Vale SA (ADR) (NYSE:VALE) published its earnings report for the fourth quarter of 2014 yesterday. The company posted weal earnings and with this news, the stock price of the company fell by 5%, reaching $7.34. It is reasoned that this weak performance byVale SA (ADR) (NYSE:VALE) was due to currency problems, declining commodity prices as well as write downs.
A net income worth $657 million was posted by Vale SA (ADR) (NYSE:VALE) for the whole of 2014. The analysts had expected this figure to be $2.5 billion. This huge cap in the expected and actual income can be particularly bad for Vale SA (ADR) (NYSE:VALE) as the company is already facing challenges which has lead the company to sell many of its prime assets to solve the problem of its cash flow. The adjusted EBITDA of the company was $13.4 billion which accounted for a 13% YoY decline.
Whereas the analysts had expected the net revenue of the company to be $46.8 billion, Vale SA (ADR) (NYSE:VALE) posted a figure of $37.5 billion. This figure accounts for a YoY decline of 13%. The EPS for 2014 were $0.86 as opposed the expected figure by analysts of $1. In 2013, the EPS figure stood at $20.6, which was 62.2% higher than this year’s EPS.
One reason for this low adjusted EBITDA was huge expenses figure of the mining segment of Vale SA (ADR) (NYSE:VALE). The company has two major write down including $98 million from inventory of thermal coal as well as $90 million from the ICMX tax credits. Furthermore, Vale SA (ADR) (NYSE:VALE) paid $107 million for the long germ environmental compulsion. Without these huge expenses, the EBITDA of Vale SA (ADR) (NYSE:VALE) would have been $2.53 billion for the last quarter of 2014. This quarter proved to be the weakest one for the company, having a negative effect on the earnings of whole year. The company recorded a net loss for the last quarter of $1.85 billion. With all of this, the price to tangible book value was $0.81.
Iron ore is one segment which now decides the fate of the company. Vale SA (ADR) (NYSE:VALE) is the largest iron ore producer and this segment alone accounts for 67% of the revenue for last quarter as well as 80% of EBITDA. IN 2013, the iron ore prices of Vale SA (ADR) (NYSE:VALE) fell by 30% YoY. In 2013, the iron ore price per metric was $112.05, while this year, this price was $75.97.
On the other hand, these falling prices were balanced by metal arms of the company. This division experienced a 54% increase in EBITDA with the total figure at $2.52 billion. Vale SA (ADR) (NYSE:VALE) was named as the largest nickel producing company in 2014. Vale SA (ADR) (NYSE:VALE) has stated that the company does not expect any such weak reports for next 2 years.
While 21% of analysts have rated the stock of company a ‘Sell’, other 45% recommend a ‘Hold’. Analysts from Jefferies expects that the iron ore prices will fall even more in coming 3 to 6 months.
