NEW YORK (TheStreet) -- Shares of Vale SA (VALE) - Get Report are down 3.43% to $9.85 in pre-market trade after the Brazil mining company surprised investors today by reporting a net loss in the third quarter, the result of a steep depreciation in the local currency and the lowest iron-ore prices since 2010, the Wall Street Journal reports.
Vale reported a $1.44 billion loss in the July-to-September period vs. a net profit of $3.5 billion a year earlier. The result was far worse than the market expected, with a survey of analysts by FactSet producing a median estimate for a $1.49 billion net profit.
Pulling Vale's bottom line into the red were nearly $3 billion in losses related to foreign exchange and derivatives, reflecting an 11% depreciation of the Brazilian real between the end of June and the end of September. Since Vale's debt is mostly denominated in dollars, the weaker real increased the value its debt as expressed in reais, creating a "mainly non cash" effect, the Journal said.
There were also problems in the market for iron ore, of which Vale is the world's leading producer.
The company, which produced a record 85.7 million metric tons of the steel making ingredient during the third quarter, also struggled to cash in that bonanza, as its inventories rose by 9.3 million tons. Protests that closed its main railroad in northern Brazil, and the opening of a new distribution center in Malaysia contributed to stockpiles, according to the Journal.
Since ferrous metals, mostly iron ore, account for nearly two-thirds of Vale's sales, the company's net revenues dropped 27% in the third quarter from a year earlier to $9.06 billion.
Earnings before interest, taxes, depreciation and amortization, or Ebitda, was down 48% on the year to $3 billion.
Separately, TheStreet Ratings team rates VALE SA as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate VALE SA (VALE) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity."
- You can view the full analysis from the report here: VALE Ratings Report