By Joe Leahy in S?o Paulo
Vale, the world?s second-largest miner by volume, reported a 20 per cent fall in fourth quarter net profit against a year earlier after a decline in the price of its most important export, iron ore.
The company said in results released late Wednesday night that net profit was $4.67bn compared with $5.92bn a year earlier, lower than a survey of analyst estimates by Bloomberg but in line with those in a Reuters survey.
Vale reported sales during the quarter were $14.8bn, down 1.17 per cent on lower demand from Europe and lower iron ore prices in the second half of the year.
The company?s performance in the fourth quarter lagged behind the third ?as a consequence of lower prices caused by the European recession and the negative expectations produced by the euro area debt crisis?, Vale said.
The weaker results come as Vale has been locked in disputes with its Chinese customers over a pricing mechanism for iron ore.
After remaining relatively stable between April and September, iron ore prices fell by about one-third in October, with the CFR Tianjin spot price in China falling to $116 per tonne from a peak of $181 in July.
Vale reported earnings before interest, taxation, depreciation and amortisation for the quarter of $7.4bn compared with $8.87bn a year earlier.
Full-year gross operating revenue was $60.39bn, up from $46.48bn a year earlier, while 2011 net profit was $22.89bn, up from $17.26bn.
?In 2011, sales to Asia represented 52.8 per cent of total revenues, slightly below 53.3 per cent in 2010. The share of sales to clients in the Americas was 25.2 per cent, up from 23.6 per cent last year, due to increased sales to the US and Brazil,? Vale said.
Credit Suisse predicted in a report that the tighter market conditions would continue in 2012, with iron ore prices expected to be weaker.
?We believe Brazilian iron ore miners will face lower year-on-year results due to lack of volume growth and 10 per cent lower year-on-year average price,? Credit Suisse said.
The results follow a turbulent year for Vale in its relations with China, whose shipping companies have objected to the Brazilian miner?s new fleet of giant iron ore carriers.
Known as Valemaxes, the ships are an attempt by Vale to reduce its freight costs, its main competitive disadvantage with its rivals in Australia, BHP and Rio Tinto.
But China has made it difficult for the ships to dock at its ports, claiming concerns over safety after one of the vessels developed cracks and had to be repaired in Brazil.
Investors are also closely watching the performance of Vale after management of the company was handed over to new chief executive Murilo Ferreira last year.
Tensions between the government and Mr Ferreira?s predecessor, Roger Agnelli, had led to concerns that the company was becoming subject to heavy handed interference from the state.
But Mr Ferreira has sought to shore up investor confidence. The company paid out a $9bn dividend last year, the largest in its history and three times as much as in 2010, and also carried out a $3bn share buy-back in November.
? The Financial Times Limited 2012