MMX Mineracao & Metalicos SA, the mining company controlled by billionaire Eike Batista, led the declines on Brazil’s Bovespa after posting its first quarterly loss in a year and saying it will delay a key port project.
MMX fell 28 centavos, or 3.8 percent, to 7.17 reais in Sao Paulo today, the most in three weeks, while the Bovespa fell 0.3 percent. The stock has declined 47 percent in the past 12 months, more than double the Bovespa’s 19 percent drop.
MMX had a net loss of 243.2 million reais ($139.2 million), compared with net income of 88.5 million reais a year earlier, the Rio de Janeiro-based company said in a regulatory filing late yesterday. The loss is MMX’s first since the second quarter of 2010 and was worse than the 30 million-real profit forecast by analysts at Barclays Plc.
The company posted a financial expense of 318.1 million reais after Brazil’s real fell 17 percent in the quarter, the worst performance among the world’s 16 most-traded currencies. The weaker real increased the value of the company’s dollar-denominated debt in local-currency terms.
“We achieved record sales, however our financial results were impacted by the variation in the exchange rate,” Chief Executive Officer Guilherme Escalhao said in yesterday’s filing.
Iron-ore production rose 1 percent in the quarter to 1.91 million metric tons, while sales of the steelmaking ingredient jumped 20 percent from last year to a record 2.11 million tons, MMX said. Total gross sales climbed 14 percent to 287.9 million reais. Costs of goods sold gained 30 percent from a year ago.
Escalhao was named MMX’s chief executive officer on Oct. 18 after Roger Downey resigned for personal reasons.
MMX delayed the start of its Sudeste port by six months to the first quarter of 2013 after re-evaluating the project and finding that it requires extra improvements and investments, it said yesterday. The development will need an additional 600 million reais for structural improvements as well as increased service and land costs, it said.
The port will also need engineering work to avoid affecting operations during a planned second-stage expansion, MMX said.
The Sudeste port’s required investment climbed to 2.4 billion reais after the re-evaluation and the company applied for additional funding from Brazil’s development bank, known as BNDES, Escalhao told analysts and investors on an earnings conference call today. Delays at the project won’t affect contracts, he said.
Serra Azul Negotiations
MMX, which is developing iron-ore projects in Brazil and Chile to tap growing Asian demand, aims to get $1.8 billion in funding for its flagship Serra Azul project.
MMX will hold negotiations next week with banks as it continues to seek funding for Serra Azul, MMX Chief Financial Officer Guido Germani said today during the same conference call. The company has met with development and export-import banks from China and Korea to provide financing for the project, he said.
The Sudeste delay and increased investment “will be negatively received by the market and could raise concerns about the company’s ability to deliver its growth plans within schedule and budget,” Felipe Reis and Alex Sciacio, analysts at Banco Santander SA in Sao Paulo, said in a note to clients today.
Vale’s Falling Profit
Vale SA, the world’s largest iron-ore producer, on Oct. 26 posted its first decline in quarterly profit in two years and missed analysts’ estimates after a weaker Brazilian real increased its dollar-denominated debt. The company’s iron-ore and pellet output reached record levels while sales volumes fell, increasing inventories.
Iron-ore prices for immediate delivery gained 8 percent since reaching their lowest level in almost two years on Oct. 28, affected by credit tightening in China and slowing steel demand from builders and automakers. They gained 1 percent to $126.30 a ton today, their seventh consecutive increase, according to The Steel Index Ltd.