1Q11 Results
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1Q11 Results

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1q11 results

1Q11 Results

May 6, 2011


1q11 results

Disclaimer

“This presentation may include statements that present Vale's expectations about future events or results. All statements, when based upon expectations about the future and not on historical facts, involve various risks and uncertainties. Vale cannot guarantee that such statements will prove correct. These risks and uncertainties include factors related to the following: (a) the countries where we operate, especially Brazil and Canada; (b) the global economy; (c) the capital markets; (d) the mining and metals prices and their dependence on global industrial production, which is cyclical by nature; and (e) global competition in the markets in which Vale operates. To obtain further information on factors that may lead to results different from those forecast by Vale, please consult the reports Vale files with the U.S. Securities and Exchange Commission (SEC), the Brazilian Comissão de Valores Mobiliários (CVM), the French Autorité des Marchés Financiers (AMF), and The Stock Exchange of Hong Kong Limited, and in particular the factors discussed under “Forward-Looking Statements” and “Risk Factors” in Vale’s annual report on Form 20-F.”


Agenda

Agenda

  • Another outstanding quarter

  • Continued growth ahead


1q11 results

Another outstanding quarter


1q11 results

Despite very adverse weather conditions, a good operational performance

∆ 1Q11/1Q10in %

  • Iron ore+3.9

  • Pellets +26.5

  • Manganese+25.5

  • Ferroalloys+3.5

  • Nickel+79.7

  • Copper+107.9

  • Coal+0.2


1q11 results

An outstanding financial performance

The best first quarter ever

1Q11US$ billion

1Q10US$ billion

∆%

Operating income13.5436.84897.8

Adjusted EBIT¹6.4562.062213.1

Adjusted EBIT margin¹48.9%31.2%+1,770 bps

Adjusted EBITDA¹7.6632.855168.6

Net earnings6.8261.604325.6

1 figures excluding the gain from the sale of assets of US$ 1.513 billion, a non-recurring event.


We have been dealing with seasonal and cyclical cost pressures

We have been dealing with seasonal and cyclical cost pressures

Main cost pressures 1Q11 vs. 4Q10

Source

 US$ million¹

  • Maintenance materials

  • Fuel and gases

  • Purchases of products

Seasonal

93

Cyclical / political

79

Cyclical

78

¹ Net of volume and FX impacts


However in addition to price increases cost reduction was important to adjusted ebitda performance

However, in addition to price increases, cost reduction was important to adjusted EBITDA performance

Adjusted EBITDA

US$ million

R&D

 FX

Cost and expenses¹

Dividends²

Price

variation

Sales volume

Gain on sale of assets

4Q10

1Q11

1 SG&A + COGS + other operating expenses

² Dividends received from affiliated non-consolidated companies


Cash generation is already well above the pre crisis peak

Cash generation is already well above the pre-crisis peak

LTM Adjusted EBITDA

US$ billion


Powerful cash flow helps to keep a healthy balance sheet with a low risk debt portfolio

Powerful cash flow helps to keep a healthy balance sheet with a low-risk debt portfolio

Total debt

Debt cost and maturity

¹,²

%

Years

10.1

5.5

9.1

4.7

¹ at end of quarter.

² cash and cash equivalent.


1q11 results

Continued growth ahead


Global ip boomed since the end of 2010 adding strength to the global demand for minerals and metals

Global IP boomed since the end of 2010, adding strength to the global demand for minerals and metals

Global industrial production

% 3mma, saar¹

¹ Seasonally adjusted annualized rate

Source: Vale and J.P. Morgan


Given the change in the inventory cycle global ip growth is expected to moderate

Given the change in the inventory cycle, global IP growth is expected to moderate

New orders/inventories ratio, sa¹

Global manufacturing PMI, sa¹

¹ Seasonally adjusted

Sources: Vale and JP Morgan


1q11 results

China remains on the fast growth path driven by domestic demand

Chinese GDP growth

%

¹ Saar

Source: CEIC


1q11 results

Both fixed asset investment and industrial production are showing signs of reacceleration in China

FAI and IP growth

FAI

IP

¹ Seasonally adjusted annualized rate

Source: Haver Analytics


1q11 results

China’s 12th FYP 2011-2015 – priorities are supportive of the demand for Vale’s iron ore

  • Average annual GDP growth of 7%.

  • Housing: 36 million units of social housing.

  • Reduction of 16% in energy consumption per unit of GDP.

  • 17% less carbon emissions per unit of GDP.

  • Proportion of urban residents to reach 51.5% vs 47.5% at the end of 2010.

  • Creation of 45 million urban jobs.


1q11 results

Targeted affordable housing starts in China

million units

72.4%


1q11 results

Global carbon steel output is running at 1.5 billion metric tons per year, expanding by 7.6% over 4Q10. Although China is the main growth driver with 50%, expansion has broadened.

China 1

Global 1

1 monthly data, on a seasonally adjusted basis.

Sources: Vale and World Steel.

3-month moving average


1q11 results

Iron ore prices continue to hover around a high level in face of strong global demand growth and supply constraints

Platts IODEX 62% Fe

US$/dry metric ton

183

May 3, 2011

Source: Platts.


1q11 results

Global SS production reached an all-time high at 8.6 Mt in 1Q11. Fast expansion in consumption expenditures in EM countries will drive long-term demand growth

Global stainless steel output 1

SA quarterly rate of change.

1 seasonally adjusted.


1q11 results

Despite the expansion of NPI/FeNi production, the nickel market remains tight due to the broad based global demand growth

Nickel prices

US$/metric ton

Inventories

Prices

Source: Bloomberg


1q11 results

According to analyst estimates, Vale has the highest growth potential among large mining companies

Copper equivalent volume growth (C2010-20, rebased)

Vale

Vale

Peer1

Peer2

Peer3

Peer4

Source: J.P. Morgan


1q11 results

Iron ore & pellets

Nickel

Coal

Copper

Fertilizers

Logistics

Energy

Steel

From 2011 to 2015, 34 additional major projects will be delivered, contributing to shareholder value creation

CSU

Greenfield

CSP

Biodiesel

Rio Colorado

Salitre

Cristalino

Serra Leste

Teluk Rubiah

Karebbe

Long-Harbour

Nacala

ALPA

Belo Monte

Simandou I

Salobo

Apolo

Konkola North

Tubarão VIII

Moatize

Serra Sul (S11D)

Ellensfield

2011

2012

2013

2014

2015

Carajás 40 Mtpy

Conceição Itabiritos

Conceição Itabiritos II

Vargem Grande Itabiritos

CLN S11D

Totten

Cauê Itabiritos

Simandou II

Moatize II

Bayovar II

Salobo II

Brownfield

Samarco IV

CLN 150 Mtpy


1q11 results

Discipline in capital allocation: return on invested capital has returned to the pre-crisis level and it is far above the cost of capital

ROIC LTM1

Invested capital

US$ billion

1 ROIC LTM = return on invested capital for last twelve-month periods.


1q11 results

Strengthening infrastructure

  • Estreito hydro power plant => delivered

  • Vale Brasil, first Valemax 400,000 dwt => delivered


1q11 results

Ramping up production

  • Tres Vallescopper

  • Onça Pumanickel

  • Oman pellets


1q11 results

Global leadership in iron ore pellets: capacity to reach 80.0 million metric tons by 2014¹

19 pellet plants around the world

Anyang

Oman 2 plants

Zhuhai

São Luís

Vargem Grande

Tubarão 7 plants

Fábrica

Samarco 3 plants

Tubarão VIII

Samarco IV

To come on stream

¹ 61.8 Mt from wholly-owned and leased plants and 18.2 Mt from affiliated companies (attributable share).


1q11 results

Acquisition of 9% of the Belo Monte hydropower plant project

  • Adds an average of 400 MW to Vale’s own generation capacity.

  • Narrows the expected increasing disequilibrium between Vale’s power consumption and generation capacity in Brazil.

  • Reduces the cost of energy¹ as cost of self generation is well below market prices.

  • Mitigates risk exposure to price and supply risks.

  • Expected rate of return higher than our cost of capital.

¹ cost with electric energy in 2010 was US$ 1.2 billion.


1q11 results

Vale: a global leader


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