| Why Fertilizers Are a Strategic Fit for Vale’s Portfolio | |
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How Will Vale Meet the Challenges of Weak Demand and Samarco? (Continued from Prior Part) Fertilizers: A strategic fit
Vale SA (VALE) is the biggest producer of phosphate and nitrogen agricultural nutrients in Brazil. It’s also developing projects in Canada and Mozambique. At Vale Day on December 1, 2015, Vale reaffirmed the positive fundamentals in its fertilizer division and stressed how fertilizer is a strategic fit for its portfolio.
- Fertilizers are countercyclical to Vale’s other business segments.
- Fertilizers are a late-cycle commodity that provide balance to the company’s portfolio.
- Long-term demand fundamentals for fertilizers are positive.
Positioning in Brazil
Vale says Brazil has the largest agricultural expansion potential due to acreage and productivity. It’s therefore positive for the fertilizer industry, as fertilizer intensity is increasing due to the geographic and farming model. Vale increased its market share by 3% in 2015. Its market share has increased from 17% in the first ten months of 2014 to 20% in the first ten months of 2015. Imports have also lost share to domestic production in the same time period.
Self-funded projects
Vale also said it has improved its EBITDA (earnings before interest, taxes, depreciation, and amortization) margins from the 2011 levels despite a decrease in prices. This was possible due to cost-cutting and improved productivity measures. Price decreases were also mitigated by marketing strategies focused on margins.
The company also believes that going forward, the strong results from this division should enable it to self-fund projects. Below are two of those projects:
- ROM (run of mine) replacement (phosphate), which is expected to start in 2017 with total capex (capital expenditure) of $144 million
- Carnalita project (potash) to replace Taquari Vassouras
The agricultural fertilizer business has had a challenging 2015 so far with many companies having a negative YTD (year-to-date) return. These companies include CF Industries (CF), Potash Corporation (POT), Mosaic (MOS), and Intrepid Potash (IPI). The Market Vectors Agribusiness ETF (MOO) invests about 3.7% of its holdings in CF.
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Vale
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EXPLORATION STAGE |
CODE : VALE3.SA |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
Vale is a producing company based in Brazil. Its main exploration property is GALIURO in USA. Vale is listed in Brazil and in France. Its market capitalisation is BRL 325.8 billions as of today (US$ 150.8 billions, € 137.9 billions). Its stock quote reached its lowest recent point on February 19, 2016 at BRL 10.51, and its highest recent level on August 27, 2021 at BRL 99.80. Vale has 5 244 319 744 shares outstanding. |