UPDATE 3-Brazil's Vale misses profit forecast, shares slide
(Adds share price, analyst and CFO comment)
By Stephen Eisenhammer
RIO DE JANEIRO Feb 26 (Reuters) - Shares in Brazil's Vale SA plunged 5 percent on Thursday as the miner posted full-year net income well below analyst forecasts due to a weaker iron ore price and Brazilian currency.
The halving of iron ore prices has hit the world's largest producer of the steelmaking ingredient as increased output from Australia coincided with slower growth in China, the largest market for the commodity.
Vale posted full year net income of $657 million, missing analysts expectations of $2.5 billion, according to a Reuters poll.
Despite record iron ore and strong nickel production, a dramatic fall in profits and cash flow is increasing pressure on Vale to sell assets to fund key projects needed to protect market share from competitors such as BHP Billiton Ltd and Rio Tinto Ltd. Vale said on Thursday it would increase the pace of divestment to free up cash.
"Costs are falling, but not fast enough," analysts at Jefferies wrote in a note to clients. "The elephant in the room is still the iron ore price, which we expect to fall further over the next 3-6 months."
But the worsening market conditions will not cause Vale to lose its investment grade, Chief Financial Officer Luciano Siani assured investors on a conference call.
"We do not expect any downgrades over the next two years as the ratings agencies have already included lower iron ore prices in their recent evaluations," he said. Continuación...