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11132003 3Q03 Conference CallWebcast Presentation - PowerPoint PPT Presentation


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Disclaimer

”This presentation may contain statements that express management’s expectations about future events or results rather than historical facts. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected in forward-looking statements, and CVRD cannot give assurance that such statements will prove correct. These risks and uncertainties include factors: relating to the Brazilian economy and securities markets, which exhibit volatility and can be adversely affected by developments in other countries; relating to the iron ore business and its dependence on the global steel industry, which is cyclical in nature; and relating to the highly competitive industries in which CVRD operates. For additional information on factors that could cause CVRD’s actual results to differ from expectations reflected in forward-looking statements, please see CVRD’s reports filed with the Brazilian Comissão de Valores Mobiliários and the U.S. Securities and Exchange Commission.”

agenda
Agenda
  • Performance highlights
  • Macroeconomic and business outlook
3q03 highlights
3Q03 highlights
  • Across the board strong sales performance.
  • Quarterly record top line - US$ 1.483 billion (+30.4% yoy)
  • Quarterly record cash generation - adjusted EBITDA equal to US$ 630 million (+21.2% yoy).
  • Bottom line - a solid US$ 468 million - 9M03 US$ 1.278 billion.
  • 2003 dividend distribution of US$ 675 million - (+12.1%) yoy) - US$ 1.75 per share vs. US$ 1.57 per share (average 1999/2002).
  • Projects on track.
excellent sales performance
Excellent sales performance

3Q03 vs 3Q02

a

46.6 million tons

A new record

747,000 tons

A new record

c

b

182,000 tons

A new record

7,371 million NTK

a - without CAEMI = 43.2 million tons

b - without CAEMI = 140,000 tons

c - running above nominal capacity

iron ore and pellets growth still constrained by capacity
Iron ore and pellets - growth still constrained by capacity

million tons

46.6

44.0

42.3

41.1

42.5

41.5

5.5

36.7

Caemi

37.7

railroad transportation reached a new quarterly record
Railroad transportation reached a new quarterly record

million ntk

7,371

6,900

6,647

6,355

6,367

5,658

5,622

cvrd logistics services performance decoupled from brazil s gdp growth
CVRD logistics services performance decoupled from Brazil’s GDP growth

Source: CVRD and Central Bank of Brazil

slide10

Sales revenues and adjusted EBITDA

3Q03 Gross Revenues US$ 1,483 million

3Q03 Adjusted EBITDA

By product

By market

US$ 630 million

a good relative performance in the mining and metals industry
A good relative performance in the mining and metals industry

Market Capitalizationas of October 31, 2003US$ billion

Net Earnings 3Q03US$ million

Source: Bloomberg LP and companies reports

a consistent strong cash generation
A consistent strong cash generation

LTM adjusted EBITDAUS$ million

2,000

Caemi+FCA

leading indicators are telling us that a synchronous global economic recovery is underway
Leading indicators are telling us that a synchronous global economic recovery is underway

JP Morgan global manufacturing PMI

Source: JPMorgan

slide18
Renewed global economic growth contributes to reduce reliance on Chinese-centric demand growth for minerals and metals

Chinese contribution to global consumption growth

Source: CVRD and AME Mineral Economics

the metals mining industry reacted to the asian crisis by reducing project capex
The metals & mining industry reacted to the Asian crisis by reducing project capex...

Source: CVRD, Smith Barney and The Economist

as well as mineral exploration
... as well as mineral exploration

Mineral exploration capex - non ferrous mineralsUS$ billion

Source: MEG - Corporate Exploration Strategies, 2002.

therefore the combination of capacity limitations and strong demand growth is producing shortages
Therefore, the combination of capacity limitations and strong demand growth is producing shortages
  • Iron ore, alumina, copper concentrate and nickel markets have tightened.
  • Shipping industry is quoting highest ever freight rates.
we expect chinese demand for cvrd iron ore to remain very strong
We expect Chinese demand for CVRD iron ore to remain very strong
  • Growth in steel capacity - according to the Chinese Iron and Steel Association, crude steel capacity will increase by 120 mtpy from the end of 2003 until the end of 2005.
  • Need for high iron content and low impurities to boost productivity and to improve quality of steel products.
  • CVRD commercial relationship is now supported by long term contracts, which gives us potential to optimize the steel value chain.
  • Dynamics of supply price elasticity is working to increase effective capesize shipping capacity.
slide23
Led by Chinese import growth, global seaborne trade is expected to increase by 7.3% in 2003 and 5.8% in 2004

CAGR 99-04

545

+5.8%

515

million tons

480

454

450

+25.6%

411

World

China

Rest of the World

+0.9%

China´s share 2002 2003E 2004E

in world seaborne trade 23% 29% 32%

Source: CVRD Statistics

cvrd iron ore capacity is also expanding
CVRD iron ore capacity is also expanding

CVRD mining projects

Capacity Start-up Capex per ton

Carajás expansion 14 mtpy 2004 US$ 10.31

Southern System expansion 3 mtpy 2004 US$ 7.14

Fabrica Nova phase 1 10 mtpy 2005

Fabrica Nova phase 2 +5 mtpy 2009

Brucutu phase 1 12 mtpy 2006

Brucutu phase 2 +6 mtpy 2008

Total increase 50 mtpy

US$ 5.67

US$ 12.22

* mine depletion: 10 million tpy until 2007

Depending on demand assessment Carajás capacity can be expanded up to 100 million tpy until 2010.

we believe that the current alumina shortage will last for a few more years
We believe that the current alumina shortage will last for a few more years

High spot prices are feeding into contract pricing, leveraging returns on Alunorte projects.

Source: Metal Bulletin, CRU and Macquarie Research

global recovery and usd weakness added better prospects to aluminum prices
Global recovery and USD weakness added better prospects to aluminum prices

Aluminum LME prices and inventories

Albras capacity

2002 406 kty

2003 430 kty

2004 450 kty

Source: LME

slide27

Despite the restart of mining capacity kept idle, declining metal inventories, USD weakness and accelerating global IP growth help to support copper prices

Copper LME prices and inventories

Source: LME

therefore a good copper outlook is welcoming sossego
Therefore, a good copper outlook is welcoming Sossego

Tightness in copper concentrate marketTC/RC charges

1997

1998

1999

2000

2001

2002

2003

Source: CRU

appendix
Appendix

Reconciliation of non-GAAP information and comparable GAAP information

  • Adjusted EBIT (US$ million)3Q02 2Q03 3Q03
  • Net operating revenues 1,098 1,170 1,432
  • COGS (554) (670) (812)
  • SG&A expenses (65) (45) (74)
  • Research and development (15) (12) (22)
  • Employee profit sharing plan (14) (9) (2)
  • Others 9 (46) (21)
  • Operating income (Adjusted EBIT) 459 388 501
  • Ajusted EBIT Margin = Operating Income / Net Operating Revenues
  • Adjusted EBITDA (US$ million)
  • Reconciliation between adjusted ebitda vs. operating cash flow
  • Operating Cash Flow 356 452 435
  • Income tax - - (47)
  • Income tax paid 6 27 6
  • Monetary and Foreign Exchange Losses 92 1 44
  • Financial Expenses 41 32 12
  • Net Working Capital (45) (31) 140
  • Others (8) 9 40
  • Adjusted EBITDA 442 490 630
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