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Vale SAPresented by:
Harpreet Singh
Johannes Tannert
DisclaimerThis is to certify that the opinions expressed in this presentations are
essentially those of the presenters and do not represent the opinions expressed by FMA. The charts and data collected are from reliable sources and no agreement was breached while presenting this data.
This presentation is intended to analyze VALE SA for investment purposes.
Summary/Agenda
Introduction
Overview – Mining Sector
Company Overview
Outlook – Mining Sector
Technical Analysis
Recommendation
Sector Consideration
High risks worldwide
Sectors where companies are not concentrated on one region
High future demand
Considered Sectors:
Consumer Goods
Pharamceuticals
Mining
FMA Portfolio
FMA portfolioInformation Technology;
9.22%
Consumer Discretionary;
7.45%Consumer Staples; 7.97%
Financials; 20.66%
Energy; 7.05%Utilities; 12.42%
Industrials; 4.99%
Materials; 7.45%
Healthcare; 15.72%
Telecom Services;
1.39%
Speciality; 0.81%Commodities; 4.88%
Mining Sector
Largest segments: Iron, Aluminium and Coal ; Dependent on steel
Cyclical, highly competitive
Biggest Producers: Australia, Brazil
Biggest Demand: China, India
Market can be divided into Major and Junior Companies
Junior Companies mainly explore new areas, very risky
Market controlled by a few companies; biggest BHP Billiton, Vale, Rio Tinto
Market Cap for top mining companies
Development of Commodity Prices
9
Overview of the companyName: VALE
Market Capitalization: US $ 120 bn
Sector: Mining Energy Logistics
Steelmaking
Listed on: NYSE, BM&F BOVESPA, Euronext Paris, The Stock Exchange of Hong Kong Limited
Second largest mining company in the world
Leader in Total Shareholder Return (38.1% for 2001-2010)
10
Vale sector distribution
Areas in which VALE is involved in mining
source: vale.com.br
11
Vale global Presence
source: vale.com.br
12
Sustainability
Introduced programs like Vale Carbon Program to control carbon foot print.
Big investment in Bio-diversity
Botanical Gardens
Natural diversity parks
Heritage Reserves
Started Environmental Management System in 2010 aimed at waste management and pollution reduction
The Vale Fund for Sustainable Development works in partnership with public sector companies to support projects aimed at a sustainable development
Vale foundation: Works for improving the Economic, Environmental and Social conditions
Vale joint ventures, subsidiaries and affiliates
14
Financials
source: vale.com.br
15
Segmented Earnings
source: vale.com.br
16
Vale operational revenue by region
North
Am
erica
C
anada
South
Am
erica
O
thers
C
hina
S
outh K
orea
O
thers
G
ermany
F
rance
It
aly
Rest
of the W
orld0
2000
4000
6000
8000
10000
12000
14000
16000
18000
1Q112Q113Q11In
bil
lion
s
17
Dividends
source: vale.com.br
18
Vale- Key ratiosRatio Vale Industry
P/E 4.60 9.90
EPS $ 5.30 n.a.
Current Ratio 2.15 1.70
Quick ratio 1.50 1.20
Dividend Yield 0.20% , this year: 9.99% 3.1%
Return on Assets 18.2% 11.9%
Return on Equity 33.73% n.a.
Profit Margin 40% 26%
Debt/Equity ratio 40% 34%
Return on Investment 23.50 17.20
Price/Operating Profit 3.48 7.45
source: stock-analysis-co.netdailyfinance.com
19
Stock Price History
source: ycharts.com
Investments- 2012
Vale production estimates: 2012
By Mineral Production in ‘000 metric tons
Iron-ore 312,000
Pellets 50,000
Coal 16,600
Nickel 300
Copper 340
Potash 650
Phosphate Rock 8,000
Vale in newsVale voted as one of the 6 ‘must-own-Brazilian’ stocks for the next decade.
Source: seekingalpha.com
Vale listed as one of the 7 stocks with yields as high as 16%.
Source: seekingalpha.com
Vale plans to offer notes due 2022 through its subsidiary- Vale Overseas Limited and the proceeds are to go towards corporate business.
Source: Vale press release
Vale sees little effect to iron ore market from Brazil rains
Source: Vale newsroom
Economic Situation: GDP growth
US Euro Area China India Brazil
-6
-4
-2
0
2
4
6
8
10
12
2009201020112012
Source: IMF
Productivity Opportunities until 2030
Source: McKinsey & Company
TSR – Mining Sector
TSR – Mining Sector
Source: PwC
Outlook: Potential Shortages
Source: McKinsey & Company
Outlook: Steel Demand
Source: McKinsey & Company
World Steel Production (growth rate)
Source: Short Range Outlook by World Steel Association
2011 20120.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
WorldChinaIndiaUSC&S AmericaEurope
Iron ore prices
End of 2011
2012 2013 2014 2015$0
$50
$100
$150
$200Price per mt
Price per mt
Source: Goldman Sachs & Partners Australia Pty Ltd
• Iron ore shortage 2012 and 2013• Over-Supply from 2014 on
Nickel Supply/Demand
Source: Macquarie Research, September 2011
Nickel imports by China
• Nickel prices fell from over $29,000 to under $17,000
NPI-Nickel Outlook
Exploring Expenditures
Source: McKinsey & Company
Technical Analysis
52 week low:
$24.26
52 week high:
$37.25
Current:
$24.46
Risk Assesment
Opportunities
Strong Emerging Markets
High demand of Iron, Steel and Nickel
Joint Ventures and Investments only in 2012 around $13 Billion, among others, in Brasil, China and Africa
High Dividends
Risks
Price drop in 2014
Dependence on Economic Situation
Exploring Expenses
Recommendation: Buy
THANK YOU