Table of Contents

 

 

 

United States

Securities and Exchange Commission

Washington, D.C. 20549

 

FORM 6-K

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the

Securities Exchange Act of 1934

 

For the month of

 

April 2018

 

Vale S.A.

 

Avenida das Américas, No. 700 – Bloco 8, Sala 218
22640-100 Rio de Janeiro, RJ, Brazil

(Address of principal executive office)

 

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

 

 

(Check One) Form 20-F x  Form 40-F o

 

(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1))

 

 

(Check One) Yes o  No x

 

(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7))

 

 

(Check One) Yes o  No x

 

(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

 

 

(Check One) Yes o  No x

 

(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b). 82-   .)

 

 

 



Table of Contents

 

Interim Financial Statements

March 31, 2018

 

 

BRGAAP in R$ (English)

 



Table of Contents

 

 

Vale S.A. Interim Financial Statements

Contents

 

 

Page

Report on the review of the quarterly information - ITR

3

Consolidated and Parent Company Income Statement

4

Consolidated and Parent Company Statement of Comprehensive Income

5

Consolidated and Parent Company Statement of Cash Flows

6

Consolidated and Parent Company Statement of Financial Position

7

Consolidated Statement of Changes in Equity

8

Consolidated and Parent Company Value Added Statement

9

Selected Notes to the Interim Financial Statements

10

1. Corporate information

10

2. Basis for preparation of the interim financial statements

10

3. Information by business segment and by geographic area

13

4. Special events occurred during the period

15

5. Costs and expenses by nature

16

6. Financial results

16

7. Income taxes

17

8. Basic and diluted earnings (loss) per share

18

9. Accounts receivable

18

10. Inventories

18

11. Other financial assets and liabilities

19

12. Non-current assets and liabilities held for sale and discontinued operations

19

13. Investments in associates and joint ventures

21

14. Intangibles

23

15. Property, plant and equipment

23

16. Loans, borrowings, cash and cash equivalents and financial investments

24

17. Liabilities related to associates and joint ventures

26

18. Financial instruments classification

26

19. Fair value estimate

27

20. Derivative financial instruments

28

21. Provisions

33

22. Litigation

33

23. Employee postretirement obligations

37

24. Stockholders’ equity

37

25. Related parties

38

26. Parent Company information (individual interim information)

39

27. Additional information about derivatives financial instruments

42

 

2



 

 

KPMG Auditores Independentes

Rua do Passeio, 38 - Setor 2 - 17º andar - Centro

20021-290 - Rio de Janeiro/RJ - Brasil

Caixa Postal 2888 - CEP 20001-970 - Rio de Janeiro/RJ - Brasil

Telefone +55 (21) 2207-9400, Fax +55 (21) 2207-9000

www.kpmg.com.br

 

Report on the review of quarterly information – ITR

 

(A free translation of the original report in Portuguese, as filed with the Brazilian Securities and Exchange Commission (CVM), prepared in accordance with the accounting practices adopted in Brazil, rules of the CVM and of the International Financial Reporting Standards - IFRS)

 

To the Board of Directors and Stockholders of

Vale S.A.

Rio de Janeiro - RJ

 

Introduction

 

1.                   We have reviewed the interim financial information, individual and consolidated, of Vale S.A. (“the Company”), identified as Parent Company and Consolidated, respectively, included in the quarterly information form - ITR for the quarter ended March 31, 2018, which comprises the statement of financial position as of March 31, 2018 and the respective statements of income and comprehensive income, statements of changes in equity and of cash flows for the three-month period then ended, including the explanatory notes.

 

2.                   The Company`s Management is responsible for the preparation of these interim financial information in accordance with the CPC 21(R1) and the IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board — IASB, as well as the presentation of these information in accordance with the standards issued by the Brazilian Securities and Exchange Commission, applicable to the preparation of quarterly information - ITR. Our responsibility is to express our conclusion on this interim financial information based on our review.

 

Scope of the review

 

3.                   We conducted our review in accordance with Brazilian and International Interim Information Review Standards (NBC TR 2410 - Revisão de Informações Intermediárias Executada pelo Auditor da Entidade and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries primarily of the management responsible for financial and accounting matters and applying analytical procedures and other review procedures. The scope of a review is significantly less than an audit conducted in accordance with auditing standards and, accordingly, it did not enable us to obtain assurance that we were aware of all the material matters that would have been identified in an audit. Therefore, we do not express an audit opinion.

 

Conclusion on the interim financial information

 

4.                   Based on our review, we are not aware of any fact that might lead us to believe that the individual and consolidated interim financial information included in the aforementioned quarterly information was not prepared, in all material respects, in accordance with CPC 21(R1) and IAS 34, issued by the IASB, applicable to the preparation of the quarterly review - ITR, and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission.

 

Other matters

 

Statements of added value

 

5.                   The individual and consolidated interim financial information related to the statement of value added for the three-month period ended March 31, 2018, prepared under the responsibility of the Company’s management, and presented as supplementary information for the purposes of IAS 34, was submitted to the same review procedures followed together with the review of the Company’s interim financial information. In order to form our conclusion, we evaluated whether this statement was reconciliated to the interim financial information and to the accounting records, as applicable, and whether their form and content are in accordance with the criteria set on Technical Pronouncement CPC 09 - Statement of Value Added. Based on our review, nothing has come to our attention that causes us to believe that the accompanying statement of value added was not prepared, in all material respects, in accordance with the individual and consolidated interim financial information taken as a whole.

 

Rio de Janeiro, April 25, 2018

 

KPMG Auditores Independentes

CRC SP-014428/O-6 F-RJ

(Original report in Portuguese signed by)

Manuel Fernandes Rodrigues de Sousa

Accountant CRC RJ-052428/O-2

 

KPMG Auditores Independentes, uma sociedade simples brasileira e firma-membro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça.

 

KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

 

3



Table of Contents

 

 

Income Statement

In millions of Brazilian reais, except earnings per share data

 

 

 

 

 

Consolidated

 

Parent company

 

 

 

 

 

Three-month period ended March 31,

 

 

 

Notes

 

2018

 

2017

 

2018

 

2017

 

Continuing operations

 

 

 

 

 

 

 

 

 

 

 

Net operating revenue

 

3(c)

 

27,932

 

26,742

 

15,705

 

17,162

 

Cost of goods sold and services rendered

 

5(a)

 

(16,970

)

(14,865

)

(8,376

)

(7,751

)

Gross profit

 

 

 

10,962

 

11,877

 

7,329

 

9,411

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (expenses) income

 

 

 

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

5(b)

 

(402

)

(388

)

(226

)

(226

)

Research and evaluation expenses

 

 

 

(223

)

(206

)

(147

)

(121

)

Pre operating and operational stoppage

 

 

 

(253

)

(364

)

(201

)

(192

)

Equity results from subsidiaries

 

 

 

 

 

2,227

 

3,065

 

Other operating revenues (expenses), net

 

5(c)

 

(406

)

(247

)

(263

)

172

 

 

 

 

 

(1,284

)

(1,205

)

1,390

 

2,698

 

Impairment and other results on non-current assets

 

4

 

(52

)

1,603

 

(80

)

(41

)

Operating income

 

 

 

9,626

 

12,275

 

8,639

 

12,068

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial income

 

6

 

759

 

1,203

 

319

 

845

 

Financial expenses

 

6

 

(2,202

)

(3,615

)

(1,924

)

(3,281

)

Other financial items

 

6

 

(628

)

518

 

(560

)

528

 

Equity results in associates and joint ventures

 

13

 

273

 

225

 

273

 

225

 

Impairment and other results in associates and joint ventures

 

17

 

(44

)

(191

)

(44

)

(191

)

Income before income taxes

 

 

 

7,784

 

10,415

 

6,703

 

10,194

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

7

 

 

 

 

 

 

 

 

 

Current tax

 

 

 

(295

)

(1,585

)

(1

)

(1,232

)

Deferred tax

 

 

 

(2,044

)

(631

)

(1,319

)

(811

)

 

 

 

 

(2,339

)

(2,216

)

(1,320

)

(2,043

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income from continuing operations

 

 

 

5,445

 

8,199

 

5,383

 

8,151

 

Net income attributable to noncontrolling interests

 

 

 

62

 

48

 

 

 

Net income from continuing operations attributable to Vale’s stockholders

 

 

 

5,383

 

8,151

 

5,383

 

8,151

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations

 

12

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

 

 

(271

)

(257

)

(271

)

(260

)

Net income attributable to noncontrolling interests

 

 

 

 

3

 

 

 

Loss from discontinued operations attributable to Vale’s stockholders

 

 

 

(271

)

(260

)

(271

)

(260

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

5,174

 

7,942

 

5,112

 

7,891

 

Net income attributable to noncontrolling interests

 

 

 

62

 

51

 

 

 

Net income attributable to Vale’s stockholders

 

 

 

5,112

 

7,891

 

5,112

 

7,891

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Vale’s stockholders:

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share (restated):

 

8

 

 

 

 

 

 

 

 

 

Common share (R$)

 

 

 

0.98

 

1.52

 

0.98

 

1.52

 

 

The accompanying notes are an integral part of these interim financial statements.

 

4



Table of Contents

 

 

Statement of Comprehensive Income

In millions of Brazilian reais

 

 

 

Consolidated

 

Parent company

 

 

 

Three-month period ended March 31,

 

 

 

2018

 

2017

 

2018

 

2017

 

Net income

 

5,174

 

7,942

 

5,112

 

7,891

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Items that will not be reclassified subsequently to the income statement

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

176

 

(71

)

(9

)

(13

)

Fair value adjustment to investment in equity securities

 

(114

)

 

(86

)

 

Equity results in associates and joint ventures

 

 

 

157

 

(58

)

Transfer to retained earnings

 

(67

)

 

(67

)

 

 

Total items that will not be reclassified subsequently to the income statement, net of tax

 

(5

)

(71

)

(5

)

(71

)

 

 

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to the income statement

 

 

 

 

 

 

 

 

 

Translation adjustments

 

61

 

(2,175

)

(100

)

(2,101

)

Net investments hedge

 

(96

)

499

 

(96

)

559

 

Transfer of realized results to net income

 

(257

)

 

(112

)

 

Total of items that may be reclassified subsequently to the income statement, net of tax

 

(292

)

(1,676

)

(308

)

(1,542

)

Total comprehensive income

 

4,877

 

6,195

 

4,799

 

6,278

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss) attributable to noncontrolling interests

 

78

 

(83

)

 

 

 

 

Comprehensive income attributable to Vale’s stockholders

 

4,799

 

6,278

 

 

 

 

 

From continuing operations

 

4,783

 

6,306

 

 

 

 

 

From discontinued operations

 

16

 

(28

)

 

 

 

 

 

 

4,799

 

6,278

 

 

 

 

 

 

Items above are stated net of tax and the related taxes are disclosed in note 7.

 

The accompanying notes are an integral part of these interim financial statements.

 

5



Table of Contents

 

 

Statement of Cash Flows

In millions of Brazilian reais

 

 

 

Consolidated

 

Parent company

 

 

 

Three-month period ended March 31,

 

 

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

 

restated

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

 

Income before income taxes from continuing operations

 

7,784

 

10,415

 

6,703

 

10,194

 

Continuing operations adjustments for:

 

 

 

 

 

 

 

 

 

Equity results in investees

 

(273

)

(225

)

(2,500

)

(3,290

)

Impairment and other results on non-current assets and associates and joint ventures

 

96

 

(1,412

)

124

 

232

 

Depreciation, amortization and depletion

 

2,834

 

2,851

 

1,403

 

1,317

 

Financial results, net

 

2,071

 

1,894

 

2,165

 

1,908

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

41

 

970

 

(1,844

)

(2,494

)

Inventories

 

153

 

(708

)

(403

)

(263

)

Suppliers and contractors

 

(1,172

)

310

 

(981

)

(152

)

Provision - Payroll, related charges and others remunerations

 

(1,653

)

(721

)

(1,122

)

(606

)

Other assets and liabilities, net

 

(303

)

(604

)

183

 

(69

)

 

 

9,578

 

12,770

 

3,728

 

6,777

 

Interest on loans and borrowings paid

 

(1,237

)

(1,595

)

(1,085

)

(1,290

)

Derivatives paid, net

 

(80

)

(338

)

(116

)

(192

)

Income taxes

 

(773

)

(1,156

)

(35

)

(652

)

Income taxes - Settlement program

 

(404

)

(379

)

(396

)

(371

)

Net cash provided by operating activities from continuing operations

 

7,084

 

9,302

 

2,096

 

4,272

 

 

 

 

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

 

 

 

 

Financial investments redeemed (invested)

 

(52

)

(167

)

(58

)

(1

)

Loans and advances - net receipts (payments) (note 25)

 

8,651

 

(455

)

4,623

 

1,515

 

Additions to property, plant and equipment, intangibles and investments

 

(2,943

)

(3,516

)

(1,782

)

(2,626

)

Proceeds from disposal of assets and investments (note 12)

 

3,536

 

1,614

 

6

 

4

 

Dividends and interest on capital received from associates and joint ventures

 

33

 

 

454

 

 

Others investments activities

 

51

 

(4

)

26

 

(71

)

Net cash provided by (used in) investing activities from continuing operations

 

9,276

 

(2,528

)

3,269

 

(1,179

)

 

 

 

 

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

 

 

 

 

Loans and borrowings

 

 

 

 

 

 

 

 

 

Additions

 

 

3,576

 

 

321

 

Repayments

 

(7,448

)

(3,533

)

(960

)

(3,140

)

Transactions with stockholders:

 

 

 

 

 

 

 

 

 

Dividends and interest on capital paid to stockholders

 

(4,721

)

 

(4,721

)

 

Dividends and interest on capital paid to noncontrolling interest

 

(290

)

(9

)

 

 

Transactions with noncontrolling stockholders

 

(56

)

799

 

(56

)

 

Net cash provided by (used in) financing activities from continuing operations

 

(12,515

)

833

 

(5,737

)

(2,819

)

 

 

 

 

 

 

 

 

 

 

Net cash used in discontinued operations (note 12)

 

(150

)

(15

)

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

3,695

 

7,592

 

(372

)

274

 

Cash and cash equivalents in the beginning of the period

 

14,318

 

13,891

 

1,876

 

1,203

 

Effect of exchange rate changes on cash and cash equivalents

 

159

 

(160

)

 

 

Effects of disposals of subsidiaries and merger, net on cash and cash equivalents

 

(331

)

(44

)

 

 

Cash and cash equivalents at end of the period

 

17,841

 

21,279

 

1,504

 

1,477

 

 

 

 

 

 

 

 

 

 

 

Non-cash transactions:

 

 

 

 

 

 

 

 

 

Additions to property, plant and equipment - capitalized loans and borrowing costs

 

194

 

322

 

194

 

322

 

 

The accompanying notes are an integral part of these interim financial statements.

 

6



Table of Contents

 

 

Statement of Financial Position

In millions of Brazilian reais

 

 

 

 

 

Consolidated

 

Parent company

 

 

 

Notes

 

March 31, 2018

 

December 31,
2017

 

March 31, 2018

 

December 31,
2017

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

16

 

17,841

 

14,318

 

1,504

 

1,876

 

Accounts receivable

 

9

 

8,939

 

8,602

 

11,897

 

9,560

 

Other financial assets

 

11

 

1,249

 

6,689

 

372

 

409

 

Inventories

 

10

 

13,184

 

12,987

 

4,714

 

4,601

 

Prepaid income taxes

 

 

 

2,401

 

2,584

 

2,200

 

2,378

 

Recoverable taxes

 

 

 

3,507

 

3,876

 

1,777

 

2,091

 

Others

 

 

 

2,001

 

1,780

 

1,210

 

1,542

 

 

 

 

 

49,122

 

50,836

 

23,674

 

22,457

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets held for sale

 

12

 

1,528

 

11,865

 

893

 

7,082

 

 

 

 

 

50,650

 

62,701

 

24,567

 

29,539

 

Non-current assets

 

 

 

 

 

 

 

 

 

 

 

Judicial deposits

 

22(c)

 

6,625

 

6,571

 

6,227

 

6,110

 

Other financial assets

 

11

 

10,128

 

10,690

 

4,268

 

1,865

 

Prepaid income taxes

 

 

 

1,952

 

1,754

 

 

 

Recoverable taxes

 

 

 

2,217

 

2,109

 

2,170

 

2,062

 

Deferred income taxes

 

7(a)

 

20,298

 

21,959

 

13,064

 

14,200

 

Others

 

 

 

931

 

882

 

1,233

 

810

 

 

 

 

 

42,151

 

43,965

 

26,962

 

25,047

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

13

 

12,367

 

11,802

 

123,970

 

117,387

 

Intangibles

 

14

 

28,560

 

28,094

 

14,088

 

13,471

 

Property, plant and equipment

 

15

 

179,979

 

181,535

 

102,528

 

102,978

 

 

 

 

 

263,057

 

265,396

 

267,548

 

258,883

 

Total assets

 

 

 

313,707

 

328,097

 

292,115

 

288,422

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

Suppliers and contractors

 

 

 

11,960

 

13,367

 

6,634

 

7,503

 

Loans and borrowings

 

16

 

6,535

 

5,633

 

5,291

 

4,378

 

Other financial liabilities

 

11

 

3,349

 

3,260

 

3,968

 

4,413

 

Taxes payable

 

7(c)

 

2,337

 

2,307

 

2,031

 

1,991

 

Provision for income taxes

 

 

 

755

 

1,175

 

 

 

Liabilities related to associates and joint ventures

 

17

 

1,227

 

1,080

 

1,227

 

1,080

 

Provisions

 

21

 

2,886

 

4,610

 

1,594

 

2,904

 

Dividends and interest on capital

 

 

 

 

4,742

 

 

4,439

 

Others

 

 

 

3,449

 

3,284

 

2,725

 

2,552

 

 

 

 

 

32,498

 

39,458

 

23,470

 

29,260

 

Liabilities associated with non-current assets held for sale

 

12

 

707

 

3,899

 

 

 

 

 

 

 

33,205

 

43,357

 

23,470

 

29,260

 

Non-current liabilities

 

 

 

 

 

 

 

 

 

 

 

Loans and borrowings

 

16

 

60,859

 

68,759

 

27,118

 

28,966

 

Other financial liabilities

 

11

 

9,642

 

9,575

 

60,850

 

54,955

 

Taxes payable

 

7(c)

 

15,942

 

16,176

 

15,623

 

15,853

 

Deferred income taxes

 

7(a)

 

5,665

 

5,687

 

 

 

Provisions

 

21

 

23,212

 

23,243

 

7,704

 

6,900

 

Liabilities related to associates and joint ventures

 

17

 

2,104

 

2,216

 

2,104

 

2,216

 

Deferred revenue - Gold stream

 

 

 

5,960

 

6,117

 

 

 

Others

 

 

 

4,891

 

4,861

 

6,689

 

6,514

 

 

 

 

 

128,275

 

136,634

 

120,088

 

115,404

 

Total liabilities

 

 

 

161,480

 

179,991

 

143,558

 

144,664

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

24

 

 

 

 

 

 

 

 

 

Equity attributable to Vale’s stockholders

 

 

 

148,557

 

143,758

 

148,557

 

143,758

 

Equity attributable to noncontrolling interests

 

 

 

3,670

 

4,348

 

 

 

Total stockholders’ equity

 

 

 

152,227

 

148,106

 

148,557

 

143,758

 

Total liabilities and stockholders’ equity

 

 

 

313,707

 

328,097

 

292,115

 

288,422

 

 

The accompanying notes are an integral part of these interim financial statements.

 

7



Table of Contents

 

 

Statement of Changes in Equity

In millions of Brazilian reais

 

 

 

Share capital

 

Results on
conversion of
shares

 

Capital reserve

 

Results from
operation with
noncontrolling
interest

 

Profit
reserves

 

Treasury
stocks

 

Unrealized
fair value
gain (losses)

 

Cumulative
translation
adjustments

 

Retained
earnings

 

Equity
attributable to
Vale’s
stockholders

 

Equity
attributable to
noncontrolling
interests

 

Total
stockholders’
equity

 

Balance at December 31, 2017

 

77,300

 

50

 

3,634

 

(2,663

)

24,539

 

(2,746

)

(3,912

)

47,556

 

 

143,758

 

4,348

 

148,106

 

Net income

 

 

 

 

 

 

 

 

 

5,112

 

5,112

 

62

 

5,174

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

 

 

 

176

 

 

(67

)

109

 

 

109

 

Net investments hedge (note 20c)

 

 

 

 

 

 

 

 

(96

)

 

(96

)

 

(96

)

Translation adjustments

 

 

 

 

 

 

 

(7

)

(205

)

 

(212

)

16

 

(196

)

Fair value adjustment to investment in equity securities

 

 

 

 

 

 

 

(114

)

 

 

(114

)

 

(114

)

Transactions with stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends of noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

(5

)

(5

)

Acquisitions and disposal of noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

(751

)

(751

)

Balance at March 31, 2018

 

77,300

 

50

 

3,634

 

(2,663

)

24,539

 

(2,746

)

(3,857

)

47,255

 

5,045

 

148,557

 

3,670

 

152,227

 

 

 

 

Share capital

 

Results on
conversion of
shares

 

Capital reserve

 

Results from
operation with
noncontrolling
interest

 

Profit
reserves

 

Treasury
stocks

 

Unrealized
fair value
gain (losses)

 

Cumulative
translation
adjustments

 

Retained
earnings

 

Equity
attributable to
Vale’s
stockholders

 

Equity
attributable to
noncontrolling
interests

 

Total
stockholders’
equity

 

Balance at December 31, 2016

 

77,300

 

50

 

 

(1,870

)

13,698

 

(2,746

)

(3,739

)

44,548

 

 

127,241

 

6,461

 

133,702

 

Net income

 

 

 

 

 

 

 

 

 

7,891

 

7,891

 

51

 

7,942

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

 

 

 

(71

)

 

 

(71

)

 

(71

)

Net investments hedge (note 20c)

 

 

 

 

 

 

 

 

559

 

 

559

 

 

559

 

Translation adjustments

 

 

 

 

 

 

 

45

 

(2,146

)

 

(2,101

)

(134

)

(2,235

)

Transactions with stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends of noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

(6

)

(6

)

Acquisitions and disposal of noncontrolling interest

 

 

 

 

(329

)

 

 

 

 

 

(329

)

(1,592

)

(1,921

)

Capitalization of noncontrolling interest advances

 

 

 

 

 

 

 

 

 

 

 

80

 

80

 

Balance at March 31, 2017

 

77,300

 

50

 

 

(2,199

)

13,698

 

(2,746

)

(3,765

)

42,961

 

7,891

 

133,190

 

4,860

 

138,050

 

 

The accompanying notes are an integral part of these interim financial statements.

 

8



Table of Contents

 

 

Value Added Statement

In millions of Brazilian Reais

 

 

 

Consolidated

 

Parent company

 

 

 

Three-month period ended March 31,

 

 

 

2018

 

2017

 

2018

 

2017

 

Generation of value added from continuing operations

 

 

 

 

 

 

 

 

 

Gross revenue

 

 

 

 

 

 

 

 

 

Revenue from products and services

 

28,251

 

27,092

 

15,964

 

17,427

 

Results on measurement or sale of non-current assets

 

(54

)

1,603

 

 

(41

)

Revenue from the construction of own assets

 

2,407

 

1,822

 

1,695

 

1,583

 

Allowance for doubtful accounts

 

5

 

 

3

 

5

 

Other revenues

 

6,265

 

138

 

2,665

 

108

 

Less:

 

 

 

 

 

 

 

 

 

Acquisition of products

 

(338

)

(514

)

(179

)

(201

)

Material, service and maintenance

 

(7,263

)

(6,102

)

(4,244

)

(4,027

)

Oil and gas

 

(1,164

)

(970

)

(776

)

(657

)

Energy

 

(795

)

(677

)

(386

)

(304

)

Freight

 

(2,931

)

(2,066

)

(29

)

(23

)

Impairment of non-current assets and others results

 

(42

)

(191

)

(124

)

(191

)

Other costs and expenses

 

(7,570

)

(1,253

)

(4,112

)

(436

)

Gross value added

 

16,771

 

18,882

 

10,477

 

13,243

 

Depreciation, amortization and depletion

 

(2,834

)

(2,851

)

(1,403

)

(1,317

)

Net value added

 

13,937

 

16,031

 

9,074

 

11,926

 

 

 

 

 

 

 

 

 

 

 

Received from third parties

 

 

 

 

 

 

 

 

 

Equity results from entities

 

273

 

225

 

2,500

 

3,290

 

Financial income

 

382

 

200

 

59

 

92

 

Monetary and exchange variation of assets

 

169

 

(571

)

226

 

(760

)

Total value added from continuing operations to be distributed

 

14,761

 

15,885

 

11,859

 

14,548

 

Value added from discontinued operations to be distributed

 

63

 

311

 

 

 

Total value added to be distributed

 

14,824

 

16,196

 

11,859

 

14,548

 

 

 

 

 

 

 

 

 

 

 

Personnel

 

2,038

 

1,805

 

981

 

823

 

Taxes and contributions

 

1,859

 

2,688

 

854

 

1,653

 

Current income tax

 

295

 

1,585

 

1

 

1,232

 

Deferred income tax

 

2,044

 

631

 

1,319

 

811

 

Financial expense (excludes capitalized interest)

 

1,792

 

2,420

 

1,646

 

3,415

 

Monetary and exchange variation of liabilities

 

797

 

(1,089

)

786

 

(1,518

)

Other remunerations of third party funds

 

762

 

(97

)

1,160

 

241

 

Reinvested net income

 

5,112

 

7,891

 

5,112

 

7,891

 

Net income attributable to noncontrolling interest

 

62

 

51

 

 

 

Distributed value added from continuing operations

 

14,761

 

15,885

 

11,859

 

14,548

 

Distributed value added from discontinued operations

 

63

 

311

 

 

 

Distributed value added

 

14,824

 

16,196

 

11,859

 

14,548

 

 

The accompanying notes are an integral part of these interim financial statements.

 

9



Table of Contents

 

 

Selected Notes to the Interim Financial Statements

Expressed in millions of Brazilian reais, unless otherwise stated

 

1.                                     Corporate information

 

Vale S.A. (the “Parent Company”) is a public company headquartered in the city of Rio de Janeiro, Brazil with securities traded on the stock exchanges of São Paulo — B3 S.A. (Vale3), New York - NYSE (VALE), Paris - NYSE Euronext (Vale3) and Madrid — LATIBEX (XVALO).

 

Vale S.A. and its direct and indirect subsidiaries (“Vale” or “Company”) are global producers of iron ore and iron ore pellets, key raw materials for steelmaking, and producers of nickel, which is used to produce stainless steel and metal alloys employed in the production of several products. The Company also produces copper, metallurgical and thermal coal, manganese ore, ferroalloys, platinum group metals, gold, silver and cobalt. The information by segment is presented in note 3.

 

2.                            Basis for preparation of the interim financial statements

 

a)        Statement of compliance

 

The condensed consolidated and individual interim financial statements of the Company (“interim financial statements”) have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) as implemented in Brazil by the Brazilian Accountant Pronouncements Committee (“CPC”), approved by the Brazilian Securities Exchange Commission (“CVM”) and by the Brazilian Federal Accounting Council (“CFC”). All relevant information from its own interim financial statements, and only this information, are being presented and correspond to those used by the Company’s Management.

 

The selected notes of the Parent Company are presented in a summarized form in note 26.

 

b)        Basis of presentation

 

The interim financial statements have been prepared to update users about relevant events and transactions occurred in the period and should be read in conjunction with the financial statements for the year ended December 31, 2017. The accounting policies, accounting estimates and judgments, risk management and measurement methods are the same as those applied when preparing the last annual financial statements, except for new accounting policies related to the application of IFRS 9 — Financial instrument and IFRS 15 — Revenue from contracts with customers, which are described in note 2(c). The accounting policy for recognizing and measuring income taxes in the interim period is described in note 7.

 

The interim financial statements of the Company and its associates and joint ventures are measured using the currency of the primary economic environment in which the entity operates (“functional currency”), which in the case of the Parent Company is the Brazilian real (“R$”). For presentation purposes, these financial statements are presented in Brazilian Reais.

 

The exchange rates used by the Company to translate its foreign operations are as follows:

 

 

 

 

 

Average rate

 

 

 

Closing rate

 

Three-month period ended

 

 

 

March 31, 2018

 

December 31, 2017

 

March 31, 2018

 

March 31, 2017

 

US Dollar (“US$”)

 

3.3238

 

3.3080

 

3.2433

 

3.1451

 

Canadian dollar (“CAD”)

 

2.5778

 

2.6344

 

2.5649

 

2.3760

 

Australian dollar (“AUD”)

 

2.5497

 

2.5849

 

2.5505

 

2.3824

 

Euro (“EUR” or “€”)

 

4.0850

 

3.9693

 

3.9866

 

3.3510

 

 

The issue of these interim financial statements was authorized by the Board of Directors on April 25, 2018.

 

10



Table of Contents

 

 

c) Changes in significant accounting policies

 

(i) IFRS 9 Financial instrument — The Company has adopted IFRS 9 Financial Instruments starting January 1, 2018. This  standard  addresses  the  classification  and  measurement  of  financial  assets  and  liabilities,  new impairment model and new rules for hedge accounting. The main changes are described below:

 

· Classification and measurement - Under IFRS 9, the Company’s financial assets are initially measured at fair value (plus transaction costs if is not measured at fair value through profit or loss).

 

The investments in debt financial instruments are subsequently measured at fair value through profit or loss (“FVTPL”), amortized cost, or fair value through other comprehensive income (“FVOCI”). The classification is based on two conditions:  the Company´s business model in which the asset is held; and whether the contractual terms give rise on specified dates to cash flows that are ‘solely payments of principal and interest’ on the principal amount outstanding (“SPPI”).

 

The FVOCI category only includes equity instruments, which is not held for trading and the Company has irrevocably elected to designate upon initial recognition. The gains or losses from equity instruments at FVOCI are not recycled to income statement on derecognition and these financial assets are not subject to an impairment assessment under IFRS 9.

 

The Company has assessed its business models as of the date of IFRS 9 initial application, 1 January 2018, and no significant impact were identified in the financial statements.

 

· Impairment - IFRS 9 has replaced the IAS 39’s incurred loss approach with a forward-looking expected credit loss (ECL) approach.

 

For accounts receivables, the Company has applied the standard’s simplified approach and has calculated ECLs based on lifetime expected credit losses. The Company has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the economic environment and by any financial guarantees related to these accounts receivables.

 

For other financial assets, the ECL is based on the 12-month ECL. The 12-month ECL is the proportion of lifetime ECLs that results from default events on a financial instrument that are possible within 12 months after the reporting date. However, when there has been a significant increase in credit risk since origination, the allowance will be based on the lifetime ECL.

 

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical experience and informed credit assessment including forward-looking information.

 

At each reporting date, the Company assesses whether financial assets carried at amortized cost are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

 

There is no significant impact on its financial statements resulting from this new impairment approach given Vale’s credit rating and risk management policies in place.

 

· Hedge accounting — The Company has elected to adopt the new general hedge accounting model in IFRS 9. The changes introduced by IFRS 9 relating to hedge accounting currently have no impact, as the Company does not currently apply cash flow or fair value hedge accounting.  The Company  currently  applies  the  net  investment  hedge for  which  there  are  no  changes introduced by this new standard.

 

(ii) IFRS 15 Revenue from contracts with customers - The Company has adopted IFRS 15 Revenue from contracts with customers starting January 1, 2018. IFRS 15 establishes a comprehensive framework for revenue recognition and replaced IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations. The Company has adopted IFRS 15 using the modified retrospective method. Accordingly, the information presented for 2017 has not been restated.

 

· Sales of commodities - IFRS 15 introduced the five-step model for revenue recognition from contracts with customers. The new standard is based on the core principle that revenue is recognized when the control of a good or service transfers to a customer of an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

 

11



Table of Contents

 

 

There is no significant impact on the timing of commodities revenue recognition under IFRS 15, since usually the transfer of risks and rewards and the transfer of control under the sales contracts are at the same point in time.

 

The disaggregated revenue information is disclosed in note 3.

 

· Shipping services - A proportion of Vale’s sales are under Cost and Freight (“CFR”) or Cost, Insurance and Freight (“CIF”) Incoterms, in which the Company is responsible for providing shipping services after the date that Vale transfers control of the goods to the customers. According to the previous standard (IAS 18), the revenue from shipping services was recognized upon loading, as well as the related costs, and was not considered a separate service.

 

Under IFRS 15, the provision of shipping services for CFR and CIF contracts should be considered as a separate performance obligation in which a proportion of the transaction price would be allocated and recognized over time as the shipping services are provided. The impact on the timing of revenue recognition of the proportion allocated to the shipping service is not significant to the Company’s quarter-end results ended March 31, 2018. Therefore, such revenue has not been presented separately in these interim financial statements.

 

· Provisionally priced commodities sales - Under IFRS 9 and 15, the treatment of the provisional pricing mechanisms embedded within the provisionally priced commodities sales remains unmodified.  Therefore, these revenues are recognized based on the estimated fair value of the total consideration receivable, and the provisionally priced sales mechanism embedded within these sale arrangements has the character of a derivative.

 

The Company is mostly exposed to the fluctuations in the iron ore and copper price.

 

The selling price of these products can be measured reliably at each period, since the price is quoted on an active market. The fair value of the sales price adjustment, in the amount of R$525 in the period ended March 31, 2018, were recognized as operational revenue in the income statement.

 

d) Accounting standards issued but not yet effective

 

The standards and interpretations issued by IASB relevant to the Company but not yet effective are the same as those applicable when preparing the financial statements for the year ended December 31, 2017. The other new standards effective from January 1, 2018 do not have a material effect on the Company’s interim financial statements.

 

e) Restatement of corresponding figures

 

The amounts corresponding to the Parent Company’s statements of cash flows, for the period ended March 31, 2017, originally presented in the interim financial statements for that period, have been restated for reclassification from financing activities in the amount of R$2,291 to investing activities. This amount relates to intercompany loans between the Parent Company and its subsidiary and was presented as cash flows from financing activities in the aforementioned period. This reclassification aligns the Company’s accounting practice with its cash management policy, which aims to manage at the Parent Company the cash generated by its subsidiaries, including sale of investments and planning for future investments.

 

 

In addition, the cash outflows in the amount of R$2,819 originally presented as transactions with stockholders were reclassified in cash flow from financing activities, from “Related Parties” to “Additions” and “Repayments” of loans and borrowings with third parties.

 

The effects of these restatements are as follows:

 

 

 

Parent company

 

 

 

Three-month period ended March 31, 2017

 

 

 

Original balance

 

Reclassification

 

Restated

 

 

 

 

 

 

 

 

 

Statement of cash flows

 

 

 

 

 

 

 

Net cash provided by operating activities

 

4,272

 

 

4,272

 

 

 

 

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

 

 

 

Loans and advances - net receipts (payments)

 

(776

)

2,291

 

1,515

 

Net cash provided by (used in) investing activities

 

(3,470

)

2,291

 

(1,179

)

 

 

 

 

 

 

 

 

Cash flow from financing activities

 

 

 

 

 

 

 

Loans and borrowings

 

 

 

 

 

 

 

Additions

 

6,421

 

(6,100

)

321

 

Repayments

 

(4,130

)

990

 

(3,140

)

Transactions with stockholders

 

 

 

 

 

 

 

Related parties

 

(2,819

)

2,819

 

 

Net cash used in financing activities

 

(528

)

(2,291

)

(2,819

)

 

 

 

 

 

 

 

 

Increase in cash and cash equivalents

 

274

 

 

274

 

 

12



Table of Contents

 

 

3.                            Information by business segment and by geographic area

 

The information presented to the Executive Board on the performance of each segment is derived from the accounting records, adjusted for reclassifications between segments.

 

a)        Adjusted LAJIDA (EBITDA)

 

Management uses adjusted EBITDA to assess each segment’s contribution to the Company’s performance and to support the decision making process.  Adjusted EBITDA is calculated for each segment using operating income or loss plus dividends received and interest from associates and joint ventures, and adding back the amounts charged as (i) depreciation, depletion and amortization and (ii) special events (additional information can be found in note 4).

 

In 2018, the Company has allocated general and corporate expenses to “Others” as these expenses are not directly related to the performance of each business segment. Therefore, “Others” includes unallocated corporate expenses. The comparative period was restated in order to reflect this change in the criteria for allocation.

 

 

 

Consolidated

 

 

 

Three-month period ended March 31, 2018

 

 

 

Net operating
revenue

 

Cost of goods
sold and
services
rendered

 

Sales,
administrative
and other
operating
expenses (i)

 

Research and
evaluation

 

Pre operating
and operational
stoppage

 

Dividends
received and
interest from
associates and
joint ventures

 

Adjusted LAJIDA
(EBITDA)

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Iron ore

 

15,278

 

(6,756

)

(41

)

(65

)

(113

)

 

8,303

 

Iron ore Pellets

 

5,142

 

(2,638

)

(5

)

(16

)

(10

)

 

2,473

 

Ferroalloys and manganese

 

406

 

(242

)

(3

)

(1

)

 

 

160

 

Other ferrous products and services

 

372

 

(237

)

(9

)

 

 

 

126

 

 

 

21,198

 

(9,873

)

(58

)

(82

)

(123

)

 

11,062

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

1,234

 

(1,086

)

6

 

(11

)

 

193

 

336

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel and other products

 

3,675

 

(2,291

)

(48

)

(29

)

(27

)

 

1,280

 

Copper

 

1,627

 

(804

)

(3

)

(12

)

 

 

808

 

 

 

5,302

 

(3,095

)

(51

)

(41

)

(27

)

 

2,088

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

198

 

(225

)

(501

)

(89

)

(18

)

33

 

(602

)

Total of continuing operations

 

27,932

 

(14,279

)

(604

)

(223

)

(168

)

226

 

12,884

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations (Fertilizers)

 

288

 

(272

)

(4

)

 

 

 

12

 

Total

 

28,220

 

(14,551

)

(608

)

(223

)

(168

)

226

 

12,896

 

 


(i) Adjusted for the special events occurred in the period.

 

 

 

Consolidated

 

 

 

Three-month period ended March 31, 2017

 

 

 

Net operating
revenue

 

Cost of goods sold
and services
rendered

 

Sales,
administrative and
other operating
expenses

 

Research and
evaluation

 

Pre operating and
operational
stoppage

 

Adjusted LAJIDA
(EBITDA)

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

 

 

 

 

Iron ore

 

15,145

 

(5,257

)

212

 

(51

)

(127

)

9,922

 

Iron ore Pellets

 

4,585

 

(2,050

)

 

(10

)

(4

)

2,521

 

Ferroalloys and manganese

 

273

 

(139

)

(3

)

 

(9

)

122

 

Other ferrous products and services

 

395

 

(239

)

(10

)

(1

)

 

145

 

 

 

20,398

 

(7,685

)

199

 

(62

)

(140

)

12,710

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

1,020

 

(779

)

(12

)

(10

)

 

219

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel and other products

 

3,558

 

(2,712

)

(41

)

(29

)

(121

)

655

 

Copper

 

1,464

 

(721

)

(2

)

(5

)

 

736

 

 

 

5,022

 

(3,433

)

(43

)

(34

)

(121

)

1,391

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

302

 

(307

)

(689

)

(100

)

(3

)

(797

)

Total of continuing operations

 

26,742

 

(12,204

)

(545

)

(206

)

(264

)

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