May 6 , 2 0 1 1 1 Q1 1 Results 1
Disclaimer “This presentation may include statements that present Vale's expectations about future events or results. All statements, when based upon expectations about the future and not on historical facts, involve various risks and uncertainties. Vale cannot guarantee that such statements will prove correct. These risks and uncertainties include factors related to the following: (a) the countries where we operate, especially Brazil and Canada; (b) the global economy; (c) the capital markets; (d) the mining and metals prices and their dependence on global industrial production, which is cyclical by nature; and (e) global competition in the markets in which Vale operates. To obtain further information on factors that may lead to results different from those forecast by Vale, please consult the reports Vale files with the U.S. Securities and Exchange Commission (SEC), the Brazilian Comissão de Valores Mobiliários (CVM), the French Autorité des Marchés Financiers (AMF), and The Stock Exchange of Hong Kong Limited, and in particular the factors discussed under “Forward- Looking Statements” and “Risk Factors” in Vale’s annual report on Form 20-F.” 2
� Another outstanding quarter � Continued growth ahead Agenda 3
Another outstanding quarter 4
Despite very adverse weather conditions, a good operational performance ∆ production 1Q11/1Q10 in % � Iron ore � Nickel +3.9 +79.7 � Pellets � Copper +26.5 +107.9 � Manganese � Coal +25.5 +0.2 � Ferroalloys +3.5 5
An outstanding financial performance The best first ∆ 1Q11 1Q10 quarter ever % US$ billion US$ billion Operating income 13.543 6.848 97.8 Adjusted EBIT¹ 6.456 2.062 213.1 Adjusted EBIT margin¹ 48.9% 31.2% +1,770 bps Adjusted EBITDA¹ 7.663 2.855 168.6 Net earnings 6.826 1.604 325.6 1 figures excluding the gain from the sale of assets of US$ 1.513 billion, a non-recurring event. 6
We have been dealing with seasonal and cyclical cost pressures Main cost pressures 1Q11 vs. 4Q10 Δ US$ million¹ Source � Maintenance materials Seasonal 93 � Fuel and gases Cyclical / political 79 � Purchases of products Cyclical 78 ¹ Net of volume and FX impacts 7
However, in addition to price increases, cost reduction was important to adjusted EBITDA performance Adjusted EBITDA US$ million (41) (65) 313 (379) 606 (1,640) 1,513 R&D Δ FX Cost and Dividends² 9,176 Price expenses¹ 8,869 variation Sales Gain on volume sale of assets 4 Q1 0 1 Q1 1 1 SG&A + COGS + other operating expenses ² Dividends received from affiliated non-consolidated companies 8
Cash generation is already well above the pre-crisis peak LTM Adjusted EBI TDA US$ billion 32.437 26.116 19.853 19.392 19.018 17.570 17.480 16.319 13.591 13.077 9.717 9.739 9.165 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 9
Powerful cash flow helps to keep a healthy balance sheet with a low-risk debt portfolio Total debt Debt cost and m aturity Total debt - US$ billion¹ Total debt/LTM EBITDA (x)¹ ¹ , ² Liquid asset s - US$ billion 2.5 2.4 Average cost of debt Average debt maturity 2.2 % Years 1.8 5.7 10.5 10.1 1.5 1.3 5.5 1.0 1.0 5.5 10.0 0.7 25.3 25.3 24.0 5.3 23.7 23.6 22.9 9.5 21.2 19.5 18.4 5.1 9.1 9.0 13.0 12.2 11.8 4.9 11.2 11.1 11.0 9.7 9.4 8.5 6.2 4.7 4.7 4.5 8.0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 ¹ at end of quarter. ² cash and cash equivalent. 10
Continued growth ahead 11
Global IP boomed since the end of 2010, adding strength to the global demand for minerals and metals Global industrial production 16 % 3mma, saar¹ 14 12 10 8 6 4 2 0 Jun- 09 Oct- 09 Feb- 10 Jun- 10 Oct- 10 Feb- 11 ¹ Seasonally adjusted annualized rate 12 Source: Vale and J.P. Morgan
Given the change in the inventory cycle, global IP growth is expected to moderate New orders/inventories ratio, sa¹ Global manufacturing PMI, sa¹ 1 ,25 58 57.4 57 1 ,20 57 1. 2 1.17 56 55.7 1 ,1 5 1. 15 55.5 Rat io, sa I ndex, sa 1.13 55 55 55 54.7 1 ,1 0 1. 1 1. 1 54.3 54 1. 08 54 1. 07 1. 07 53.3 1 ,05 1. 05 53 52.9 1. 01 52 1 ,00 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-1 0 Aug-1 0 Oct-1 0 Dec-1 0 Feb-1 1 Apr-1 1 ¹ Seasonally adjusted Sources: Vale and JP Morgan 13
China remains on the fast growth path driven by domestic demand Chinese GDP growth % 16 14 12 10 8 6 YoY 4 QoQ¹ 2 0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 ¹ Saar Source: CEIC 14
Both fixed asset investment and industrial production are showing signs of reacceleration in China FAI and IP growth 3 0 2 0 FAI I P 2 9 1 8 2 8 1 6 2 7 % 3m m a,saar 1 2 6 1 4 % YoY 2 5 1 2 2 4 2 3 1 0 2 2 8 2 1 2 0 6 Jan- 1 0 Mar- 1 0 May- 1 0 Jul- 1 0 Sep- 1 0 Nov- 1 0 Jan- 1 1 Mar- 1 1 ¹ Seasonally adjusted annualized rate Source: Haver Analytics 15
China’s 12th FYP 2011-2015 – priorities are supportive of the demand for Vale’s iron ore � Average annual GDP growth of 7%. � Housing: 36 million units of social housing. � Reduction of 16% in energy consumption per unit of GDP. � 17% less carbon emissions per unit of GDP. � Proportion of urban residents to reach 51.5% vs 47.5% at the end of 2010. � Creation of 45 million urban jobs. 16
Targeted affordable housing starts in China million units 0 2 4 6 8 10 12 5.8 2010 72.4% 10.0 2011 17
Global carbon steel output is running at 1.5 billion metric tons per year, expanding by 7.6% over 4Q10. Although China is the main growth driver with 50%, expansion has broadened. China 1 Global 1 65 130 60 125 120 Million metric tons 55 115 Million metric tons 110 50 105 100 45 95 90 40 85 80 35 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 7 8 9 0 1 7 8 9 0 0 0 0 0 0 0 1 1 1 - - - - - - - - - r r r r r p p p p a a a a a e e e e M M M M M S S S S 3-month moving average 1 monthly data, on a seasonally adjusted basis. Sources: Vale and World Steel. 18
Iron ore prices continue to hover around a high level in face of strong global demand growth and supply constraints Platts IODEX 62% Fe US$/dry metric ton 1 8 3 200 May 3, 2011 185 170 155 140 125 110 Apr- 1 0 Jun- 1 0 Aug- 1 0 Oct- 1 0 Dec- 1 0 Feb- 1 1 Apr- 1 1 Source: Platts. 19
Global SS production reached an all-time high at 8.6 Mt in 1Q11. Fast expansion in consumption expenditures in EM countries will drive long-term demand growth 1 Global stainless steel output 9,000 40% 30% 8,000 20% '000 m etric tons 7,000 10% QoQ 0% 6,000 - 10% 5,000 - 20% 4,000 - 30% 8 8 8 8 9 9 9 9 0 0 0 0 1 0 0 0 0 0 0 0 0 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 Q Q Q Q Q Q Q Q Q Q Q Q Q 1 2 3 4 1 2 3 4 1 2 3 4 1 SA quarterly rate of change. 1 seasonally adjusted. 20
Despite the expansion of NPI/FeNi production, the nickel market remains tight due to the broad based global demand growth Nickel prices US$/ metric ton Inventories Prices 170 29.000 160 27.000 US$ per m etric ton 150 000' m etric ton 25.000 140 23.000 130 21.000 120 19.000 110 17.000 15.000 100 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Source: Bloomberg 21
According to analyst estimates, Vale has the highest growth potential among large mining companies Copper equivalent volume growth (C2010-20, rebased) Vale Vale Peer1 Peer2 Peer3 Peer4 Source: J.P. Morgan 22
From 2011 to 2015, 34 additional major projects will be delivered, contributing to shareholder value creation CSU Greenfield CSP Biodiesel Rio Colorado Salitre Cristalino Serra Leste Teluk Rubiah Karebbe Long-Harbour Nacala ALPA Belo Monte Salobo Simandou I Apolo Konkola North Moatize Tubarão VIII Serra Sul (S11D) Ellensfield 2011 2012 2013 2014 2015 Carajás 40 Mtpy Conceição Itabiritos Iron ore & pellets Conceição Itabiritos II Nickel Vargem Grande CLN S11D Totten Itabiritos Coal Copper Cauê Itabiritos Simandou II Fertilizers Moatize II Logistics Bayovar II Salobo II Brow nfield Energy Steel Samarco IV CLN 150 Mtpy 23
Discipline in capital allocation: return on invested capital has returned to the pre-crisis level and it is far above the cost of capital 40% 200 35% 180 30% 160 140 25% ROI C LTM 1 US$ billion 120 20% 100 I nvested capital 15% 80 US$ billion 60 10% 40 5% 20 0% 0 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 1 ROIC LTM = return on invested capital for last twelve-month periods. 24
Strengthening infrastructure � Estreito hydro power plant => delivered � Vale Brasil , first Valemax 400,000 dwt => delivered 25
Ramping up production � Tres Valles copper � Onça Puma nickel � Oman pellets 26
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