Vale SA reported a 2016 net income of $3.98 billion on net operating revenues of $29.36 billion. This contrasts to the net loss of $12.13 billion and revenues of $25.61 billion posted in 2015. The company attributed the financial turnaround to higher EBITDA ($5.1 billion), bigger gains on foreign exchange and monetary variation ($10.63 billion), and lower impairment of non-current assets and onerous contracts ($6.01 billion). This was partly offset by higher taxes due to the reporting period’s higher earnings.
Underlying earnings were a positive $4.97 billion in 2016, against a negative $1.70 billion in 2015.
Net operating revenues were 15 percent higher year-on-year in 2016, mainly because of higher realized prices and sales volumes of iron ore fines and pellets and higher base metals volumes, but were partly offset by lower prices of the latter commodities.
Last year, Vale’s earnings were badly hit by the downturn in commodity prices, especially of iron ore, and substantially higher impairment charges.
In 2016, impairments of non-current assets and onerous contracts led to non-cash losses of $2.91 billion, compared to $8.93 billion in the prior year. Vale, which has been shedding assets in order to pay down debt, recorded a $1.74 billion impairment in fourth-quarter 2016 as a result of the agreement in December to sell the bulk of its fertilizer assets to The Mosaic Co. for $2.5 billion (GM Feb 10, p. 13; Dec. 23, 2016).
Vale’s Fertilizers business segment saw its 2016 adjusted EBITDA plummet 63 percent, to $209 million on net operating revenues of $1.875 billion, compared with 2015’s $567 million and $2.225 billion, respectively. Fertilizers’ fourth-quarter 2016 adjusted EBITDA was more than halved compared with the same year-ago quarter, to $48 million on net operating revenues of $429 million, against fourth-quarter 2015’s $117 million and $481 million, respectively. Vale’s Fertilizers business contributed 1.7 percent of the group’s adjusted EBITDA in 2016, down from eight percent in 2015.
The Brazilian company confirmed last week it had restarted its hunt for a buyer for its Cubatão-based nitrogen and non-integrated phosphate businesses, which were not included in the sale agreement with Mosaic (GM Feb. 17, p. 16). Yara International ASA earlier had been mentioned as a possible buyer for the Cubatão assets (GM Sept. 23, 2016; April 8, 2016), but is said to have withdrawn its interest in November “after several months of talks.” Yara has said it does not comment on speculations or rumors. In the meantime, CF Industries Holdings Inc. told analysts Feb. 16 that it has no interest in Vale’s assets.
The purchase of Vale’s partially-constructed Rio Colorado, Argentina, potash project remains an option for Mosaic as part of its transaction with Vale (GM Dec. 23, 2016). The Argentine mining project’s inclusion is subject to Mosaic’s agreement following appropriate diligence.