 | |
- close
- close
Suggest other news sources for this topic
WIKI ANALYSIS
Companhia Vale do Rio Doce is one of the largest global companies of mining and metal industry. The company is present in 13 Brazilian states and in 32 countries, in the five continents, and it is a world leader in iron ore and pellets production and commercialization, besides owning the largest nickel reserves of the planet. Vale is also a very important global producer of copper, coal, bauxite, alumina, Aluminum Prices, potassium, kaolin, manganese and ferroligas concentrate.
Business Overview
Besides investing strongly in mineral exploitation and research in Brazil and in countries such as from South America, Africa, Asia and Oceania, among others, Vale is one of the largest job-creators of the country. In 2006, the Company created around four thousand direct jobs. In December 31st of last year, it counted on nearly 44 thousand employees of its own, as well as 12 thousand employees from CVRD Inco, Canadian nickel producer, purchased by the company last year. It is also plausible that, yet in an indirect way, each job created by Vale represents five new vacancies within the productive chain.
In order to afford its activities, the Company has fostered an integrated structure of logistics which turned it into the greatest logistic service provider of the country. While being the operator of more than 9 thousand kilometers of railways and 10 port heads of its own, Vale creates full solutions from the synergy between railroads, ports and seven sea heads of its own.
Vale is also the greatest investor in electric energy generation of the country. The energy generated supplements its operational areas’ necessities: the Company, along with its supervisors, colligations and joint ventures, is the major energy consumer of Brazil.
The Company participates in the share structure of six hydro-electric plants, which are already working: Igarapava, Porto Estrela, Candonga, Funil, Eliezer Batista, Amador Aguiar I and II. Together, the hydro-electric plants generate1, 422 megawatts of energy. The use of energy of its own contributes for the reduction of production costs.
Uses long life and low cost assets as well as an expanding pipeline project and a global multi-commodity exploration program to sustain wealth creating options. BCG has named it as one of the top 25 sustainable value creators due to its strategy of the last 10 years. Traded on the NYSE, BOVESPA and Euronext Paris[1]
- Vale adjusted to the downturn by focusing on sustainable improvements. It has used its production capacity in PTI utilizing fuel powered sources, adjusting its product offering to adjust to market demands, reassessment of mine design and process to allow to improve efficiency. Workforce efficiency has improved, corporate function and operations has been reorganized and there have been cost-reduction programs in all operations. Vale has also made projects that deliver long term growth a priority.[2]
History
In 2006, Vale consolidated its internationalization process. By 2008, the company was present in 32 countries including: Brazil, South Africa, Angola, Argentine, Australia, Chile, China, USA, France, Gabon, India, Japan, Mozambique, Mongolia, Norway, Peru, Switzerland, Canada, Guatemala, Colombia, Barbados, Guinea, Finland, Germany, Oman, Kazakhstan, Taiwan, Indonesia and South Korea.
Vale’s intervention is characterized by transparent management, respect of its shareholders’ rights, environment protection, the development of its working force and provision of communities’ life-quality improvement. By means of Fundação Vale do Rio Doce, it fulfills social programs applied to territorial sustainable development of the regions where it attends, always guided by the strong respect towards local values and customs.
Business and Financial Metrics
- 58% of Vale’s gross revenues come from the Asian market and 58% of its gross revenues comes from iron ore and pellets.
- Vale has a higher average total shareholder return relative to the market than any other basic materials company.[3]
Gross operating revenue was $38.5BB, an increase of 16.3% from 2007 numbers. This increase was due, in large part, to higher prices.
- Capital expenditures in 2008 were $10.319BB. Of this $7.519BB came from organic growth and the rest was invested in maintaining existing operations.
- The global financial crisis marked a 46.9% decrease in demand in the last quarter of 2008 compared to the 2007 demand. Further, net income in the last quarter of 2008 was 71.6% lower than the 3rd quarter of 2008 due to a large amount of goodwill impairment after the acquisition of Vale Inco
- Operating margin is affected by the fluctuating exchange rates. Revenues are denominated in USD where COGS are denominated mostly in reais (R$). Thus, the decrease in income stemmed from the dollar losing value. During the first half of 2008 the devaluation of the USD had an adverse effect on the operating margin. However, in the second half of the year, the appreciation of the USD relative to R$ aided Vale in their cost-reduction programs.
- Gross revenues from nickel and other products decreased 33.6% due to a decline in nickel prices and copper sales and despite the increase in sales of precious metals.
- COGS increased 7.2% from 2007 to 2008 due to the depreciation of the USD, the outsourcing services, rising material costs, rising energy costs, rising personnel costs and the acquisition of iron and ore pellets from third parties.
Business Segments
- Ferrous Minerals (61.6% of Gross Revenues) : Dedicated to the sale of iron and iron ore pellets, manganese and ferroalloys. Most of the operations for this business segment occur in Brazil, China, France and Norway.
- Non-Ferrous Minerals (31.3% of Gross Revenues): Extraction, processing and sale of nickel, aluminum, copper, PGMs (platinum-group metals), by-products of the nickel mining like gold and silver and other non-ferrous minerals like kaolin.
- Coal (1.5% of Gross Revenues): operates mainly in Australia.
- Other (5.6% of Gross Revenues)
Head quartered in Brazil, Vale also operates in Canada, USA, Colombia, Peru, Barbados, Peru, Chile, Argentina, Chile, Norway, UK, Germany, Switzerland, Guinea, DRC, Gabon, Angola, Zambia, Mozambique, South Africa, Kazakhstan, Mongolia, Oman, China, India, Thailand, South Korea, Japan, Taiwan, Philippines, Indonesia, Singapore, Australia, and New Caledonia.[6]
Research and Development
Trends and Forces
Government incentives
The US has established the “cash for clunkers” program to support production in the auto sector. The EU has also adopted programs that incentivize auto production. The Chinese government has provided a stimulus package for the infrastructure and construction sector. In Brazil there has been a reduction in the tax on industrialized products and improvement in credit conditions.[7]
Shifting demands for mined products
Nickel demand continues to grow in the Chinese market (2009). Demand will continue to grow because of declining scrap availability and higher austenic ratio. Nickel supply however declined in the first half of 2009. Steel demand has increased because of better than expected economic improvements, government incentives and end of destocking process in various nations. Iron ore market: Brazil and the US show higher domestic demand for iron ore which means supply of seaborne ore will decrease. Lead times and the Indian monsoon period will affect short term production capabilities. [8]
Competition
In the Asian Market
Their transportation costs from Australia to Asia are lower than Vale’s, Vale responds to this competition by providing ore with low impurity levels and by cultivating sales relationships by sustaining a reliable supply of specific demands. In the Brazilian/Latin American market
Competition focuses around integrated transportation systems, high quality ore, and providing good technical services. In the pellet market
- LKAB
- Cleveland-Cliffs (CLF)
- Quebec Cartier Mining Co
- Iron Ore Company of Canada (subsidiary of Rio Tinto Ltd)
- Gulf Industrial Investment
References
- ↑ http://www.vale.com/vale_us/media/factsheeti.pdf
- ↑ http://www.vale.com/vale_us/media/Presentation_Investor%20tour.pdf
- ↑ http://www.vale.com/vale_us/media/factsheeti.pdf
- ↑ Company 20F, http://www.vale.com/vale_us/media/20F_2008_i.pdf
- ↑ Company 20F, http://www.vale.com/vale_us/media/20F_2008_i.pdf
- ↑ http://www.vale.com/vale_us/media/factsheeti.pdf
- ↑ http://www.vale.com/vale_us/media/Presentation_Investor%20tour.pdf
- ↑ http://www.vale.com/vale_us/media/Presentation_Investor%20tour.pdf
- ↑ Company 20F, http://www.vale.com/vale_us/media/20F_2008_i.pdf
| ||||||
|
|
