VALLEY OF THE RIO DOCE COMPANY
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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

November 2003

Valley of the Rio Doce Company

(Translation of Registrant’s name into English)

Avenida Graca Aranha, No. 26
20030-900 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 [   ]

(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 [   ]  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

Companhia Vale of the Rio Doce

TABLE OF CONTENTS:

This form 6-K contains the following:

                 
Item                
Press Release titled “Performance of Companhia Vale do Rio Doce in the Third Quarter of 2003; US GAAP dated November 13, 2003”
    1.  
 
Third Quarterly Financial Statements; US GAAP
    2.  


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US GAAP

(COMPANHIA VALE DO RIO DOCE LOGO)

BOVESPA: VALE3, VALE5
NYSE: RIO, RIOPR
LATIBEX: XVALO, XVALP

www.cvrd.com.br
rio@cvrd.com.br
Departamento de
Relações com
Investidores

Roberto Castello Branco
Rafael Campos
Barbara Geluda
Daniela Tinoco
Eduardo Mello Franco
Rafael Azevedo
Tel: (5521) 3814-4540

PERFORMANCE OF COMPANHIA VALE DO RIO DOCE IN THE THIRD QUARTER OF 2003

The financial and operational information contained in this press release, except whether otherwise indicated, is based on consolidated figures, according to generally accepted accounting principles in the United States of America (“US GAAP”). This information, with the exception of that referring to investment and market behavior, is based on the quarterly financial statements, which have been reviewed by independent auditors. The main subsidiaries of CVRD which form part of these consolidated figures are: RDM, RDME, RDMN, Urucum Mineração, Caemi, Pará Pigmentos, Docenave, Ferteco, Ferrovia Centro-Atlântica (FCA), Aluvale, Alunorte, Florestas Rio Doce, Celmar, Rio Doce Europa, Itaco, CVRD Overseas e Rio Doce Finance International.

Rio de Janeiro, November 12, 2003 – Companhia Vale do Rio Doce (CVRD) has reported net earnings of US$ 468 million for the third quarter of 2003 (3Q03), corresponding to earnings per share of US$ 1.22.

Net earnings for the first nine months of 2003 amounted to US$ 1.278 billion, the equivalent of US$ 3.33 per share, being almost the same as the record earnings of US$ 1.287 billion obtained during the whole year of 2001.

Operational ROE(1), as measured by the ratio between adjusted EBIT(2) (earnings before interest expenses and taxes)/shareholders’ equity, amounted to 43.2% on an annualized basis, compared to 34.0% in the previous quarter.

Quarterly records were obtained for revenue and cash generation, alumina and kaolin sales, and logistics services.

The good results obtained by CVRD were due to the favourable conditions in the markets in which it operates, and particularly the quality of business strategy execution, consistent with the aim of maximizing value over the long term.

  Record revenues

Gross operational revenues in 3Q03 amounted to a record US$ 1.483 billion, 21.7% higher than that obtained in 2Q03 and an increase of 30.4% on 3Q02. In the first nine months of 2003, accumulated gross revenues amounted to US$ 3.855 billion, an increase of 21.2% in comparison to that generated in the same period last year.

  Exports

CVRD’s consolidated export revenues, in accordance with BR GAAP (generally accepted accounting principles in Brazil), amounted to US$ 994 million in 3Q03,

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an increase of 5.0% on the previous quarter figure of US$ 947 million, and 27.4% higher than the US$ 780 million reported in 3Q02. Export revenues accumulated to the end of September 2003 amounted to US$ 2.741 billion, compared with US$ 2.370 billion in the same period a year earlier.

CVRD’s net consolidated exports (exports minus imports) amounted to US$ 2.373 billion in the period January/September 2003, representing 13.4% of Brazil’s trade surplus of US$ 17.797 billion.

  Record cash generation

Cash generation, as measured by EBITDA(3) (earnings before interest, tax, depreciation and amortization) amounted to US$630 million, an increase of 28.6% on 2Q03 and 21.2% higher than in 3Q02, hence constituting a quarterly record. Accumulated adjusted EBITDA in the first nine months of 2003 amounted to US$ 1.562 billion, an increase of 16.4% compared to the same period in 2002.

Adjusted EBITDA margin (4), which is the ratio between adjusted EBITDA and net revenues, amounted to 44.0%, higher than the 41.9% figure recorded in 2Q03, but lower than the 47.4% reported in 3Q02.

  Sales

Shipments of iron ore and pellets amounted to 46.618 million tons, increase of 12.3% on the previous quarter and of 10.0% on 3Q02. Up to the end of September, sales of these products amounted to 130.633 million tons compared to 120.193 million tons in the first nine months of 2002.

The consolidation of Caemi added 3.410 million tons of iron ore to sales in 3Q03. If this effect were to be disregarded from sale shipment figures, sales would have amounted to 43.208 million tons, the second highest quarterly volume in the Company’s history.

Alumina sales set new records, amounting to 747,000 tons, an increase of 23.7% compared to 2Q03 and up 114.7% on 3Q02. Shipments of primary aluminum, corresponding to CVRD’s take from Albras, amounted to 54,000 tons, compared to 51,000 tons in 2Q03 and 49,000 tons in 3Q02.

Kaolin sales reached the quarterly record of 182,000 tons in 3Q03. In the first nine months of 2003, shipments of this industrial mineral reached 374,000 tons vis-à-vis 235,000 tons in the same period of 2002.

General cargo transported (cargo other than iron ore and pellets) for customers on the Vitória a Minas (EFVM), Carajás (EFC), and Centro-Atlântica (FCA) railroads, beat the record set in the previous quarter, with 7.371 billion net ton kilometers (ntk). This represented an increase of 6.8% and 10.9%, on 2Q03 and 3Q02, respectively.

  Investments

In the first nine months of 2003, CVRD invested US$ 1.519 billion. Of this total, US$ 634.2 million was spent on production capacity growth (growth capex), US$ 382.9 million was allocated to maintenance (stay-in-business capex) and US$ 502 million was dedicated to acquisitions.

  Dividends

On October 31, the Company distributed two tranches of dividends to its shareholders.

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The first tranche, of R$ 1.48 per share, corresponded to the second instalment of the minimum dividend announced on January 30 this year. The second tranche, of R$ 1.94 per share, refers to the additional dividend approved by CVRD’s Board of Directors on August 27.

Therefore, in 2003, the first year in which the new Dividend Policy, approved on November 13, 2002, was implemented, the Company paid interest on shareholder’s equity of R$ 5.04 per share, amounting to a total of R$ 1.935 million.

Converted into US$, the total dividend distributed in 2003 was US$ 675 million, being equivalent to US$ 1.75 per share, having increased 12.1% vis-à-vis 2002.

In the 12 months to the end of October, the estimated dividend yield in US dollars was 5.4% for common shareholders and 6.1% for preferred shareholders.

  Financial statements

Starting in September 2003, a number of companies were consolidated into CVRD’s financial statements in US GAAP: Caemi and FCA. In this quarter, therefore, this consolidation refers only to the month of September.

In Caemi’s financial statements, the following companies have been consolidated: Cadam, a producer of kaolin, and MBR – Minerações Brasileiras Reunidas, a producer of iron ore. The results of MRS Logística affect the shareholder participation line of Caemi and also that of CVRD.

Beginning in 2002, according to the rule established by the Statement of Financial Accounting Standard 142 (SFAS 142), the company has carried out an impairment test on the premia paid for assets with the aim of verifying the feasibility of their recovery, having chosen the month of September of each year as the period to carry out this procedure. This test consists of determining a fair value for each investment and comparing to the value booked in the accounts of CVRD. In 2003, the impairment test for each of the Company’s assets booked with goodwill revealed that there is no need for any asset write-down.

SELECTED FINANCIAL INDICATORS

                                         
    US$ million
   
    3Q 02   2Q 03   3Q 03   D%   D%
    (A)   (B)   (C)   (C/A)   (C/B)
   
 
 
 
 
Gross Revenues
    1,137       1,219       1,483       30.4       21.7  
Gross Margin (%)
    49.5       42.7       43.3              
Adjusted EBITDA
    520       490       630       21.2       28.6  
Adjusted EBITDA margin (%)
    47.4       41.9       44.0              
Adjusted EBIT
    459       388       501       9.2       29.1  
Adjusted EBIT Margin (%)
    41.8       33.2       35.0              
Net Earnings
    (150 )     456       468     Nm     2.6  
Net Margin (%)
    (13.7 )     39.0       32.7              
Total Debt/ Adjusted LTM EBITDA
    2.1       1.7       2.1              
Annualized Operational ROE (%) (*)
    70.4       34.0       43.2              
Investments (**)
    198.6       407.3       871.5       338.8       114.0  

(*) Adjusted EBIT/net worth

(**) including acquisitions

(COMPANHIA VALE DO RIO DOCE LOGO)   RELEVANT EVENTS

In recent months, a number of initiatives have been concluded whose principal aim is to adhere to the strategic focus of the Company and to help increase transparency.

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Acquisitions

On September 2, the Company completed the purchase of 50% of the ordinary shares and 40% of the preferred shares of Caemi Mineração e Metalurgia S.A. (Caemi) for US$ 426.4 million, now having 60.2% of the total capital of this company and all the ordinary shares.

Restructuring of logistics assets

With the authorization granted by the Brazilian regulatory agency for the transportation sector (ANTT), a capital increase of FCA was carried out. CVRD fully subscribed the capital increase, for a total of R$ 1.003 billion, of which R$ 798.3 million corresponded to the conversion of advance payments for future capital increases already made, and the remaining R$ 204.9 million to be paid in 4 cash instalments, of which three have already been made. The last instalment of R$ 61.5 million will be paid in December 2003. As a consequence, CVRD became the controlling shareholder of this railroad company, with 99.99% of its common shares and 99.99% of its total capital. FCA will now be fully integrated into CVRD’s logistics strategy, thereby making investment in the railroad possible, in order to enlarge and improve its general cargo transportation capacity for the Company’s clients.

On November 7, 2003, also upon receiving the authorization from ANTT, CVRD divested its stakes in Companhia Ferroviária do Nordeste (CFN) and Sepetiba Tecon.

Simplification of operational structure

CVRD has merged Ferteco Mineração S.A. into the main Parent Company, taking over the management of Córrego do Feijão and Fábrica iron ore mines, as well as of the Fábrica pellet plant, located in the Iron Quadrangle, in the state of Minas Gerais. This event did not alter the Company’s financial statements in US GAAP.

CVRD has also absorbed Celmar S.A into the parent company, its assets being transferred to Ferro Gusa Carajás S.A., a joint venture created with Nucor for the production of pig iron in the north of Brazil. Therefore, Celmar S.A. ceased to exist.

Starting in January 2004, CVRD’s manganese and ferro-alloys operations will be conducted via four wholly-owned subsidiaries: Rio Doce Manganês (Sibra’s new name since 15 October 2003), Urucum Mineração, Rio Doce Manganese Norway and Rio Doce Manganèse Europe.

Divestitures

On August 15, CVRD finalized the sale of the assets of the gold mine Fazenda Brasileiro. The proceeds from this sale, which amounted to US$ 21 million, were accounted for in this quarter under the item “other operational revenues / expenses”.

On October 24, the company sold its 11.1% stake in Fertilizantes Fosfatados S.A. –Fosfértil for R$ 240 million. The R$ 115 million accounting gain from this transaction will be added to the result in 4Q03.

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(COMPANHIA VALE DO RIO DOCE LOGO)   BUSINESS OUTLOOK

Global production of crude steel, according to the International Iron and Steel Institute (IISI), grew 7.1% in the first nine months of 2003, compared to the same period last year, hence registering a slowdown in relation to the first six months of 2003, when production expanded 8.2% year-on-year. This was due to production cutbacks in 3Q03 in the European Union, particularly in Germany, France and Spain, as well as in the US, in reaction to the lackluster macroeconomic performance in the first half of the year.

The driving force behind the global expansion of crude steel production, which according to our estimates is likely to reach 960 million tons this year, compared to 903 million tons in 2002, is China, whose steel production has increased 21.6% this year to the end of September. In the last 60 months up to the end of September 2003, Chinese steel production has grown at an average annual rate of 15%, while in the rest of the world steel production has expanded at an annual rate of 2.6%.

Consistent with its current stage of economic development, steel consumption in China is growing even more rapidly and CRU expects China’s imports to exceed 40 million tons in 2003, compared to 29 million last year. The increase in China’s overseas purchases of steel influences rising production in certain Asian countries, Japan in particular, whose steel industry has grown 3.5% this year.

The IISI’s most conservative scenario for the medium term indicates Chinese steel consumption should reach 330 million tons by 2007, with an annual average growth of 9.3% between 2002 and 2007, compared to 15.3% between 1997 and 2002. According to the same source, global consumption will grow until 2007 at an average annual rate of 3.6%, the same rate as that registered in the period 1997/2002.

The strong Chinese demand is having a positive impact on steel prices, with the CRU Steel Price Index (CRUspi) returning to its upward cycle since June. Between December 2001 and October 2003, CRUspi increased by 45.4%.

Another important implication is the substantial increase in demand for iron ore, with Chinese imports during the period January-September 2003 totaling 110 million tons, almost the same volume imported during the whole of last year, which amounted to 111.7 million tons. Compared with the same period in 2002, Chinese imports of iron ore were up 33.1%.

It is estimated that Chinese imports of iron ore will increase by approximately 35 million tons in 2003, with total imports into Asia rising by 40 million tons.

Japan imported 98.8 million tons of iron ore in the first nine months of 2003, 3.2% more than in the same period last year.

It is likely that the global economy in 3Q03 registered its highest rate of growth since the stock market bubble burst in the US, in 1Q00. The USA, whose GDP grew by an annualized rate of 7.2% in 3Q03, extraordinarily high for a developed economy, and Asia, where China’s GDP grew by an annualized 9.1% in 3Q03, led the acceleration in global growth.

At the same time, leading indicators of economic activity are signaling the start of a synchronized recovery in the global economy. In fact, the strongest signals for future growth are coming not only from the US, but also Japan, Southeast Asia, Latin America and even the European Union, where GDP growth this year is likely to be very modest, below 1%. After almost three years of below long term trend

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annual growth of 3.6%, the global economy seems likely to resume its normal expansion rate.

The change in the global economic cycle has been adding more consistency to the demand for ores and metals, whose pattern, although favorable, has been relying almost exclusively on the extraordinary expansion in China. Metal prices, already influenced by the weakness in the US dollar, reacted positively to the change in expectations for global GDP growth. The price of copper, for example, is now fluctuating in the range of US$ 0.90c a pound, having reached at the end of October 2003 its highest level since October 1997, while the prices of primary aluminum, of approximately US$ 1,500 per ton, even in the face of relatively high stock levels in the industry, are among its highest since May 2001.

The combination of dramatic growth in Chinese demand, now leveraged by the prospect of a synchronized recovery in the global economy, and the restricted growth in the supply of ores and metals in the last few years - the industry reacted to the financial crisis in Southeast Asia in 1997 by reducing investments in capacity expansions - have created imbalances in the markets of certain products, which, despite the expansion projects currently under development, are likely to persist for at least another two years.

CVRD estimates that seaborne trade of iron ore will amount to 545 million tons in 2004, compared to 515 million tons this year, with more than 80% of this growth due to the increasing amount of Chinese purchases overseas. With the extra capacity at Carajás set to come on stream in 2004, ahead of schedule, pushing production up to 70 million tons a year, the enlargement of the Maritime Terminal at Ponta da Madeira to a capacity of 74 million tons a year and the small increase in capacity in the Southern System (3 million tons a year), the Company should benefit to a greater extent from the pick-up in demand.

The dynamics of price elasticity is likely to gradually correct the excessive increase in freight rates, which has been caused by the considerable expansion in seaborne iron ore trade - evaluated at approximately 65 million tons in 2002/2003. China has doubled its average monthly imports from 6 million tons in 2001 to 12 million tons in 2003, while at the same time, investment in the construction of new Capesize vessels has not kept pace with this trade expansion.

The enlargement of port capacity in Brazil, Australia and China, to reduce ship-waiting time, should in the short-term help to increase the effective supply of maritime transportation. Furthermore, according to Clarkson Research Studies, in 2004, shipyards will place an extra 5.6 million deadweight tons of shipping capacity in the marketplace, the equivalent of 35 Capesize vessels, representing an increase of approximately 6% in the global fleet, which will also help to ease the current imbalance between supply and demand for transoceanic transportation. The reaction to the increase in shipping supply will be more significant in 2006 and 2007, bearing in mind the length of time between orders being placed and deliveries being met.

Notwithstanding the sharp rise in freight prices on the spot market, with a widening of the spread between the Brasil/Asia–Australia/Asia rates, and the probable slowdown in Chinese GDP growth to around 7% in the next few quarters, demand for CVRD’s iron ore will continue to be very strong. This is because of the expansion plans for the Chinese steel industry – the Chinese Iron and Steel Association recently estimated that Chinese production capacity will expand by 120 million tons between the end of 2003 and 2005 – and also because of the Company’s position as a supplier of high content ore with low levels of impurities, important factors for increasing productivity and improving the quality of steel products. Furthermore, the long-term contracts with its Chinese clients permit

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CVRD to make an effective contribution in optimizing the value chain for steel production.

In the case of alumina, spot prices have remained at around US$ 300 per ton FOB, approximately 20% of the current primary aluminum price on the LME, reflecting the strong demand pressure from China. In the first nine months of this year, Chinese imports amounted to 4.24 million tons, an increase of 32.3% in relation to the same period in 2002.

We expect that the market shortages will continue during 2004 and 2005, which will mean that prices will remain high for many months, in contrast to what occurred in 1995 and 1999/2000, when the high prices seen in alumina saw a rapid reversal.

Spot market prices are influencing prices in short and long-term contracts. This benefits Alunorte, a subsidiary of CVRD, which is signing contracts to absorb its additional production capacity of 1.8 million tons a year, from the construction of stages 4 and 5, which are due to come into service in 2006.

The recent increase in the price of primary aluminum on the LME has had a positive effect on CVRD’s alumina revenues, whose contracts are indexed to metal prices. This situation benefits the sales of Albras, whose production, due to the de-bottleneckings, will amount to 430,000 tons in 2003, rising to 450,000 tons in 2004. However, depending on the recovery in the global economy, it is estimated that in 2004 there will be an excess supply situation in the aluminum market, in relation to global consumption, which will tend to limit the trend of recent price increases.

Stocks of copper have been falling, due to the slow expansion in the supply of copper concentrate and the sharp increase in Chinese consumption. Moreover, it has been estimated that this shortage will continue next year as a result of expected growth in demand. Despite the fact that the increase in the metal price tends to stimulate expansion in the supply of copper concentrate, no downward pressure is expected on prices for this product, given the continued level of excess demand. This scenario is therefore positive for the sales outlook of Sossego, which will be running at full production capacity in the middle of 2004, at an annual production rate of 470,000 tons of concentrate a year.

(COMPANHIA VALE DO RIO DOCE LOGO)    SALES VOLUME AND REVENUES

Shipments of iron ore and pellets in 3Q03 amounted to 46.618 million tons, compared to 42.388 million tons in 3Q02, and 41.496 million tons in 2Q03, an increase of 10.0% and 12.3%, respectively. The consolidation of Caemi added 3.410 million tons of iron ore to the shipment figures in 3Q03.

In the first nine months of this year, CVRD’s iron ore and pellet shipments amounted to 130.633 million tons, exceeding by 10.440 million tons the shipments recorded in the same period in 2002.

The shipments of Caemi, carried out by a subsidiary MBR, in the first nine months of 2003, amounted to 27.550 million tons, compared to 24.289 million tons in the same period in 2002. Approximately 83% of Caemi’s sales were directed to the export market. China is Caemi´s main market, accounting for 26% of Caemi´s iron ore shipments (7.2 million tons).

Pellet sales amounted to 5.475 million tons in 3Q03, representing an increase of 13.0% in comparison to 3Q02 and up 5.8% in relation to 2Q03. Starting in 3Q03, the São Luis pellet plant began operating at full capacity – 6 million tons a year – all of its production being sold to the export market. Therefore, in addition to a

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higher production capacity, CVRD now has more flexibility in the supply of pellets for its clients, via the Tubarão complex in the Southeast of the country, via São Luís in the State of Maranhão, at Ponta da Madeira, and via the Fabrica plant in the State of Minas Gerais (this last one is more focused on the domestic market).

To meet its commitments to clients, in view of the excess demand prevailing in 3Q03 in global markets, CVRD bought 2.1 million tons of iron ore from third parties, bringing the total amount of iron ore bought from small mining companies in the first nine months of 2003 to 7.2 million tons, the equivalent of 6.3% of the 113.8 million tons sold by CVRD in this period.

Another effect of excess global demand has materialized in the form of demurrage expenses, which amounted to US$ 8 million in 3Q03, compared to US$ 12 million in 2Q03. Expenses in this area amounted to US$ 29 million in the first nine months of this year, up 81.3% compared to the US$ 16 million incurred in the first nine months of 2002. With Pier 3 entering into operation at the Ponta da Madeira Marine Terminal, and the investments that have been made in the Port of Tubarão to speed up shiploading, these costs are expected to fall in 2004. Despite their increase, demurrage expenses accounted for only 1.4% of COGS in the first nine months of 2003.

CVRD’s iron ore exports up to the end of September 2003 (excluding Caemi) amounted to 92.8 million tons, representing 72.9% of total sales. China was the Company’s main market with 19.3 million tons, representing 20.8% of the total, which in turn represented 18% of the total imports of that country in the period January/September of this year. Sales to the European Union amounted to 33.5 million tons, Germany leading with 13.8 million tons, followed by France with 6.2 million tons and Belgium, with 4.0 million tons. Japan bought 12.2 million tons, South Korea, 5.0 million tons, Argentina 3.3 million tons and the USA, 2.8 million tons.

VOLUME SOLD - IRON ORE AND PELLETS

                                                 
    ‘000 tons
   
    3Q02   %   2Q03   %   3Q03   %
   
 
 
 
 
 
Iron ore
    37,541       88.6 %     36,321       87.5 %     41,143       88.3 %
Pellets
    4,847       11.4 %     5,175       12.5 %     5,475       11.7 %
Total
    42,388       100.0 %     41,496       100.0 %     46,618       100.0 %

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IRON ORE AND PELLETS EXPORTS* - 9M03

                           
      million tons
     
                      %
                     
Asia
    43.176               46.5  
 
China
    19.291               20.8  
 
Japan
    12.174               13.1  
 
South Korea
    5.028               5.4  
 
Bahrain
    1.916               2.1  
 
Taiwan
    1.698               1.8  
 
Others
    3.069               3.3  
European Union
    33.455               36.1  
 
Germany
    13.827               14.9  
 
France
    6.219               6.7  
 
Belgium
    4.083               4.4  
 
Italy
    3.845               4.1  
 
Spain
    2.080               2.2  
 
United Kingdom
    1.728               1.9  
 
Holland
    1.673               1.8  
United States
    2.829               3.0  
Others
    13.326               14.4  
Total
    92.786               100.0  

*     Doesn’t consider exports made by Caemi (MBR).

The growth in global steel production has had a positive influence on demand for manganese and ferro-alloys. CVRD’s sales of manganese ore in 3Q03 amounted to 238,000 tons, compared to 234,000 tons in 2Q03 and 213,000 tons in 3Q02. In the first nine months of 2003, total sales amounted to 678,000 tons, up 25.1% on the same period last year, when 542,000 tons were sold. Beginning in 3Q03, when ferro-alloy sales amounted to 134,000 tons compared to 103,000 tons in the previous quarter, RDMN began to operate one of its two furnaces, producing carbon steel alloys (FeAcMn) and silicon manganese alloys (FeSiMn).

Given the expansion in alumina production, with the completion of stage 3 at Alunorte in March 2003, alumina sales continue to grow as well as benefit from the new market price scenario. In 3Q03, the Company sold 747,000 tons, an increase of 23.7% on the previous quarter. In the first nine months of 2003, the Company sold 1.897 million tons, an increase of 290% on the amount of 487,000 tons sold in the first three quarters of 2002. However, it should be noted that Alunorte was consolidated into CVRD’s US GAAP financial statements only since 3Q02.

Sales of primary aluminium have been increasing, amounting to 54,000 tons in 3Q03, compared to 51,000 tons sold in 2Q03 and 49,000 tons sold in 3Q02. This increase is a result of expanded capacity at Albras, which has increased from 406,000 tpa to 430,000 tpa in 2003. For 2004, due to the removal of a number of production bottlenecks in its plant, production capacity at Albras should increase to 450,000 tons of primary aluminium per year.

With the strong demand coming from Brazil’s agricultural sector, which has been seeing record harvests, potash sales increased to 198,000 tons, up 32.9% in comparison to 2Q03. The Taquari-Vassouras potash mine is currently operating at a capacity of 650,000 tpa, over its nominal capacity of 600,000 tpa. In the first three quarters of 2003, 505,000 tons of potash were sold, down 4.4% when compared to the first three quarters of 2002, during which 528,000 tons were shipped. This drop is due to the sales of existing inventories in 2002. With the capacity expansion in the Taquari-Vassouras mine from 600,000 tpa to 850,000

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tpa, which should be completed in the middle of 2005, the Company will aim to cater to the excess demand existing in this market and benefit from the good growth potential of this business.

Sales of gold fell to 14,211 ounces in 3Q03, well below the volume sold of 63,531 ounces in 3Q02. This reduction, already expected, was due to the exhaustion of the Igarapé Bahia gold mine and the sale of the Fazenda Brasileiro gold mine. As a result of these two events, the Company will only be selling gold as a by-product of copper production. Part of the mineral exploration budget is being invested in the search for new gold deposits, with the aim of resuming production of this precious metal in the future.

Kaolin sales amounted to 182,000 tons, compared to 84,000 tons in 2Q03, an increase of 116.7%. The consolidation of Caemi, and its subsidiary kaolin producer CADAM, added 68,000 tons to sales in 3Q03. Disregarding the added sales from CADAM, total sales would have amounted to 114,000 tons, a quarterly record, with an increase of 35.7% in relation to 2Q03. In the first nine months of 2003, sales of this industrial mineral amounted to 374,000 tons, 59.2% higher than the 235,000 tons sold in the same period last year. Sales volume in 2003, disregarding the extra sales due to CADAM, should exceed 400,000 tons, reflecting the very positive outcome of the change in marketing policy, implemented in 2003 to take advantage of installed capacity at PPSA.

VOLUME SOLD - ORES AND METALS

                         
    ‘000 tons
   
    3Q02   2Q03   3Q03
   
 
 
Gold (ounces)
    63,531       19,773       14,211  
Manganese
    213       234       238  
Ferro-alloys
    176       103       134  
Alumina
    348       604       747  
Aluminum
    49       51       54  
Bauxite
    398       262       520  
Potash
    223       149       198  
Kaolin
    89       84       182  

General cargo transported also reached new records, – 7.371 billion ntk, an increase of 10.9% in relation to 3Q02 and up 6.8% compared to 2Q03. In the first nine months of 2003, EFVM, EFC and FCA transported 19.893 billion ntk of general cargo, compared to 18.672 billion in the same period last year, an increase of 6.5 %.

The integration of CVRD’s assets, the definition of a commercial policy, the launching of new services and investment in locomotives and railcars, are enabling the Company’s logistics services to grow at rates well above Brazilian GDP growth.

Freight handling for clients at CVRD’s ports and maritime terminals amounted to 6.772 million tons, up 16.0% in relation to 3Q02, and showing a slight drop of 1.7% compared to 2Q03.

VOLUME SOLD – LOGISTICS SERVICES

                                 
    ‘000 tons
   
    3Q02           2Q03   3Q03
   
         
 
Railroads (million ntk)
    6,647               6,900       7,371  
Ports
    5,835               6,889       6,772  

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The Company’s gross operating revenues amounted to US$ 1.483 billion in 3Q03, 30.4% higher than in 3Q02 and an increase of 21.7% on 2Q03. Comparing the revenue obtained in 3Q03, with the US$ 1.137 billion obtained in 3Q02, an increase of US$ 346 million is observed, US$ 201 million of which is explained by price increases in iron ore, pellets, ferro-alloys, potash, aluminium, alumina and logistics services, and US$ 145 million is explained by growth in sales volume.

3Q03 revenues of US$ 701 million obtained from iron ore sales accounted for 47.3% of total sales, an increase of 32.3% in comparison to 3Q02, and up 18,2% on 2Q03. The average iron ore shipment price amounted to US$ 17.13 per ton, up 5.4% on 2Q03 and an increase of 20.8% on 3Q02. Pellet sales generated revenues of US$ 205 million in 3Q03 – 13.8% of total revenues – representing an increase of 18.5% in relation to 3Q02 and up 30.6% compared to 2Q03. The average pellet price amounted to US$ 36.64 per ton in 3Q03, compared to US$ 30.84 in 2Q03.

As a consequence of the retroactive impact of the price increases negotiated with CVRD’s clients in May of this year, US$ 58 million was booked as part of sales revenue from iron ore and pellets in 3Q03 (which referred to the price increase on shipments made in the first half of the year). A further US$ 2 million remains to be booked in 4Q03. These adjustments do not include sales made by MBR.

Service revenue from the operation of the 5 joint-venture pellet plants at Tubarão amounted to US$ 12 million, compared to US$ 10 million in 3Q02 and US$ 11 million in 2Q03.

Revenue from the sales of manganese and ferro-alloys amounted to US$ 78 million in 3Q03, practically the same as the US$ 79 million reported in 2Q03. Manganese and ferro-alloy revenues accumulated in 2003 to the end of September amounted to US$ 227 million, compared to US$ 199 million in the same period a year earlier.

Revenues from the sale of alumina amounted to US$ 149 million, compared to US$ 104 million in 2Q03 and US$ 64 million in 3Q02. In addition to the extra volume from the expansion at Alunorte, revenue growth also reflected an increase in the average shipment price, which stood at US$ 199.16 per ton in 3Q03, compared to US$ 178.20 in 3Q02. With the recovery in aluminium prices – alumina contract prices are linked to the LME metal price – and the actual renewal of alumina contracts in a much stronger price scenario than that in 2002, and with prices tending to stabilize at the current levels, growth in revenues and profitability can be expected.

Revenues from the sales of primary aluminium amounted to US$ 81 million, compared to US$ 78 million in 2Q03 and US$ 73 million in 3Q02. In this case, the increase in revenues resulted, not only from an increase in volumes, but also due to an increase in average price: US$ 1,407.85 per ton in 3Q03, compared to US$ 1,369.55 in 2Q03 and US$ 1,375.02 in 3Q02.

Logistics services generated gross revenues of US$ 159 million, representing 10.7% of total gross revenues in 3Q03.

The transport of general cargo, which produced revenues of US$ 101 million, registered an increase of 53.0% in relation to 3Q02’s US$ 66 million and was 27.9% higher than 2Q03’s US$ 79 million. The main elements behind this increase were services provided to the steel industry, which accounted for 38.0% of the total, services to the agro-industry, which accounted for 31.9% of revenues (with particular emphasis on soy beans, sugar and alcohol), and inter-modal transport, with 3.1%. Despite the small proportion of logistics revenues represented by inter-modal transport, which basically involves the transport of products from factories to large distribution canters, the growth rate in this segment has been extremely

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high, having practically quadrupled between 3Q02 and 3Q03. Another important segment was the transport of building materials and forestry products.

Port services generated revenues of US$ 40 million in 3Q03, compared to US$ 36 million in 3Q02 and to US$ 38 million in 2Q03. Maritime transport operations generated revenues of US$ 18 million in 3Q03, of which US$ 10 million came from container transport, amounting to 16,765 Teus. As part of its logistics services, CVRD operates a fleet of five ships, which transport containers between various ports along the Brazilian coast and going as far as Buenos Aires.

Revenues from the sale of gold dropped from US$ 21 million in 3Q02 to US$ 7 million in 2Q03 and US$ 5 million in 3Q03. Potash sales remained stable in 3Q03, at US$ 28 million, in relation to 3Q02, with an average price of US$ 140.08 per ton compared to US$ 117.52 in 3Q02. In relation to 2Q03, revenues increased by 33.3%, due to the growth in volume sold.

Sales to external markets accounted for 68% of the US$ 3.855 billion total gross revenues obtained by the Company in the first nine months of 2003. Europe, with 30% and Asia with 23%, were its most important markets. China, as a result of the strong increase in iron ore purchases, became individually, after Brazil, CVRD’s most important market, accounting for US$ 390 million, about 10% of total Company revenue.

GROSS REVENUE BY PRODUCT

                                                 
    US$ million
   
    3Q02   %   2Q03   %   3Q03   %
   
 
 
 
 
 
Iron Ore
    530       46.6       593       48.6       701       47.3  
Pellet plant operation services
    10       0.9       11       0.9       12       0.8  
Pellets
    173       15.2       157       12.9       205       13.8  
Gold
    21       1.8       7       0.6       5       0.3  
Logistics services
    118       10.4       138       11.3       159       10.7  
Aluminum, alumina and bauxite
    146       12.8       188       15.4       243       16.4  
Manganese and ferro-alloys
    79       6.9       79       6.5       78       5.3  
Potash
    27       2.4       21       1.7       28       1.9  
Kaolin
    13       1.1       14       1.1       25       1.7  
Others
    20       1.8       11       0.9       27       1.8  
Total
    1,137       100.0       1,219       100.0       1,483       100.0  

GROSS REVENUE BY DESTINATION

                                                   
      US$ million
     
      3Q02   %   2Q03   %   3Q03   %
     
 
 
 
 
 
Domestic market
    381       33.5       405       33.2       463       31.2  
External market
    756       66.5       814       66.8       1,020       68.8  
 
USA
    70       6.2       42       3.4       53       3.6  
 
Europe
    393       34.6       375       30.8       415       28.0  
 
Japan
    65       5.7       122       10.0       115       7.8  
 
Asian, ex Japan
    115       10.1       143       11.7       263       17.7  
 
Rest of the World
    113       9.9       132       10.8       174       11.7  
Total
    1,137       100.0       1,219       100.0       1,483       100.0  

(COMPANHIA VALE DO RIO DOCE LOGO)   NET EARNINGS OF US$ 468 MILLION

Net earnings in 3Q03 amounted to US$ 468 million, compared to the US$ 150 million loss recorded in 3Q02. In the first nine months of the year, the Company

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obtained net earnings of US$ 1.278 billion, much higher than the US$ 111 million reported in the same period in 2002.

The growth in net revenues of US$ 334 million and the improvement of US$ 249 million in the result from shareholdings, had an important influence on the Company’s performance in 3Q03, compared to 3Q02.

In iron ore and pellets, the result from shareholdings showed an increase of US$ 144 million in 3Q03. Samarco had excellent performance in 3Q03, with sales volume of 3.928 million tons of iron ore (569,000) and pellets (3.359 million), and net earnings of US$ 33 million. Its sales grew by 15% in the first nine months of 2003, in relation to the same period a year earlier, 35% of its shipments being sold to China, the company being the largest supplier of pellets in that market.

In 3Q02, Caemi made a provision US$ 88 million, due to the restructuring of its affiliate Quebec Cartier Mining Company (QCM). Other companies, such as Samarco and Kobrasco, saw their results negatively affected by the depreciation of the Real against the US dollar in that quarter.

The aluminum area increased its contribution to CVRD’s earnings by US$ 58 million. In addition to the elimination of the negative effects from exchange rate volatility, which occurred in 3Q02, the operational performance of the companies improved substantially, with increased sales and prices thereafter. MRN shipped 4.049 million tons of bauxite in 3Q03 compared to 2.554 million tons in 3Q02, at an average price of US$ 19.21 per ton compared to the previous US$ 18.46, and Albras sold 111,000 tons in 3Q03 compared to 104,000 tons in 3Q02, with prices increasing by 6%. MRN contributed to the quarter’s earnings with US$ 11 million, Albras with US$ 14 million and Valesul with US$ 2 million.

As a consequence of the good performance of the steel sector, with the increase in production, sales and prices, the result from shareholdings in affiliates improved, increasing from US$ 15 million in 3Q02 to US$ 26 million in 3Q03. Usiminas contributed with US$ 14 million and CST with US$ 14 million, while the CSI stake had a negative effect on CVRD’s earnings, representing a loss of US$ 2 million, as a consequence of falling prices and a drop in production.

RESULT FROM SHAREHOLDINGS

                         
    US$ million
   
    3Q02   2Q03   3Q03
   
 
 
Steel
    15       16       26  
Aluminum and bauxite
    (31 )     47       27  
Logistics
    (38 )     (72 )     (1 )
Pellets
    (18 )     35       26  
Iron ore
    (94 )     10       6  
Others
    6       (1 )     5  
Total
    (160 )     35       89  

The financial result showed an improvement of US$ 82 million, principally due to the fact that in 3Q02 there were losses from interest-rate hedging with derivatives.

In addition to the aforementioned factors, in 3Q02 the main determining factor behind the negative result was the appreciation of the US dollar in relation to the Real on CVRD’s foreign currency denominated debt, which amounted to a loss of US$ 506 million, and which in 3Q03 was limited to US$ 57 million.

The increase of US$ 258 million in the cost of goods sold (COGS) in 3Q03 which amounted to US$ 812 million, in comparison to the US$ 554 million in 3Q02, is

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basically explained by: (i) the consolidation of the results from other CVRD companies in September 2003, which added US$ 55 million to COGS – Caemi US$ 39 million and FCA US$ 16 million – where the most important impact occurred in the item “contracted services” of US$ 28 million; (ii) an increase of US$ 76 million in material costs, due to provisions for repairs and an actual increase in production; and (iii), an increase of US$ 55 million with aluminum, alumina and bauxite purchases, along with sales volume growth and revenue growth for these products.

COGS BREAKDOWN

                                                 
    US$ million
   
    3Q02   %   2Q03   %   3Q03   %
   
 
 
 
 
 
Personnel
    69       12.5       63       9.4       74       9.1  
Material
    118       21.3       180       26.9       194       23.9  
Contracted Services
    100       18.1       103       15.4       150       18.5  
Acquisition of Iron Ore and Pellets
    66       11.9       83       12.4       87       10.7  
Acquisition of Other Products
    108       19.5       125       18.7       175       21.6  
Depreciation and Exhaustion
    40       7.2       47       7.0       63       7.8  
Energy
    28       5.1       28       4.2       38       4.7  
Others
    25       4.5       41       6.1       31       3.8  
Total
    554       100.0       670       100.0       812       100.0  

(COMPANHIA VALE DO RIO DOCE LOGO)   CASH GENERATION

In this quarter, the Company generated record adjusted EBITDA of US$ 630 million. This was an increase of 21.2% in relation to 3Q02 (US$ 520 million) and up 28.6% compared to 2Q03 (US$ 490 million). Adjusted EBITDA margin amounted to 44.0%, lower than the margin in 3Q02 (47.4%) but higher than that in 2Q03, of 41.9%.

In the period from January to September 2003, adjusted EBITDA amounted to US$ 1.562 billion, an increase of 16.4%, or US$ 220 million, in relation to the same period in 2002. In the last 12 months to September 2003, adjusted EBITDA amounted to US$ 2.000 billion.

Increase in adjusted EBITDA in relation to 3Q02

The principal reason for the increase in adjusted EBITDA in 3Q03 relative to 3Q02 was the growth of US$ 334 million in net operational revenues. Other factors also contributed favourably: (i) the increase in dividends received from subsidiaries and affiliates of around US$ 49 million, with a total US$ 66 million in 3Q03 compared to US$ 17 million in 3Q02; (ii) the US$ 21 million gain from the sale of the Fazenda Brasileiro gold mine, accounted for at the “other operational expenses/revenues” line.

In 3Q03, CVRD received dividends from CST of US$ 30 million, US$ 14 million from Samarco, US$ 3 million from Usiminas, US$ 2 million from Fosfértil, and US$ 17 million from other companies.

According to the Securities and Exchange Commission (SEC) guidelines regarding the reporting of non-GAAP measurements, any event should not be considered as non-recurring if it is likely to be repeated during the next two years, or has already occurred within the previous two years. In this way, as CVRD has sold assets within the last two years, ships and forestry being examples, having in 4Q03 already sold a number of shareholdings - in CFN, Sepetiba Tecon and Fosfértil -

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the US$ 21 million in proceeds derived from the sale of Fazenda Brasileiro was not discounted from adjusted EBITDA in 3Q03 as a non-recurring item.

The consolidation of Caemi and FCA had a net positive effect of US$ 21 million on adjusted EBITDA in 3Q03, being US$ 27 million from Caemi and a negative figure of US$ 6 million from FCA.

The ferrous mineral businesses contributed US$ 453 million to adjusted EBITDA, experiencing a reduction in their participation within the Company’s adjusted EBITDA from 80.0% in 2Q03 to 71.9% in 3Q03. Logistics services generated adjusted EBITDA of US$ 53 million, showing a reduced participation within the Company’s adjusted EBITDA from 11.8% in 2Q03, to 8.4% in 3Q03. The aluminum businesses, with US$ 65 million in adjusted EBITDA, accounted for 10.3% of the Company’s adjusted EBITDA, almost double the figure of 5.5% recorded in 2Q03.

QUARTERLY ADJUSTED EBITDA

                                 
    US$ million
   
    3Q02           2Q03   3Q03
   
         
 
Net Operating Revenues
    1,098               1,170       1,432  
COGS
    (554 )             (670 )     (812 )
S,G &A
    (65 )             (45 )     (74 )
Research and Development
    (15 )             (12 )     (22 )
Other Operational Expenses
    (5 )             (55 )     (23 )
ADJUSTED EBIT
    459               388       501  
Depreciation, Amortization & Exhaustion
    44               54       63  
Dividends Received
    17               36       66  
Adjustment for Non-recurring Items (asset impairment)
                  12        
ADJUSTED EBITDA
    520               490       630  

ADJUSTED EBITDA BY BUSINESS AREA

                                                 
    US$ million
   
    3Q02   %   2Q03   %   3Q03   %
   
 
 
 
 
 
Ferrous Minerals
    359       69.0       392       80.0       453       71.9  
Non- Ferrous Minerals
    26       5.0                   21       3.3  
Logistics
    34       6.5       58       11.8       53       8.4  
Aluminum
    43       8.3       27       5.5       65       10.3  
Others
    58       11.2       13       2.7       38       6.0  
Total
    520       100.0       490       100.0       630       100.0  

(COMPANHIA VALE DO RIO DOCE LOGO)   DEBT

CVRD’s total debt as at September 30, 2003, amounted to US$ 4.304 billion, an increase on its position at the end of 2Q03, when the figure stood at US$ 3.282 billion. Part of this increase was due to the consolidation of Caemi (US$ 207 million) and FCA (US$ 132 million). The remaining US$ 683 million corresponds partially to a temporary increase in the Company’s debt. This increase is transitory given that in 4Q03 scheduled debt repayments amount to approximately US$ 400 million, including in this total, the maturity of the CVRD 2003 bond, of US$ 200 million in face value, which falls due in December.

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Net debt (5) as of September 30 amounted to US$ 2.964 billion, given that cash and equivalents increased from US$ 966 million at the end of 2Q03 to US$ 1.340 billion at the end of September.

As a consequence of this temporary increase in debt levels, the leverage indicator Total Debt/ LTM adjusted EBITDA (6) increased from 1.74x to 2.15x. However, this ratio is distorted, because the numerator includes, for example, 100% Caemi’s debt of US$ 207 million, while the denominator takes into account only one month of its cash generation, in other words, only US$ 27 million. Therefore, considering that Caemi has a degree of leverage slightly below that of CVRD, it is expected, all other things being equal, that this indicator will converge to the levels seen in 2Q03.

The debt/firm value (7) ratio dropped slightly from 0.23 in 2Q03 to 0.22 in 3Q03.

Interest coverage remained fairly constant, as the ratio of adjusted EBITDA /interest expenses (8), was 11.67x in 3Q03, compared to 11.95x in 2Q03.

FINANCIAL EXPENSES

                 
    US$ million
   
    2Q03   3Q03
   
 
Financial Expenses on:
               
Local Debt
    (4 )     (6 )
External Debt
    (35 )     (43 )
Debt with Related Parties
    (2 )     (5 )
Total Debt-related Financial Expenses
    (41 )     (54 )
                 
    2Q03   3Q03
   
 
Gross Interest on:
               
Tax and Labour Contingencies
    (6 )     (10 )
Tax on Financial Transactions (CPMF)
    (5 )     (6 )
Derivatives
    4       2  
Others
    (16 )     (15 )
Total Gross Interest
    (23 )     (29 )
     
Total
    (64 )     (83 )

The value of the guarantees granted to non-consolidated companies amounted to US$ 326 million at the end of September, of which US$ 278 million was denominated in US dollars and US$ 48 million denominated in Reais. US$ 291 million of these guarantees refer to obligations incurred by Albras.

In the 12 months ending September 2003, Albras’ adjusted EBITDA amounted to US$ 226 million and its debt at the end of the same month amounted to US$ 387 million, representing, therefore, a Total Debt/ LTM adjusted EBITDA ratio of 1.7x, which is extremely comfortable.

The value of guarantees fell by US$ 158 million in relation to those in 2Q03, given that US$ 135 million, which was related to FCA, is now consolidated in CVRD’s financial statements.

DEBT INDICATORS

                         
    US$ million
   
    3Q02   2Q03   3Q03
   
 
 
Gross Debt
    3,579       3,282       4,304  
Net Debt
    2,177       2,316       2,964  
Gross Debt / LTM adjusted EBITDA (x)
    2.12       1.74       2.15  
Adjusted EBITDA / Interest Expenses (x)
    10.00       11.95       11.67  
Gross Debt / Firm Value (x)
    0.29       0.23       0.22  

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(COMPANHIA VALE DO RIO DOCE LOGO)   INVESTMENTS

In the first nine months of 2003, CVRD’s capital expenditure amounted to US$ 1.519 billion. Of this total, US$ 634.2 million was invested in the expansion of production capacity (growth capex), US$ 382.9 million in maintenance (stay-in-business capex) and US$ 502 million in acquisitions.

During 3Q03, CVRD invested a total of US$ 871.6 million, of which US$ 426.4 million referred to the acquisition of Caemi.

In this quarter, US$ 243.1 million was invested in projects. Most of this amount was allocated to the following investments; first, to the development of the Sossego copper project, which incurred expenditure of US$ 106.3 million in the quarter; second, to increasing alumina production capacity, which accounted for US$ 26 million; third, to the expansion of the Taquari-Vassouras potash mine, accounting for US$ 8.6 million; fourth, to the purchase of locomotives and railcars, accounting for US$ 28.6 million. In addition, US$ 32.8 million was invested in projects related to the ferrous business in the Northern System and US$ 13.6 million in the Southern System.

Expenditure on mineral exploration and technological research amounted to US$ 18.9 million.

Expenditure on maintenance (stay-in-business capex) in 3Q03 amounted to US$ 183.2 million, including capital injections of US$ 54.1 million for the financial restructuring of subsidiaries (FCA and PPSA) and US$ 9.1 million on information technology.

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Main ongoing projects:

                                         
        Investment realized    
        US$ million    
       
   
Area   Project   1Q03   2Q03   3Q03   9M03   Status

 
 
 
 
 
 
Ferrous   Expansion of iron ore production capacity in the Northern System     6.1       7.7       14.2       28.0     It is expected that the Northern System will be operating at a rate of 70 million tons per year in 1Q04, consequently being some 12 months ahead of schedule.
                                         
    Pier III at the Marine Terminal of Ponta da Madeira (TMPM)     2.1       2.8       4.7       9.6     Completion scheduled for February 2004 . The implementation of this project is proceeding on schedule with capex estimated at US$ 33.3 million. Pier III will have a shipment loading capacity of 18 million tons a year, increasing the capacity of TMPM to 74 million tons a year.
                                         
    Brucutu iron
ore mine –
Southern
System
    0.146       0.296       1.1       1.5     Completion of first phase scheduled for 2006, when the mine will have a production capacity of 12 million tons per year. The work is proceeding according to schedule. Total investment is budgeted at US$ 219.9 million.
                                         
    Nova Fábrica
iron ore mine
–Southern
System
    0.637       2.5       5.9       9.0     11% of the investment has already been realised and work is proceeding according to schedule. Fábrica Nova should reach nominal production capacity of 10 million tons a year in 2005, reaching 15 million tons in 2009. Total capex is estimated at US$ 84.4 million, with investment in 2003 budgeted at US$ 39.6 million. The project is on schedule and within budget.
                                         
    Conversion of RDMN     3.6       3.4       4.5       11.5     Total investment in the conversion of the furnaces at RDMN is estimated at US$ 15 million and, after completion, the plant will have a production capacity of 110,000 tons of manganese ferro-alloys. The first furnace is already in operation. The conversion of the second is expected for completion by the end of 2003.
                                         
Non
Ferrous
  Sossego
Copper Mine
    40.5       87.5       106.3       234.3     83% of the total investment for the project has already been carried out, which represents completion of around 90% of the work. Commissioning is scheduled for 1Q04., production ramp up for 2Q04, and start of commercial operations for July 04.
                                         
    Expansion of the Taquari- Vassouras Potash Mine     4.0       6.9       8.6       19.5     Completion scheduled for 1H05. 38% of the total investment in the project has already been realised. 42% of the work has already been completed. After the expansion, the mine will have a capacity increase of 850,000 tons a year.
                                         
Logistics   Purchase of Locomotives and Railcars     18.9       35.3       28.6       82.8     Of the 2,010 railcars and 77 locomotives which will be purchased by the end of 2003 , the company has already received 1,356 railcars and 66 locomotives. Part of this equipment will be allocated to the transport of general cargo and part for the transport of iron ore. 51% of the total investment, estimated at US$ 162.9 million has already been carried out.
                                         
    Praia Mole
Marine
Terminal
(phases I & II)
    0.707       1.5       3.0       5.2     Phase I was concluded in April 2003. After the completion of Phase II, scheduled for 2Q04, the shipment capacity of the terminal will be 14.5 million tons a year. Total investment is budgeted at US$ 20.9 million.
                                         
Aluminium   Paragominas     0.344       1.3       2.6       4.3     The start-up of the Paragmonias bauxite mine is scheduled for 2006, with an initial production capacity of 4.5 million tons per year, with a total investment of US$ 271 million.
                                         
    Alunorte
stage 3
    32.1       21.0       12.9       66.0     Project concluded in April 2003
                                         
    Alunorte
stages 4 & 5
                13.1       13.1     The project for the construction of modules 4 and 5 at Alunorte, which will add an additional 1.8 million tons to the plant capacity, began this quarter. This expansion is scheduled for completion in 2006, with total investment budgeted at approximately US$ 583 million.

3Q 03

18


Table of Contents

US GAAP

                                         
Electricity   Aimorés
Hydroelectric
Plant
    6.4       7.6       2.9       16.9     Full operation has been postponed to October 2004, as a result of delays in the relocation of a town due to legal issues. The construction of the plant is proceeding according to schedule. The plant will be ready within the initial period envisaged, but will not be able to generate electricity because the water reservoir will not be full.
                                         
    Candonga
Hydroelectric
Plant
    6.7       5.4       3.6       15.7     Completion scheduled for December 2003. Almost 100% of the total investment in the project, estimated at US$ 40.1 million, has been completed.

MBR, a producer of iron ore controlled by Caemi, invested US$ 61.2 million in the first nine months of 2003, US$ 50.9 million in the expansion of its production capacity to 40 million tons a year in 2004. CADAM, a kaolin producer also controlled by Caemi, invested US$ 10.1 million in the same period. The investments made by MBR and CADAM were not included in the investments reported by CVRD.

Among affiliates and joint ventures, in the period from January to September 2003, MRN invested a total of US$ 30.2 million, US$ 21 million of which was spent on the completion of the project to expand its bauxite production capacity to 16.3 million tons a year, US$ 12.3 million was invested in Albras and US$ 16.8 million in Samarco.

INVESTMENTS - 3Q03

                                     
By business area   US$ million   %   By category   US$ million   %

 
 
 
 
 
Ferrous Minerals     585,9       67,2 %   Capital infusions     54,1       6,2 %
Logistics     62,3       7,1 %   Maintenance & Environmental Protection     120,0       13,8 %
Non-ferrous Minerals     167,8       19,3 %   Projects     243,1       27,9 %
Aluminum     31,9       3,7 %   Mineral Prospecting & Technological Research     18,9       2,2 %
Power Generation     12,8       1,5 %   Information Technology     9,1       1,0 %
Others     10,8       1,2 %   Acquisitions     426,4       48,9 %
Total     871,6       100,0 %   Total     871,6       100,0 %

3Q 03

19


Table of Contents

US GAAP

FINANCIAL STATEMENTS

                         
    US$ million
   
    3Q02   2Q03   3Q03
   
 
 
Gross operating revenues
    1,137       1,219       1,483  
Taxes
    (39 )     (49 )     (51 )
Net Operating Revenue
    1,098       1,170       1,432  
Cost of Goods Sold
    (554 )     (670 )     (812 )
Gross Profit
    544       500       620  
Gross Margin (%)
    49.5       42.7       43.3  
Selling, General and Administrative Expenses
    (65 )     (45 )     (74 )
Research and Development Expenses
    (15 )     (12 )     (22 )
Employee Profit-Sharing
    (14 )     (9 )     (2 )
Others
    9       (46 )     (21 )
Operating Profit
    459       388       501  
Financial Revenues
    10       29       27  
Financial Expenses
    (148 )     (64 )     (83 )
Monetary Variation
    (506 )     257       (57 )
Tax and Social Contribution (Current)
          (135 )     41  
Tax and Social Contribution (Deferred)
    148       (25 )     (41 )
Equity Income and Provision for Losses
    (160 )     35       89  
Accounting Changes for Asset Write-offs
                 
Minority Shareholding Participation
    47       (29 )     (9 )
Net Earnings
    (150 )     456       468  
Earnings per Share (US$)
    (0.39 )     1.19       1.22  

BALANCE SHEET

                             
        US$ million
       
        09/30/02   06/30/03   09/30/03
       
 
 
Assets
                       
 
Current
    2,893       2,482       3,139  
 
Long-term
    1,170       1,727       1,483  
 
Fixed
    3,429       5,574       6,878  
Total
    7,492       9,783       11,500  
Liabilities
                       
 
Current
    1,602       2,044       2,602  
 
Long Term
    3,282       3,177       4,257  
 
Shareholders’ Equity
    2,608       4,562       4,641  
   
Paid-up Capital
    2,944       3,367       3,367  
   
Reserves
    (336 )     1,195       1,274  
Total
    7,492       9,783       11,500  

3Q 03

20


Table of Contents

US GAAP

CASH FLOW STATEMENT

                             
        US$ million
       
        3Q02   2Q03   3Q03
       
 
 
Cash flows from operating activities:
                       
 
Net income
    (150 )     456       468  
 
Adjustments to reconcile net income with cash provided by operating activities:
                       
   
Depreciation, depletion and amortization
    44       54       63  
   
Dividends received
    17       36       66  
   
Equity in results of affiliates and joint ventures and change in provision for losses on equity investments
    160       (35 )     (89 )
   
Deferred income taxes
    (148 )     25       41  
   
Provisions for contingencies
    (15 )     108        
   
Impairment of property, plant and equipment
    0       12       0  
   
Gain in accounting practice for asset retirement obligations
    0              
   
Pension plan
    2       2       3  
   
Foreign exchange and monetary losses
    875       (258 )     13  
   
Net unrealized derivative losses
    37       (1 )     21  
   
Minority interest
    (47 )     29       9  
   
Others
    17       (7 )     (20 )
 
Decrease (increase) in assets:
                       
   
Accounts receivable
    (90 )     65       (24 )
   
Inventories
    (18 )     (25 )     (27 )
   
Others
    (54 )     (26 )     (1 )
 
Increase (decrease) in liabilities:
                       
   
Suppliers
    (9 )     18       (2 )
   
Payroll and related charges
    17       13       (15 )
   
Others
    33       (14 )     (71 )
 
Net cash provided by operating activities
    671       452       435  
Cash flows from investing activities:
                       
 
Loans and advances receivable
    33       (53 )     36  
 
Guarantees and deposits
    (22 )     (152 )     78  
 
Additions to investments
    0       (61 )     (8 )
 
Additions to property, plant and equipment
    (191 )     (308 )     (443 )
 
Proceeds from disposals of property, plant and equipment
    50       37       21  
 
Net cash used to acquire subsidiaries
    0             (380 )
 
Net cash used in investing activities
    (130 )     (537 )     (696 )
Cash flows from financing activities:
                       
 
Short-term debt, net issuances (repayments)
    (354 )     60       (4 )
   
Loans
    10       (6 )     46  
 
Long-term debt
    148       40       779  
 
Repayments of long-term debt
    (105 )     (179 )     (139 )
 
Interest attributed to stockholders
    0       (215 )     (33 )
 
Net cash used in financing activities
    (301 )     (300 )     649  
 
Increase (decrease) in cash and cash equivalents
    240       (385 )     388  
 
Effect of exchange rate changes on cash and cash equivalents
    (410 )     67       (14 )
 
Cash and cash equivalents, beginning of period
    1.572       1.284       966  
 
Cash and cash equivalents, end of period
    1,402       966       1,340  
 
Cash paid during the period for:
                       
   
Interest on short-term debt
    (15 )     (1 )     0  
   
Interest on long-term debt, net of interest capitalized
    (43 )     (28 )     (50 )
   
Interest capitalized
    1       5       4  
   
Income tax
    0       (27 )     (6 )
Non-cash transactions
                       
   
Conversion of loans receivable to investments
    20       76       9  

3Q 03

21


Table of Contents

US GAAP

Ferrous Minerals Companies

IRON ORE AND PELLETS FINANCIAL INDICATORS

                           
      US$ million
     
KOBRASCO   3Q02   2Q03   3Q03

 
 
 
Volume Sold (‘000 tons)
    850       1,128       1,000  
 
Export Markets
    850       667       800  
 
Domestic Market
    0       461       200  
Average Price (US$/ton)
    29.47       30.35       34.59  
 
Net Operating Revenues
    25       34       35  
COGS
    (21 )     (30 )     (28 )
Operating Profit
    4       2       6  
Net Financial Result
    (46 )     16       (2 )
Net Earnings
    (28 )     11       3  
Gross Margin (%)
    16.0       11.8       20.0  
Adjusted EBITDA
    5       2       7  
Adjusted EBITDA Margin (%)
    20.0       5.8       20.0  
Total Debt
    147       102       102  
 
- Short Term
    0       0       0  
 
- Long Term
    147       102       102  
                           
NIBRASCO   3Q02   2Q03   3Q03

 
 
 
Volume Sold (‘000 tons)
    1,842       1,719       1,626  
 
Export Markets
    290       513       509  
 
Domestic Market
    1,552       1,206       1,117  
Average Price (US$/ton)
    25.96       26.77       33.79  
 
Net Operating Revenues
    52       50       60  
COGS
    (47 )     (51 )     (53 )
Operating Profit
    3       (1 )     6  
Net Financial Result
    0       0       (1 )
Net Earnings
    2       (1 )     6  
Gross Margin (%)
    9.6       (2.0 )     11.7  
Adjusted EBITDA
    4       0       7  
Adjusted EBITDA Margin (%)
    7.7       0.0       11.7  
Total Debt
    4       2       2  
 
- Short Term
    2       2       2  
 
- Long Term
    2       0       0  
                           
ITABRASCO   3Q02   2Q03   3Q03

 
 
 
Volume Sold (‘000 tons)
    815       843       838  
 
Export Markets
    572       778       838  
 
Domestic Market
    243       65       0  
Average Price (US$/ton)
    30.06       35.25       32.96  
 
Net Operating Revenues
    26       31       27  
COGS
    (23 )     (26 )     (25 )
Operating Profit
    1       7       1  
Net Financial Result
    5       (2 )     1  
Net Earnings
    4       3       2  
Gross Margin (%)
    11.5       16.1       7.4  
Adjusted EBITDA
    1       7       1  
Adjusted EBITDA Margin (%)
    3.8       22.6       3.7  
Total Debt
    16       0       1  
 
- Short Term
    0       0       0  
 
- Long Term
    16       0       1  

3Q 03

22


Table of Contents

US GAAP

IRON ORE AND PELLETS FINANCIAL INDICATORS

                           
      US$ million
     
HISPANOBRAS   3Q02   2Q03   3Q03

 
 
 
Volume Sold (‘000 tons)
    685       890       824  
 
Export Markets
    165       625       94  
 
Domestic Market
    520       265       730  
Average Price (US$/ton)
    32.07       36.33       32.59  
 
Net Operating Revenues
    24       32       27  
COGS
    (20 )     (28 )     (21 )
Operating Profit
    2       6       1  
Net Financial Result
    3       (2 )     (1 )
Net Earnings
    4       4       0  
Gross Margin (%)
    16.7       12.5       22.2  
Adjusted EBITDA
    2       6       2  
Adjusted EBITDA Margin (%)
    8.3       18.8       7.4  
                           
SAMARCO   3Q02   2Q03   3Q03

 
 
 
Volume Sold Iron Ore- Export Markets (‘000 tons)
    596       938       569  
Average Price (US$/ton)
    15.81       16.57       17.56  
Volume Sold Pellets- Export Markets (‘000 tons)
    3,275       3,339       3,359  
Average Price (US$/ton)
    30.13       35.03       35.47  
 
Net Operating Revenues
    100       125       119  
COGS
    (47 )     (59 )     (58 )
Gross Margin (%)
    53.0       52.8       51.3  
Adjusted EBITDA
    45       57       54  
Adjusted EBITDA Margin (%)
    45.0       45.6       45.4  
Operating Income
    40       51       48  
Net Financial Result
    (52 )     8       (5 )
Net Income
    (24 )     46       33  
Total Debt
    246       188       174  
 
- Short Term
    170       138       136  
 
- Long Term
    76       50       38  
                           
GIIC*   3Q02   2Q03   3Q03

 
 
 
Volume Sold - (‘000 tons)
    643       1,178       900  
Average Price (US$/ton)
    41.55       43.30       41.18  
 
Net Operating Revenues
    25       49       41  
COGS
    (23 )     (37 )     (30 )
Operating Income
    1       8       6  
Net Financial Result
    0       0       0  
Gross Margin (%)
    8.0       24.5       26.8  
Net Income
    2       8       6  
Adjusted EBITDA
    3       8       7  
Adjusted EBITDA Margin (%)
    12.0       16.3       17.1  
Total Debt
    40       35       30  
 
- Short Term
    0       0       0  
 
- Long Term
    40       35       30  

*Financial indicators calculated according to standards set by the International Accounting Standards Committee

3Q 03

23


Table of Contents

US GAAP

Aluminum Companies

ALUMINUM FINANCIAL INDICATORS

                           
      US$ million
     
MRN   3Q02   2Q03   3Q03

 
 
 
Volume Sold (‘000 tons)
    2,554       3,512       4,049  
 
Export Markets
    740       958       1,324  
 
Domestic Market
    1,814       2,554       2,725  
Average Price (US$/ton)
    18.46       18.98       19.21  
 
Net Operating Revenues
    43       64       73  
COGS
    (30 )     (34 )     (39 )
Operating Profit
    12       29       33  
Net Financial Result
    17       (12 )     (1 )
Gross Margin (%)
    30.2       46.9       46.6  
Net Earnings
    30       15       28  
Adjusted EBITDA
    22       39       45  
Adjusted EBITDA Margin (%)
    51.2       60.9       61.6  
Total Debt
    101       200       203  
 
- Short Term
    23       134       145  
 
- Long Term
    78       66       58  
                           
ALBRAS   3Q02   2Q03   3Q03

 
 
 
Volume Sold (‘000 tons)
    104       106       111  
 
Export Markets
    101       102       107  
 
Domestic Market
    3       4       4  
Average Price (US$/ton)
    1,289.68       1,326.07       1,366.25  
 
Net Operating Revenues
    133       142       152  
COGS
    (79 )     (91 )     (92 )
Adjusted EBITDA
    56       50       62  
Adjusted EBITDA Margin (%)
    42.1       35.2       40.8  
Operating Income
    52       46       58  
Net Financial Result
    (153 )     58       (31 )
Gross Margin (%)
    40.6       35.9       39.5  
Net Income
    (101 )     77       27  
Total Debt
    519       400       387  
 
- Short Term
    20       0       0  
 
- Long Term
    499       400       387  
                           
VALESUL   3T02   2T03   3T03

 
 
 
Volume Sold (‘000 tons)
    18       24       26  
 
Export Markets
    8       15       17  
 
Domestic Market
    10       9       9  
Average Price (US$/ton)
    1,654.96       1,685.82       1,668.32  
 
Net Operating Revenues
    30       38       41  
COGS
    (20 )     (30 )     (33 )
Operating Profit
    8       3       7  
Net Financial Result
    0       0       0  
Gross Margin (%)
    33.3       21.1       19.5  
Net Earnings
    7       1       5  
Adjusted EBITDA
    9       5       8  
Adjusted EBITDA Margin (%)
    30.0       13.2       19.5  
Total Debt
    1       2       2  
 
- Short Term
    0       1       1  
 
- Long Term
    1       1       1  

3Q 03

24


Table of Contents

US GAAP

Steel Companies

STEEL FINANCIAL INDICATORS

                           
      US$ million
     
CSI   3Q02   2Q03   3Q03

 
 
 
Volume Sold (‘000 tons)
    508       447       508  
Average Price (US$/ton)
    382.38       401.96       374.08  
 
Net Operating Revenues
    196       182       191  
COGS / Other Expenses
    (173 )     (179 )     (195 )
Operating Profit
    23       3       (4 )
Net Financial Result
    (3 )     (3 )     (2 )
Net Earnings
    12       0       (3 )
Adjusted EBITDA
    30       11       3  
Adjusted EBITDA Margin (%)
    15.3       6.0       1.6  

3Q 03

25


Table of Contents

US GAAP

(COMPANHIA VALE DO RIO DOCE LOGO)   APPENDIX

Reconciliation of non-GAAP information and comparable GAAP information

(1)  Annualized Operational ROE (%)

                         
    3T02   2T03   3T03
   
 
 
(Adjusted EBIT x 4 / Stockholder’s equity)
    70.4       34.0       43.2  

(2)  Adjusted EBIT

                         
            US$ million        
                     
    3Q02   2Q03   3Q03
   
 
 
Net operating revenues
    1,098       1,170       1,432  
COGS
    (554 )     (670 )     (812 )
SG&A expenses
    (65 )     (45 )     (74 )
Research and development
    (15 )     (12 )     (22 )
Employee profit sharing plan
    (14 )     (9 )     (2 )
Others
    9       (46 )     (21 )
Operating income (Adjusted EBIT)
    459       388       501  

(3)  Adjusted EBITDA

The term “EBITDA” refers to a financial measure that is defined as earnings (losses) before interest, taxes, depreciation and amortisation; we use the term “Adjusted EBITDA” to reflect that our financial measure also excludes monetary gains/losses, equity in results of affiliates and joint ventures less dividends received from those companies, changes in provision for losses on equity investments, adjustments for changes in accounting practices, minority interests and non-recurring expenses. However, Adjusted EBITDA is not a measure determined under GAAP in the United States of America and may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA should not be construed as a substitute for operating income or as a better measure of liquidity than cash flow from operating activities, which are determined in accordance with GAAP. We have presented Adjusted EBITDA to provide additional information with respect to our ability to meet future debt service, capital expenditure and working capital requirements. The following schedule reconciles Adjusted EBITDA to net cash provided by (used in) operating activities reported on our Consolidated Statements of Cash Flows, which we believe is the most directly comparable GAAP measure:

RECONCILIATION BETWEEN ADJUSTED EBITDA VS. OPERATING CASH FLOW

                         
    US$ million
   
    1Q03   2Q03   3Q03
   
 
 
Operating Cash Flow
    356       452       435  
Income tax
                (47 )
Income tax paid
    6       27       6  
Monetary and Foreign Exchange Losses
    92       1       44  
Financial Expenses
    41       32       12  
Net Working Capital
    (45 )     (31 )     140  
Others
    (8 )     9       40  
Adjusted EBITDA
    442       490       630  

3Q 03

26


Table of Contents

US GAAP

       (4)  Adjusted EBITDA Margin

                         
    3Q02   2Q03   3Q03
   
 
 
Adjusted EBITDA Margin (Adjusted EBITDA/Net Revenues)
    47.4       41.9       44.0  
Operating Income / Net Revenues
    41.8       33.2       35.0  

       (5)  Net Debt

RECONCILIATION BETWEEN GROSS DEBT VS. NET DEBT

                         
    US$ million
   
    3Q02   2Q03   3Q03
   
 
 
Gross Debt
    3,579       3,282       4,304  
Cash and cash equivalents
    (1,402 )     (966 )     (1,340 )
Net Debt
    2,177       2,316       2,964  

       (6)  Gross Debt / Adjusted LTM EBITDA

                         
    3Q02   2Q03   3Q03
   
 
 
Gross Debt / adjusted LTM EBITDA (x)
    2.12       1.74       2.15  
Gross Debt/Operating Cash Flow (x)
    1.33       1.82       2.47  

       (7)  Gross Debt/ Firm Value

                         
    3Q02   2Q03   3Q03
   
 
 
Gross Debt/ Firm Value (FV)
    0.29       0.23       0.22  
Gross Debt/ Assets
    0.48       0.34       0.37  
 
Firm Value = Gross Debt + Market capitalization
                       

       (8)  Adjusted EBITDA / Interest expenses

                         
    3Q02   2Q03   3Q03
   
 
 
Adjusted EBITDA / Interest expenses (x)
    10.0       12.0       11.7  
Operating income / Financial expenses (x)
    3.1       6.1       6.0  
 
 

This communication may include declarations which represent the expectations of the Company’s Management about future results or events. All such declarations, when based on future expectations and not on historical facts, involve various risks and uncertainties. The Company cannot guarantee that such declarations turn out to be correct. Such risks and uncertainties include factors relative to the Brazilian economy and capital markets, which are volatile and may be affected by developments in other countries; factors relative to the iron ore business and its dependence on the steel industry, which is cyclical in nature; and factors relative to to the high degree of competitiveness in industries in which CVRD operates. To obtain additional information on factors which could cause results to be different from those estimated by the Company, please consult the reports filed with the Comissão de Valores Mobiliários (CVM - Brazilian stock exchange regulatory authority) and the U.S. Securities and Exchange Commission - SEC, including the most recent Annual Report - CVRD Form 20F.”

3Q 03

27


TABLE OF CONTENTS

REPORT OF INDEPENDENT ACCOUNTANTS
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Income (Loss)
Condensed Consolidated Statements of Cash Flows
Condensed Consolidated Statements of Changes in Stockholders’ Equity
Notes to the Condensed Consolidated Financial Information
Supplemental Financial Information


Table of Contents

COMPANHIA VALE DO RIO DOCE
INDEX TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION

         
    Page
Report of PricewaterhouseCoopers Auditores Independentes
    F-2  
 
Consolidated Balance Sheets as of September 30, 2003 and December 31, 2002
    F-3  
 
Consolidated Statements of Income for the three-month periods ended September 30,
2003, June 30, 2003 and September 30, 2002 and for the nine-month periods
ended September 30, 2003 and 2002
    F-5  
 
Consolidated Statements of Cash Flows for the three-month periods ended September 30,
2003, June 30, 2003 and September 30, 2002 and for the nine-month periods
ended September 30, 2003 and 2002
    F-6  
 
Consolidated Statements of Changes in Stockholders’ Equity for the three-month
periods ended September 30, 2003, June 30, 2003 and September 30, 2002 and for
the nine-month periods ended September 30, 2003 and 2002
    F-7  
 
Notes to the Consolidated Financial Information
    F-8  
 
Supplemental Financial Information
    S-1  

F - 1


Table of Contents

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Companhia Vale do Rio Doce

We have reviewed the accompanying unaudited condensed consolidated balance sheet of Companhia Vale do Rio Doce and subsidiaries as of September 30, 2003, and the unaudited condensed consolidated statements of income, of cash flows and of changes in stockholders’ equity for the three-month periods ended September 30, 2003, June 30, 2003 and September 30, 2002 and for the nine-month periods ended September 30, 2003 and 2002. This financial information is the responsibility of the Company’s management. The unaudited financial information of certain affiliates, the investments in which total US$ 248 million at September 30, 2003 and equity in earnings which total US$ 15 million, US$ 9 million, US$ 17 million, US$ 37 million and US$ 16 million for the three-month periods ended September 30, 2003, June 30, 2003 and September 30, 2002 and for the nine-month periods ended September 30, 2003 and 2002, respectively, and that of certain subsidiaries, which statements reflect total revenues of US$ 82 million and US$ 133 million for the three and nine-month periods ended September 30, 2002, respectively, were reviewed by other independent accountants whose reports thereon have been furnished to us.

We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews and the reports of other accountants, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Companhia Vale do Rio Doce and subsidiaries as of December 31, 2002, and the related consolidated statements of income, shareholders’ equity, and cash flows for the year then ended (not presented herein). In our report dated February 21, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2002 is fairly stated in all material respects, in relation to the consolidated balance sheet from which it has been derived.

As discussed in Note 4 to the financial statements, the Company changed its method of accounting for asset retirement obligations, as from January 1, 2003.

PricewaterhouseCoopers
Auditores Independentes

Rio de Janeiro, Brazil
November 7, 2003

F - 2


Table of Contents

Condensed Consolidated Balance Sheets
Expressed in millions of United States dollars

                     
        September   December
        30, 2003   31, 2002
       
 
        (unaudited)        
Assets
               
Current assets
               
 
Cash and cash equivalents
    1,340       1,091  
 
Accounts receivable
               
   
Related parties
    125       121  
   
Unrelated parties
    617       539  
 
Loans and advances to related parties
    27       49  
 
Inventories
    505       292  
 
Deferred income tax
    121       211  
 
Others
    404       286  
 
 
   
     
 
 
    3,139       2,589  
 
 
   
     
 
Property, plant and equipment, net
    5,888       3,297  
Investments in affiliated companies and joint ventures and other investments and provision for losses on equity investments
    990       732  
Other assets
               
 
Goodwill on acquisition of subsidiaries
    480       412  
 
Loans and advances
               
   
Related parties
    61       89  
   
Unrelated parties
    68       73  
 
Prepaid pension cost
    79       79  
 
Deferred income tax
    266       358  
 
Judicial deposits
    390       239  
 
Unrealized gain on derivative instruments
    2       3  
 
Others
    137       84  
 
 
   
     
 
 
    1,483       1,337  
 
 
   
     
 
TOTAL
    11,500       7,955  
 
 
   
     
 

F - 3


Table of Contents

Condensed Consolidated Balance Sheets
Expressed in millions of United States dollars

(Continued)

                   
      September   December
      30, 2003   31, 2002
     
 
      (unaudited)        
Liabilities and stockholders’ equity
               
Current liabilities
               
 
Suppliers
    418       325  
 
Payroll and related charges
    94       76  
 
Interest attributed to stockholders
    419       3  
 
Current portion of long-term debt - unrelated parties
    1,147       717  
 
Short-term debt
    129       184  
 
Loans from related parties
    101       64  
 
Others
    294       139  
 
 
   
     
 
 
    2,602       1,508  
 
 
   
     
 
Long-term liabilities
               
 
Employees post-retirement benefits
    173       141  
 
Long-term debt - unrelated parties
    2,921       2,359  
 
Loans from related parties
    6       7  
 
Provisions for contingencies (Note 9)
    563       428  
 
Unrealized loss on derivative instruments
    87       76  
 
Others
    214       122  
 
 
   
     
 
 
    3,964       3,133  
 
 
   
     
 
Minority interests
    293       27  
 
 
   
     
 
Stockholders’ equity
               
 
Preferred class A stock - 600,000,000 no-par-value shares authorized and 138,575,913 issued
    1,055       904  
 
Common stock - 300,000,000 no-par-value shares authorized and 249,983,143 issued
    1,902       1,630  
 
Treasury stock - 4,183 (2002 - 4,481) preferred and 4,715,170 common shares
    (88 )     (88 )
 
Additional paid-in capital
    498       498  
 
Other cumulative comprehensive income
    (4,449 )     (5,175 )
 
Appropriated retained earnings
    2,251       2,230  
 
Unappropriated retained earnings
    3,472       3,288  
 
 
   
     
 
 
    4,641       3,287  
 
 
   
     
 
TOTAL
    11,500       7,955  
 
 
   
     
 

See notes to condensed consolidated financial information.

F - 4


Table of Contents

Condensed Consolidated Statements of Income (Loss)
Expressed in millions of United States dollars (Unaudited)
(except number of shares and per-share amounts)

                                             
            Nine months ended
        Three months ended   September 30,
       
 
        September   June   September    
        30, 2003   30, 2003   30, 2002   2003   2002
       
 
 
 
 
Operating revenues, net of discounts, returns and allowances
                                       
 
Sales of ores and metals
                                       
   
Iron ore and pellets
    918       761       713       2,425       2,083  
   
Gold
    5       7       21       21       90  
   
Manganese and ferroalloys
    81       89       92       245       216  
   
Potash
    28       21       27       70       67  
   
Others
    25       14       13       55       33  
   
 
   
     
     
     
     
 
 
    1,057       892       866       2,816       2,489  
 
Revenues from logistic services
    159       138       118       412       360  
 
Aluminum products
    243       188       146       598       312  
 
Other products and services
    24       1       7       29       20  
   
 
   
     
     
     
     
 
 
    1,483       1,219       1,137       3,855       3,181  
 
Value-added tax
    (51 )     (49 )     (39 )     (143 )     (117 )
   
 
   
     
     
     
     
 
 
Net operating revenues
    1,432       1,170       1,098       3,712       3,064  
   
 
   
     
     
     
     
 
Operating costs and expenses
                                       
 
Cost of ores and metals sold
    (530 )     (438 )     (374 )     (1,396 )     (1,187 )
 
Cost of logistic services
    (89 )     (73 )     (63 )     (232 )     (196 )
 
Cost of aluminum products
    (185 )     (157 )     (113 )     (484 )     (273 )
 
Others
    (8 )     (2 )     (4 )     (11 )     (18 )
   
 
   
     
     
     
     
 
 
    (812 )     (670 )     (554 )     (2,123 )     (1,674 )
 
Selling, general and administrative expenses
    (74 )     (45 )     (65 )     (168 )     (173 )
 
Research and development
    (22 )     (12 )     (15 )     (45 )     (36 )
 
Employee profit sharing plan
    (2 )     (9 )     (14 )     (23 )     (20 )
 
Others
    (21 )     (46 )     9       (101 )     (73 )
   
 
   
     
     
     
     
 
 
    (931 )     (782 )     (639 )     (2,460 )     (1,976 )
   
 
   
     
     
     
     
 
Operating income
    501       388       459       1,252       1,088  
   
 
   
     
     
     
     
 
Non-operating income (expenses)
                                       
 
Financial income
    27       29       10       84       87  
 
Financial expenses
    (83 )     (64 )     (148 )     (229 )     (327 )
 
Foreign exchange and monetary gains (losses), net
    (57 )     257       (506 )     250       (837 )
   
 
   
     
     
     
     
 
 
    (113 )     222       (644 )     105       (1,077 )
   
 
   
     
     
     
     
 
Income before income taxes, equity results and minority interests
    388       610       (185 )     1,357       11  
   
 
   
     
     
     
     
 
Income taxes
                                       
 
Current
    41       (135 )           (100 )     (4 )
 
Deferred
    (41 )     (25 )     148       (131 )     262  
   
 
   
     
     
     
     
 
 
          (160 )     148       (231 )     258  
   
 
   
     
     
     
     
 
Equity in results of affiliates and joint ventures and change in provision for losses on equity investments
    89       35       (160 )     218       (208 )
Minority interests
    (9 )     (29 )     47       (56 )     50  
   
 
   
     
     
     
     
 
Income (loss) from continuing operations
    468       456       (150 )     1,288       111  
   
 
   
     
     
     
     
 
Change in accounting pratice for asset retirement obligations (note 4)
                      (10 )      
   
 
   
     
     
     
     
 
Net income (loss)
    468       456       (150 )     1,278       111  
   
 
   
     
     
     
     
 
Basic earnings(losses) per Preferred Class A Share
    1.22       1.19       (0.39 )     3.33       0.29  
   
 
   
     
     
     
     
 
Basic earnings(losses) per Common Share
    1.22       1.19       (0.39 )     3.33       0.29  
   
 
   
     
     
     
     
 
Weighted average number of shares outstanding (thousands of shares)
                                       
 
Common shares
    245,268       245,268       245,268       245,268       245,268  
 
Preferred Class A shares
    138,571       138,571       138,575       138,571       138,575  

See notes to condensed consolidated financial information.

F - 5


Table of Contents

Condensed Consolidated Statements of Cash Flows
Expressed in millions of United States dollars (Unaudited)

                                                 
                Nine months ended
            Three months ended   September 30,
           
 
            September   June   September    
            30, 2003   30, 2003   30, 2002   2003   2002
           
 
 
 
 
Cash flows from operating activities:
                                       
 
Net income (loss)
    468       456       (150 )     1,278       111  
 
Adjustments to reconcile net income with cash provided by operating activities:
                                       
   
Depreciation, depletion and amortization
    63       54       44       160       171  
   
Dividends received
    66       36       17       138       72  
   
Equity in results of affiliates and joint ventures and change in provision for losses on equity investments
    (89 )     (35 )     160       (218 )     208  
   
Deferred income taxes
    41       25       (148 )     131       (262 )
   
Current income taxe contingency
          108             108        
   
Provisions for others contingencies
                (15 )     9       54  
   
Impairment of property, plant and equipment
          12             12       11  
   
Change in accounting pratice for asset retirement obligations (note 4)
                      10        
   
Pension plan
    3       2       2       8       8  
   
Foreign exchange and monetary losses (gains)
    13       (258 )     875       (387 )     1,341  
   
Net unrealized derivative losses (gains)
    21       (1 )     37       23       50  
   
Minority interests
    9       29       (47 )     56       (50 )
   
Others
    (20 )     (7 )     17       (21 )     145  
 
Decrease (increase) in assets:
                                       
   
Accounts receivable
    (24 )     65       (90 )     105       (172 )
   
Inventories
    (27 )     (25 )     (18 )     (28 )     (43 )
   
Others
    (1 )     (26 )     (54 )     (28 )     (84 )
 
Increase (decrease) in liabilities:
                                       
   
Suppliers
    (2 )     18       (9 )     (77 )     (23 )
   
Payroll and related charges
    (15 )     13       17       (8 )     22  
   
Others
    (71 )     (14 )     33       (28 )     39  
 
 
   
     
     
     
     
 
 
Net cash provided by operating activities
    435       452       671       1,243       1,598  
 
 
   
     
     
     
     
 
Cash flows from investing activities:
                                       
 
Loans and advances receivable
                                       
   
Related parties
                                       
     
Additions
    (15 )     (54 )     (6 )     (92 )     (35 )
     
Repayments
    33             23       62       52  
   
Others
    18       1       16       35       18  
 
Guarantees and deposits
    78       (152 )     (22 )     (86 )     (61 )
 
Additions to investments
    (8 )     (61 )           (69 )     (1 )
 
Additions to property, plant and equipment
    (443 )     (308 )     (191 )     (949 )     (508 )
 
Proceeds loss disposal of assets
    21             49       21       49  
 
Proceeds from disposals of property, plant and equipment
          37       1       37       2  
 
Cash used to acquire subsidiaries, net of cash acquired
    (380 )                 (380 )     (45 )
 
 
   
     
     
     
     
 
 
Net cash used in investing activities
    (696 )     (537 )     (130 )     (1,421 )     (529 )
 
 
   
     
     
     
     
 
Cash flows from financing activities:
                                       
 
Short-term debt, net issuances (repayments)
    (4 )     60       (354 )     (37 )     (143 )
 
Loans
                                       
   
Related parties
                                       
     
Additions
    48             20       48       32  
     
Repayments
    (2 )     (6 )     (10 )     (24 )     (29 )
 
Issuances of long-term debt
                                       
   
Related parties
                      2       11  
   
Others
    779       40       148       996       661  
 
Repayments of long-term debt
                                       
   
Related parties
          (4 )           (4 )     (15 )
   
Others
    (139 )     (175 )     (105 )     (415 )     (245 )
Interest attributed to stockholders
    (33 )     (215 )           (248 )     (329 )
 
 
   
     
     
     
     
 
Net cash used in financing activities
    649       (300 )     (301 )     318       (57 )
 
 
   
     
     
     
     
 
Increase (decrease) in cash and cash equivalents
    388       (385 )     240       140       1,012  
Effect of exchange rate changes on cash and cash equivalents
    (14 )     67       (410 )     109       (727 )
Cash and cash equivalents, beginning of period
    966       1,284       1,572       1,091       1,117  
 
 
   
     
     
     
     
 
Cash and cash equivalents, end of period
    1,340       966       1,402       1,340       1,402  
 
 
   
     
     
     
     
 
Cash paid during the period for:
                                       
     
Interest on short-term debt
          (1 )     (15 )     (7 )     (31 )
     
Interest on long-term debt, net of interest capitalized
    (50 )     (28 )     (43 )     (127 )     (111 )
       
Interest capitalized
    4       5       1       13       11  
     
Income tax
    (6 )     (27 )           (39 )     (4 )
Non-cash transactions
                                       
     
Conversion of loans receivable to investments
    9       76       20       96       40  

See notes to condensed consolidated financial information.

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Table of Contents

Condensed Consolidated Statements of Changes in Stockholders’ Equity
Expressed in millions of United States dollars (Unaudited)
(except number of shares and per-share amounts)

                                                 
                Nine months ended
            Three months ended   September 30,
           
 
            September   June   September    
            30, 2003   30, 2003   30, 2002   2003   2002
           
 
 
 
 
Preferred class A stock (including one special share)
                                       
 
Beginning of the period
    1,055       904       904       904       820  
 
Transfer from appropriated retained earnings
          151             151       84  
 
 
   
     
     
     
     
 
 
End of the period
    1,055       1,055       904       1,055       904  
 
 
   
     
     
     
     
 
Common stock
                                       
 
Beginning of the period
    1,902       1,630       1,630       1,630       1,479  
 
Transfer from appropriated retained earnings
          272             272       151  
 
 
   
     
     
     
     
 
 
End of the period
    1,902       1,902       1,630       1,902       1,630  
 
 
   
     
     
     
     
 
Treasury stock
                                       
 
Begining and end of the period
    (88 )     (88 )     (88 )     (88 )     (88 )
 
 
   
     
     
     
     
 
Additional paid-in capital
                                       
 
Beginning and end of the period
    498       498       498       498       498  
 
 
   
     
     
     
     
 
Other cumulative comprehensive income
                                       
 
Cumulative translation adjustments
                                       
   
Beginning of the period
    (4,406 )     (4,999 )     (4,253 )     (5,185 )     (3,475 )
   
Change in the period
    (67 )     593       (1,042 )     712       (1,820 )
 
 
   
     
     
     
     
 
   
End of the period
    (4,473 )     (4,406 )     (5,295 )     (4,473 )     (5,295 )
 
 
   
     
     
     
     
 
 
Unrealized gain on available-for-sale security
                                       
   
Beginning of the period
    18       13                    
   
Change in the period
    (4 )     5             14        
 
 
   
     
     
     
     
 
   
End of the period
    14       18             14        
 
 
   
     
     
     
     
 
 
Adjustments relating to investments in affiliates
                                       
   
Begining and end of the period
    10       10       10       10       10  
 
 
   
     
     
     
     
 
Total other cumulative comprehensive income
    (4,449 )     (4,378 )     (5,285 )     (4,449 )     (5,285 )
 
 
   
     
     
     
     
 
Appropriated retained earnings
                                       
 
Beginning of the period
    2,292       2,351       2,425       2,230       3,212  
 
Transfer (to) from retained earnings
    (41 )     364       (790 )     444       (1,342 )
 
Transfer to capital stock
          (423 )           (423 )     (235 )
 
 
   
     
     
     
     
 
 
End of the period
    2,251       2,292       1,635       2,251       1,635  
 
 
   
     
     
     
     
 
Retained earnings
                                       
 
Beginning of the period
    3,281       3,321       2,846       3,288       2,184  
       
Net income
    468       456       (150 )     1,278       111  
       
Interest attributed to stockholders
                                       
       
Preferred class A stock ($0.87 and $0.39 per share in 2003 and 2002)
    (115 )     (48 )     (62 )     (235 )     (116 )
       
Common stock ($0.87 and $0.39 per share in 2003 and 2002)
    (203 )     (84 )     (110 )     (415 )     (207 )
       
Appropriation (to) from reserves
    41       (364 )     790       (444 )     1,342  
 
 
   
     
     
     
     
 
 
End of the period
    3,472       3,281       3,314       3,472       3,314  
 
 
   
     
     
     
     
 
Total stockholders’ equity
    4,641       4,562       2,608       4,641       2,608  
 
 
   
     
     
     
     
 
Comprehensive income is comprised as follows:
                                       
       
Net income (loss)
    468       456       (150 )     1,278       111  
       
Cumulative translation adjustments
    (67 )     593       (1,042 )     712       (1,820 )
       
Unrealized gain (loss) on available-for-sale security
    (4 )     5             14        
 
 
   
     
     
     
     
 
Total comprehensive income (loss)
    397       1,054       (1,192 )     2,004       (1,709 )
 
 
   
     
     
     
     
 
Shares
                                       
Preferred class A stock (including one special share)
    138,575,913       138,575,913       138,575,913       138,575,913       138,575,913  
 
 
   
     
     
     
     
 
Common stock
    249,983,143       249,983,143       249,983,143       249,983,143       249,983,143  
 
 
   
     
     
     
     
 
Treasury stock (1)
                                       
 
Beginning of the period
    (4,719,405 )     (4,719,635 )     (4,719,921 )     (4,719,651 )     (4,715,261 )
 
Acquisitions
                            (4,660 )
 
Sales
    52       230             298        
 
 
   
     
     
     
     
 
 
End of the period
    (4,719,353 )     (4,719,405 )     (4,719,921 )     (4,719,353 )     (4,719,921 )
 
 
   
     
     
     
     
 
 
    383,839,703       383,839,651       383,839,135       383,839,703       383,839,135  
 
 
   
     
     
     
     
 

(1)  As of September 30, 2003, 4,715,170 common shares and 4,183 preferred shares were held in treasury in the amount of US$ 88. The 4,715,170 common shares guarantees a loan given to our subsidiary Alunorte.

See notes to condensed consolidated financial information.

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Table of Contents

    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 operations and those of our joint ventures and affiliates are described in Note 8.
 
    The main operating subsidiaries we consolidate are as follows:
                         
            Head office   Principal
Subsidiary   % ownership   location   activity

 
 
 
Alumina do Norte do Brasil S.A - Alunorte
    57     Brazil   Aluminum
CADAM S.A. (2) (4)
    61     Brazil   Kaolin
CELMAR S.A. - Indústria de Celulose e Papel (3)
    100     Brazil   Forestry
CVRD Overseas Ltd.
    100     Cayman Island   Trading
Ferrovia Centro-Atlântica S.A. (4)
    100     Brazil   Logistics
Ferteco Mineração S.A. - FERTECO (3)
    100     Brazil   Iron ore and Pellets
Florestas Rio Doce S.A.
    100     Brazil   Forestry
Itabira Rio Doce Company Ltd. - ITACO
    100     Cayman Island   Trading
Mineração Serra do Sossego S.A. (1)
    100     Brazil   Copper
Minerações Brasileiras Reunidas S.A. - MBR (2) (4)
    85     Brazil   Iron ore
Navegação Vale do Rio Doce S.A. - DOCENAVE
    100     Brazil   Shipping
Pará Pigmentos S.A.
    76     Brazil   Kaolin
Rio Doce International Finance Ltd. - RDIF
    100     Bahamas   International finance
Rio Doce Manganèse Europe - RDME
    100     France   Ferroalloys
Rio Doce Manganese Norway - RDMN
    100     Norway   Ferroalloys
Salobo Metais S.A. (1)
    100     Brazil   Copper
SIBRA - Eletrosiderúrgica Brasileira S.A.
    100     Brazil   Manganese and Ferroalloys
Urucum Mineração S.A.
    100     Brazil   Iron ore, Ferroalloys and
Manganese
Vale do Rio Doce Alumínio S.A. - ALUVALE
    100     Brazil   Aluminum

  (1)   Development stage companies
  (2)   Through Caemi Mineração e Metalurgia S.A.
  (3)   Merged with CVRD as from August 29, 2003
  (4)   Consolidated as from September 1, 2003

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. 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 (see Note 8).
 
    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.

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3   Summary of significant accounting policies
 
    Our condensed consolidated interim financial information as of September 30, 2003 for the three-month periods ended September 30, 2003, June 30, 2003, and September 30, 2002 and for the nine month periods ended September 30, 2003 and 2002 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 nine-month period ended September 30, 2003 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2003.
 
    This condensed interim financial information should be read in conjunction with our consolidated financial statements for the year ended December 31, 2002.
 
    The provision for losses on equity investments relates to our investments in affiliates which have reported negative stockholders’ equity in their financial information prepared in accordance with US GAAP and in circumstances where we have assumed commitments to fund our share of the accumulated losses, if necessary, through additional capital contributions or other means. Accordingly we (a) first reduce the value of the investment to zero and (b) subsequently provide for our portion of negative equity.
 
    Other current assets include $30 related to ships held for sale, at September 30, 2003.
 
4   Change in accounting practice
 
    In June 2001, the FASB issued SFAS 143 - “Accounting for Asset Retirement Obligations”. We adopted SFAS 143 as from January 1, 2003, as a consequence an additional $26 for asset retirement obligations was recorded as “Others - long-term liabilities”, a net increase of $11 in mine development costs was registered within “Property, plant and equipment” and a resulting change of $10 was registered as “Change in Accounting Practice for Asset Retirement Obligations” on the Statement of Income, net of income tax ($15 gross of deferred income tax). Over time the liabilities will be accreted for the change in their present value and initial capitalized costs will be depleted over the useful lives of the related assets.
 
5   Recently-issued accounting pronouncements
 
    In June 2002, the FASB has issued SFAS 146 - “Accounting for Costs Associated with Exit or Disposal Activities”. The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. SFAS 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. We adopted SFAS 146 as from January 1, 2003. We have not committed to disposal of or disposed of any significant activities since adoption.
 
    In November 2002 the FASB issued FIN 45 - “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”. The Interpretation elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit. It also clarifies that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value, or market value, of the obligations it assumes under that guarantee and must disclose that information in its interim and annual financial information. The initial recognition and initial measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002, regardless of the guarantor’s fiscal year-end. The disclosure requirements in the Interpretation, applicable as from December 31, 2002 are disclosed in Note 9. We have not issued any material guarantees since December 31, 2002.

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    In January 2003, FASB issued Interpretation No. 46 (FIN 46) – Consolidation of Variable Interest Entities. FIN 46 provides guidance on when certain entities should be consolidated or the interests in those entities should be disclosed by enterprises that do not control them through majority voting interest. This interpretation applies immediately to variable interest entities created after January 31, 2003. We are evaluating the impact on our financial statements.
 
    In May 2003. FASB issued SFAS No. 150, Accounting For Certain Financial Instruments with Characteristics of both Liabilities and Equity (“SFAS 150”) this Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). The Board decided to make this statement effective shortly after issuance for contracts created or modified after it is issued and for existing contracts at the beginning of the first interim period beginning after June 15, 2003. We do not expect SFAS 150 to have a material impact on our financial statements.
 
6   Income taxes
 
    Income taxes in Brazil comprise federal income tax and social contribution, which is an additional federal tax. The statutory enacted tax rates applicable in the periods presented are as follows:
                 
    Nine months ended September 30 - %
   
    2003   2002
   
 
Federal income tax
    25       25  
Social contribution
    9       9  
 
   
     
 
Composite tax rate
    34       34  
 
   
     
 

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Table of Contents

    The amount reported as income tax expense in our consolidated financial information is reconciled to the statutory rates as follows:
                                           
          Nine months ended
      Three months ended   September 30,
     
 
      September   June 30,   September    
      30, 2003   2003   30, 2002   2003   2002
     
 
 
 
 
Income before income taxes, equity results and minority interests
    388       610       (185 )     1,357       11  
 
   
     
     
     
     
 
Federal income tax and social contribution expense at statutory enacted rates
    (132 )     (207 )     63       (461 )     (4 )
Adjustments to derive effective tax rate:
                                       
 
Tax benefit on interest attributed to stockholders
    107       59       47       229       90  
 
Exempt foreign income (expenses)
    9       (26 )     82       (33 )     174  
 
Tax incentives
    8       40             48       2  
 
Valuation allowance
    4             (43 )     13       (37 )
 
Other non-taxable gains (losses)
    4       (26 )     23       (27 )     33  
 
Adjustment to reflect expected annual effective tax rate
                (24 )            
 
   
     
     
     
     
 
Federal income tax and social contribution expense in consolidated statements of income
          (160 )     148       (231 )     258  
 
   
     
     
     
     
 

    We have certain tax incentives relative to our iron ore and manganese operations in Carajás and relative to alumina 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. Both incentives relative to alumina expires in 2010. 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.
 
7   Inventories
                   
      September 30,   December 31,
      2003   2002
     
 
Finished products
               
 
Iron ore and pellets
    168       86  
 
Manganese and ferroalloys
    62       51  
 
Alumina
    20       15  
 
Others
    26       12  
Spare parts and maintenance supplies
    229       128  
 
 
   
     
 
 
    505       292  
 
 
   
     
 

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8   Investments in affiliated companies and joint ventures, unless otherwise stated
                                                                   
      September 30, 2003   Investments   Goodwill
     
 
 
                              Net                                
                              income   September           September        
      Participation in   Net   for the   30,   December   30,   December
      capital (%)   equity   period   2003   31, 2002   2003   31, 2002
     
 
 
 
 
 
 
      voting   total                                                
     
 
                                               
Steel
                                                               
 
Usinas Siderúrgicas de Minas Gerais S.A USIMINAS
    22.99       11.46       270       296       31                    
 
Companhia Siderúrgica de Tubarão - CST (1)
    24.93       28.02       307       101       86       27              
 
California Steel Industries Inc. - CSI
    50.00       50.00       204       2       102       107              
 
SIDERAR (costs $15) - available for sale investments
    4.85       4.85                   62       30              
 
                                   
     
     
     
 
 
                                    281       164              
Aluminum and bauxite
                                                               
 
Mineração Rio do Norte S.A. - MRN
    40.00       40.00       418       53       167       162              
 
Valesul Alumínio S.A. - VALESUL
    54.51       54.51       96       14       52       39              
 
Alumínio Brasileiro S.A. - ALBRAS
    51.00       51.00       197       183       101                    
 
Alumina do Norte do Brasil S.A. - ALUNORTE (Consolidated as from ‘September 30, 2002, after acquisition of control)
    62.09       57.03                                      
 
                                   
     
     
     
 
 
                                    320       201              
Iron ore and pellets
                                                               
 
Caemi Mineração e Metalurgia S.A. (3)
                      17             77              
 
Companhia Nipo-Brasileira de Pelotização - NIBRASCO
    51.11       51.00       33       6       17       12              
 
Companhia Hispano-Brasileira de Pelotização - HISPANOBRÁS
    51.00       50.89       34       5       17       14              
 
Companhia Coreano-Brasileira de Pelotização - KOBRASCO
    50.00       50.00                                      
 
Companhia Ítalo-Brasileira de Pelotização - ITABRASCO
    51.00       50.90       24       5       12       9              
 
Gulf Industrial Investment Company - GIIC
    50.00       50.00       75       18       37       37              
 
SAMARCO Mineração S.A. - SAMARCO
    50.00       50.00       392       117       196       154       37       30  
 
Minas da Serra Gera S.A - MSG
    50.00       50.00       34       4       17       9              
 
Others
                            14       12              
 
                                   
     
     
     
 
 
                                    310       324       37       30  
Other affiliates and joint ventures
                                                               
 
Fertilizantes Fosfatados S.A. - FOSFERTIL (2)
    10.96       11.12       284       92       32       25              
 
Others
                            25       15              
 
                                   
     
     
     
 
 
                                    57       40              
 
                                   
     
     
     
 
 
                                    968       729       37       30  
 
                                   
     
     
     
 
Balance / Change in provision for losses on equity investments:
                                                               
 
Alumínio Brasileiro S.A. - ALBRAS
                                          (1 )            
 
Companhia Ferroviária do Nordeste - CFN
                                                       
 
Companhia Coreano-Brasileira de Pelotização - KOBRASCO
                                    (9 )     (16 )            
 
Ferroban - Ferrovias Bandeirantes S.A.
                                                       
 
Ferrovia Centro-Atlântica S.A. - FCA
                                                       
 
MRS Logística S.A
                                          (6 )            
 
Sepetiba Tecon S.A.
                                    (6 )     (4 )            
 
                                   
     
     
     
 
 
                                    (15 )     (27 )            
 
                                   
     
     
     
 
Total
                                    953       702       37       30  
 
                                   
     
     
     
 

[Additional columns below]

[Continued from above table, first column(s) repeated]

                                           
      Equity Adjustments
     
                              Nine months ended
      Three months ended   September 30,
     
 
              June                        
      September   30,   September                
      30, 2003   2003   30, 2002   2003   2002
     
 
 
 
 
Steel
                                       
 
Usinas Siderúrgicas de Minas Gerais S.A USIMINAS
    14       10       (7 )     34       (15 )
 
Companhia Siderúrgica de Tubarão - CST (1)
    14       6       16       26       11  
 
California Steel Industries Inc. - CSI
    (2 )           6       1       12  
 
SIDERAR (costs $15) - available for sale investments
                             
 
   
     
     
     
     
 
 
    26       16       15       61       8  
Aluminum and bauxite
                                       
 
Mineração Rio do Norte S.A. - MRN
    11       6       12       21       31  
 
Valesul Alumínio S.A. - VALESUL
    2       1       4       7       8  
 
Alumínio Brasileiro S.A. - ALBRAS
    14       40             93        
 
Alumina do Norte do Brasil S.A. - ALUNORTE (Consolidated as from ‘September 30, 2002, after acquisition of control)
                            (23 )
 
   
     
     
     
     
 
 
    27       47       16       121       16  
Iron ore and pellets
                                       
 
Caemi Mineração e Metalurgia S.A. (3)
    3       7       (88 )     15       (87 )
 
Companhia Nipo-Brasileira de Pelotização - NIBRASCO
    3       (1 )     1       3       2  
 
Companhia Hispano-Brasileira de Pelotização - HISPANOBRÁS
    1       2       2       4       5  
 
Companhia Coreano-Brasileira de Pelotização - KOBRASCO
                            (2 )
 
Companhia Ítalo-Brasileira de Pelotização - ITABRASCO
    1       1       2       2       4  
 
Gulf Industrial Investment Company - GIIC
    3       4             9       3  
 
SAMARCO Mineração S.A. - SAMARCO
    17       23       (11 )     59       (3 )
 
Minas da Serra Gera S.A - MSG
    1       1       (3 )     3        
 
Others
                (1 )            
 
   
     
     
     
     
 
 
    29       37       (98 )     95       (78 )
Other affiliates and joint ventures
                                       
 
Fertilizantes Fosfatados S.A. - FOSFERTIL (2)
    5       2       3       10       5  
 
Others
    6       (1 )     3       8       (22 )
 
   
     
     
     
     
 
 
    11       1       6       18       (17 )
 
   
     
     
     
     
 
 
    93       101       (61 )     295       (71 )
 
   
     
     
     
     
 
Balance / Change in provision for losses on equity investments:
                                       
 
Alumínio Brasileiro S.A. - ALBRAS
                (47 )     1       (59 )
 
Companhia Ferroviária do Nordeste - CFN
          (2 )     (1 )     (2 )     (3 )
 
Companhia Coreano-Brasileira de Pelotização - KOBRASCO
    1       6       (12 )     10       (17 )
 
Ferroban - Ferrovias Bandeirantes S.A.
                1             (1 )
 
Ferrovia Centro-Atlântica S.A. - FCA
    (8 )     (73 )     (22 )     (92 )     (32 )
 
MRS Logística S.A
    2       3       (7 )     6       (14 )
 
Sepetiba Tecon S.A.
    1             (11 )           (11 )
 
   
     
     
     
     
 
 
    (4 )     (66 )     (99 )     (77 )     (137 )
 
   
     
     
     
     
 
Total
    89       35       (160 )     218       (208 )
 
   
     
     
     
     
 

[Additional columns below]

[Continued from above table, first column(s) repeated]

                                                   
                                              Quoted
      Dividends received   market
     
 
                              Nine months ended   September
      Three months ended   September 30,   30,
     
 
 
              June                                
      September   30,   September                        
      30, 2003   2003   30, 2002   2003   2002   2003
     
 
 
 
 
 
Steel
                                               
 
Usinas Siderúrgicas de Minas Gerais S.A USIMINAS
    3             2       3       4       128  
 
Companhia Siderúrgica de Tubarão - CST (1)
    30             1       35       1       295  
 
California Steel Industries Inc. - CSI
    2       3       6       5       6        
 
SIDERAR (costs $15) - available for sale investments
                                  62  
 
   
     
     
     
     
     
 
 
    35       3       9       43       11       485  
Aluminum and bauxite
                                               
 
Mineração Rio do Norte S.A. - MRN
    11             8       16       31        
 
Valesul Alumínio S.A. - VALESUL
          3             3              
 
Alumínio Brasileiro S.A. - ALBRAS
                                   
 
Alumina do Norte do Brasil S.A. - ALUNORTE (Consolidated as from ‘September 30, 2002, after acquisition of control)
                                   
 
   
     
     
     
     
     
 
 
    11       3       8       19       31        
Iron ore and pellets
                                               
 
Caemi Mineração e Metalurgia S.A. (3)
                            3       182  
 
Companhia Nipo-Brasileira de Pelotização - NIBRASCO
                                   
 
Companhia Hispano-Brasileira de Pelotização - HISPANOBRÁS
                      2       1        
 
Companhia Coreano-Brasileira de Pelotização - KOBRASCO
                                   
 
Companhia Ítalo-Brasileira de Pelotização - ITABRASCO
          1             1              
 
Gulf Industrial Investment Company - GIIC
    4                   9       6        
 
SAMARCO Mineração S.A. - SAMARCO
    14       25             53       17        
 
Minas da Serra Gera S.A - MSG
          1             1       1        
 
Others
                                   
 
   
     
     
     
     
     
 
 
    18       27             66       28       182  
Other affiliates and joint ventures
                                               
 
Fertilizantes Fosfatados S.A. - FOSFERTIL (2)
    2       2             9       2       70  
 
Others
          1             1              
 
   
     
     
     
     
     
 
 
    2       3             10       2       70  
 
   
     
     
     
     
     
 
 
    66       36       17       138       72       737  
 
   
     
     
     
     
     
 
Balance / Change in provision for losses on equity investments:
                                               
 
Alumínio Brasileiro S.A. - ALBRAS
                                   
 
Companhia Ferroviária do Nordeste - CFN
                                   
 
Companhia Coreano-Brasileira de Pelotização - KOBRASCO
                                   
 
Ferroban - Ferrovias Bandeirantes S.A.
                                   
 
Ferrovia Centro-Atlântica S.A. - FCA
                                   
 
MRS Logística S.A
                                   
 
Sepetiba Tecon S.A.
                                   
 
   
     
     
     
     
     
 
 
                                   
 
   
     
     
     
     
     
 
Total
    66       36       17       138       72       737  
 
   
     
     
     
     
     
 

(1)   During the quarter ended June 30, 2003 CVRD acquired an additional 4.42% of the voting shares and 5.64% of the preferred shares, representing 5.17% of CST’s total capital for US$ 60.
(2)   We have significant influence through a shareholders’ agreement – See Note 12 – Subsequent Events.
(3)   Consolidated as from September 01, 2003, after acquisition of control.

F - 12


Table of Contents

Caemi Pro-forma

The condensed pro-forma income statement below shows the impact of the acquisition of Caemi on the consolidated statements of income as if the current 60.23% participation in Caemi had been acquired on January 1, 2002 (instead of the 16.86% equity investment previously held).

                                                 
    Nine-months ended (Unaudited)
   
    September 30, 2003   September 30, 2002
   
 
    CVRD   Pre-acquisition           CVRD                
    Consolidated   CAEMI (1)   Pro Forma   Consolidated   CAEMI (2)   Pro Forma
   
 
 
 
 
 
Net operating revenues
    3,712       424       4,136       3,064       414       3,478