PT Vale Q1 sales increases 32%

By Romel S. Gurky

Petromindo|Lucky

IDX-listed integrated nickel mining firm PT Vale Indonesia Tbk reported sales of US$143.9 million in the first quarter (Q1) of this year, 19 percent lower than sales in the fourth quarter of last year, but 32 percent higher than in the first quarter as the company delivered 17,524 metric tons (t) of nickel in matte.

?We realized a slightly lower sales price in the first quarter of 2017 compared to the fourth quarter of 2016,? said Nico Kanter, CEO and President Director of PT Vale in a statement Thursday unveiling its first quarter 2017 unaudited financial results.

?And we believe that the nickel price in 2017 will remain low as inventory levels on the London Metal Exchange (LME) and Shanghai Futures Exchange (SHFE) are still high. There is also uncertainty in the global nickel market over whether the Indonesian ore export quota will add additional volume or simply replace a diminishing ore supply from the Philippines to China. This underlines the importance of remaining focused on optimizing production capacity, improving efficiency and reducing costs.?

As reported last week, PT Vale conducted planned maintenance activities in Q1 2017 but with a shorter shutdown duration than in Q1 2016. As a result, nickel in matte production volume in Q1 2017 was 2 percent higher than in Q1 2016. These maintenance activities are crucial to improving operational efficiency and continuity, the company said.

PT Vale?s cost of revenue fell by 6 percent from $155.1 million in Q4 2016 to $146.4 million in Q1 2017. However, cost of revenue per metric ton of nickel matte sold in Q1 2017 increased by 17 percent from the previous quarter driven by higher costs of employment, fuels and supplies. Lower production and sales volumes also contributed to a higher cost of revenue per metric ton of nickel matte sold. This reinforces the necessity of maximizing production capacity. As a result, the company reported negative gross profit in Q1 2017.

Fuel prices, particularly the price of HSFO, increased significantly in Q1 2017 as compared to Q4 2016. Fuel consumption per metric ton of production in Q1 2017 was also affected by a lower production volume. ?However, this will improve with planned maintenance activities completed by the end of the first quarter of 2017,? PT Vale said.

A higher coal price in Q1 2017, which increased by 18 percent over the previous quarter, contributed to a higher cost of supplies in the quarter. Nonetheless, the company said it remains confident that it is more efficient to use coal for its dryers and reduction kilns and is continuing its Coal Conversion Project 2 (CCP2).

PT Vale delivered EBITDA of $24.5 million and disbursed approximately $18.8 million in capital expenditures in Q1 2017. The company?s cash and cash equivalents as of March 31, 2017 and December 31, 2016 were $235.5 million and $185.6 million, respectively. PT Vale said it will continue to exercise prudent control of its spending to preserve cash.

Editing by Reiner Simanjuntak