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‘Quiet’ Ferreira Takes Over at Vale as Conflict Hurts Stock

Vale SA's incoming Chief Executive Officer Murilo Ferreira. Photographer: Renzo Gostoli/Bloomberg
Vale SA's incoming Chief Executive Officer Murilo Ferreira. Photographer: Renzo Gostoli/Bloomberg

May 23 (Bloomberg) -- After Murilo Ferreira helped Vale SA win a takeover battle for Canadian miner Inco Ltd. in 2006, his boss, Chief Executive Officer Roger Agnelli, promoted him to head the unit and build a global nickel business from Toronto.

Nickel output rose to a record by 2008, in part because Ferreira boosted relations with local unions and took a consensus-building approach that impressed fellow executives and labor representatives such as United Steelworkers Union leader Leo Gerard. Those attributes have now helped him win the top job at Rio de Janeiro-based Vale, after Brazil’s government ousted Agnelli in a dispute over its strategy and investments.

“What struck me a lot is that he’s a very balanced and quiet person,” Arthur Vasconcellos, the executive at headhunter firm CTPartners that interviewed Ferreira for the Vale CEO selection process, said in a telephone interview on May 10. “He has a very international vision, knows the mining and steelmaking business deeply and has a very strategic mindset.”

Ferreira, 57, is taking over as CEO amid investor concern that Vale, the world’s largest producer of iron ore, will yield to pressure from Brazilian President Dilma Rousseff to spend more on projects that boost the value of exports, such as steelmaking, where returns can be half those of iron ore.

Vale Slump

Vale slumped to an eight-month low in Sao Paulo trading on May 16. It traded at 5.49 times estimated earnings for this year on May 20, compared with 11.32 times for BHP Billiton Ltd. and 6.75 times for Rio Tinto Group, according to Bloomberg data. Its dollar bonds due in 2020 yielded 1.26 percentage points more than similar-maturity securities from Melbourne-based BHP on May 10, the most since Vale sold the securities in September.

Vale fell 5 centavos, or 0.1 percent, to 43.70 reais in Sao Paulo trading and lost 9.9 percent since the start of the year, compared with a 10 percent drop for the benchmark Bovespa Index.

Net income rose to a record $6.83 billion in the first quarter, helped by a 95 percent increase in the price of iron-ore sold and a one-time gain from the sale of assets.

The stock is an “unusual buy opportunity” as it has a “very strong” earnings outlook and is “unlikely” to suffer a sharp drop in iron-ore prices, Goldman Sachs Group Inc. analysts led by Marcelo Aguiar in Sao Paulo said in a May 19 report.

Government Criticism

While Agnelli oversaw more than $84 billion in investments and acquisitions and distributed $17 billion in dividends, he clashed with the government over demands he spend more on steelmaking and criticism he fired too many local workers when Latin America’s largest economy entered recession in 2009 for the first time in six years.

Agnelli also faced criticism from former president Luiz Inacio Lula da Silva for buying ships in China when Brazil was setting up its own yards. The disputes ended his decade-long tenure as Vale head when Ferreira officially took yesterday.

The choice of Ferreira is likely to improve relations with politicians in Brasilia, which may be positive for the stock, according to analysts such as Rene Kleyweg at UBS AG in London.

“The reason he is there is because he would be able to ensure a more constructive working relationship with the government,” he said in a telephone interview. “That means a more professional approach in terms of how, if any conflicts do arise, they would be handled in a more professional fashion.”

Same Strategy

In his first public comments since his nomination as CEO, Ferreira said May 20 that the company will “continue working under the same parameters that allowed it to succeed in the past few years.” The company will maintain the same strategic plans and budgeted spending of $24 billion this year, he said.

Ferreira declined to comment when contacted by Bloomberg News.

Less than two years into the job at Inco, Ferreira quit the company as slumping commodity prices and the CEO’s management style strained relations, according to two people familiar with the situation. The men clashed when Ferreira wanted time for voluntary redundancies, while Agnelli wanted to fire workers.

Ferreira “felt first-hand the very different cultures that Vale has to learn if they are to be successful in their overseas developments,” Mark Cutifani, a former chief operating officer of Vale Inco and now CEO of AngloGold Ashanti Ltd., wrote in e-mailed comments to Bloomberg News. “He’s a gentleman and probably learnt a lot from his experience with Inco.”

Canada Strike

About six months after Ferreira left the company, approximately 3,000 employees represented by the steelworkers at Vale’s nickel operations in Sudbury and Port Colborne in Canada went on strike to protest pay and conditions. The industrial dispute lasted more than a year before ending in July 2010.

Production of the metal used to prevent corrosion in stainless steel fell to zero in the first quarter of 2010 from 22,400 metric tons a year earlier at Sudbury because of the strike, according to Vale production reports.

“There was a complete cultural shift when Murilo’s successor appeared and it became very authoritarian,” union leader Gerard said. “When our folks met Mr Ferreira they were impressed with him as someone who was honorable, had an open mind and interested in discussing how we can work together.”

Ferreira returns to the company he started with as an analyst in 1977. Until February, he worked at Studio Investimentos, an investment fund set up with partners including former Vale Chief Financial Officer Gabriel Stoliar in a French-style house in Rio’s beachside neighborhood of Leblon. Its Studio Master FIA fund returned about 33 percent during 2010 and is down 0.2 percent this year, according to Bloomberg data.

Vale Holdings

Even after leaving in 2008, Ferreira continued to watch the company closely: the fund’s main holding as of Jan. 31 was Vale. It also held shares of Petroleo Brasileiro SA and Santos Brasil Participacoes SA, Brazil’s biggest port by value shipped.

“Murilo will carry on with Vale’s internationalization and diversification processes, enlarging the company’s presence in non-iron ore markets such as coal, copper, zinc and fertilizers,” says Jorio Dauster, who headed Vale between 1999 and 2001. “He impressed me by his easy way with colleagues and workers, as well as his preference for team work,” he said.

Ferreira was born in the town of Uberaba, 475 kilometers (295 miles) west of Belo Horizonte, capital of the southeastern state of Minas Gerais, which is also the birthplace of President Rousseff. He earned two graduate and post-graduate degrees in business administration from the Getulio Vargas Foundation in Sao Paulo and in Rio de Janeiro.

Head of Inco

Prior to becoming the head of Inco and the company’s executive director of nickel and base metals sales, he was director of the company’s aluminum business.

“I leave in peace with a sense of mission accomplished,” Agnelli told reporters May 20. “Murilo was among my right-hand men at Vale. He did brilliant work in the aluminum area, a fantastic job,” he said in Rio de Janeiro.

A fan of Fluminense, Brazil’s current soccer champions, Ferreira lives in Leblon with his wife and a teenager daughter. As a practicing catholic, he goes to Church regularly.

“He is a very serious guy,” said Diego Hernandez, Chief Executive Officer of Codelco, the world’s largest copper producer, who was an executive director for Vale’s non-ferrous division between 2001 and 2004. “He as a Brazilian went to Canada Inco. That was a tough challenge.”

Pension Funds

Brazil pension funds Funcef, Previ, Petros and Funcesp, all linked to state-run institutions, hold 49 percent of Valepar SA, the company that controls Vale with about 53.5 percent of its ordinary shares. BNDESPAR, a subsidiary of the Brazilian state-owned development bank, holds 11.5 percent of the controller and also has a 6.7 percent direct stake in Vale’s common shares.

“The shareholders decided to make changes in the direction of the company and I wanted to go along with them. Now it’s business as usual. I don’t see any anomaly,” Brazil’s Finance Minister Guido Mantega said May 3 in a Senate hearing, adding that Agnelli ignored the government’s criticism over job cuts and requests to invest more in steel to boost exports.

Ferreira was one of six candidates that CTPartners’ Vasconcellos drew up after a request from Vale Chairman Ricardo Flores on March 31, he said in a telephone interview from Sao Paulo. Contenders would have to be present or former executive directors of the company, according to a requirement set by Vale’s controlling shareholder Valepar, reducing the number of candidates and speeding up the process, he said.

“They were looking for a substitute of Roger that would give continuity,” said Vasconcellos, a former executive at Alcoa Inc. and steelmaker Cia. Siderurgica Nacional SA.

“Murilo is a business thinker, a very good strategist, a tireless negotiator,” Vasconcellos said. “He seems quiet but he is always advancing in the negotiations,” he said.

To contact the reporter on this story: Juan Pablo Spinetto in Rio De Janeiro at

To contact the editor responsible for this story: Dale Crofts at

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