Press Release | ||||||||
2Q05 Financial Pages (US GAAP F Pages) | ||||||||
2Q05 Financial Pages (US GAAP S Pages) | ||||||||
Signature page |
| 62.386 million tons of iron ore and pellets shipped in 2Q05, beating the 4Q04 record of 61.824 million tons. |
| Gross revenues of US$3.721 billion, 53.3% higher than the previous quarterly record, of US$2.428 billion for 4Q04. |
| Operating profit, measured by adjusted EBIT(1), reached US$1.771 billion, 112.9% more than in 2Q04. |
| Adjusted EBIT margin of 50.1%, 680 basis points (bp) higher than the previous record of 43.3% in 2Q04. |
| Adjusted EBITDA(2), at US$2.033 billion, more than doubled the value of 2Q04, passing the US$2 billion mark for the first time in CVRDs history. |
| LTM adjusted EBITDA amounted to US$5.034 billion, showing its thirteenth consecutive quarter of growth. | |
| Net earnings of US$ 1.630 billion, 223.4% yoy growth, and 72.9% higher than the previous record of US$ 943 million, registered in 3Q04. |
US$ million | ||||||||||||||||||||
2Q04 | 1Q05 | 2Q05 | 1S04 | 1S05 | ||||||||||||||||
Gross revenues |
2,033 | 2,328 | 3,721 | 3,764 | 6,049 | |||||||||||||||
Adjusted EBIT |
832 | 795 | 1,771 | 1,415 | 2,566 | |||||||||||||||
Adjusted EBIT margin (%) |
43.3 | 35.9 | 50.1 | 39.6 | 44.6 | |||||||||||||||
Adjusted EBITDA |
971 | 993 | 2,033 | 1,714 | 3,026 | |||||||||||||||
Net earnings |
504 | 698 | 1,630 | 909 | 2,328 | |||||||||||||||
Earnings per share (US$) |
0.44 | 0.61 | 1.41 | 0.79 | 2.02 | |||||||||||||||
Annualized ROE (%) |
31.8 | 35.4 | 39.0 | 31.8 | 39.0 | |||||||||||||||
Total debt/ adjusted LTM EBITDA (3) (x) |
1.55 | 1.05 | 0.83 | 1.55 | 0.83 | |||||||||||||||
Capex |
488.3 | 570.3 | 821.3 | 846.3 | 1,391.6 |
Except where otherwise indicated, operational and financial information in this press release is based on the consolidated figures in accordance with generally accepted accounting principles in the United States (US GAAP). Except for the information on investments and market behavior, this information is based on quarterly financial statements reviewed by independent auditors. The main subsidiaries of CVRD that are consolidated are: Caemi, Alunorte, Albras, RDM, RDME, RDMN, Urucum Mineração, Docenave, Ferrovia Centro-Atlântica (FCA), Itaco, CVRD Overseas and Rio Doce International Finance. |
2
3
| CVRD rated investment grade |
| Dividend payment |
| Development of the Vermelho nickel project approved |
| CVRD begins mineral exploration in Australia |
4
| First iron ore shipment to Ukraine |
| Divestment of QCM |
| Ferrous minerals |
5
| The aluminum chain |
6
| Copper |
| Industrial minerals |
7
| Logistics |
Thousands of tons | ||||||||||||||||||||||||
2Q04 | % | 1Q05 | % | 2Q05 | % | |||||||||||||||||||
Iron ore |
48,357 | 86.6 | 52,483 | 87.8 | 56,167 | 90.0 | ||||||||||||||||||
Pellets |
7,459 | 13.4 | 7,313 | 12.2 | 6,219 | 10.0 | ||||||||||||||||||
Total |
55,816 | 100.0 | 59,796 | 100.0 | 62,386 | 100.0 |
Thousands of tons | ||||||||||||||||||||||||
2Q04 | % | 1Q05 | % | 2Q05 | % | |||||||||||||||||||
EU |
17,577 | 31.5 | % | 17,403 | 29.1 | % | 20,016 | 32.1 | % | |||||||||||||||
Germany |
6,199 | 11.1 | % | 5,816 | 9.7 | % | 6,466 | 10.4 | % | |||||||||||||||
France |
3,088 | 5.5 | % | 2,424 | 4.1 | % | 2,850 | 4.6 | % | |||||||||||||||
Belgium |
2,047 | 3.7 | % | 1,907 | 3.2 | % | 1,779 | 2.9 | % | |||||||||||||||
Italy |
1,883 | 3.4 | % | 1,920 | 3.2 | % | 3,148 | 5.0 | % | |||||||||||||||
Others |
4,360 | 7.8 | % | 5,336 | 8.9 | % | 5,773 | 9.3 | % | |||||||||||||||
China |
8,400 | 15.0 | % | 10,857 | 18.2 | % | 11,747 | 18.8 | % | |||||||||||||||
Japan |
6,818 | 12.2 | % | 5,693 | 9.5 | % | 6,249 | 10.0 | % | |||||||||||||||
South Korea |
1,823 | 3.3 | % | 2,455 | 4.1 | % | 1,237 | 2.0 | % | |||||||||||||||
Middle East |
1,136 | 2.0 | % | 1,314 | 2.2 | % | 2,063 | 3.3 | % | |||||||||||||||
USA |
1,755 | 3.1 | % | 1,276 | 2.1 | % | 1,083 | 1.7 | % | |||||||||||||||
Brazil |
13,985 | 25.1 | % | 14,210 | 23.8 | % | 14,397 | 23.1 | % | |||||||||||||||
Steel mills and pig iron producers |
9,167 | 16.4 | % | 8,820 | 14.8 | % | 9,038 | 14.5 | % | |||||||||||||||
Pelletizing joint ventures |
4,818 | 8.6 | % | 5,390 | 9.0 | % | 5,359 | 8.6 | % | |||||||||||||||
RoW |
4,322 | 7.7 | % | 6,588 | 11.0 | % | 5,595 | 9.0 | % | |||||||||||||||
Total |
55,816 | 100.0 | % | 59,796 | 100.0 | % | 62,387 | 100.0 | % |
8
Thousands of tons | ||||||||||||
2Q04 | 1Q05 | 2Q05 | ||||||||||
Manganese ore |
203 | 198 | 194 | |||||||||
Ferro alloys |
137 | 132 | 147 | |||||||||
Alumina |
336 | 478 | 402 | |||||||||
Primary aluminum |
119 | 109 | 110 | |||||||||
Bauxite |
365 | 361 | 475 | |||||||||
Potash |
166 | 138 | 129 | |||||||||
Kaolin |
293 | 280 | 303 | |||||||||
Copper concentrates |
34 | 85 | 105 |
2Q04 | 1Q05 | 2Q05 | ||||||||||
Railroads (million ntk) |
7,135 | 5,679 | 7,418 | |||||||||
Ports (thousand tons) |
7,614 | 6,355 | 8,336 |
US$ / ton | ||||||||||||
2Q04 | 1Q05 | 2Q05 | ||||||||||
Iron ore |
19.50 | 20.73 | 38.58 | |||||||||
Pellets |
40.89 | 43.89 | 90.69 | |||||||||
Manganese |
54.19 | 101.01 | 97.94 | |||||||||
Ferro alloys |
1,007.30 | 1,075.76 | 938.78 | |||||||||
Alumina |
247.02 | 284.52 | 273.63 | |||||||||
Aluminum |
1,647.06 | 1,834.86 | 1,854.55 | |||||||||
Bauxite |
21.92 | 27.70 | 27.37 | |||||||||
Potash |
186.75 | 217.39 | 240.31 | |||||||||
Kaolin |
133.11 | 139.29 | 148.51 | |||||||||
Copper concentrates |
705.88 | 882.35 | 885.71 |
US$ million | ||||||||||||||||||||||||
2Q04 | % | 1Q05 | % | 2Q05 | % | |||||||||||||||||||
Ferrous minerals |
1,426 | 70.2 | 1,604 | 68.9 | 2,908 | 78.2 | ||||||||||||||||||
Iron ore |
943 | 46.4 | 1,088 | 46.7 | 2,167 | 58.2 | ||||||||||||||||||
Pellet plant operation services |
15 | 0.7 | 20 | 0.9 | 6 | 0.2 | ||||||||||||||||||
Pellets |
304 | 15.0 | 321 | 13.8 | 564 | 15.2 | ||||||||||||||||||
Manganese ore |
11 | 0.5 | 20 | 0.9 | 19 | 0.5 | ||||||||||||||||||
Ferro alloys |
139 | 6.8 | 142 | 6.1 | 138 | 3.7 | ||||||||||||||||||
Others |
14 | 0.7 | 13 | 0.6 | 14 | 0.4 | ||||||||||||||||||
Non ferrous minerals |
94 | 4.6 | 144 | 6.2 | 169 | 4.5 | ||||||||||||||||||
Potash |
31 | 1.5 | 30 | 1.3 | 31 | 0.8 | ||||||||||||||||||
Kaolin |
39 | 1.9 | 39 | 1.7 | 45 | 1.2 | ||||||||||||||||||
Copper concentrates |
24 | 1.2 | 75 | 3.2 | 93 | 2.5 | ||||||||||||||||||
Aluminum products |
289 | 14.2 | 346 | 14.9 | 327 | 8.8 | ||||||||||||||||||
Primary aluminum |
197 | 9.7 | 200 | 8.6 | 204 | 5.5 | ||||||||||||||||||
Alumina |
82 | 4.0 | 136 | 5.8 | 110 | 3.0 | ||||||||||||||||||
Bauxite |
8 | 0.4 | 10 | 0.4 | 13 | 0.3 | ||||||||||||||||||
Others |
2 | 0.1 | 0 | | 0 | | ||||||||||||||||||
Logistics services |
220 | 10.8 | 232 | 10.0 | 316 | 8.5 | ||||||||||||||||||
Railroads |
153 | 7.5 | 159 | 6.8 | 233 | 6.3 | ||||||||||||||||||
Ports |
45 | 2.2 | 47 | 2.0 | 59 | 1.6 | ||||||||||||||||||
Shipping |
22 | 1.1 | 26 | 1.1 | 24 | 0.6 | ||||||||||||||||||
Others |
4 | 0.2 | 2 | 0.1 | 1 | 0.0 | ||||||||||||||||||
Total |
2,033 | 100.0 | 2,328 | 100.0 | 3,721 | 100.0 |
9
US$ million | ||||||||||||||||||||||||
2Q04 | % | 1Q05 | % | 2Q05 | % | |||||||||||||||||||
Europe |
706 | 34.7 | 653 | 28.0 | 1,149 | 30.9 | ||||||||||||||||||
Brazil |
580 | 28.5 | 652 | 28.0 | 1,013 | 27.2 | ||||||||||||||||||
China |
203 | 10.0 | 279 | 12.0 | 431 | 11.6 | ||||||||||||||||||
Japan |
197 | 9.7 | 216 | 9.3 | 324 | 8.7 | ||||||||||||||||||
Emerging Asia (ex China) |
87 | 4.3 | 125 | 5.4 | 167 | 4.5 | ||||||||||||||||||
USA |
58 | 2.9 | 98 | 4.2 | 119 | 3.2 | ||||||||||||||||||
Rest of the World |
202 | 9.9 | 305 | 13.1 | 518 | 13.9 | ||||||||||||||||||
Total |
2,033 | 100.0 | 2,328 | 100.0 | 3,721 | 100.0 |
10
US$ million | ||||||||||||||||||||||||
2Q04 | % | 1Q05 | % | 2Q05 | % | |||||||||||||||||||
Personnel |
92 | 10.1 | 98 | 7.9 | 117 | 7.8 | ||||||||||||||||||
Material |
149 | 16.3 | 231 | 18.5 | 279 | 18.5 | ||||||||||||||||||
Fuels |
102 | 11.2 | 130 | 10.4 | 148 | 9.8 | ||||||||||||||||||
Electric energy |
68 | 7.5 | 97 | 7.8 | 117 | 7.8 | ||||||||||||||||||
Outsourced services |
178 | 19.5 | 290 | 23.3 | 342 | 22.7 | ||||||||||||||||||
Acquisition of iron ore and pellets |
116 | 12.7 | 115 | 9.2 | 215 | 14.3 | ||||||||||||||||||
Acquisition of other products |
83 | 9.1 | 87 | 7.0 | 81 | 5.4 | ||||||||||||||||||
Depreciation and exhaustion |
85 | 9.3 | 122 | 9.8 | 127 | 8.4 | ||||||||||||||||||
Others |
39 | 4.3 | 77 | 6.2 | 82 | 5.4 | ||||||||||||||||||
Total |
912 | 100.0 | 1.247 | 100.0 | 1.508 | 100.0 |
11
2Q04 | 1Q05 | 2Q05 | ||||||||||
Ferrous minerals |
45.8 | % | 38.8 | % | 56.2 | % | ||||||
Non ferrous minerals |
48.3 | % | 30.9 | % | 39.4 | % | ||||||
Aluminum |
47.9 | % | 38.6 | % | 32.7 | % | ||||||
Logistics |
28.1 | % | 22.2 | % | 30.0 | % | ||||||
Total |
43.3 | % | 35.9 | % | 50.1 | % |
12
US$ million | ||||||||||||
2Q04 | 1Q05 | 2Q05 | ||||||||||
Net operating revenues |
1.920 | 2.213 | 3.536 | |||||||||
COGS |
(912 | ) | (1,247 | ) | (1,508 | ) | ||||||
SG&A |
(106 | ) | (113 | ) | (135 | ) | ||||||
Research and development |
(27 | ) | (34 | ) | (54 | ) | ||||||
Other operational expenses |
(43 | ) | (24 | ) | (68 | ) | ||||||
Adjusted EBIT |
832 | 795 | 1.771 | |||||||||
Depreciation, amortization & exhaustion |
79 | 129 | 136 | |||||||||
Dividends received |
60 | 69 | 126 | |||||||||
Adjusted EBITDA |
971 | 993 | 2,033 |
US$ million | ||||||||||||||||||||||||
2Q04 | % | 1Q05 | % | 2Q05 | % | |||||||||||||||||||
Ferrous minerals |
678 | 69.8 | 674 | 67.9 | 1.687 | 83.0 | ||||||||||||||||||
Non ferrous minerals |
28 | 2.9 | 40 | 4.0 | 45 | 2.2 | ||||||||||||||||||
Logistics |
99 | 10.2 | 90 | 9.1 | 130 | 6.4 | ||||||||||||||||||
Aluminum |
164 | 16.9 | 169 | 17.0 | 149 | 7.3 | ||||||||||||||||||
Others |
2 | 0.2 | 20 | 2.0 | 22 | 1.1 | ||||||||||||||||||
Total |
971 | 100.0 | 993 | 100.0 | 2.033 | 100.0 |
13
14
US$ million | ||||||||||||
Financial expenses on: | 2Q04 | 1Q05 | 2Q05 | |||||||||
Debt with third parties |
(79 | ) | (48 | ) | (57 | ) | ||||||
Debt with related parties |
(5 | ) | (2 | ) | (4 | ) | ||||||
Total debt related financial expenses |
(84 | ) | (50 | ) | (61 | ) |
Gross interest on: | 2Q04 | 1Q05 | 2Q05 | |||||||||
Tax and labour contingencies |
(9 | ) | (11 | ) | (13 | ) | ||||||
Tax on financial transactions (CPMF) |
(14 | ) | (9 | ) | (16 | ) | ||||||
Derivatives |
23 | 5 | 56 | |||||||||
Others |
(22 | ) | (27 | ) | (17 | ) | ||||||
Total gross interest |
(22 | ) | (42 | ) | 10 | |||||||
Total |
(106 | ) | (92 | ) | (51 | ) |
US$ million | ||||||||||||
2Q04 | 1Q05 | 2Q05 | ||||||||||
Gross debt |
4.514 | 4.182 | 4.168 | |||||||||
Net debt |
3.455 | 3.060 | 3.212 | |||||||||
Gross debt / adjusted LTM EBITDA (x) |
1.55 | 1.05 | 0.83 | |||||||||
Adjusted LTM EBITDA / LTM interest expenses (x) |
12.94 | 13.24 | 17.73 | |||||||||
Gross debt / EV (6) (x) |
0.22 | 0.11 | 0.11 |
15
Area | Project | Budgeted 2005 | Status | |||||
US$ million | ||||||||
Ferrous minerals
|
Expansion of the Carajás iron ore mines by 85 Mtpa Northern System | 140 | For completion in 2006, this will add 15 million tons to CVRDs annual production capacity. The second ship loading system of Pier III is in test phase. | |||||
Brucutu iron ore mine Southern System |
205 | Phase I should be completed in 2006, increasing nominal production capacity to 15 million tpy. Phase II is scheduled for completion in 2007, to bring production capacity to 24 million tpy. A further expansion, to 30 million tpy is currently under study. | ||||||
Itabira iron ore mines Southern System |
16 | Modernization of operations and expansion of production capacity to 46 million tpy, for conclusion and startup in 2006. |
1 | Capex figures are based on actual disbursements. |
16
Area | Project | Budgeted 2005 | Status | |||||
US$ million | ||||||||
Fazendão iron ore mine Southern System |
52 | Project to produce 14 million tons run-of-mine (ROM) iron ore/year. Works to begin in second half 2005, for completion and operational startup in 2007. | ||||||
Fábrica iron ore mine Southern System |
38 | Project for expansion of production capacity by 5 million tons, from 12 to 17 million tpy. Startup scheduled for 2007. | ||||||
Timbopeba iron ore mine Southern System |
25 | Extension of the mines working life to 2008, with estimated annual production capacity of 2.7 million tons. US$7.8 million will be invested in development, purchase of small scale equipment and new access for the crushing facilities; a further US$17.6 million will be spent on rolling stock for the EFVM railroad. | ||||||
Tubarão Port expansion Southern System |
22 | Expansion of the conveyor belt and dockside machinery, and construction of new dockside storage patios. | ||||||
Expansion of the São Luis pelletizingplant | 18 | Expansion of capacity from 6 to 7 million tpy. The expansion will be completed by January 2006. Production this year is estimated at 6.25 million tons. | ||||||
Coal
|
Anthracite | 86 | Acquisition of 25% of the Chinese anthracite producer Henan Longyu Energy Resources Ltd., in partnership with Yoncheng and Baosteel, has been completed. The mine will produce 1.7 million tons of high quality anthracite in 2005. | |||||
Metallurgical coke | 16 | Acquisition of 25% stake in the Chinese coal producer Shandong Yankuang International Coking Ltd. for production of metallurgical coke in association with Yankuang. The project has estimated production capacity of 2 million tpy of coke, and 200,000 tpy of methanol. Startup is planned for 2006. | ||||||
Non-ferrous minerals
|
Expansion of the Taquari-Vassouras potash mine |
9 | Project to expand nominal potash production capacity from 600,000 to 850,000 tpy. The ramp-up period has begun and production of 710,000 tons is expected this year. | |||||
118 copper mine | 32 | Project for production of 36,000 tons of copper cathode/year. | ||||||
Vermelho nickel mine | 34 | Project for production of 46,000 tons of metallic nickel and 2,800 tons of cobalt, per year. Approved in July 2005; conclusion planned for 4Q08. | ||||||
Aluminum
|
Alumina: Alunorte Modules 4 and 5 | 306 | Modules 4 and 5 will increase the refinerys production capacity to 4.2 million tons of alumina/year. Completion is planned for 1Q06. | |||||
Paragominas I bauxite mine |
154 | Will produce 4.5 million tpy of bauxite starting early in 2007. Tubes are currently being delivered for construction of the 244-km ore delivery pipeline to transport bauxite from Paragominas to the alumina refinery in Barcarena, in the Brazilian state of Pará. Earthmoving work has been completed for start of construction. | ||||||
Logistics
|
Acquisition of locomotives and railcars for EFVM, EFC and FCA railroads | 559 | 2,288 railcars and 63 locomotives were bought in the first half of 2005. | |||||
Electric energy
|
Aimorés hydroelectric power plant |
12 | This power plant on the Doce river in the Brazilian state of Minas Gerais will have generation capacity of 330MW. The first turbine started up in July 2005; the other two are programmed to startup by October. CVRD owns 51.0% stake in the project. | |||||
Capim Branco I and II hydroelectric power plants | 73 | Both plants are on the Araguari river in the Brazilian state of Minas Gerais. Scheduled to start operating in 2006, they have generating capacity of 240MW and 210MW, respectively. Works are 68% completed on Capim Branco I, and 41% on Capim Branco II. CVRD has a 48.4% stake in both projects. |
17
US$ million | ||||||||||||||||
Business area | 2Q05 | Realized 2005 | ||||||||||||||
Ferrous minerals |
340.2 | 41.4 | % | 540.1 | 38.8 | % | ||||||||||
Non ferrous minerals |
53.1 | 6.5 | % | 88.8 | 6.4 | % | ||||||||||
Logistcs |
128.6 | 15.6 | % | 282.5 | 20.3 | % | ||||||||||
Aluminum |
151.0 | 18.4 | % | 277.7 | 19.9 | % | ||||||||||
Coal |
91.5 | 11.1 | % | 94.0 | 6.8 | % | ||||||||||
Electric energy |
35.7 | 4.4 | % | 59.5 | 4.3 | % | ||||||||||
Others |
21.1 | 2.6 | % | 49.1 | 3.5 | % | ||||||||||
Total |
821.3 | 100.0 | % | 1,391.6 | 100.0 | % |
18
US$ million | ||||||||||||
06/30/04 | 03/31/05 | 06/30/05 | ||||||||||
Assets |
||||||||||||
Current |
3,069 | 3,923 | 4,634 | |||||||||
Long-term |
1,527 | 1,688 | 1,911 | |||||||||
Fixed |
7,838 | 10,763 | 13,022 | |||||||||
Total |
12,434 | 16,374 | 19,567 | |||||||||
Liabilities |
||||||||||||
Current |
1,980 | 2,391 | 3,002 | |||||||||
Long term |
5,275 | 5,895 | 6,316 | |||||||||
Shareholders equity |
5,179 | 8,088 | 10,249 | |||||||||
Paid-up capital |
3,707 | 3,707 | 6,366 | |||||||||
Reserves |
1,472 | 4,381 | 3,883 | |||||||||
Total |
12,434 | 16,374 | 19,567 |
US$ million | ||||||||||||
2Q04 | 1Q05 | 2Q05 | ||||||||||
Gross operating revenues |
2,033 | 2,328 | 3,721 | |||||||||
Taxes |
(113 | ) | (115 | ) | (185 | ) | ||||||
Net operating revenue |
1,920 | 2,213 | 3,536 | |||||||||
Cost of goods sold |
(912 | ) | (1,247 | ) | (1,508 | ) | ||||||
Gross profit |
1,008 | 966 | 2,028 | |||||||||
Gross margin (%) |
52.5 | 43.7 | 57.4 | |||||||||
Selling, general and administrative expenses |
(106 | ) | (113 | ) | (135 | ) | ||||||
Research and development expenses |
(27 | ) | (34 | ) | (54 | ) | ||||||
Employee profit-sharing |
(17 | ) | (17 | ) | (24 | ) | ||||||
Others |
(26 | ) | (7 | ) | (44 | ) | ||||||
Operating profit |
832 | 795 | 1,771 | |||||||||
Financial revenues |
19 | 29 | 27 | |||||||||
Financial expenses |
(106 | ) | (92 | ) | (51 | ) | ||||||
Monetary variation |
(245 | ) | (2 | ) | 304 | |||||||
Tax and social contribution (Current) |
(41 | ) | (160 | ) | (330 | ) | ||||||
Tax and social contribution (Deferred) |
(23 | ) | 47 | (107 | ) | |||||||
Equity income and provision for losses |
150 | 133 | 220 | |||||||||
Minority interest |
(82 | ) | (52 | ) | (204 | ) | ||||||
Net earnings |
504 | 698 | 1,630 |
19
US$ million | ||||||||||||
2Q04 | 1Q05 | 2Q05 | ||||||||||
Cash flows from operating activities: |
||||||||||||
Net income |
504 | 698 | 1,630 | |||||||||
Adjustments to reconcile net income with cash provided by
operating activities: |
||||||||||||
Depreciation, depletion and amortization |
79 | 129 | 136 | |||||||||
Dividends received |
60 | 69 | 126 | |||||||||
Equity in results of affiliates and joint ventures
and change in provision for losses on equity
investments |
(150 | ) | (133 | ) | (220 | ) | ||||||
Deferred income taxes |
23 | (47 | ) | 107 | ||||||||
Provisions for contingencies |
| (3 | ) | (8 | ) | |||||||
Impairment of property, plant and equipment |
| 4 | 12 | |||||||||
Foreign exchange and monetary losses |
291 | 27 | (298 | ) | ||||||||
Net unrealized derivative losses |
(22 | ) | (5 | ) | (85 | ) | ||||||
Minority interest |
82 | 52 | 204 | |||||||||
Net interest payable |
27 | (2 | ) | 38 | ||||||||
Others |
27 | (17 | ) | (63 | ) | |||||||
Decrease (increase) in assets: |
||||||||||||
Accounts receivable |
(132 | ) | (92 | ) | (472 | ) | ||||||
Inventories |
(67 | ) | (20 | ) | (50 | ) | ||||||
Others |
67 | (74 | ) | (187 | ) | |||||||
Increase (decrease) in liabilities: |
||||||||||||
Suppliers |
(59 | ) | 45 | 142 | ||||||||
Payroll and related charges |
(18 | ) | (35 | ) | 13 | |||||||
Income Tax |
| (79 | ) | 325 | ||||||||
Others |
(12 | ) | (86 | ) | 76 | |||||||
Net cash provided by operating activities |
700 | 431 | 1,426 | |||||||||
Cash flows from investing activities: |
||||||||||||
Loans and advances receivable |
3 | 4 | (5 | ) | ||||||||
Guarantees and deposits |
(18 | ) | (17 | ) | (3 | ) | ||||||
Additions to investments |
(6 | ) | (1 | ) | (90 | ) | ||||||
Additions to property, plant and equipment |
(416 | ) | (661 | ) | (777 | ) | ||||||
Proceeds from disposals of property, plant and equipment |
| 2 | 1 | |||||||||
Net cash used in investing activities |
(437 | ) | (673 | ) | (874 | ) | ||||||
Cash flows from financing activities: |
||||||||||||
Short-term debt, net issuances (repayments) |
(44 | ) | 21 | 216 | ||||||||
Loans |
2 | (13 | ) | (6 | ) | |||||||
Long-term debt |
227 | 239 | 125 | |||||||||
Repayments of long-term debt |
(201 | ) | (156 | ) | (432 | ) | ||||||
Interest attributed to stockholders |
(269 | ) | | (500 | ) | |||||||
Net cash used in financing activities |
(285 | ) | 91 | (597 | ) | |||||||
Increase (decrease) in cash and cash equivalents |
(22 | ) | (151 | ) | (45 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents |
(2 | ) | 24 | (121 | ) | |||||||
Cash and cash equivalents, beginning of period |
1,083 | 1,249 | 1,122 | |||||||||
Cash and cash equivalents, end of period |
1,059 | 1,122 | 956 | |||||||||
Cash paid during the period for: |
||||||||||||
Interest on long-term debt |
(51 | ) | (82 | ) | (35 | ) | ||||||
Income tax |
| (79 | ) | (171 | ) | |||||||
Non-cash transactions |
||||||||||||
Interest capitalized |
(6 | ) | (15 | ) | (9 | ) | ||||||
Income tax paid with credits |
(64 | ) | (27 | ) | (53 | ) |
20
US$ million | ||||||||||||
2Q04 | 1Q05 | 2Q05 | ||||||||||
Net operating revenues |
1,920 | 2,213 | 3,536 | |||||||||
COGS |
(912 | ) | (1,247 | ) | (1,508 | ) | ||||||
SG&A |
(106 | ) | (113 | ) | (135 | ) | ||||||
Research & development |
(27 | ) | (34 | ) | (54 | ) | ||||||
Other operating expenses |
(43 | ) | (24 | ) | (68 | ) | ||||||
Adjusted EBIT |
832 | 795 | 1,771 |
US$ million | ||||||||||||
2Q04 | 1Q05 | 2Q05 | ||||||||||
Operating cash flow |
700 | 431 | 1,426 | |||||||||
Income tax |
41 | 160 | 330 | |||||||||
Monetary and foreign exchange losses |
(46 | ) | (25 | ) | (6 | ) | ||||||
Financial expenses |
60 | 65 | (14 | ) | ||||||||
Net working capital |
221 | 341 | 153 | |||||||||
Unrealized losses with derivatives |
22 | 5 | 85 | |||||||||
Others |
(27 | ) | 16 | 59 | ||||||||
Adjusted EBITDA |
971 | 993 | 2,033 |
2Q04 | 1Q05 | 2Q05 | ||||||||||
Total debt / adjusted LTM EBITDA (x)
|
1.55 | 1.05 | 0.83 | |||||||||
Total debt / LTM operating cash flow (x)
|
2.01 | 1.27 | 1.03 |
21
US$ million | ||||||||||||
2Q04 | 1Q05 | 2Q05 | ||||||||||
Gross debt |
4,514 | 4,182 | 4,168 | |||||||||
Cash and cash equivalents |
1,059 | 1,122 | 956 | |||||||||
Net debt |
3,455 | 3,060 | 3,212 |
2T04 | 1T05 | 2T05 | ||||||||||
Adjusted LTM EBITDA / LTM interest expenses (x)
|
12.94 | 13.24 | 17.73 | |||||||||
LTM operating income / LTM interest expenses (x)
|
10.26 | 11.12 | 15.05 |
2Q04 | 1Q05 | 2Q05 | ||||||||||
Total debt / EV (x)
|
21.74 | 11.06 | 10.98 | |||||||||
Total debt / total assets (x)
|
36.30 | 25.54 | 21.30 |
22
Page | ||||
Condensed Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004 |
F-3 | |||
Condensed Consolidated Statements of Income for the three-month periods ended June 30,
2005 and 2004 and March 31, 2005 and for the six-month periods ended June 30, 2005 and
2004 |
F-5 | |||
Condensed Consolidated Statements of Cash Flows for the three-month periods ended June 30,
2005 and 2004 and March 31, 2005 and for the six-month periods ended June 30, 2005 and
2004 |
F-6 | |||
Condensed Consolidated Statements of Changes in Stockholders Equity for the three-month
periods ended June 30, 2005 and 2004 and March 31, 2005 and for the six- month periods
ended June 30, 2005 and 2004 |
F-7 | |||
Notes to the Condensed Consolidated Financial Information |
F-8 | |||
Supplemental Financial Information |
S-1 |
F-1
F-2
June 30, | December 31, | |||||||
2005 | 2004 | |||||||
(unaudited) | ||||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
956 | 1,249 | ||||||
Accounts receivable, net |
||||||||
Related parties |
252 | 124 | ||||||
Unrelated parties |
1,486 | 905 | ||||||
Loans and advances to related parties |
82 | 56 | ||||||
Inventories |
1,033 | 849 | ||||||
Deferred income tax |
215 | 203 | ||||||
Recoverable taxes |
250 | 285 | ||||||
Others |
360 | 219 | ||||||
4,634 | 3,890 | |||||||
Property, plant and equipment, net |
11,514 | 9,063 | ||||||
Investments in affiliated companies and joint ventures and other
investments, net of provision for losses on equity investments |
1,508 | 1,159 | ||||||
Other assets |
||||||||
Goodwill on acquisition of subsidiaries |
546 | 486 | ||||||
Loans and advances |
||||||||
Related parties |
44 | 55 | ||||||
Unrelated parties |
58 | 56 | ||||||
Prepaid pension cost |
248 | 170 | ||||||
Deferred income tax |
33 | 70 | ||||||
Judicial deposits |
622 | 531 | ||||||
Unrealized gain on derivative instruments |
2 | 4 | ||||||
Others |
358 | 231 | ||||||
1,911 | 1,603 | |||||||
TOTAL |
19,567 | 15,715 | ||||||
F-3
June 30, | December 31, | |||||||
2005 | 2004 | |||||||
(unaudited) | ||||||||
Liabilities and stockholders equity |
||||||||
Current liabilities |
||||||||
Suppliers |
971 | 689 | ||||||
Payroll and related charges |
132 | 141 | ||||||
Interest attributed to stockholders |
16 | 11 | ||||||
Current portion of long-term debt unrelated parties |
685 | 730 | ||||||
Short-term debt |
346 | 74 | ||||||
Loans from related parties |
50 | 52 | ||||||
Provision for taxes |
382 | 459 | ||||||
Provision for operational expenses |
157 | 64 | ||||||
Others |
263 | 235 | ||||||
3,002 | 2,455 | |||||||
Long-term liabilities |
||||||||
Employees post-retirement benefits |
229 | 215 | ||||||
Long-term debt unrelated parties |
3,072 | 3,214 | ||||||
Loans from related parties |
15 | 18 | ||||||
Provisions for contingencies (Note 9) |
1,318 | 914 | ||||||
Unrealized loss on derivative instruments |
115 | 236 | ||||||
Provisions for environmental liabilities |
159 | 134 | ||||||
Others |
339 | 350 | ||||||
5,247 | 5,081 | |||||||
Minority interests |
1,069 | 788 | ||||||
Stockholders equity |
||||||||
Preferred class A stock - 1,800,000,000
no-par-value shares authorized and 415,727,739 |
2,150 | 1,176 | ||||||
Common stock - 900,000,000 no-par-value
shares authorized and 749,949,429 issued |
3,806 | 2,121 | ||||||
Treasury stock - 11,803 (2004 - 11,951) preferred
and 14,145,510 common shares |
(88 | ) | (88 | ) | ||||
Additional paid-in capital |
498 | 498 | ||||||
Other cumulative comprehensive loss |
(2,744 | ) | (3,774 | ) | ||||
Appropriated retained earnings |
1,829 | 4,143 | ||||||
Unappropriated retained earnings |
4,798 | 3,315 | ||||||
10,249 | 7,391 | |||||||
TOTAL |
19,567 | 15,715 | ||||||
F-4
Three-month | Six-month periods | |||||||||||||||||||
periods ended | ended June 30 | |||||||||||||||||||
June | March | June | ||||||||||||||||||
30, 2005 | 31, 2005 | 30, 2004 | 2005 | 2004 | ||||||||||||||||
Operating revenues, net of discounts, returns and allowances |
||||||||||||||||||||
Sales of ores and metals |
3,077 | 1,748 | 1,520 | 4,825 | 2,774 | |||||||||||||||
Revenues from logistic services |
316 | 232 | 220 | 548 | 411 | |||||||||||||||
Aluminum products |
327 | 346 | 289 | 673 | 569 | |||||||||||||||
Other products and services |
1 | 2 | 4 | 3 | 10 | |||||||||||||||
3,721 | 2,328 | 2,033 | 6,049 | 3,764 | ||||||||||||||||
Value-added tax |
(185 | ) | (115 | ) | (113 | ) | (300 | ) | (188 | ) | ||||||||||
Net operating revenues |
3,536 | 2,213 | 1,920 | 5,749 | 3,576 | |||||||||||||||
Operating costs and expenses |
||||||||||||||||||||
Cost of ores and metals sold |
(1,134 | ) | (912 | ) | (647 | ) | (2,046 | ) | (1,290 | ) | ||||||||||
Cost of logistic services |
(169 | ) | (143 | ) | (117 | ) | (312 | ) | (232 | ) | ||||||||||
Cost of aluminum products |
(203 | ) | (191 | ) | (143 | ) | (394 | ) | (290 | ) | ||||||||||
Others |
(2 | ) | (1 | ) | (5 | ) | (3 | ) | (8 | ) | ||||||||||
(1,508 | ) | (1,247 | ) | (912 | ) | (2,755 | ) | (1,820 | ) | |||||||||||
Selling, general and administrative expenses |
(135 | ) | (113 | ) | (106 | ) | (248 | ) | (207 | ) | ||||||||||
Research and development |
(54 | ) | (34 | ) | (27 | ) | (88 | ) | (50 | ) | ||||||||||
Employee profit sharing plan |
(24 | ) | (17 | ) | (17 | ) | (41 | ) | (30 | ) | ||||||||||
Others |
(44 | ) | (7 | ) | (26 | ) | (51 | ) | (54 | ) | ||||||||||
(1,765 | ) | (1,418 | ) | (1,088 | ) | (3,183 | ) | (2,161 | ) | |||||||||||
Operating income |
1,771 | 795 | 832 | 2,566 | 1,415 | |||||||||||||||
Non-operating income (expenses) |
||||||||||||||||||||
Financial income |
27 | 29 | 19 | 56 | 31 | |||||||||||||||
Financial expenses |
(51 | ) | (92 | ) | (106 | ) | (143 | ) | (248 | ) | ||||||||||
Foreign exchange and monetary gains (losses), net |
304 | (2 | ) | (245 | ) | 302 | (287 | ) | ||||||||||||
280 | (65 | ) | (332 | ) | 215 | (504 | ) | |||||||||||||
Income before income taxes, equity results and minority interests |
2,051 | 730 | 500 | 2,781 | 911 | |||||||||||||||
Income taxes |
||||||||||||||||||||
Current |
(330 | ) | (160 | ) | (41 | ) | (490 | ) | (138 | ) | ||||||||||
Deferred |
(107 | ) | 47 | (23 | ) | (60 | ) | 9 | ||||||||||||
(437 | ) | (113 | ) | (64 | ) | (550 | ) | (129 | ) | |||||||||||
Equity in results of affiliates and joint ventures and change in provision
for losses on equity investments |
220 | 133 | 150 | 353 | 236 | |||||||||||||||
Minority interests |
(204 | ) | (52 | ) | (82 | ) | (256 | ) | (109 | ) | ||||||||||
Net income |
1,630 | 698 | 504 | 2,328 | 909 | |||||||||||||||
Income available to preferred stockholders |
588 | 252 | 182 | 840 | 328 | |||||||||||||||
Income available to common stockholders |
1,042 | 446 | 322 | 1,488 | 581 | |||||||||||||||
Basic and diluted earnings per Preferred Class A Share |
1.41 | 0.61 | 0.44 | 2.02 | 0.79 | |||||||||||||||
Basic and diluted earnings per Common Share |
1.41 | 0.61 | 0.44 | 2.02 | 0.79 | |||||||||||||||
Weighted average number of shares outstanding (thousands of shares) |
||||||||||||||||||||
Preferred Class A shares |
415,716 | 415,716 | 415,713 | 415,716 | 415,713 | |||||||||||||||
Common shares |
735,804 | 735,804 | 735,804 | 735,804 | 735,804 |
F-5
Six-month periods | ||||||||||||||||||||
Three-month periods ended | ended June 30 | |||||||||||||||||||
June | March | June | ||||||||||||||||||
30,2005 | 31,2005 | 30,2004 | 2005 | 2004 | ||||||||||||||||
Cash flows from operating activities: |
||||||||||||||||||||
Net income |
1,630 | 698 | 504 | 2,328 | 909 | |||||||||||||||
Adjustments to reconcile net income to cash provided by
operating activities: |
||||||||||||||||||||
Depreciation, depletion and amortization |
136 | 129 | 79 | 265 | 178 | |||||||||||||||
Dividends received |
126 | 69 | 60 | 195 | 121 | |||||||||||||||
Equity in results of affiliates and joint ventures and change in provision
for losses on equity investments |
(220 | ) | (133 | ) | (150 | ) | (353 | ) | (236 | ) | ||||||||||
Deferred income taxes |
107 | (47 | ) | 23 | 60 | (9 | ) | |||||||||||||
Provisions for other contingencies |
(8 | ) | (3 | ) | | (11 | ) | | ||||||||||||
Impairment of property, plant and equipment |
12 | 4 | | 16 | | |||||||||||||||
Foreign exchange and monetary losses (gains) |
(298 | ) | 27 | 291 | (271 | ) | 336 | |||||||||||||
Net unrealized derivative losses (gains) |
(85 | ) | (5 | ) | (22 | ) | (90 | ) | 32 | |||||||||||
Minority interests |
204 | 52 | 82 | 256 | 109 | |||||||||||||||
Interest payable, net |
38 | (2 | ) | 27 | 36 | 13 | ||||||||||||||
Others |
(63 | ) | (17 | ) | 27 | (80 | ) | 9 | ||||||||||||
Decrease (increase) in assets: |
||||||||||||||||||||
Accounts receivable |
(472 | ) | (92 | ) | (132 | ) | (564 | ) | (155 | ) | ||||||||||
Inventories |
(50 | ) | (20 | ) | (67 | ) | (70 | ) | (82 | ) | ||||||||||
Others |
(187 | ) | (74 | ) | 67 | (261 | ) | 42 | ||||||||||||
Increase (decrease) in liabilities: |
||||||||||||||||||||
Suppliers |
142 | 45 | (59 | ) | 187 | (84 | ) | |||||||||||||
Payroll and related charges |
13 | (35 | ) | (18 | ) | (22 | ) | (21 | ) | |||||||||||
Taxes payable |
325 | (79 | ) | | 246 | | ||||||||||||||
Others |
76 | (86 | ) | (12 | ) | (10 | ) | 135 | ||||||||||||
Cash provided by operating activities |
1,426 | 431 | 700 | 1,857 | 1,297 | |||||||||||||||
Cash flows from investing activities: |
||||||||||||||||||||
Loans and advances receivable |
||||||||||||||||||||
Related parties |
||||||||||||||||||||
Additions |
(27 | ) | | (6 | ) | (27 | ) | (6 | ) | |||||||||||
Repayments |
22 | 3 | 5 | 25 | 46 | |||||||||||||||
Others |
| 1 | 4 | 1 | 19 | |||||||||||||||
Guarantees and deposits |
(3 | ) | (17 | ) | (18 | ) | (20 | ) | (42 | ) | ||||||||||
Additions to investments |
(90 | ) | (1 | ) | (6 | ) | (91 | ) | (15 | ) | ||||||||||
Additions to property, plant and equipment |
(777 | ) | (661 | ) | (416 | ) | (1,438 | ) | (797 | ) | ||||||||||
Proceeds Others from disposals of property, plant and equipment |
1 | 2 | | 3 | | |||||||||||||||
Cash used in investing activities |
(874 | ) | (673 | ) | (437 | ) | (1,547 | ) | (795 | ) | ||||||||||
Cash flows from financing activities: |
||||||||||||||||||||
Short-term debt, net issuances (repayments) |
216 | 21 | (44 | ) | 237 | | ||||||||||||||
Loans |
||||||||||||||||||||
Related parties |
||||||||||||||||||||
Additions |
3 | 4 | 3 | 7 | 6 | |||||||||||||||
Repayments |
(9 | ) | (17 | ) | (1 | ) | (26 | ) | (7 | ) | ||||||||||
Issuances of long-term debt |
||||||||||||||||||||
Related parties |
11 | 4 | | 15 | | |||||||||||||||
Others |
114 | 235 | 227 | 349 | 892 | |||||||||||||||
Repayments of long-term debt |
||||||||||||||||||||
Others |
(432 | ) | (156 | ) | (201 | ) | (588 | ) | (671 | ) | ||||||||||
Interest attributed to stockholders |
(500 | ) | | (269 | ) | (500 | ) | (269 | ) | |||||||||||
Cash provided by (used in) financing activities |
(597 | ) | 91 | (285 | ) | (506 | ) | (49 | ) | |||||||||||
Increase (decrease) in cash and cash equivalents |
(45 | ) | (151 | ) | (22 | ) | (196 | ) | 453 | |||||||||||
Effect of exchange rate changes on cash and cash equivalents |
(121 | ) | 24 | (2 | ) | (97 | ) | (5 | ) | |||||||||||
Initial cash in new consolidated subsidiary |
| | | | 26 | |||||||||||||||
Cash and cash equivalents, beginning of period |
1,122 | 1,249 | 1,083 | 1,249 | 585 | |||||||||||||||
Cash and cash equivalents, end of period |
956 | 1,122 | 1,059 | 956 | 1,059 | |||||||||||||||
Cash paid during the period for: |
||||||||||||||||||||
Interest on short-term debt |
| | | | (2 | ) | ||||||||||||||
Interest on long-term debt |
(35 | ) | (82 | ) | (51 | ) | (117 | ) | (131 | ) | ||||||||||
Income tax |
(171 | ) | (79 | ) | | (250 | ) | | ||||||||||||
Non-cash transactions |
||||||||||||||||||||
Interest capitalized |
(9 | ) | (15 | ) | (6 | ) | (24 | ) | (11 | ) | ||||||||||
Income tax paid with credits |
(53 | ) | (27 | ) | (64 | ) | (80 | ) | (61 | ) |
F-6
Three-month periods ended | Six-month periods ended June 30 | |||||||||||||||||||
June | March | June | ||||||||||||||||||
30, 2005 | 31, 2005 | 30, 2004 | 2005 | 2004 | ||||||||||||||||
Preferred class A stock (including three special
shares) |
||||||||||||||||||||
Beginning of the period |
1,176 | 1,176 | 1,055 | 1,176 | 1,055 | |||||||||||||||
Transfer from appropriated retained earnings |
974 | | 121 | 974 | 121 | |||||||||||||||
End of the period |
2,150 | 1,176 | 1,176 | 2,150 | 1,176 | |||||||||||||||
Common stock |
||||||||||||||||||||
Beginning of the period |
2,121 | 2,121 | 1,902 | 2,121 | 1,902 | |||||||||||||||
Transfer from appropriated retained earnings |
1,685 | | 219 | 1,685 | 219 | |||||||||||||||
End of the period |
3,806 | 2,121 | 2,121 | 3,806 | 2,121 | |||||||||||||||
Treasury stock |
||||||||||||||||||||
End of the period |
(88 | ) | (88 | ) | (88 | ) | (88 | ) | (88 | ) | ||||||||||
Additional paid-in capital |
||||||||||||||||||||
End of the period |
498 | 498 | 498 | 498 | 498 | |||||||||||||||
Other cumulative comprehensive loss |
||||||||||||||||||||
Cumulative translation adjustments |
||||||||||||||||||||
Beginning of the period |
(3,891 | ) | (3,869 | ) | (4,480 | ) | (3,869 | ) | (4,449 | ) | ||||||||||
Change in the period |
1,032 | (22 | ) | (277 | ) | 1,010 | (308 | ) | ||||||||||||
End of the period |
(2,859 | ) | (3,891 | ) | (4,757 | ) | (2,859 | ) | (4,757 | ) | ||||||||||
Unrealized gain on available-for-sale securities |
||||||||||||||||||||
Beginning of the period |
116 | 95 | 77 | 95 | 74 | |||||||||||||||
Change in the period |
(1 | ) | 21 | (16 | ) | 20 | (13 | ) | ||||||||||||
End of the period |
115 | 116 | 61 | 115 | 61 | |||||||||||||||
Total other cumulative comprehensive loss |
(2,744 | ) | (3,775 | ) | (4,696 | ) | (2,744 | ) | (4,696 | ) | ||||||||||
Appropriated retained earnings |
||||||||||||||||||||
Beginning of the period |
4,126 | 4,143 | 3,016 | 4,143 | 3,035 | |||||||||||||||
Transfer (to) from retained earnings |
362 | (17 | ) | (175 | ) | 345 | (194 | ) | ||||||||||||
Transfer to capital stock |
(2,659 | ) | | (340 | ) | (2,659 | ) | (340 | ) | |||||||||||
End of the period |
1,829 | 4,126 | 2,501 | 1,829 | 2,501 | |||||||||||||||
Retained earnings |
||||||||||||||||||||
Beginning of the period |
4,030 | 3,315 | 3,119 | 3,315 | 2,857 | |||||||||||||||
Net income |
1,630 | 698 | 504 | 2,328 | 909 | |||||||||||||||
Interest attributed to stockholders |
||||||||||||||||||||
Preferred class A stock |
(180 | ) | | (48 | ) | (180 | ) | (106 | ) | |||||||||||
Common stock |
(320 | ) | | (83 | ) | (320 | ) | (187 | ) | |||||||||||
Appropriation (to) from reserves |
(362 | ) | 17 | 175 | (345 | ) | 194 | |||||||||||||
End of the period |
4,798 | 4,030 | 3,667 | 4,798 | 3,667 | |||||||||||||||
Total stockholders equity |
10,249 | 8,088 | 5,179 | 10,249 | 5,179 | |||||||||||||||
Comprehensive income is comprised as follows: |
||||||||||||||||||||
Net income |
1,630 | 698 | 504 | 2,328 | 909 | |||||||||||||||
Cumulative translation adjustments |
1,032 | (22 | ) | (277 | ) | 1,010 | (308 | ) | ||||||||||||
Unrealized gain on
available-for-sale securities |
(1 | ) | 21 | (16 | ) | 20 | (13 | ) | ||||||||||||
Total comprehensive income |
2,661 | 697 | 211 | 3,358 | 588 | |||||||||||||||
Shares |
||||||||||||||||||||
Preferred class A stock (including three special
shares) |
415,727,739 | 415,727,739 | 415,727,739 | 415,727,739 | 415,727,739 | |||||||||||||||
Common stock |
749,949,429 | 749,949,429 | 749,949,429 | 749,949,429 | 749,949,429 | |||||||||||||||
Treasury stock (1) |
||||||||||||||||||||
Beginning of the period |
(14,157,325 | ) | (14,157,461 | ) | (14,158,059 | ) | (14,157,461 | ) | (14,158,059 | ) | ||||||||||
Sales |
12 | 136 | | 148 | | |||||||||||||||
End of the period |
(14,157,313 | ) | (14,157,325 | ) | (14,158,059 | ) | (14,157,313 | ) | (14,158,059 | ) | ||||||||||
1,151,519,855 | 1,151,519,843 | 1,151,519,109 | 1,151,519,855 | 1,151,519,109 | ||||||||||||||||
Interest attributed to stockholders (per share) |
||||||||||||||||||||
Preferred class A stock (including three
special shares) |
0.43 | | 0.11 | 0.43 | 0.25 | |||||||||||||||
Common stock |
0.43 | | 0.11 | 0.43 | 0.25 |
(1) | As of June 30, 2005, 14,145,510 common shares and 11,803 preferred shares were held in treasury in the amount of US$ 88. The 14,145,510 common shares guarantee a loan of our subsidiary Alunorte. |
F - 7
Notes to the Condensed Consolidated Financial Information Expressed in millions of United States dollars, unless otherwise stated (Unaudited) |
||
1 | The Company and its operations | |
Companhia Vale do Rio Doce (CVRD) is a limited liability company, duly organized and existing under the laws of the Federative Republic of Brazil. Our operations are carried out through CVRD and its subsidiary companies, joint ventures and affiliates, and mainly consist of mining, non-ferrous metal production and logistics, as well as energy, aluminum and steel activities. Further details of our joint ventures and affiliates are described in Note 7. | ||
The main operating subsidiaries we consolidate are as follows: |
%voting | ||||||||||||||||
Subsidiary | % ownership | capital | Head office location | Principal activity | ||||||||||||
Alumina do Norte do Brasil S.A. Alunorte
(Alunorte) |
57 | 61 | Brazil | Alumina | ||||||||||||
Alumínio Brasileiro S.A. Albras (Albras) |
51 | 51 | Brazil | Aluminum | ||||||||||||
CADAM S.A (CADAM) (1) |
37 | 100 | Brazil | Kaolin | ||||||||||||
CVRD Overseas Ltd. |
100 | 100 | Cayman Islands | Trading | ||||||||||||
Ferrovia Centro-Atlântica S. A. |
100 | 100 | Brazil | Logistics | ||||||||||||
Itabira Rio Doce Company Ltd. ITACO |
100 | 100 | Cayman Islands | Trading | ||||||||||||
Minerações Brasileiras Reunidas S.A. MBR (2) |
56 | 90 | Brazil | Iron ore | ||||||||||||
Navegação Vale do Rio Doce S.A. DOCENAVE |
100 | 100 | Brazil | Shipping | ||||||||||||
Pará Pigmentos S.A. (1) |
76 | 86 | Brazil | Kaolin | ||||||||||||
Rio Doce International Finance Ltd. RDIF |
100 | 100 | Bahamas | International finance | ||||||||||||
Rio Doce Manganês S.A. |
100 | 100 | Brazil | Manganese and Ferroalloys | ||||||||||||
Rio Doce Manganèse Europe RDME |
100 | 100 | France | Ferroalloys | ||||||||||||
Rio Doce Manganese Norway RDMN |
100 | 100 | Norway | Ferroalloys | ||||||||||||
Salobo Metais S.A. |
100 | 100 | Brazil | Copper | ||||||||||||
Urucum Mineração S.A. |
100 | 100 | Brazil | Iron ore, Ferroalloys and | ||||||||||||
Manganese |
(1) | Through Caemi Mineração e Metalurgia S.A. CVRD holds 60.2% of the total capital and 100% of the voting capital. | |
(2) | Through Caemi Mineração e Metalurgia S.A. and Belém Administrações e Participações Ltda. |
2 | Basis of consolidation | |
All majority-owned subsidiaries where we have both share and management control are consolidated, with elimination of all significant intercompany accounts and transactions. Additionally, variable interest entities in which we are the primary beneficiary (FASB Interpretation FIN No. 46 Consolidation of Variable Interest Entities (revised December 2003)) are consolidated as from January 1, 2004. Investments in unconsolidated affiliates and joint ventures are reported at cost plus our equity in undistributed earnings or losses. Included in this category are certain joint ventures in which we have majority ownership but, by force of shareholders agreements, do not have effective management control. We provide for losses on equity investments with negative stockholders equity where applicable. | ||
We evaluate the carrying value of our listed investments relative to publicly available quoted market prices. If the quoted market price is below book value, and such decline is considered other than temporary, we write-down our equity investments to quoted market value. | ||
We define joint ventures as businesses in which we and a small group of other partners each participate actively in the overall entity management, based on a shareholders agreement. We define affiliates as businesses in which we participate as a minority stockholder but with significant influence over the operating and financial policies of the investee. | ||
Investments in unincorporated joint ventures, formed for the purpose of investing in hydroelectric power projects, are proportionately consolidated. |
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3 | Summary of significant accounting policies | |
Our condensed consolidated interim financial information for the three-month periods ended June 30, 2005, March 31, 2005 and June 30, 2004 and for the six-month periods ended June 30, 2005 and 2004 is unaudited. However, in our opinion, such condensed consolidated financial information includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for interim periods. The results of operations for the three and six month period ended June 30, 2005 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2005. | ||
In preparing the consolidated financial statements, we are required to use estimates to account for certain assets, liabilities, revenues and expenses. Our consolidated financial statements therefore include various estimates concerning the selection of useful lives of property, plant and equipment, provisions necessary for contingent liabilities, fair values assigned to assets and liabilities acquired in business combinations, income tax valuation allowances, employee post-retirement benefits and other similar evaluations, actual results may vary from our estimates. | ||
Exchange rates at June 30, 2005, March 31, 2005 and December 31, 2004 were R$2,3504: US$1.00, R$2,6662: US$1.00 and R$2,6544: US$1.00, respectively. | ||
4 | Recently-issued accounting pronouncements | |
In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections which sets reporting of a change in accounting principles or errors. We do not expect FASB No. 154 to have a significant impact on our financial position, results of operations or cash flows. | ||
In March 2005, the FASB issued FSP FIN 46(R)-5, Consolidation of Variable Interests Entities to address whether a reporting enterprise should consider whether it holds an implicit variable interest in a variable interest entity (VIE) or potential VIE when specific conditions exist. We adopted FIN 46R and we do not expect FSP FIN 46(R)-5 to have any impact on our financial position, results of operations or cash flows. | ||
In March 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations which refers to legal obligation to perform an asset retirement activity. We do not expect FASB Interpretation No. 47 to have a significant impact on our financial position, results of operations or cash flows. | ||
In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment which sets accounting requirements for share-based compensation to employees, including employee-stock-purchase-plans (ESPPs) and provides guidance on accounting for awards to non-employees. Which did not have a significant impact on our financial position, results of operations or cash flows. | ||
In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets an amendment of APB No. 29. We will apply this Statement in the event exchanges of nonmonetary assets occur in fiscal periods beginning after June 15, 2005. | ||
In November 2004, the FASB issued SFAS No. 151, Inventory Costs an amendment of ARB No. 43, Chapter 4 that deals with inventory pricing. We have already adopted this new Statement, which did not have a significant impact on our financial position, results of operations or cash flows. | ||
In September 2004, the FASB issued FSP EITF Issue 03-1-1, which delayed the effective date of paragraphs 10-20 of EITF Issue No. 03-1, The Meaning of Other-Than-Temporary |
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Impairment and Its Application to Certain Investments. We do not expect EITF Issue No. 03-01 to have any impact on our financial position, results of operations or cash flows. | ||
5 | Income taxes | |
Income taxes in Brazil comprise federal income tax and social contribution, which is an additional federal tax. The statutory composite enacted tax rate applicable in the periods presented is 34% represented by a 25% federal income tax rate plus a 9% social contribution rate. | ||
The amount reported as income tax expense in our condensed consolidated financial information is reconciled to the statutory rates as follows: |
Three-month | Six-month periods | |||||||||||||||||||
periods ended | ended June 30 | |||||||||||||||||||
June 30, | March 31, | June 30, | ||||||||||||||||||
2005 | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||
Income before income taxes, equity results and minority interests |
2,051 | 730 | 500 | 2,781 | 911 | |||||||||||||||
Federal income tax and social contribution expense at
statutory enacted rates |
(697 | ) | (248 | ) | (171 | ) | (945 | ) | (310 | ) | ||||||||||
Adjustments to derive effective tax rate: |
||||||||||||||||||||
Tax benefit on interest attributed to stockholders |
131 | 54 | 44 | 185 | 99 | |||||||||||||||
Exempt foreign income (expenses) |
82 | 46 | 21 | 128 | 35 | |||||||||||||||
Difference on tax basis of equity investees |
(17 | ) | (4 | ) | (16 | ) | (21 | ) | (30 | ) | ||||||||||
Tax incentives |
59 | 22 | 3 | 81 | 12 | |||||||||||||||
Valuation allowance reversal (provision) |
| | 52 | | 52 | |||||||||||||||
Other non-taxable gains (losses) |
5 | 17 | 3 | 22 | 13 | |||||||||||||||
Federal income tax and social contribution expense in
consolidated statements of income |
(437 | ) | (113 | ) | (64 | ) | (550 | ) | (129 | ) | ||||||||||
We have certain tax incentives relative to our iron ore and manganese operations in Carajás, potash in Sergipe and relative to alumina and aluminum in Barcarena. The incentives relative to iron ore and manganese comprise full income tax exemption on defined production levels up to 2005 and partial exemption up to 2013. The incentive relating to alumina and potash comprise full income tax exemption on defined production levels which expires in 2010 and 2013, respectively, while the partial exemption incentives relative to aluminum expire in 2013. An amount equal to the tax saving must be appropriated to a reserve account within stockholders equity and may not be distributed in the form of cash dividends. | ||
6 | Inventories |
June 30, | December | |||||||
2005 | 31, 2004 | |||||||
Finished products |
||||||||
Iron ore and pellets |
224 | 205 | ||||||
Manganese and ferroalloys |
164 | 156 | ||||||
Aluminum |
53 | 54 | ||||||
Alumina |
22 | 20 | ||||||
Kaolin |
19 | 17 | ||||||
Others |
31 | 11 | ||||||
Spare parts and maintenance supplies |
520 | 386 | ||||||
1,033 | 849 | |||||||
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7 | Investments in affiliated companies and joint ventures |
June 30, 2005 | Investments | Equity Adjustments | Dividends received | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quoted | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six-month periods | Six-month periods | market | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three-month periods ended | ended June 30 | Three-month periods ended | ended June 30 | value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Participation in | Net | Net income for | June 30, | December | June 30, | March 31, | June 30, | June 30, | March 31, | June 30, | June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
capital (%) | equity | the period | 2005 | 31, 2004 | 2005 | 2005 | 2004 | 2005 | 2004 | 2005 | 2005 | 2004 | 2005 | 2004 | 2005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
voting | total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ferrous |
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Companhia Nipo-Brasileira de Pelotização NIBRASCO (2) |
51.11 | 51.00 | 67 | 28 | 34 | 30 | 11 | 2 | 5 | 13 | 7 | | | | | | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||||
Companhia Hispano-Brasileira de Pelotização HISPANOBRÁS (2) |
51.00 | 50.89 | 82 | 32 | 42 | 26 | 14 | 2 | 3 | 16 | 4 | 3 | 1 | | 4 | | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||||
Companhia Coreano-Brasileira de Pelotização KOBRASCO |
50.00 | 50.00 | 62 | 33 | 31 | 13 | 14 | 3 | 1 | 17 | 2 | | | | | | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||||
Companhia
Ítalo-Brasileira de Pelotização ITABRASCO (2) |
51.00 | 50.90 | 69 | 29 | 35 | 18 | 13 | 1 | 3 | 14 | 4 | | | | | | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||||
Gulf Industrial Investment Company GIIC |
50.00 | 50.00 | 139 | 70 | 70 | 45 | 23 | 12 | 2 | 35 | 6 | 11 | | 1 | 11 | 7 | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||||
SAMARCO Mineração S.A. SAMARCO (3) |
50.00 | 50.00 | 588 | 182 | 340 | 261 | 56 | 34 | 20 | 90 | 45 | 35 | 20 | 30 | 55 | 49 | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||||
Minas da
Serra Geral S.A. MSG |
50.00 | 50.00 | 39 | (2 | ) | 19 | 18 | (4 | ) | | (2 | ) | (4 | ) | (2 | ) | | | | | | n/a | ||||||||||||||||||||||||||||||||||||||||||||||
Others |
| | | | 26 | 24 | 1 | (2 | ) | | (1 | ) | (1 | ) | | | | | | n/a | ||||||||||||||||||||||||||||||||||||||||||||||||
597 | 435 | 128 | 52 | 32 | 180 | 65 | 49 | 21 | 31 | 70 | 56 | n/a | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Logistics |
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MRS Logística S.A |
37.23 | 29.35 | 261 | | 75 | 78 | 12 | 10 | 8 | 22 | 14 | 5 | | | 5 | | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||||
Others |
| | | | | 1 | | | | | | | | | | | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||||
75 | 79 | 12 | 10 | 8 | 22 | 14 | 5 | | | 5 | | n/a | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Holdings |
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Steel |
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Usinas Siderúrgicas de Minas Gerais S.A. USIMINAS |
22.99 | 11.46 | 2,013 | 864 | 231 | 140 | 57 | 42 | 16 | 99 | 34 | 34 | | | 34 | 13 | 425 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Companhia Siderúrgica de Tubarão CST (1) |
| | | | | | 61 | | 78 | | | | | | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||||||
California Steel Industries Inc. CSI |
50.00 | 50.00 | 324 | 32 | 162 | 149 | 5 | 11 | 15 | 16 | 14 | | 20 | 2 | 20 | 2 | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||||
SIDERAR (cost $15) available for sale investments |
4.85 | 4.85 | | | 130 | 110 | | | | | | | | | | | 130 | |||||||||||||||||||||||||||||||||||||||||||||||||||
523 | 399 | 62 | 53 | 92 | 115 | 126 | 34 | 20 | 2 | 54 | 15 | 555 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Aluminum and bauxite |
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Mineração Rio do Norte S.A. MRN |
40.00 | 40.00 | 362 | 80 | 145 | 171 | 17 | 15 | 14 | 32 | 25 | 30 | 28 | 20 | 58 | 41 | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||||
Valesul Alumínio S.A. VALESUL |
54.51 | 54.51 | 114 | 7 | 62 | 55 | 1 | 3 | 4 | 4 | 7 | 8 | | 7 | 8 | 9 | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||||
207 | 226 | 18 | 18 | 18 | 36 | 32 | 38 | 28 | 27 | 66 | 50 | n/a | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Coal |
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Henan Longyu Resources Co. Ltd(4) |
| | | | 86 | | | | | | | | | | | | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||||
Shandong Yankuang International Company Ltd(4) |
| | | | 10 | 10 | | | | | | | | | | | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||||
96 | 10 | | | | | | | | | | | n/a | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other affiliates and joint ventures |
| | | | 10 | 10 | | | | | (1 | ) | | | | | | n/a | ||||||||||||||||||||||||||||||||||||||||||||||||||
836 | 645 | 80 | 71 | 110 | 151 | 157 | 72 | 48 | 29 | 120 | 65 | 555 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total |
1,508 | 1,159 | 220 | 133 | 150 | 353 | 236 | 126 | 69 | 60 | 195 | 121 | 555 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) | During 2004 we sold its interest in CST; | |
(2) | We held a majority of the voting power of several entities that were accounted for under the equity method in accordance with EITF 96-16 due to veto rights held by minority under shareholders agreements; | |
(3) | Investment includes goodwill of US$45 in periods presented; |
|
(4) | Preoperating investiments. |
F - 11
8 | Pension costs |
Six-month periods | ||||||||||||||||||||
Three month periods ended | ended June 30 | |||||||||||||||||||
June 30, | March 31, | June 30, | ||||||||||||||||||
2005 | 2005 | 2004 (*) | 2005 | 2004 (*) | ||||||||||||||||
Service cost benefits earned during the period |
1 | | | 1 | 1 | |||||||||||||||
Interest cost on projected benefit obligation |
60 | 56 | 47 | 116 | 94 | |||||||||||||||
Expected return on assets |
(75 | ) | (69 | ) | (53 | ) | (144 | ) | (106 | ) | ||||||||||
Amortization of initial transitory obligation |
2 | 3 | 2 | 5 | 4 | |||||||||||||||
Net deferral |
(4 | ) | (4 | ) | (6 | ) | (8 | ) | (12 | ) | ||||||||||
Net periodic pension cost |
(16 | ) | (14 | ) | (10 | ) | (30 | ) | (19 | ) | ||||||||||
(*) | Based on 2004 annual periodic pension cost. |
In addition to benefits provided under the Pension Plan, accruals have been made relative to supplementary health care benefits extended in previous periods as part of early-retirement programs. Such accruals included in long-term liabilities totaled US$229 and US$215, at June 30, 2005 and December 31, 2004, respectively, plus US$44 and US$34, respectively, in current liabilities. | ||
The cost recognized for the three-month ended June 30, 2005, March 31, 2005, and June 30, 2004 relative to the defined contribution element of the New Plan was US$2, in each period. | ||
We previously disclosed in our consolidated financial statements for the year ended December 31, 2004, that we expected to contribute US$16 to our defined benefit pension plan in 2005. As of June 30, 2005, US$9 of our contributions have been made. We do not expect any change in our previous estimate. | ||
9 | Commitments and contingencies | |
(a) | At June 30, 2005, we had extended guarantees for borrowings obtained by affiliates and joint ventures in the amount of US$6, as follows: |
Amount of | Denominated | Final | Counter | |||||||||||||||||
Affiliate or Joint Venture | guarantee | currency | Purpose | maturity | guarantees | |||||||||||||||
SAMARCO |
5 | US$ | Debt guarantee | 2008 | None | |||||||||||||||
VALESUL |
1 | R$ | Debt guarantee | 2007 | None | |||||||||||||||
6 | ||||||||||||||||||||
We expect no losses to arise as a result of the above guarantees. We charge a commission for extending these guarantees in the case of Samarco. | ||
We have not provided any significant guarantees since January 1, 2003 which would require fair value adjustments under FIN 45 Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. | ||
(b) | We and our subsidiaries are defendants in numerous legal actions in the normal course of business. Based on the advice of our legal counsel, management believes that the provision made against contingent losses is sufficient to cover probable losses in connection with such actions. |
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The provision for contingencies and the related judicial deposits are composed as follows: |
June 30, 2005 | December 31, 2004 | |||||||||||||||
Provision for | Judicial | Provision for | Judicial | |||||||||||||
contingencies | deposits | contingencies | deposits | |||||||||||||
Labor claims |
256 | 127 | 221 | 109 | ||||||||||||
Civil claims |
204 | 95 | 185 | 72 | ||||||||||||
Tax related actions |
814 | 390 | 473 | 341 | ||||||||||||
Others |
44 | 10 | 35 | 9 | ||||||||||||
1,318 | 622 | 914 | 531 | |||||||||||||
Labor related actions principally comprise employee claims for (i) payment of time spent travelling from their residences to the work-place, (ii) additional payments for alleged dangerous or unhealthy working conditions and (iii) various other matters, often in connection with disputes about the amount of indemnities paid upon dismissal. | ||
Civil actions principally relate to claims made against us by contractors in connection with losses alleged to have been incurred by them as a result of various past government economic plans during which full indexation of contracts for inflation was not permitted. | ||
Tax related actions principally comprise our challenges of certain income tax, revenue taxes, Value Added Tax and of the tax on checking account transaction CPMF. | ||
We continue to vigorously pursue our interests in all the above actions but recognize that probably will incur some losses in the final instance, for which we have made provisions. | ||
Our judicial deposits are made as required by the courts for us to be able to enter or continue a legal action. When judgment is favorable to us, we receive the deposits back; when unfavorable, the deposits are released to the prevailing party. | ||
Contingencies settled in the three-month period ended June 30, 2005, March 31, 2005 and june 30, 2004 aggregated US$56, US$4 and US$14, respectively, and additional provisions aggregated US$44, US$14 and US$39, respectively. | ||
In addition to the contingencies for which we have made provisions, we have possible losses in connection with tax contingencies totaling US$843 at June 30, 2005, for which, no provision is maintained. | ||
(c) | We and BNDES entered into a contract, known as the Mineral Risk Contract, in March 1997, relating to prospecting authorizations for mining regions where drilling and exploration are still in their early stages. The Mineral Risk Contract provides for the joint development of certain unexplored mineral deposits in approximately two million identified hectares of land in the Carajás region, as well as proportional participation in any financial benefits earned from the development of such resources. Iron ore and manganese deposits already identified and subject to development are specifically excluded from the Mineral Risk Contract. | |
Pursuant to the Mineral Risk Contract, we and BNDES each agreed to provide US$205, which represents half of the US$410 in expenditures estimated as necessary to complete geological exploration and mineral resource development projects in the region. We will oversee these projects and BNDES will advance us half of our costs on a quarterly basis. Under the Mineral Risk Contract, as of June 30, 2005, the remaining contributions towards exploration and development activities totaled US$44. In the event that either of us wishes to conduct further exploration and development after having spent such US$205, the contract provides that each party may either choose to match the other partys contributions, or may choose to have its financial interest proportionally diluted. If a partys participation in the project is diluted to an amount lower than 40% of the amount invested in connection with exploration and development projects, then the Mineral Risk Contract provides that the diluted party will lose all the rights and benefits provided for in the Mineral Risk Contract and |
F - 13
any amounts previously contributed to the project. | ||
Under the Mineral Risk Contract, BNDES has agreed to compensate us through a finders fee production royalty on their share of mineral resources that are discovered and placed into production. This finders fee is equal to 3.5% of the revenues derived from the sale of gold, silver and platinum group metals and 1.5% of the revenues derived from the sale of other minerals, including copper, except for gold and other minerals discovered at Serra Leste, for which the finders fee is equal to 6.5% of revenues. | ||
(d) | At the time of our privatization in 1997, we issued shareholder revenue interests known in Brazil as debentures to our then-existing shareholders, including the Brazilian Government. The terms of the debentures, were set to ensure that our pre-privatization shareholders, including the Brazilian Government, would participate alongside us in potential future financial benefits that we are able to derive from exploiting our mineral resources. | |
On March 22, 2005 we declared a distribution on these debentures in the amount of US$3, paid as from April 1, 2005. | ||
(e) | We use various judgments and assumptions when measuring our environmental liabilities and asset retirement obligations. Changes in circumstances, law or technology may affect our estimates and we periodically review the amounts accrued and adjust them as necessary. Our accruals do not reflect unasserted claims because we are currently not aware of any such issues. Also the amounts provided are not reduced by any potential recoveries under cost sharing, insurance or indemnification arrangements because such recoveries are considered uncertain. The changes are demonstrated as follows: |
Three-month periods ended | Six-month periods | |||||||||||||||||||
(unaudited) | ended June 30 | |||||||||||||||||||
June 30, | March 31, | June 30, | ||||||||||||||||||
2005 | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||
Environmental liabilities beginning of period |
137 | 134 | 82 | 134 | 81 | |||||||||||||||
Accretion expense |
10 | 4 | 4 | 14 | 6 | |||||||||||||||
Liabilities settled in the current period |
(4 | ) | | | (4 | ) | | |||||||||||||
Cumulative translation adjustment |
16 | (1 | ) | (4 | ) | 15 | (5 | ) | ||||||||||||
Environmental liabilities end of period |
159 | 137 | 82 | 159 | 82 | |||||||||||||||
10 | Segment and geographical information | |
In 1999 we adopted SFAS 131 Disclosures about Segments of an Enterprise and Related Information with respect to the information we present about our operating segments. SFAS 131 introduced a management approach concept for reporting segment information, whereby such information is required to be reported on the basis that the chief decision-maker uses internally for evaluating segment performance and deciding how to allocate resources to segments. Our business segments are currently organized as follows: | ||
Ferrous products comprises iron ore mining and pellet production, as well as the Northern and Southern transportation systems, including railroads, ports and terminals, as they pertain to mining operations. Manganese mining and ferroalloys are also included in this segment. | ||
Non-ferrous products comprises the production of non-ferrous minerals, including potash, kaolin, copper and research of others minerals, mainly nickel. |
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Logistics comprises our transportation systems as they pertain to the operation of our ships, ports and railroads for third-party cargos. | ||
Holdings divided into the following sub-groups: |
| Aluminum comprises aluminum trading activities, alumina refining and aluminum metal smelting and investments in joint ventures and affiliates engaged in bauxite mining. | ||
| Steel comprises our investments in joint ventures and affiliates operating in the steel industry. | ||
| Others comprises our investments in joint ventures and affiliates engaged in other business. |
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As of and for the three-month periods ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2005 | March 31, 2005 | June 30, 2004 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Holdings | Holdings | Holdings | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non | Non | Non | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ferrous | ferrous | Logistics | Aluminum | Others | Eliminations | Consolidated | Ferrous | ferrous | Logistics | Aluminum | Others | Eliminations | Consolidated | Ferrous | ferrous | Logistics | Aluminum | Others | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross revenues Export |
3,539 | 206 | 17 | 422 | | (1,476 | ) | 2,708 | 2,059 | 153 | 20 | 445 | | (1,001 | ) | 1,676 | 1,875 | 81 | 22 | 398 | | (923 | ) | 1,453 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross revenues Domestic |
679 | 42 | 318 | 81 | | (107 | ) | 1,013 | 386 | 49 | 228 | 93 | | (104 | ) | 652 | 364 | 35 | 219 | 47 | | (85 | ) | 580 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost and expenses |
(2,580 | ) | (203 | ) | (210 | ) | (392 | ) | (12 | ) | 1,583 | (1,814 | ) | (1,792 | ) | (162 | ) | (158 | ) | (397 | ) | | 1,105 | (1,404 | ) | (1,591 | ) | (89 | ) | (142 | ) | (308 | ) | | 1,008 | (1,122 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Depreciation, depletion and amortization |
(97 | ) | (17 | ) | (10 | ) | (12 | ) | | | (136 | ) | (97 | ) | (13 | ) | (9 | ) | (10 | ) | | | (129 | ) | (57 | ) | (6 | ) | (8 | ) | (8 | ) | | | (79 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Operating income (loss) |
1,541 | 28 | 115 | 99 | (12 | ) | | 1,771 | 556 | 27 | 81 | 131 | | | 795 | 591 | 21 | 91 | 129 | | | 832 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial income |
78 | | 11 | 3 | 1 | (66 | ) | 27 | 69 | 1 | 8 | 2 | | (51 | ) | 29 | 63 | | 2 | 20 | 1 | (67 | ) | 19 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial expenses |
(159 | ) | (4 | ) | (4 | ) | 50 | | 66 | (51 | ) | (129 | ) | (1 | ) | (3 | ) | (10 | ) | | 51 | (92 | ) | (139 | ) | (2 | ) | (5 | ) | (26 | ) | (1 | ) | 67 | (106 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Foreign exchange and monetary gains (losses), net |
201 | 3 | (7 | ) | 107 | | | 304 | (5 | ) | 3 | | | | | (2 | ) | (202 | ) | (2 | ) | (1 | ) | (42 | ) | 2 | | (245 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity in results of affiliates and joint ventures and
change in provision for losses on equity investments |
128 | | 12 | 18 | 62 | | 220 | 52 | | 10 | 18 | 53 | | 133 | 32 | | 8 | 18 | 92 | | 150 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income taxes |
(390 | ) | (1 | ) | (5 | ) | (40 | ) | (1 | ) | | (437 | ) | (67 | ) | (2 | ) | (5 | ) | (39 | ) | | | (113 | ) | (87 | ) | (4 | ) | (1 | ) | 31 | (3 | ) | | (64 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Minority interests |
(105 | ) | | | (99 | ) | | | (204 | ) | (24 | ) | | | (28 | ) | | | (52 | ) | (31 | ) | 1 | | (52 | ) | | | (82 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income |
1,294 | 26 | 122 | 138 | 50 | | 1,630 | 452 | 28 | 91 | 74 | 53 | | 698 | 227 | 14 | 94 | 78 | 91 | | 504 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sales classified by geographic destination: |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Export market
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
America, except United States |
334 | | 11 | 81 | | (144 | ) | 282 | 216 | | 11 | 106 | | (145 | ) | 188 | 172 | | 18 | 41 | | (98 | ) | 133 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
United States |
166 | | | 42 | | (89 | ) | 119 | 126 | | 3 | 78 | | (109 | ) | 98 | 121 | | | 7 | | (70 | ) | 58 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Europe |
1,518 | 125 | 6 | 185 | | (685 | ) | 1,149 | 824 | 50 | 6 | 132 | | (359 | ) | 653 | 857 | 68 | 4 | 212 | | (435 | ) | 706 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Middle East/Africa/Oceania |
277 | 34 | | | | (75 | ) | 236 | 124 | 38 | | 6 | | (51 | ) | 117 | 87 | 1 | | | | (19 | ) | 69 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Japan |
353 | 6 | | 98 | | (133 | ) | 324 | 192 | 6 | | 97 | | (79 | ) | 216 | 187 | 4 | | 105 | | (99 | ) | 197 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
China |
641 | 10 | | | | (220 | ) | 431 | 399 | 28 | | 26 | | (174 | ) | 279 | 300 | 5 | | 33 | | (135 | ) | 203 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asia, other than Japan and China |
250 | 31 | | 16 | | (130 | ) | 167 | 178 | 31 | | | | (84 | ) | 125 | 151 | 3 | | | | (67 | ) | 87 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3,539 | 206 | 17 | 422 | | (1,476 | ) | 2,708 | 2,059 | 153 | 20 | 445 | | (1,001 | ) | 1,676 | 1,875 | 81 | 22 | 398 | | (923 | ) | 1,453 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic market |
679 | 42 | 318 | 81 | | (107 | ) | 1,013 | 386 | 49 | 228 | 93 | | (104 | ) | 652 | 364 | 35 | 219 | 47 | | (85 | ) | 580 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4,218 | 248 | 335 | 503 | | (1,583 | ) | 3,721 | 2,445 | 202 | 248 | 538 | | (1,105 | ) | 2,328 | 2,239 | 116 | 241 | 445 | | (1,008 | ) | 2,033 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets: |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, plant and equipment, net |
7,511 | 1,478 | 827 | 1,572 | 126 | | 11,514 | 6,192 | 1,403 | 690 | 1,255 | 1 | | 9,541 | 4,542 | 1,020 | 483 | 826 | 1 | | 6,872 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additions to Property, plant and equipment |
525 | 46 | 52 | 153 | 1 | | 777 | 368 | 29 | 42 | 109 | | | 548 | 165 | 62 | 153 | 35 | 1 | | 416 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in affiliated companies and joint ventures and
other investments, net of provision for
losses |
597 | | 75 | 207 | 629 | | 1,508 | 466 | | 66 | 217 | 473 | | 1,222 | 330 | | 56 | 195 | 385 | | 966 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital employed |
6,468 | 1,001 | 827 | 1,079 | 22 | | 9,397 | 5,275 | 918 | 682 | 975 | (27 | ) | | 7,823 | 4,307 | 679 | 449 | 816 | 26 | | 6,277 |
F-16
As of and for the three-month periods ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2005 | March 31, 2005 | June 30, 2004 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Value | Depreciation, | Value | Depreciation, | Value | Depreciation, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | added | Net | Cost and | depletion and | Operating | Revenues | added | Net | Cost and | depletion and | Operating | Revenues | added | Net | Cost and | depletion and | Operating | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Export | Domestic | Total | tax | revenues | expenses | Net | amortization | income | Export | Domestic | Total | tax | revenues | expenses | Net | amortization | income | Export | Domestic | Total | tax | revenues | expenses | Net | amortization | income | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ferrous |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Iron ore |
1,694 | 472 | 2,166 | (81 | ) | 2,085 | (682 | ) | 1,403 | (87 | ) | 1,316 | 865 | 225 | 1,090 | (30 | ) | 1,060 | (529 | ) | 531 | (84 | ) | 447 | 732 | 211 | 943 | (38 | ) | 905 | (394 | ) | 511 | (55 | ) | 456 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pellets |
462 | 107 | 569 | (27 | ) | 542 | (333 | ) | 209 | (4 | ) | 205 | 267 | 74 | 341 | (11 | ) | 330 | (237 | ) | 93 | (3 | ) | 90 | 251 | 68 | 319 | (11 | ) | 308 | (207 | ) | 101 | | 101 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Manganese |
14 | 5 | 19 | (1 | ) | 18 | (14 | ) | 4 | | 4 | 16 | 4 | 20 | (2 | ) | 18 | (9 | ) | 9 | | 9 | 8 | 3 | 11 | (2 | ) | 9 | (7 | ) | 2 | | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ferroalloys |
98 | 56 | 154 | (14 | ) | 140 | (96 | ) | 44 | (5 | ) | 39 | 102 | 51 | 153 | (14 | ) | 139 | (82 | ) | 57 | (3 | ) | 54 | 103 | 50 | 153 | (13 | ) | 140 | (72 | ) | 68 | (3 | ) | 65 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2,268 | 640 | 2,908 | (123 | ) | 2,785 | (1,125 | ) | 1,660 | (96 | ) | 1,564 | 1,250 | 354 | 1,604 | (57 | ) | 1,547 | (857 | ) | 690 | (90 | ) | 600 | 1,094 | 332 | 1,426 | (64 | ) | 1,362 | (680 | ) | 682 | (58 | ) | 624 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non ferrous |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Potash |
| 31 | 31 | (2 | ) | 29 | (15 | ) | 14 | (2 | ) | 12 | | 30 | 30 | (3 | ) | 27 | (14 | ) | 13 | (2 | ) | 11 | | 31 | 31 | (6 | ) | 25 | (13 | ) | 12 | (1 | ) | 11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kaolin |
38 | 7 | 45 | (1 | ) | 44 | (24 | ) | 20 | (6 | ) | 14 | 34 | 5 | 39 | (2 | ) | 37 | (20 | ) | 17 | (10 | ) | 7 | 34 | 5 | 39 | (1 | ) | 38 | (21 | ) | 17 | (4 | ) | 13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Copper |
89 | 4 | 93 | (1 | ) | 92 | (44 | ) | 48 | (9 | ) | 39 | 61 | 14 | 75 | (3 | ) | 72 | (40 | ) | 32 | (8 | ) | 24 | 24 | | 24 | | 24 | (4 | ) | 20 | (2 | ) | 18 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
127 | 42 | 169 | (4 | ) | 165 | (83 | ) | 82 | (17 | ) | 65 | 95 | 49 | 144 | (8 | ) | 136 | (74 | ) | 62 | (20 | ) | 42 | 58 | 36 | 94 | (7 | ) | 87 | (38 | ) | 49 | (7 | ) | 42 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Aluminum |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Alumina |
94 | 16 | 110 | (11 | ) | 99 | (95 | ) | 4 | (6 | ) | (2 | ) | 114 | 22 | 136 | (8 | ) | 128 | (98 | ) | 30 | (6 | ) | 24 | 83 | | 83 | (4 | ) | 79 | (66 | ) | 13 | (5 | ) | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Aluminum |
194 | 10 | 204 | (1 | ) | 203 | (93 | ) | 110 | (6 | ) | 104 | 191 | 9 | 200 | (1 | ) | 199 | (90 | ) | 109 | (4 | ) | 105 | 197 | 1 | 198 | (1 | ) | 197 | (67 | ) | 130 | (3 | ) | 127 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bauxite |
13 | | 13 | | 13 | (12 | ) | 1 | | 1 | 10 | | 10 | | 10 | (9 | ) | 1 | | 1 | 8 | | 8 | | 8 | (8 | ) | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
301 | 26 | 327 | (12 | ) | 315 | (200 | ) | 115 | (12 | ) | 103 | 315 | 31 | 346 | (9 | ) | 337 | (197 | ) | 140 | (10 | ) | 130 | 288 | 1 | 289 | (5 | ) | 284 | (141 | ) | 143 | (8 | ) | 135 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Logistics |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Railroads |
| 232 | 232 | (37 | ) | 195 | (124 | ) | 71 | (9 | ) | 62 | | 159 | 159 | (27 | ) | 132 | (91 | ) | 41 | (8 | ) | 33 | | 153 | 153 | (25 | ) | 128 | (81 | ) | 47 | (4 | ) | 43 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ports |
| 60 | 60 | (10 | ) | 50 | (33 | ) | 17 | | 17 | | 46 | 46 | (9 | ) | 37 | (26 | ) | 11 | (1 | ) | 10 | | 45 | 45 | (3 | ) | 42 | (21 | ) | 21 | (1 | ) | 20 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ships |
12 | 12 | 24 | (2 | ) | 22 | (19 | ) | 3 | (2 | ) | 1 | 15 | 12 | 27 | (2 | ) | 25 | (25 | ) | | | | 10 | 12 | 22 | (7 | ) | 15 | (25 | ) | (10 | ) | (1 | ) | (11 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12 | 304 | 316 | (49 | ) | 267 | (176 | ) | 91 | (11 | ) | 80 | 15 | 217 | 232 | (38 | ) | 194 | (142 | ) | 52 | (9 | ) | 43 | 10 | 210 | 220 | (35 | ) | 185 | (127 | ) | 58 | (6 | ) | 52 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Others |
| 1 | 1 | 3 | 4 | (45 | ) | (41 | ) | | (41 | ) | 1 | 1 | 2 | (3 | ) | (1 | ) | (19 | ) | (20 | ) | | (20 | ) | 3 | 1 | 4 | (2 | ) | 2 | (23 | ) | (21 | ) | | (21 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2,708 | 1,013 | 3,721 | (185 | ) | 3,536 | (1,629 | ) | 1,907 | (136 | ) | 1,771 | 1,676 | 652 | 2,328 | (115 | ) | 2,213 | (1,289 | ) | 924 | (129 | ) | 795 | 1,453 | 580 | 2,033 | (113 | ) | 1,920 | (1,009 | ) | 911 | (79 | ) | 832 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
F-17
Six-month periods ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2005 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Holdings | Holdings | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non | Non | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ferrous | ferrous | Logistics | Aluminum | Others | Eliminations | Consolidated | Ferrous | ferrous | Logistics | Aluminum | Others | Eliminations | Consolidated | |||||||||||||||||||||||||||||||||||||||||||
Gross revenues Export |
5.598 | 359 | 37 | 867 | | (2.477 | ) | 4.384 | 3,437 | 115 | 41 | 761 | | (1,658 | ) | 2,696 | ||||||||||||||||||||||||||||||||||||||||
Gross revenues Domestic |
1.065 | 91 | 546 | 174 | | (211 | ) | 1.665 | 651 | 63 | 403 | 106 | | (155 | ) | 1,068 | ||||||||||||||||||||||||||||||||||||||||
Cost and expenses |
(4.372 | ) | (365 | ) | (368 | ) | (789 | ) | (12 | ) | 2.688 | (3.218 | ) | (2,960 | ) | (142 | ) | (270 | ) | (612 | ) | | 1,813 | (2,171 | ) | |||||||||||||||||||||||||||||||
Depreciation, depletion and amortization |
(194 | ) | (30 | ) | (19 | ) | (22 | ) | | | (265 | ) | (135 | ) | (12 | ) | (15 | ) | (16 | ) | | | (178 | ) | ||||||||||||||||||||||||||||||||
Operating (loss) income |
2.097 | 55 | 196 | 230 | (12 | ) | | 2.566 | 993 | 24 | 159 | 239 | | | 1,415 | |||||||||||||||||||||||||||||||||||||||||
Financial income |
147 | 1 | 19 | 5 | 1 | (117 | ) | 56 | 107 | | 6 | 3 | 2 | (87 | ) | 31 | ||||||||||||||||||||||||||||||||||||||||
Financial expenses |
(288 | ) | (5 | ) | (7 | ) | 40 | | 117 | (143 | ) | (255 | ) | (3 | ) | (9 | ) | (67 | ) | (1 | ) | 87 | (248 | ) | ||||||||||||||||||||||||||||||||
Foreign exchange and monetary gains (losses), net |
196 | 6 | (7 | ) | 107 | | | 302 | (234 | ) | (2 | ) | (6 | ) | (48 | ) | 3 | | (287 | ) | ||||||||||||||||||||||||||||||||||||
Equity in results of affiliates and joint ventures and
change in provision for losses on equity investments |
180 | | 22 | 36 | 115 | | 353 | 65 | | 14 | 32 | 125 | | 236 | ||||||||||||||||||||||||||||||||||||||||||
Income taxes |
(457 | ) | (3 | ) | (10 | ) | (79 | ) | (1 | ) | | (550 | ) | (141 | ) | (4 | ) | (3 | ) | 22 | (3 | ) | | (129 | ) | |||||||||||||||||||||||||||||||
Minority interests |
(129 | ) | | | (127 | ) | | | (256 | ) | (45 | ) | | | (64 | ) | | | (109 | ) | ||||||||||||||||||||||||||||||||||||
Net income |
1.746 | 54 | 213 | 212 | 103 | | 2.328 | 490 | 15 | 161 | 117 | 126 | | 909 | ||||||||||||||||||||||||||||||||||||||||||
Sales classified by geographic destination: |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Export market |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
America, except United States |
550 | | 22 | 187 | | (289 | ) | 470 | 330 | | 33 | 111 | | (201 | ) | 273 | ||||||||||||||||||||||||||||||||||||||||
United States |
292 | | 3 | 120 | | (198 | ) | 217 | 228 | | | 45 | | (136 | ) | 137 | ||||||||||||||||||||||||||||||||||||||||
Europe |
2.342 | 175 | 12 | 317 | | (1.044 | ) | 1.802 | 1,516 | 90 | 8 | 361 | | (747 | ) | 1,228 | ||||||||||||||||||||||||||||||||||||||||
Middle East/Africa/Oceania |
401 | 72 | | 6 | | (126 | ) | 353 | 176 | 1 | | | | (45 | ) | 132 | ||||||||||||||||||||||||||||||||||||||||
Japan |
545 | 12 | | 195 | | (212 | ) | 540 | 337 | 12 | | 185 | | (166 | ) | 368 | ||||||||||||||||||||||||||||||||||||||||
China |
1.040 | 38 | | 26 | | (394 | ) | 710 | 538 | 9 | | 59 | | (232 | ) | 374 | ||||||||||||||||||||||||||||||||||||||||
Asia, other than Japan and China |
428 | 62 | | 16 | | (214 | ) | 292 | 312 | 3 | | | | (131 | ) | 184 | ||||||||||||||||||||||||||||||||||||||||
5.598 | 359 | 37 | 867 | | (2.477 | ) | 4.384 | 3,437 | 115 | 41 | 761 | | (1,658 | ) | 2,696 | |||||||||||||||||||||||||||||||||||||||||
Domestic market |
1.065 | 91 | 546 | 174 | | (211 | ) | 1.665 | 651 | 63 | 403 | 106 | | (155 | ) | 1,068 | ||||||||||||||||||||||||||||||||||||||||
6.663 | 450 | 583 | 1.041 | | (2.688 | ) | 6.049 | 4,088 | 178 | 444 | 867 | | (1,813 | ) | 3,764 | |||||||||||||||||||||||||||||||||||||||||
Assets: |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, plant and equipment, net |
7.511 | 1.478 | 827 | 1.572 | 126 | | 11.514 | 4,542 | 1,020 | 483 | 826 | 1 | | 6,872 | ||||||||||||||||||||||||||||||||||||||||||
Additions to Property, plant and equipment |
1.007 | 75 | 94 | 262 | | | 1.438 | 322 | 133 | 285 | 57 | | | 797 | ||||||||||||||||||||||||||||||||||||||||||
Investments in affiliated companies and joint ventures and
other investments, net of provision for losses |
597 | | 75 | 207 | 629 | | 1.508 | 330 | | 56 | 195 | 385 | | 966 | ||||||||||||||||||||||||||||||||||||||||||
Capital employed |
6.468 | 1.001 | 827 | 1.079 | 22 | | 9.397 | 4,307 | 679 | 449 | 816 | 26 | | 6,277 |
F-18
Six-month periods ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2005 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | Value | Depreciation, | Revenues | Value | Depreciation, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
added | Net | Cost and | depletion and | Operating | added | Net | Cost and | depletion and | Operating | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Export | Domestic | Total | tax | revenues | expenses | Net | amortization | income | Export | Domestic | Total | tax | revenues | expenses | Net | amortization | income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ferrous |
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Iron ore |
2,559 | 697 | 3,256 | (111 | ) | 3,145 | (1,204 | ) | 1,941 | (178 | ) | 1,763 | 1,384 | 385 | 1,769 | (61 | ) | 1,708 | (779 | ) | 929 | (125 | ) | 804 | ||||||||||||||||||||||||||||||||||||||||||||||||
Pellets |
729 | 181 | 910 | (38 | ) | 872 | (570 | ) | 302 | (7 | ) | 295 | 434 | 120 | 554 | (19 | ) | 535 | (379 | ) | 156 | (3 | ) | 153 | ||||||||||||||||||||||||||||||||||||||||||||||||
Manganese |
30 | 9 | 39 | (3 | ) | 36 | (23 | ) | 13 | | 13 | 14 | 6 | 20 | (3 | ) | 17 | (14 | ) | 3 | | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Ferroalloys |
200 | 107 | 307 | (28 | ) | 279 | (178 | ) | 101 | (8 | ) | 93 | 194 | 81 | 275 | (21 | ) | 254 | (158 | ) | 96 | (7 | ) | 89 | ||||||||||||||||||||||||||||||||||||||||||||||||
3,518 | 994 | 4,512 | (180 | ) | 4,332 | (1,975 | ) | 2,357 | (193 | ) | 2,164 | 2,026 | 592 | 2,618 | (104 | ) | 2,514 | (1,330 | ) | 1,184 | (135 | ) | 1,049 | |||||||||||||||||||||||||||||||||||||||||||||||||
Non ferrous |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Potash |
| 61 | 61 | (5 | ) | 56 | (29 | ) | 27 | (4 | ) | 23 | | 54 | 54 | (9 | ) | 45 | (22 | ) | 23 | (3 | ) | 20 | ||||||||||||||||||||||||||||||||||||||||||||||||
Kaolin |
72 | 12 | 84 | (3 | ) | 81 | (51 | ) | 30 | (9 | ) | 21 | 68 | 10 | 78 | (3 | ) | 75 | (43 | ) | 32 | (7 | ) | 25 | ||||||||||||||||||||||||||||||||||||||||||||||||
Copper |
150 | 18 | 168 | (4 | ) | 164 | (84 | ) | 80 | (17 | ) | 63 | 24 | | 24 | | 24 | (4 | ) | 20 | (2 | ) | 18 | |||||||||||||||||||||||||||||||||||||||||||||||||
222 | 91 | 313 | (12 | ) | 301 | (164 | ) | 137 | (30 | ) | 107 | 92 | 64 | 156 | (12 | ) | 144 | (69 | ) | 75 | (12 | ) | 63 | |||||||||||||||||||||||||||||||||||||||||||||||||
Aluminum |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Alumina |
208 | 38 | 246 | (19 | ) | 227 | (193 | ) | 34 | (12 | ) | 22 | 181 | 6 | 187 | (9 | ) | 178 | (156 | ) | 22 | (9 | ) | 13 | ||||||||||||||||||||||||||||||||||||||||||||||||
Aluminum |
385 | 19 | 404 | (2 | ) | 402 | (183 | ) | 219 | (10 | ) | 209 | 347 | 12 | 359 | (1 | ) | 358 | (121 | ) | 237 | (7 | ) | 230 | ||||||||||||||||||||||||||||||||||||||||||||||||
Bauxite |
23 | | 23 | | 23 | (21 | ) | 2 | | 2 | 23 | | 23 | | 23 | (21 | ) | 2 | | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
616 | 57 | 673 | (21 | ) | 652 | (397 | ) | 255 | (22 | ) | 233 | 551 | 18 | 569 | (10 | ) | 559 | (298 | ) | 261 | (16 | ) | 245 | |||||||||||||||||||||||||||||||||||||||||||||||||
Logistics |
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Railroads |
| 391 | 391 | (64 | ) | 327 | (215 | ) | 112 | (17 | ) | 95 | | 286 | 286 | (44 | ) | 242 | (147 | ) | 95 | (12 | ) | 83 | ||||||||||||||||||||||||||||||||||||||||||||||||
Ports |
| 106 | 106 | (19 | ) | 87 | (59 | ) | 28 | (1 | ) | 27 | | 83 | 83 | (6 | ) | 77 | (44 | ) | 33 | (2 | ) | 31 | ||||||||||||||||||||||||||||||||||||||||||||||||
Ships |
27 | 24 | 51 | (4 | ) | 47 | (44 | ) | 3 | (2 | ) | 1 | 21 | 21 | 42 | (10 | ) | 32 | (52 | ) | (20 | ) | (1 | ) | (21 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
27 | 521 | 548 | (87 | ) | 461 | (318 | ) | 143 | (20 | ) | 123 | 21 | 390 | 411 | (60 | ) | 351 | (243 | ) | 108 | (15 | ) | 93 | |||||||||||||||||||||||||||||||||||||||||||||||||
Others |
1 | 2 | 3 | | 3 | (64 | ) | (61 | ) | | (61 | ) | 6 | 4 | 10 | (2 | ) | 8 | (43 | ) | (35 | ) | | (35 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
4,384 | 1,665 | 6,049 | (300 | ) | 5,749 | (2,918 | ) | 2,831 | (265 | ) | 2,566 | 2,696 | 1,068 | 3,764 | (188 | ) | 3,576 | (1,983 | ) | 1,593 | (178 | ) | 1,415 | |||||||||||||||||||||||||||||||||||||||||||||||||
F-19
11 | Derivative financial instruments | |
Volatility of interest rates, exchange rates and commodity prices are the main market risks to which we are exposed all three are managed through derivative instruments. These have the exclusive aim of reducing exposure to risk. We do not use derivatives for speculation purposes. | ||
We monitor and evaluate our derivative positions on a regular basis and adjust our strategy in response to market conditions. We also periodically review the credit limits and credit worthiness of our counter-parties in these transactions. In view of the policies and practices established for operations with derivatives, management considers the occurrence of non-measurable risk situations as unlikely. | ||
The asset (liability) balances and the change in fair value of derivative financial instruments are as follows (the quarterly information is unaudited): |
Interest | ||||||||||||||||||||||||
rates | ||||||||||||||||||||||||
(LIBOR) | Currencies | Gold | Alumina | Aluminum | Total | |||||||||||||||||||
Unrealized gains (losses) at April 1, 2005 |
(12 | ) | 3 | (31 | ) | (50 | ) | (113 | ) | (203 | ) | |||||||||||||
Financial settlement |
4 | | 2 | 9 | 9 | 24 | ||||||||||||||||||
Unrealized gains (losses) in the period |
| (1 | ) | 3 | 24 | 59 | 85 | |||||||||||||||||
Effect of exchange rate changes |
(1 | ) | | (4 | ) | (5 | ) | (9 | ) | (19 | ) | |||||||||||||
Unrealized gains (losses) at June 30, 2005 |
(9 | ) | 2 | (30 | ) | (22 | ) | (54 | ) | (113 | ) | |||||||||||||
Unrealized gains (losses) at January 1, 2005 |
(17 | ) | 4 | (37 | ) | (55 | ) | (127 | ) | (232 | ) | |||||||||||||
Financial settlement |
3 | | 2 | 8 | 10 | 23 | ||||||||||||||||||
Unrealized gains (losses) in the period |
2 | (1 | ) | 3 | (3 | ) | 4 | 5 | ||||||||||||||||
Effect of exchange rate changes |
| | 1 | | | 1 | ||||||||||||||||||
Unrealized gains (losses) at March 31, 2005 |
(12 | ) | 3 | (31 | ) | (50 | ) | (113 | ) | (203 | ) | |||||||||||||
Unrealized gains (losses) at April 1, 2004 |
(48 | ) | 1 | (37 | ) | (36 | ) | (43 | ) | (163 | ) | |||||||||||||
Financial settlement |
11 | | 1 | | | 12 | ||||||||||||||||||
Unrealized gains (losses) in the period |
5 | | 9 | 4 | 4 | 22 | ||||||||||||||||||
Effect of exchange rate changes |
2 | | 2 | 2 | 2 | 8 | ||||||||||||||||||
Unrealized gains (losses) at June 30, 2004 |
(30 | ) | 1 | (25 | ) | (30 | ) | (37 | ) | (121 | ) | |||||||||||||
Unrealized gains (losses) at January 1, 2005 |
(17 | ) | 4 | (37 | ) | (55 | ) | (127 | ) | (232 | ) | |||||||||||||
Financial settlement |
7 | | 4 | 17 | 19 | 47 | ||||||||||||||||||
Unrealized gains (losses) in the period |
2 | (2 | ) | 6 | 21 | 63 | 90 | |||||||||||||||||
Effect of exchange rate changes |
(1 | ) | | (3) | (5 | ) | (9 | ) | (18 | ) | ||||||||||||||
Unrealized gains (losses) at June 30, 2005 |
(9 | ) | 2 | (30 | ) | (22 | ) | (54 | ) | (113 | ) | |||||||||||||
Unrealized gains (losses) at January 1, 2004 |
(46 | ) | 5 | (32 | ) | (18 | ) | | (91 | ) | ||||||||||||||
Initial consolidation of Albras |
| | | | (20 | ) | (20 | ) | ||||||||||||||||
Financial settlement |
14 | (2 | ) | 1 | | | 13 | |||||||||||||||||
Unrealized gains (losses) in the period |
(1 | ) | (2 | ) | 4 | (14 | ) | (19 | ) | (32 | ) | |||||||||||||
Effect of exchange rate changes |
3 | | 2 | 2 | 2 | 9 | ||||||||||||||||||
Unrealized gains (losses) at June 30, 2004 |
(30 | ) | 1 | (25 | ) | (30 | ) | (37 | ) | (121 | ) | |||||||||||||
Unrealized gains (losses) in the period are included in our income statement under the caption of financial expenses and foreign exchange on liabilities. |
F-20
Interest rates (LIBOR)
|
October 2007 | |
Currencies
|
December 2011 | |
Gold
|
December 2008 | |
Alumina
|
December 2008 | |
Aluminum
|
December 2008 |
F-21
(a) | EBITDA represents operating income plus depreciation, amortization and depletion plus impairment/gain on sale of property, plant and equipment plus dividends received from equity investees. | |
(b) | EBITDA is not a US GAAP measure and does not represent cash flow for the periods presented and should not be considered as an alternative to net income (loss), as an indicator of our operating performance or as an alternative to cash flow as a source of liquidity. | |
(c) | Our definition of EBITDA may not be comparable with EBITDA as defined by other companies. | |
(d) | Although EBITDA, as defined above, does not provide a US GAAP measure of operating cash flows, we use it to measure our operating performance and it is commonly used by financial analysts in evaluating our business. |
S-1
As of and for the | As of and for the six-month | |||||||||||||||||||
three-months periods ended | periods ended | |||||||||||||||||||
June 30, | March 31, | June 30, | June 30, | |||||||||||||||||
2005 | 2005 | June 30, 2004 | 2005 | 2004 | ||||||||||||||||
Current debt |
||||||||||||||||||||
Current portion of long-term debt unrelated parties |
685 | 711 | 853 | 685 | 853 | |||||||||||||||
Short-term debt |
346 | 118 | 127 | 346 | 127 | |||||||||||||||
Loans from related parties |
50 | 51 | 45 | 50 | 45 | |||||||||||||||
1,081 | 880 | 1,025 | 1,081 | 1,025 | ||||||||||||||||
Long-term debt |
||||||||||||||||||||
Long-term debt unrelated parties |
3,072 | 3,290 | 3,488 | 3,072 | 3,488 | |||||||||||||||
Loans from related parties |
15 | 12 | 1 | 15 | 1 | |||||||||||||||
3,087 | 3,302 | 3,489 | 3,087 | 3,489 | ||||||||||||||||
Gross debt (current plus long-term debt) |
4,168 | 4,182 | 4,514 | 4,168 | 4,514 | |||||||||||||||
Interest paid over: |
||||||||||||||||||||
Short-term debt |
| | | | (2 | ) | ||||||||||||||
Long-term debt |
(35 | ) | (82 | ) | (51 | ) | (117 | ) | (131 | ) | ||||||||||
Interest paid |
(35 | ) | (82 | ) | (51 | ) | (117 | ) | (133 | ) | ||||||||||
EBITDA |
2,033 | 993 | 971 | 3,026 | 1,714 | |||||||||||||||
Stockholders equity |
10,249 | 8,088 | 5,179 | 10,249 | 5,179 | |||||||||||||||
EBITDA / LTM Interest paid |
17.73 | 13.24 | 12.94 | 17.73 | 12.94 | |||||||||||||||
Gross Debt / LTM EBITDA |
0.83 | 1.05 | 1.55 | 0.83 | 1.55 | |||||||||||||||
Gross debt / Equity Capitalization (%) |
29 | 36 | 47 | 29 | 47 | |||||||||||||||
Financial expenses |
||||||||||||||||||||
Third party local debt |
(15 | ) | (10 | ) | (12 | ) | (25 | ) | (25 | ) | ||||||||||
Third party foreign debt |
(42 | ) | (38 | ) | (67 | ) | (80 | ) | (110 | ) | ||||||||||
Related party debt |
(4 | ) | (2 | ) | (5 | ) | (6 | ) | (7 | ) | ||||||||||
Gross interest |
(61 | ) | (50 | ) | (84 | ) | (111 | ) | (142 | ) | ||||||||||
Labor and civil claims and tax-related actions |
(13 | ) | (11 | ) | (9 | ) | (24 | ) | (15 | ) | ||||||||||
Tax on financial transactions CPMF |
(16 | ) | (9 | ) | (14 | ) | (25 | ) | (18 | ) | ||||||||||
Derivatives (Interest rate / Currencies) |
(3 | ) | 2 | 37 | (1 | ) | 3 | |||||||||||||
Derivatives (gold / alumina / aluminum) |
59 | 3 | (14 | ) | 62 | (39 | ) | |||||||||||||
Others |
(17 | ) | (27 | ) | (22 | ) | (44 | ) | (37 | ) | ||||||||||
(51 | ) | (92 | ) | (106 | ) | (143 | ) | (248 | ) | |||||||||||
Financial income |
||||||||||||||||||||
Cash and cash equivalents |
19 | 14 | 10 | 33 | 19 | |||||||||||||||
Others |
8 | 15 | 9 | 23 | 12 | |||||||||||||||
27 | 29 | 19 | 56 | 31 | ||||||||||||||||
Financial expenses, net |
(24 | ) | (63 | ) | (87 | ) | (87 | ) | (217 | ) | ||||||||||
Foreign exchange and monetary gain (losses) on liabilities(1) |
537 | (30 | ) | (363 | ) | 507 | (428 | ) | ||||||||||||
Foreign exchange and monetary gain (losses) on assets |
(233 | ) | 28 | 118 | (205 | ) | 141 | |||||||||||||
Foreign exchange and monetary gain (losses), net |
304 | (2 | ) | (245 | ) | 302 | (287 | ) | ||||||||||||
Financial result, net |
280 | (65 | ) | (332 | ) | 215 | (504 | ) | ||||||||||||
(1) | Includes foreign exchange gain(loss) on derivatives in the amount of US$29, US$0, US$1, US$29 and US$(4) for the three-month periods ended June 30, 2005, March 31,2005 and June 30 2004 and for the six-month periods ended June 30, 2005 and June 30, 2004, respectively. |
S-2
As of and for the | As of and for the six-month | |||||||||||||||||||
three-month periods ended | periods ended | |||||||||||||||||||
June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||
2005 | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||
Operating income |
1,771 | 795 | 832 | 2,566 | 1,415 | |||||||||||||||
Depreciation |
136 | 129 | 79 | 265 | 178 | |||||||||||||||
1,907 | 924 | 911 | 2,831 | 1,593 | ||||||||||||||||
Dividends received |
126 | 69 | 60 | 195 | 121 | |||||||||||||||
EBITDA |
2,033 | 993 | 971 | 3,026 | 1,714 | |||||||||||||||
Net operating revenues |
3,536 | 2,213 | 1,920 | 5,749 | 3,576 | |||||||||||||||
Margin EBITDA |
57.5 | % | 44.9 | % | 50.6 | % | 52.6 | % | 47.9 | % |
As of and for the three-month periods ended | As of and for the six-month periods ended | |||||||||||||||||||||||||||||||||||||||
June 30, 2005 | March 31, 2005 | June 30, 2004 | June 30, 2005 | June 30, 2004 | ||||||||||||||||||||||||||||||||||||
Operating | Operating | Operating | Operating | |||||||||||||||||||||||||||||||||||||
cash | cash | cash | Operating | cash | ||||||||||||||||||||||||||||||||||||
EBITDA | flows | EBITDA | flows | EBITDA | flows | EBITDA | cash flows | EBITDA | flows | |||||||||||||||||||||||||||||||
Net income |
1.630 | 1.630 | 698 | 698 | 504 | 504 | 2,328 | 2,328 | 909 | 909 | ||||||||||||||||||||||||||||||
Income tax |
107 | 107 | (47 | ) | (47 | ) | 23 | 23 | 60 | 60 | (9 | ) | (9 | ) | ||||||||||||||||||||||||||
Income tax cash |
330 | | 160 | | 41 | | 490 | | 138 | | ||||||||||||||||||||||||||||||
Equity in results of affiliates and joint ventures and
change in provision for losses on equity investments |
(220 | ) | (220 | ) | (133 | ) | (133 | ) | (150 | ) | (150 | ) | (353 | ) | (353 | ) | (236 | ) | (236 | ) | ||||||||||||||||||||
Foreign exchange and monetary gains(losses) |
(304 | ) | (298 | ) | 2 | 27 | 245 | 291 | (302 | ) | (271 | ) | 287 | 336 | ||||||||||||||||||||||||||
Financial (income)/expenses, net |
24 | 38 | 63 | (2 | ) | 87 | 27 | 87 | 36 | 217 | 13 | |||||||||||||||||||||||||||||
Minority interests |
204 | 204 | 52 | 52 | 82 | 82 | 256 | 256 | 109 | 109 | ||||||||||||||||||||||||||||||
Net working capital |
| (153 | ) | | (341 | ) | | (221 | ) | | (494 | ) | | (165 | ) | |||||||||||||||||||||||||
Net unrealized derivative losses(gains) |
| (85 | ) | | (5 | ) | | (22 | ) | | (90 | ) | | 32 | ||||||||||||||||||||||||||
Others |
| (59 | ) | | (16 | ) | | 27 | | (75 | ) | | 9 | |||||||||||||||||||||||||||
Operating income |
1,771 | 1,164 | 795 | 233 | 832 | 561 | 2,566 | 1,397 | 1,415 | 998 | ||||||||||||||||||||||||||||||
Depreciation, depletion and amortization |
136 | 136 | 129 | 129 | 79 | 79 | 265 | 265 | 178 | 178 | ||||||||||||||||||||||||||||||
Dividends received |
126 | 126 | 69 | 69 | 60 | 60 | 195 | 195 | 121 | 121 | ||||||||||||||||||||||||||||||
2,033 | 1,426 | 993 | 431 | 971 | 700 | 3,026 | 1,857 | 1,714 | 1,297 | |||||||||||||||||||||||||||||||
Operating cash flows |
1,426 | 431 | 700 | 1,857 | 1,297 | |||||||||||||||||||||||||||||||||||
Income tax |
330 | 160 | 41 | 490 | 138 | |||||||||||||||||||||||||||||||||||
Foreign exchange and monetary gains(losses) |
(6 | ) | (25 | ) | (46 | ) | (31 | ) | (49 | ) | ||||||||||||||||||||||||||||||
Financial (income)/expenses, net |
(14 | ) | 65 | 60 | 51 | 204 | ||||||||||||||||||||||||||||||||||
Net working capital |
153 | 341 | 221 | 494 | 165 | |||||||||||||||||||||||||||||||||||
Others |
144 | 21 | (5 | ) | 165 | (41 | ) | |||||||||||||||||||||||||||||||||
EBITDA |
2,033 | 993 | 971 | 3,026 | 1,714 | |||||||||||||||||||||||||||||||||||
S-3
S-4
Date: August 12, 2005 | COMPANHIA VALE DO RIO DOCE (Registrant) |
|||||
By: | /s/ Fabio de Oliveira Barbosa | |||||
Fabio de Oliveira Barbosa | ||||||
Chief Financial Officer |