UBS expecting gloomy 2009 for Vale, but healthier 2010 - Brazil
Published: Thursday, January 8, 2009 17:18 (GMT -0400)
By Business News Americas staff reporters
bnamericas.com
UBS is expecting a gloomy 2009 for Brazilian miner Vale (NYSE: RIO, Bovespa:VALE3) but expects the market to recover in 2010, the Swiss bank said a report released Thursday.
"In 2009 the slowdown should come as no surprise due to the significant decline in steel production in H1," said the report signed by UBS Pactual analysts Edmo Chagas and Carlos Vasques. "In 2010, we expect improved demand to drive volumes up to 303Mt [of iron ore for Vale]."
In 2007, the Brazilian miner produced 296Mt of iron ore.
The report also mentioned UBS has not changed commodities price assumptions of 40% lower for iron ore in 2009 and 5% lower in 2010. Prices for Vale iron ore are approximately US$70-80/t, according to the company website.
In regard to 4Q08, UBS said the quarter for Vale was "marked by demand deterioration and its effects over the company's operations and financials."
"We forecast iron ore shipments to be 30% lower quarter-on-quarter at 60Mt," said the statement. "On the other hand, local currencies' depreciation should contribute to lower costs and smooth the impact of lower sales."
However, UBS expects Vale to report foreign exchange losses due to the stronger US dollar by the end of the quarter.
"We expect revenues and Ebitda to reflect the weaker performance of Vale's main businesses - iron ore and nickel - with revenues declining 35% quarter-on-quarter to US$7.6bn and Ebitda down to US$4.1bn. As a result, we expect earnings to be down by about 60%, or US$1.8bn (EPS of US$0.34)" for 4Q08.
Rio de Janeiro-based Vale is the world's largest iron ore producer and one of the biggest nickel miners. |
