Vale’s Performance in 1Q18 to a record sales volume for a first quarter of iron ore and pellets...
Transcript of Vale’s Performance in 1Q18 to a record sales volume for a first quarter of iron ore and pellets...
2 Ag
en
da“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 in particular the factors discussed under
“Forward-Looking Statements” and “Risk Factors” in Vale’s annual report on Form
20-F.”
“Cautionary Note to U.S. Investors - The SEC permits mining companies, in their
filings with the SEC, to disclose only those mineral deposits that a company can
economically and legally extract or produce. We present certain information in
this presentation, including ‘measured resources,’ ‘indicated resources,’ ‘inferred
resources,’ ‘geologic resources’, which would not be permitted in an SEC filing.
These materials are not proven or probable reserves, as defined by the SEC, and
we cannot assure you that these materials will be converted into proven or
probable reserves, as defined by the SEC. U.S. Investors should consider closely
the disclosure in our Annual Report on Form 20-K, which may be obtained from
us, from our website or at http://http://us.sec.gov/edgar.shtml.” Dis
clai
mer
3 Ag
en
da
Agen
da
1. Vale’s performance in 1Q18
2. Capital expenditures
3. Capital structure
4. Business segment performance
5
US$ 4.0 biTotal EBITDA
Performance highlights in 1Q18
5
US$ 890 miCapital Expenditures
US$ 104 miCoal EBITDA
US$ 39.8/tFerrous Minerals
EBITDA Margin
US$ 5.0 biFree Cash Flow
US$ 14.9 biNet Debt
41%9%
77% 18%
1 Excluding Manganese and Ferroalloys
10%1
6
4.3084.109 3.971
1Q17 4Q17 1Q18
EBITDA was leveraged by our premium and flexible product
portfolio in 1Q18
Highlights 1Q18
Adjusted EBITDA was US$ 3.971 billion
in 1Q18, remaining practically in line
with 4Q17, despite the challenge of
seasonally lower volumes
Improved sales mix for Ferrous
Minerals and Base Metals leveraged
higher realized prices
The flexibility of Vale`s supply chain
led to a record sales volume for a first
quarter of iron ore and pellets
Adjusted EBITDA
6
US$ billion
7
Strong cash generated from operations and proceeds from
divestments led to an increase in FCF in 1Q18
7
US$ million
2,943 (381)
(365)(890) 1,084
2,572 52 5,015 (2,277)
(1,437)
(261)1,040
Cashgenerated
fromoperations
Intereston loans
Income taxes& Refis
settlementprogram
Capex Net disposal/acquisitionof assets
andinvestments
NacalaProjectFinance
Others Freecashflow
Debtrepayment,
net
Shareholderremuneration
Others Increase(decrease)
incash & cashequivalents
1
2 3
4
1 Includes derivatives and financial instruments, dividends and interest on capital from associates and JVs and other loans,
advances and investments activities 2 Net cash provided by operating and investing activities from continuing operations 3 Includes the premium paid in the tender offer of the 2022 notes4 Includes dividends and interest on capital paid to noncontrolling interest, transactions with noncontrolling stockholders, net
cash from discontinued operations, effects of disposals of subsidiaries and merger, net cash used in discontinued operations
and foreign exchange effect on cash and cash equivalents
9
Capital expenditures were reduced to the lowest level for a first
quarter since 2005
1Q18 Highlights
Capital expenditures totaled US$ 890
million in 1Q18, following the trend of
remaining sub US$ 1 billion per quarter
Capital expenditures guidance of US$
3.8 billion for 2018 is reinforced
S11D achieved combined physical
progress of 95% in 1Q18 with the mine
site concluded and 91% progress at the
logistic infrastructure sites
Project and sustaining capex
US$ million
9
587
347 361
526631
529
1Q17 4Q17 1Q18
Growth projects Sustaining
978890
1,113
10
Sustaining capex segmentation is consistent with the
rigorous capital allocation process
Highlights 1Q18
Ferrous Minerals and Base Metals
business segments represented
61% and 34% of sustaining capex,
respectively
Lower nickel sustaining investments,
as non-performing assets in nickel
were placed in care &
maintenance
Higher investment in Ferrous
Minerals due to restart of
pelletizing plants, leveraging on
the higher pellet premium
10
302248 278
365 322
187233
250186
138
12 1626
50
43
25 812
28
24
1Q17 2Q17 3Q17 4Q17 1Q18
Coal Copper Nickel Ferrous Minerals
US$ million
Total Sustaining
526 507 568 631 529
12
22,777
18,143
14,901
1Q17 4Q17 1Q18
US$ 5.375 billion
Substantial net debt reduction of US$ 3.2 billion quarter-
on-quarter
12
Net debtCash position
on March 31st, 2018US$ million
13
1.61.5
1.31.2
1.0
1Q17 2Q17 3Q17 4Q17 1Q18
Leverage decreased to 1.0x and will reduce further as net debt
target of US$ 10 bi is reached in the short term
Net debt / LTM1 EBITDA Ratio
1 LTM – last twelve months
Net debt in
1Q18:
US$ 14.901
billion
Cash position in
1Q18:
US$ 5.375 billion
Average
maturity:
9.3 years
Average cost of
debt:
4.97% per annum
13
14
Cash balance will be used to implement a liability management
program to reduce gross debt in 2018
Gross debt amortization schedule1
1 As of March 31st, 2018. Does not include accrued charges.
US$ billion
67% of our debt settlement will occur
after 2022
14
Gross debt
US$ million
29,570
22,48920,276
1Q17 4Q17 1Q18
0.71.7 2.5 1.7
13.2
19.8
2018 2019 2020 2021 2022onwards
Grossdebt
16
Vale’s premium and flexible portfolio of products leads,
and profits from, the structural “flight to quality” trend
16
-40
-30
-20
-10
0
10
20
30
Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18
Título do Gráfico65%-62%
58%-62%
Premiums and discounts
+US$17/t
Source: Bloomberg and Mysteel
US$ 44/t
-US$ 27/t
US$/t
17
3,427
152 2 25 341 212 51 17 49
3,408
EBITDA4Q17
IODEX62% Fe¹
FX Bunker Volume Premiums &commercialinitiatives
Freight &distribution
costs
Unit costs Others EBITDA1Q18
US$ million
18
1 IODEX 62% Fe net effect in both revenues (US$ 238 million) and costs (US$ 86 million).
Active supply chain management, higher quality and
average premium offset seasonally lower sales volumes
Ferrous Minerals Adjusted EBITDA
18
74.3 76.3
66.4
2.1
3.1 1.2 0.8 0.2 3.3
4.1
5.9
AveragePlatts
1Q18 (dmt)
Quality Premium / discount and commercial conditions
Provisionalprices in
prior quarter¹
Laggedprices
Current Provisionalprices
in currentquarter²
CFR reference price (dmt)
Adjustmentfor
FOB sales
Moisture Vale CFR/FOB price(wmt)³
Impact of pricing system adjustments
1 Adjustment as a result of provisional prices booked in 4Q17 at US$ 72.8/t.2 Difference between the weighted average of the prices provisionally set at the end of 1Q18 at US$ 64.8/t based on forward curves and the average
of US$ 74.3/t from the 1Q18 IODEX.3 Vale price is net of taxes.
US$/t, 1Q18
+2.7%
18
Improved product sales mix drove the quality and premium
contributions up to US$ 5.2/t
191 Ex-ROM
EBITDA breakeven decreased by US$ 1.7/t as a result of
higher quality and premiums
14.8
16.4
3.2
0.7 3.1
5.2
33.0
2.4
30.5
3.9 34.5
C1 cash cost¹ Freight Royalties & expenses
Distribution Moisture Quality EBITDA breakeven
iron ore fines
Pellet adjustment
EBITDA breakeven (pellets &
fines)
Sustaining Iron ore & pellets cash breakeven
Cost landed in China
US$/t, 1Q18
19
20
Base Metals EBITDA was positively impacted by improved
sales mix and higher premiums
20
Nickel sales product mix
8% 12% 7%
7%10%
7%
30%23%
22%
55% 56%63%
1Q17 4Q17 1Q18
Class I
Class II battery-suitable
Class II
Intermediates
361674
-2,360
410
-300
1,390
Vale's average aggregate realized
premium after timing and
pricing adjustments
Vale's average aggregate realized premium
IntermediatesClass II premium
Class II battery-suitable discount
Class I premium
Nickel premium/discount by product and
average aggregate realized premiums
US$/t, 1Q18
21
Coal EBITDA continued to improve in 1Q18, driven by higher
realized prices
21
6974
104
1Q17 4Q17 1Q18
Coal EBITDA
US$ million
Highlights 1Q18
Coal adjusted EBITDA increased 41%,
despite lower sales volumes
Higher realized prices were due to the
increase of the share of contracts
linked to index reference price
92% of the metallurgical coal sales were
priced based on market index, including
index-lagged prices, vs. 77% in 4Q17
99% of thermal coal sales were priced
based on index prices vs. 86% in 4Q17
23
Fe Pellets Ni Cu Coal
Production and sales highlights
Total: 82.0 Mt
N. System: 40.6 Mt
Total: 12.8 Mt Total: 58.6 Mt
Long Harbour:
8.6 Mt
Total: 93.3 Mt Mozambique: 2.4 Mt
&
Quarterly record%
%
23
Record for a first quarter&
Sales volumes IO & Pel: 84.3 Mt&
24
Highlights 1Q18
Net operating revenues of US$ 8.603
billion
Revenues were US$ 88 million higher
than in 1Q17, mainly due to higher
sales volumes for Ferrous Minerals
and higher sales prices for Base
Metals
58% sales to Asia and 10% domestic
sales
Ferrous Minerals accounted for 76%
of revenues
Base Metals accounted for 19% of
revenues
Net operating revenues by
destination in 1Q18
24
Revenues
42%
17%
9%
10%
7%
6%
6%3%
China EuropeOther Asia BrazilJapan North AmericaRest of the World Middle East
25
5,294
4,747
607
6169 70
4Q17 Sales volumes
Commodities linkedcosts
Exogenous factors
Expenses 1Q18
Costs and expenses
Highlights 1Q18
COGS remained practically in line with 4Q17, after excluding the effects of:
seasonally lower sales volumes;
higher commodities prices, resulting in higher pelletizing plants leasing costs and higher royalties;
other exogenous factors, such as the negative impact of exchange rate variation and higher oil costs
Higher bunker oil prices were partially offset by lower spot freight rates in 1Q18
Costs and expenses1 1Q18 vs. 4Q17
US$ million
25
1 Excluding depreciation.
26
Evolution of iron ore fines cash cost, freight and expenses
14.7 14.6 14.8
1Q17 4Q17 1Q18
C1 cash cost FOB port1 Freight
US$/t
14.2
17.016.4
1Q17 4Q17 1Q18
Expenses2 & royalties
1.5
2.5
3.2
1.3
1Q17³ 4Q17 1Q18
1 Ex-ROM and ex-royalties. 2 Including dividends received. Net of depreciation. Considers the new allocation criteria for general and administrative expenses as described in the box “Managerial
Allocation Changes” of this Earnings Release.3 Expenses per ton totaled a positive amount in 1Q17, mainly due to the recovery of the insurance (US$ 85 million) associated with the destruction of the “Fábrica Nova
– Timbopeba” long distance belt conveyor.
26
Positive one-off impact3
2.8
27
Iron ore fines sales composition
27
16% 15% 9%
16% 14%13%
67% 70%76%
1Q17 4Q17 1Q18
Premium products¹SouthernSoutheasternOthers
1 Composed of pellets, Carajás and Brazilian Blend Fines.
28
Iron ore pricing systems
Provisional - prior quarter Lagged
Current Provisional - current quarter
0.2
-0.8
4Q17 1Q18
1.0
-0.2
4Q17 1Q18
Pricing system breakdown Impact of pricing mechanisms
US$/t
28
10% 11% 9%
49% 49% 56%
41% 40% 35%
1Q17 4Q17 1Q18
Lagged
Current
Provisional
-0.5
1.2
4Q17 1Q18
2.4
-3.3
4Q17 1Q18
29
Price realization copper
6,961
6,768
6,380
5,827
193
388
553
Average LME copper price
Current period price adjustments
Copper gross realized price
Prior period price adjustments
Copper realized price before discounts
TC/RCs, penalties, premiums and
discounts
Average copper realized price
29
US$/t, 1Q18
30
Unit cost of sales per operation, net of by-product credits
Operation (US$ / t) 1Q18 4Q17 1Q17
North Atlantic Operations1 (nickel) 6,756 4,624 6,699
PTVI (nickel) 7,246 6,609 6,821
VNC (nickel) 8,874 8,420 11,232
Onça Puma (nickel) 7,685 7,536 9,341
Sossego (copper) 3,267 3,270 2,941
Salobo (copper) 1,155 679 1,406
1 North Atlantic figures include Clydach and Acton refining costs.
30
31
228.5204.6
(7.4) (6.4) (4.7) (3.7) (1.6) (0.1)
50.060.070.080.090.0
100.0110.0120.0130.0140.0150.0160.0170.0180.0190.0200.0210.0220.0230.0
Averagereference price
1Q18
Quality Premium, discounts & commercial conditions
Provisional prices in prior
quarters
Lagged and current prices
Provisional prices in current quarters
Freight differential
Valeprice 1Q18
US$/t, 1Q18
31
Impact of pricing system adjustments
Price realization –metallurgical coal from Mozambique
32
US$/t, 1Q18
32
Price realization – thermal coal from Mozambique
94.4 (13.5) 0.8 (0.3) 0.5 (0.0) 0.2
82.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
Averagereference price
1Q18
Quality Premium, discounts & commercial conditions
Provisional prices in prior
quarters
Lagged and current prices
Provisional prices in current quarters
Freight differential
Valeprice1Q18
Impact of pricing system adjustments
33
17%
74%
8%
Hedge to USD USD BRL Others
23%
63%
13%
Development Agencies Capital MarketsBank Loans
Debt position breakdown
Debt breakdown by instrument Debt breakdown by currency
(after hedge)
33