Transcript VALE – SELL / 9/13/12 MARK BLAZO, PORTFOLIO MANAGER PITCH OVERVIEW   Sell 36.591 shares @ $18.99 each $694.86

VALE – SELL / 9/13/12
MARK BLAZO, PORTFOLIO MANAGER
PITCH OVERVIEW


Sell 36.591 shares @ $18.99 each
$694.86
VALE




Exploration, production, and sale of basic metals in
Brazil and internationally
Larget producer of iron ore in the world
Involved in fertilizers, logistics, and steel businesses
Majority of revenue from selling iron ore and nickel
IRON ORE IMPORTS




China 34%
Japan 23%
Germany 7.5%
Rest of World 35.5%
IRON ORE PRICES


Iron ore prices
down 37% this
year
Steepest drop
among industrial
commodities due to
China’s slowdown
CHINESE STEEL PROFITS

Chinese steel companies saw profits decline 49.4%
from a year earlier to $6.64 billion
CHINESE INFRASTRUCTURE STIMULUS




¼ size of failed 2008-2009 Chinese stimulus
Iron ore prices will remain low, hurting margins
Stimulus now priced in to stock after 6.75% jump
Do we want to be in a sector that requires stimulus
to boost demand?
GROWTH AND COMPETITION

Major competitor: BHP Billiton
COMPETITORS
STRENGTHS

Debt to Equity Ratio
 Low

0.34
debt on the books
Quick Ratio
 High
1.20
ratio allows Vale to meet short-term cash needs
WEAKNESSES



Net Income
-67% YoY
Weak operating cash flow
Decreasing stock price
OPPORTUNITIES

New infrastructure spending from Chinese
government
 Roads
 Water
ports
 Airports
THREATS

Countries are continually being exposed for having
financial problems
 Spain
 Italy
 Greece
RECENT NEWS


On September 5th, Vale recently postponed plans of a
mining project in Canada. The mine would produce
1500 jobs and 2.9 million metric tons of potash. The
reason for the cancellation of immediately starting the
job is “because of decreased China demand and
drought conditions in the United States. Potash is used in
fertilizers and agricultural products and the agrarian
industry isn’t doing well.”
The recent drought in the U.S. and lack of demand in
China is causing action from Vale.
RECENT NEWS



A report released on September 9th showed
Japan’s economy (purchases 23% of world’s iron
ore supply) slowing drastically from an estimated
1.4% growth to 0.7%
European debt crisis putting a cap on spending from
businessesS
Data released on September 8th shows smallest rise
in China’s industrial output in the last three years.
VALUATION







52-week change
S&P 52-week change
-31.9%
22.2%
Quarterly Revenue Growth
Quarterly Earnings Growth
-2.1%
-48.3%
Total Cash
Debt-Equity
P/E
4.2B
34%
6.75
Total Debt 27.3B
Current Ratio 2.24
SUMMARY


Sell 36.591 shares @ $18.99 each
$694.86