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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

  • Highlights

  • Delivering profitable growth

  • A good business outlook is supported by the long cycle


Highlights


Highlights

  • An outstanding performance.

  • Fundamentals better than they have been in many years. Current cycle is one of the strongest since late 19th century.

  • Good strategy execution is allowing us to explore growth opportunities wisely.

  • Disciplined capital management creates highly competitive growth platforms and high return on invested capital.

  • Powerful cash flow and good financial policy generate a healthier balance sheet.


Delivering profitable growth


Sales in a strong growth path

  • An all-time high revenue, US$ 2.3 billion, with qoq growth (12.5%) mostly driven by larger volumes (71%).

In 000’ tons

a

million of ntk


Ferrous minerals accounted for 69% of revenues. China is an important growth driver, but accounts for only 11% of revenues

9M04 Gross Revenues: US$ 6.051 billion

By product

By geography


Iron ore and pellets shipments reached an all-time high in 3Q04

million tons

116.7

60.4

55.9

55.6

148.7

52.9

46.6

42.5

164.2

41.5

186.2

130.6

169.2

CAGR 00-04E = 9.7%


CVRD railroads transported a record volume of general cargo for clients

Billion of ntk

CAGR 00-04E = 9.8%


Adjusted EBIT reaches a new quarterly record


Operational excellence across-the-board

adjusted EBIT margin by business area


An outstanding earnings performance among main metals and mining companies reporting quarterly

Market Capas of September 30, 2004 US$ billion

3Q04 Net EarningsUS$ million

Source: Bloomberg LP and company reports


To stay at the lowest end of the industry cost curve is key to weather the downcycle and to leverage the upcycle

Net earnings

US$ million


Despite the BRL appreciation against the USD, quarterly cash generation hits the one billion dollar mark. Ten quarters of consecutive growth

LTM adjusted(2) EBITDAUS$ billion


Investments are changing CVRD profile: cash flow became much more powerful and generated from a more diversified set of sources

Sources of cash generation

1Q02 Adjusted EBITDA

3Q04 Adjusted EBITDA

US$ 397 million

US$ 1.007 billion


Capex reached US$ 1.27 billion in the first nine months of 2004, with four major projects delivered

CAPEX 9M04

US$ 1.270 billion

Main projects

delivered

Pier III PDM

Carajás 70 Mt

Candonga

Sossego

Growth capex

US$ 798 million

On track

Fabrica Nova I

Carajás 85 Mt

Brucutu I

Fazendão

Itabira

Alunorte 4&5

Paragominas I

Taquari-Vassouras

Aimorés

Capim Branco I&II

Stay-in-business

capex

US$ 472 million


Capital allocation discipline and good strategy execution spearheaded constantly high performance

Return on invested capital

a

Annualized


Powerful cash generation allows CVRD to finance growth initiatives and to meet shareholders’ dividend expectations

2004 dividend

US$ 0.68 per share

Dividend growth

2004/2003+15.7%

2003/2002+12.1%


Balance sheet is improving continuously


A good business outlook is

supported by the long cycle


After growing at 5% per year, a 30-year high, global economy recovery reached a mature stage

Global PMI

Source: JPMorgan


We expect global GDP growth rate to stay above long-term trend in the near future

Global GDP growth

%

CAGR 1970 - 2003 = 3.6%

Source: IMF and CVRD


Some indicators are signalling that a Chinese soft landing is becoming more likely

Fixed asset investment

Bank credit

YoY%

YoY%

Source: CEIC


China’s GDP growth is slowly cooling down. We expect growth rate to converge to 7% per year

GDP growth

YoY %

Source: CEIC and CVRD


Apparent steel consumption is forecast to continue to grow faster than global GDP

CAGR 1974-94 = 0.0% - 1994-04E = 2.9%

CAGR 1974-94 = 7.9% - 1994-04E = 8.4%

Million tons

+5.1%

+7.6%

+10.3%

+12.9%

Source: IISI and CVRD


Global seaborne iron ore demand is expected to follow above long-term trend growth

Million tons

CAGR 1990-04E = 3.9%

CAGR 1990-04E = 20.7%

+5.9%

+10.8%

+15.4%

+31.8%

Source: CVRD


Aluminum inventories are dwindling as global demand is growing at almost 10% per year

Source: IAI, LME, Comex and Bloomberg


We expect global aluminum market to remain in deficit in 2005

000’ tons

Source: CRU and CVRD


The outlook for the next 12 months is for continuing tightness in the alumina market

Source: Metal Bulletin, LME and Bloomberg


Copper inventories continue to be depleted. Low inventories give support to next year’s prices

Source: Bloomberg


CVRD – A Global Leader

www.cvrd.com.br

e-mail: [email protected]


Appendix

Reconciliation of non-GAAP information and comparable GAAP information

  • (1) Adjusted EBIT (US$ million)3Q032Q043Q04

  • Net operating revenues1,4321,9202,173

  • COGS(812)(912)(1,053)

  • SG&A expenses(74)(106)(112)

  • Research and development(22)(27)(36)

  • Other Operating Expenses(23)(43)(86)

  • Operating income (Adjusted EBIT)501832886

  • (2) Adjusted EBITDA (US$ million)

  • Reconciliation between adjusted EBITDA vs. operating cash flow

  • Operating Cash Flow4357001,107

  • Income tax (41)41285

  • Monetary and Foreign Exchange Losses44(46)41

  • Financial Expenses6260113

  • Net Working Capital 140221(436)

  • Others(10)(5)(103)

  • Adjusted EBITDA6309711,007


Appendix

Reconciliation of non-GAAP information and comparable GAAP information

  • (3) Gross Debt / LTM Adjusted EBITDA3Q032Q043Q04

  • Gross Debt / LTM Adjusted EBITDA (x) 2.151.551.34

  • Gross Debt / LTM Operating Cash Flow (x) 2.462.011.51

  • (4) LTM Adjusted EBITDA / LTM Interest Expense

  • LTM Adjusted EBITDA / LTM Interest Expenses (x)10.1512.9412.94

  • LTM Operating Profit / LTM Interest Expenses (X)8.0910.2610.64

  • (5) Gross Debt / Enterprise value

  • Gross Debt / Enterprise value (x) 0.240.220.16

  • Gross debt / Total assets (x)0.370.360.30

  • Enterprise Value = Market Capitalization + Net Debt


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