarter, despite a USD 12/t decline in the reference price. This is due to an expanded product portfolio and positive adjustments in commission valuation.
• Vale closed the joint venture deal with Apollo for USD 600 million, thereby strengthening its strategic position.

Negative highlights:

• Net sales decreased by 10% year-on-year, from USD 10.623 million in Q3 2023 to USD 9.553 million in Q3 2024.
• Adjusted EBIT decreased by 21% year-on-year, from USD 3.651 million in Q3 2023 to USD 2.867 million in Q3 2024
• Free cash flow was significantly lower at USD 179 million and recorded a year-on-year decrease of 84%.
• Net income attributable to Vale shareholders decreased by 15% year-on-year, from USD 2.836 million in Q3 2023 to USD 2.412 million in Q3 2024
• Expanded net debt increased to USD 16.5 billion as of September 30, mainly due to additional provisions related to the dam breach at Samarco