What is happening with Vale’s shares (VALE3)?

Dividends from Vale will fall with correction in iron ore prices (Image: Reuters/Washington Alves)

A OK (VOUCH3) is sensitive to volatility abroad. exposed to iron orethe company’s shares accumulated a fall of 4.16% in the week, despite the increase of 2.28% this Friday (26).

The strong correction in steel raw material prices played the role of mining company to the level of R$ 65-66. But it is not new that the market has been discussing the normalization of commoditywhich took advantage of a rally driven especially by speculation at the beginning of the year.

Banks like Bank of America (BofA) and the USB BB signaled months ago that iron ore levels at $130/ton were not sustainable, anticipating a market correction.

A Genial Investimentos, who was also skeptical about the prices at which the commodity was traded, saw that the natural path for prices was downwards. According to the brokerage, the consolidation of some factors in China should curb the upward trajectory of prices and reverse the direction of the curves from the second half of 2023.

According to Genial’s projections, iron ore will be below the barrier of US$ 100/ton from the second half of 2023.

Weak start to the year

Another factor that put pressure on Vale’s shares was the release of weaker numbers at the beginning of the year. In April, the company released its usual quarterly production and sales report, anticipating smaller results from January to March 2023 compared to past periods.

Said and done: net income from Vale’s continued operations reached US$ 1.87 billion in the first quarter, a drop of 58% in relation to the value reported in the same period last year, of US$ 4.47 billion.

With smaller sales, the company’s net revenue totaled US$ 8.43 billion in the first quarter, a decrease of 22% in the annual comparison.

Meanwhile, adjusted Ebitda (earnings before interest, taxes, depreciation and amortization) from continuing operations totaled US$ 3.57 billion, compared to the US$ 6.21 billion presented a year earlier. The weaker line result reflects lower realized prices of iron ore fines and pellets and lower sales of iron ore fines, in addition to higher costs.

Will dividends dry up?

You dividends of Brazilian companies fell in the first quarter, with the biggest impact coming from Vale, shows the 38th edition of the Janus Henderson Global Dividend Indexa study that maps dividend trends globally.

The mining company cut US$ 1.8 billion in dividends in the period. The cut was the biggest reduction in dividend payments worldwide, reveals the survey.

In general, the decrease in mining sector dividends had a significant impact on global dividend growth.

According to Janus Hendersonmining dividends fell by a fifth in the first quarter, offsetting increases from banks and mining producers. Petroleum. The fall in payments to shareholders in the sector, he explains, reflects lower prices of commodities.

More cuts should be carried out in the coming months by mining companies around the world, evaluates the manager.

Fernando Siqueira, head of research at Investment Guide, also paints a weaker scenario for Vale’s dividends. With the drop in iron ore prices, the profit to be reported will be lower, which will consequently affect the amount to be distributed by the company.

Vale’s action is suggested by Credit Suisse (Image: REUTERS/Julie Gordon)

What to do with the shares?

From the perspective of the proximity of the drop in interest rates, Guide assesses that other sectors seem more attractive than stocks exposed to commodities.

“There are a lot of stocks that suffered a lot when interest rates went up and, with the expectation of falling interest rates, they can benefit. This ends up being a negative point, in relative terms, for Vale”, says Siqueira.

Despite seeing little room for further declines for Vale, the brokerage firm is concentrating its portfolio positions on assets more targeted to the domestic economy.

Raphael Citron, variable income manager at Porto Asset Management, believes that the short-term scenario should remain challenging for the company. However, he assesses that, for investors focused on the medium/long term, the stock remains a good option.

“Vale has a comparatively lower cost of extracting ore, so it can go through periods of lower tide comfortably. The company’s debt is low for its size,” she explains.

“In addition, the company has a base metals business that should benefit from the search for a cleaner energy matrix. The company’s strategy is to unlock value in this segment, so we may have some good news in this regard”, completes Citron.

In this week, the Credit Suisse reaffirmed the recommendation of “outperform” (expected performance above the market average, equivalent to “buy”) for ADRs (American Depositary Receipts) of Vale (OK). The Swiss bank understands that Vale is better positioned than its peers to benefit from the industry’s decarbonization process in the coming years.

Source: Moneytimes

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