Vale S.a. · BMFBOVESPA:VALE3
Vale — Q1 2018 Earnings Presentation
34 slides from Vale's earnings presentation, Apr 26, 2018
Slide 1: Vale's Performance in 1Q18
Ricardo Teles / Agência Vale Vale’s Performance in 1Q18 Rio 1 de Janeiro, April 26th, 2018
Slide 2: Agend
“This presentation may include statements that present Vale's expectations about future events or results. All statements, when based upon expectations about the Agend future and not on historical facts, involve various risks and uncertainties. Vale cannot guarantee that such statements will prove c
Slide 3: Agenda
Agenda Agend 1. Vale’s performance in 1Q18 2. Capital expenditures 3. Capital structure 4. Business segment performance 3
Slide 4: Vale's performance in 1Q18
Vale’s performance in 1Q18 4
Slide 5: Performance highlights in 1Q18
5 Performance highlights in 1Q18 US$ 890 mi US$ 104 mi US$ 4.0 bi Capital 9% Coal 41% Total EBITDA Expenditures EBITDA US$ 39.8/t US$ 5.0 bi US$ 14.9 bi Ferrous Minerals 1 10% 77% 18% EBITDA Margin Free Cash Flow Net Debt 5 1 Excluding Manganese and Ferroalloys
Slide 6: EBITDA was leveraged by our premium and flexible product portfolio in 1Q18
6 EBITDA was leveraged by our premium and flexible product portfolio in 1Q18 Adjusted EBITDA Highlights 1Q18 US$ billion Adjusted EBITDA was US$ 3.971 billion in 1Q18, remaining practically in line 4.308 4.109 3.971 with 4Q17, despite the challenge of seasonally lower volumes Improved sales mix for
Slide 7: Strong cash generated from operations led to an increase in FCF in 1Q18
7 Strong cash generated from operations and proceeds from divestments led to an increase in FCF in 1Q18 US$ million 2,572 52 5,015 (2,277) 2,943 (381) (1,437) (365) (890) 1,084 (261) 1,040 Cash Interest Income taxes Capex Net disposal/ Nacala Others 1 Free Debt Shareholder Others 4 Increase generate
Slide 8: Capital expenditures
Capital expenditures 8
Slide 9: Capital expenditures were reduced to the lowest level for a first quarter since 2005
9 Capital expenditures were reduced to the lowest level for a first quarter since 2005 Project and sustaining capex 1Q18 Highlights US$ million 1,113 Capital expenditures totaled US$ 890 978 million in 1Q18, following the trend of 526 890 631 remaining sub US$ 1 billion per quarter 529 Capital expen
Slide 10: Sustaining capex segmentation is consistent with the rigorous capital allocation process
10 Sustaining capex segmentation is consistent with the rigorous capital allocation process US$ million Highlights 1Q18 Coal Copper Nickel Ferrous Minerals Total Sustaining Ferrous Minerals and Base Metals business segments represented 526 507 568 631 529 61% and 34% of sustaining capex, 28 respecti
Slide 11: Capital structure
Capital structure 11
Slide 12: Substantial net debt reduction of US$ 3.2 billion quarter-on-quarter
12 Substantial net debt reduction of US$ 3.2 billion quarter- on-quarter Net debt Cash position US$ 5.375 billion on March 31st, 2018 US$ million 22,777 18,143 14,901 1Q17 4Q17 1Q18 12
Slide 13: Leverage decreased to 1.0x and will reduce further
13 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 1.6 Net debt in 1.5 1Q18: Cash position in 1.3 US$ 14.901 1Q18: 1.2 billion US$ 5.375 billion 1.0 Average Average cost of maturity: debt: 9.3 years 4.97% pe
Slide 14: Cash balance will be used to implement a liability management program
14 Cash balance will be used to implement a liability management program to reduce gross debt in 2018 Gross debt Gross debt amortization schedule1 US$ million US$ billion 19.8 13.2 29,570 22,489 2.5 1.7 20,276 1.7 0.7 2018 2019 2020 2021 2022 Gross onwards debt 67% of our debt settlement will occur
Slide 15: Business segment performance
Business segment performance 15
Slide 16: Vale's premium and flexible portfolio leads the structural flight to quality trend
16 Vale’s premium and flexible portfolio of products leads, and profits from, the structural “flight to quality” trend Título do Gráfico Premiums and discounts 65%-62% 58%-62% US$/t 30 20 +US$17/t 10 0 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 US$ 44/t -10 -20 -US$ 27/t -
Slide 17: Active supply chain management offset seasonally lower sales volumes
18 Active supply chain management, higher quality and average premium offset seasonally lower sales volumes Ferrous Minerals Adjusted EBITDA US$ million 152 2 25 341 17 49 212 51 3,408 3,427 EBITDA IODEX FX Bunker Volume Premiums & Freight & Unit costs Others EBITDA 4Q17 62% Fe¹ commercial distribut
Slide 18: Improved product sales mix drove quality and premium contributions up to US$ 5.2/t
18 Improved product sales mix drove the quality and premium contributions up to US$ 5.2/t US$/t, 1Q18 + 2.7% 3.1 1.2 0.8 0.2 3.3 2.1 4.1 76.3 74.3 5.9 66.4 Average Quality Premium / Provisional Lagged Current Provisional CFR reference Adjustment Moisture Vale CFR/FOB Platts discount and prices in pr
Slide 19: EBITDA breakeven decreased by US$ 1.7/t
19 EBITDA breakeven decreased by US$ 1.7/t as a result of higher quality and premiums US$/t, 1Q18 5.2 0.7 3.1 2.4 3.2 3.9 34.5 33.0 16.4 30.5 14.8 C1 cash cost¹ Freight Royalties & Distribution Moisture Quality EBITDA Pellet EBITDA Sustaining Iron ore & expenses breakeven adjustment breakeven pellet
Slide 20: Base Metals EBITDA positively impacted by improved sales mix and higher premiums
20 Base Metals EBITDA was positively impacted by improved sales mix and higher premiums Nickel sales product mix Nickel premium/discount by product and average aggregate realized premiums Class I Class II battery-suitable US$/t, 1Q18 Class II Intermediates 1,390 674 410 361 -300 55% 56% 63% -2,360 2
Slide 21: Coal EBITDA continued to improve in 1Q18
21 Coal EBITDA continued to improve in 1Q18, driven by higher realized prices Coal EBITDA Highlights 1Q18 US$ million Coal adjusted EBITDA increased 41%, despite lower sales volumes 104 Higher realized prices were due to the increase of the share of contracts 74 linked to index reference price 69 92
Slide 22: Additional information
Additional information 22
Slide 23: Production and sales highlights
23 Production and sales highlights % Quarterly record & Record for a first quarter Fe Pellets Ni Cu Coal Total: 82.0 Mt Total: 12.8 Mt Total: 58.6 Mt Total: 93.3 Mt Mozambique: 2.4 Mt & % N. System: 40.6 Mt Long Harbour: 8.6 Mt & Sales volumes IO & Pel: 84.3 Mt 23
Slide 24: Revenues
24 Revenues Net operating revenues by Highlights 1Q18 destination in 1Q18 Net operating revenues of US$ 8.603 billion 3% 6% 6% Revenues were US$ 88 million higher than in 1Q17, mainly due to higher 7% sales volumes for Ferrous Minerals 42% and higher sales prices for Base Metals 10% 58% sales to Asi
Slide 25: Costs and expenses
25 Costs and expenses Costs and expenses1 1Q18 vs. 4Q17 Highlights 1Q18 US$ million COGS remained practically in line with 4Q17, after excluding the effects of: 5,294 607 seasonally lower sales volumes; higher commodities prices, resulting in higher pelletizing plants leasing costs 69 70 and hig
Slide 26: Evolution of iron ore fines cash cost, freight and expenses
26 Evolution of iron ore fines cash cost, freight and expenses US$/t C1 cash cost FOB port1 Freight Expenses2 & royalties Positive one-off impact3 17.0 2.8 14.7 14.8 16.4 3.2 14.6 14.2 1.3 2.5 1.5 1Q17 4Q17 1Q18 1Q17 4Q17 1Q18 1Q17³ 4Q17 1Q18 1 Ex-ROM and ex-royalties. 2 Including dividends received
Slide 27: Iron ore fines sales composition
27 Iron ore fines sales composition Premium products¹ Southern Southeastern Others 67% 70% 76% 16% 14% 13% 16% 15% 9% 1Q17 4Q17 1Q18 27 1 Composed of pellets, Carajás and Brazilian Blend Fines.
Slide 28: Iron ore pricing systems
28 Iron ore pricing systems Pricing system breakdown Impact of pricing mechanisms US$/t Lagged Current Provisional - prior quarter Lagged Provisional 1.2 0.2 41% 40% 35% -0.5 -0.8 4Q17 1Q18 4Q17 1Q18 Current Provisional - current quarter 49% 49% 56% 2.4 1.0 -0.2 10% 11% 9% -3.3 1Q17 4Q17 1Q18 4Q17 1
Slide 29: Price realization copper
29 Price realization copper US$/t, 1Q18 6,961 193 6,768 388 6,380 553 5,827 Average LME Current period Copper gross Prior period price Copper realized TC/RCs, penalties, Average copper copper price price adjustments realized price adjustments price before premiums and realized price discounts discou
Slide 30: Unit cost of sales per operation, net of by-product credits
30 Unit cost of sales per operation, net of by-product credits Operation (US$ / 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 (copp
Slide 31: Price realization – metallurgical coal from Mozambique
31 Price realization – metallurgical coal from Mozambique US$/t, 1Q18 (7.4) 230.0 (6.4) (4.7) 220.0 (3.7) (1.6) (0.1) 210.0 200.0 190.0 180.0 170.0 160.0 150.0 140.0 228.5 130.0 204.6 120.0 110.0 100.0 90.0 80.0 70.0 60.0 50.0 Average Quality Premium, Provisional Lagged and Provisional Freight Vale
Slide 32: Price realization – thermal coal from Mozambique
32 Price realization – thermal coal from Mozambique US$/t, 1Q18 100.0 90.0 94.4 (13.5) 0.8 (0.3) 0.5 (0.0) 0.2 80.0 82.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Average Quality Premium, Provisional Lagged and Provisional Freight Vale reference price discounts & prices in prior current prices prices i
Slide 33: Debt position breakdown
33 Debt position breakdown Debt breakdown by instrument Debt breakdown by currency (after hedge) 13% 8% 17% 23% 63% 74% Development Agencies Capital Markets Hedge to USD USD BRL Others Bank Loans 33
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