Vale SA, the world’s largest iron-ore producer, will reduce dividends more than analysts estimated this year as prices for the steel-making ingredient are expected to hover near six-year lows.
The Rio de Janeiro-based company will pay at least $2 billion in dividends this year, down 52 percent from the $4.2 billion disbursed in 2014, Vale said in a statement Friday. That’s the lowest level since 2007 and compares with a $2.2 billion average estimate of 12 analysts surveyed by Bloomberg.
Vale, also the world’s biggest nickel producer, faces diminishing revenue and profits after the price of iron ore collapsed last year amid a supply glut and weaker demand. The miner, which on Jan. 23 had its credit rating cut by Standard & Poor’s amid growing debt burden concerns, will spend $10.2 billion in projects and operations this year, reducing cash available for shareholders.
The dividend cut preserves a “a sound capital structure” as it completes projects at a time of lower prices, Vale said. “At the same time, we are intensifying the cost and capex reduction targets announced last December and developing partnerships and divestments to reinforce our free cash flow generation.”
Holders of voting and non-voting stock will get about $0.39 a share in two installments on April 30 and on Oct. 30, Vale said in the statement. The dividend plan is still subject to the approval of the company’s board.
“Vale should maintain dividend payment at minimum levels in 2015-16,” Bank of America Corp. analysts led by Thiago Lofiego in Sao Paulo wrote in a Dec. 20 note. “Continued oversupply should maintain iron-ore prices pressured.”
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The analysts’ note had a $2 billion “floor” dividend payment forecast for Vale. The 12 analysts polled by Bloomberg had estimates between $1.3 billion and $3 billion.
Vale shares rose 2.2 percent to 16.55 reais at the close in Sao Paulo Friday, reducing a decline this year to 14 percent. While the Brazilian company has been reducing dividend payments since distributing a record $12 billion in 2011, Vale still paid more relative to its share price than its main competitors, with an 8 percent dividend yield.
Iron-ore is expected to average $75 a ton in 2015, according to the mean estimate of 21 analysts in a Bloomberg survey, after averaging $96.93 a ton last year. Ore with 62 percent iron content delivered to the Chinese port of Qingdao declined 1.7 percent to $62.21 a dry ton on Friday, the lowest since Metal Bulletin started to compile the price index in 2009.
Source: Bloomberg |
