PT Vale?s net profit drops by more than 96%

Courtesy of Vale

IDX-listed integrated nickel mining company PT Vale Indonesia Tbk saw its earnings last year dropped by 96.23 percent to US$1.9 million from $50.5 million in the previous as the company suffered from lower price and output.

The company said in a statement on Thursday that revenue fell by 26 percent to $584.1 million from $789.7 million.

PT Vale did not say the reasons for the drop in net profit and revenue, but it reported that production and average selling price last year were lower than the previous year.

Elsewhere, PT Vale said in the statement it delivered EBITDA of $135.0 million in 2016, approximately 74 percent of which was generated in the second half of the year.

The company?s cash and cash equivalents as of December 31, 2016 and September 30, 2016, were $185.6 million and $200.4 million, respectively.

In 2016, PT Vale disbursed approximately $70.2 million in capital expenditures, with approximately 61 percent of that amount spent in the first half of 2016.

PT Vale said it will continue to exercise prudent control of its spending to preserve cash.

?Our improved cost performance helped us record positive earnings and EBITDA despite the challenges we faced throughout the year including a very challenging nickel market,? reported Nico Kanter, CEO and President Director of the company in the statement.

?This experience underlines the importance of remaining focused on optimizing production capacity, improving efficiency and reducing costs. We believe the nickel price in 2017 will remain low considering the high inventory levels on the London Metal Exchange (LME) and Shanghai Futures Exchange (SHFE). 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.?

The cost of revenue decrease in 2016 was driven mainly by lower costs of fuels, supplies and services offset to a lesser extent by higher employment, depreciation, amortization and depletion costs. Fuel costs, which decreased by 38 percent, contributed more than 47 percent of the cost of revenue decrease. The company achieved more efficient fuel consumption in the year with both High Sulphur Fuel Oil (HSFO) and diesel consumption falling per metric ton of nickel in matte produced. At the same time, costs for diesel and HSFO fell by 24 percent and 34 percent, respectively. While benefiting from a low global oil price, the company also improved its procurement practices, particularly for strategic material purchases including diesel and HSFO.

On a quarterly basis, the company?s sales volume in the fourth quarter of 2016 (4Q16) was 5 percent higher than the sales volume in 3Q16, despite a 10 percent production decline in those respective periods. A 7 percent increase in the average realized nickel price in the quarter contributed to a 13 percent increase in revenue in 4Q16 over the previous quarter.

Cost of revenue per metric ton of nickel matte sold in 4Q16 increased by 9 percent from the previous quarter. Contributing to this was a transformer failure in one of the company?s furnaces, as disclosed in the Production Report issued on February 16, 2017. This led to lower-than-plan production. The cost per metric ton of production increases in 4Q16 ranged from 7 percent for fuel costs to 25 percent for supplies.

Editing by Reiner Simanjuntak