Table of Contents

 

 

 

United States

Securities and Exchange Commission

Washington, D.C. 20549

 

FORM 6-K

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the

Securities Exchange Act of 1934

 

For the month of

 

March 2018

 

Vale S.A.

 

Praia de Botafogo, No 186
Botafogo, 22250-145 - Rio de Janeiro RJ - Brasil

(Address of principal executive office)

 

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

 

 

(Check One) Form 20-F x  Form 40-F o

 

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

 

 

(Check One) Yes o  No x

 

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

 

 

(Check One) Yes o  No x

 

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

 

 

(Check One) Yes o  No x

 

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

 

 

 


Table of Contents

 

 

Financial Statements

December 31, 2018

 

 

BRGAAP in R$ (English)

 


Table of Contents

 

Vale S.A. Financial Statements

Contents

 

 

Page

Independent auditor’s report on the financial statements

3

Consolidated and Parent Company Income Statement

10

Consolidated and Parent Company Statement of Comprehensive Income

11

Consolidated and Parent Company Statement of Cash Flows

12

Consolidated and Parent Company Statement of Financial Position

13

Consolidated Statement of Changes in Equity

14

Consolidated and Parent Company Value Added Statement

15

Notes to the Financial Statements

16

1. Corporate information

16

2. Basis for preparation of the financial statements

16

3. Brumadinho’s dam failure

20

4. Information by business segment and by geographic area

24

5. Costs and expenses by nature

28

6. Financial results

29

7. Streaming transactions

30

8. Income taxes

31

9. Basic and diluted earnings (loss) per share

33

10. Accounts receivable

33

11. Inventories

34

12. Recoverable taxes

34

13. Other financial assets and liabilities

35

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

36

15. Subsidiaries

38

16. Investments

39

17. Noncontrolling interest

43

18. Intangibles

44

19. Property, plant and equipment

45

20. Impairment and onerous contracts

48

21. Loans, borrowings and cash and cash equivalents

50

22. Liabilities related to associates and joint ventures

51

23. Financial instruments classification

53

24. Fair value estimate

56

25. Derivative financial instruments

58

26. Provisions

61

27. Asset retirement obligations

62

28. Litigation

63

29. Employee benefits

65

30. Stockholders’ equity

73

31. Related parties

77

32. Commitments

78

33. Risk management

79

34. Additional information about derivatives financial instruments

82

 

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KPMG Auditores Independentes

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

20021-290 - Rio de Janeiro/RJ - Brasil

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

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

www.kpmg.com.br

 

Independent auditor’s report on the financial statements

 

(A free translation of the original report in Portuguese as published in Brazil containing financial statement prepared in accordance with accounting practices adopted in Brazil and rules of the International Financial Reporting Standards - IFRS)

 

To The Stockholders, Board Members and Management of

Vale S.A.

Rio de Janeiro - RJ

 

Opinion

 

We have audited the individual and consolidated financial statements of Vale S.A. (“the Company”), identified as Parent Company and Consolidated, respectively, which comprise the individual and consolidated balance sheet as of December 31, 2018, and the related statements of income, comprehensive income, changes in equity and cash flows for the year then ended, as well as the related notes, comprising significant accounting policies and other explanatory information.

 

In our opinion, the aforementioned financial statements present fairly, in all material respects, the individual and consolidated financial position of Vale S.A. as of December 31, 2018, its individual and consolidated financial performance and its individual and consolidated cash flows for the year then ended in accordance with accounting practices adopted in Brazil and in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board - IASB.

 

Basis for Opinion

 

We conducted our audit in accordance with Brazilian and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the individual and consolidated Financial Statements section of our report. We are independent of the Company and its subsidiaries in accordance with the ethical requirements of Ethics Standards Boards for Accountants and Professional Standard issued by Federal Accounting Council, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

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

 

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

 

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Emphasis - Subsequent Event

 

Without qualifying our report further, we draw your attention to Note 3 to the individual and consolidated financial statements of the Company, which describes the Brumadinho dam failure, which occurred at the Company’s operating facilities, on January 25, 2019. The Company’s management considered that the event is not a condition that existed at the end of the reporting period, and therefore does not require adjustments in the book values recognized in the financial statements as of December 31, 2018.  The amounts disclosed in the Note related to this event are based on Management’s best estimates, but, at the current stage of the investigations, assessments of the causes and possible third parties lawsuits, it is not possible to reliably measure all costs that the Company may incur for the purposes of disclosure in the financial statements.

 

Key Audit Matters

 

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the current period. These matters were addressed in the context of our audit of the individual and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

1.              Impairment - Individual and consolidated financial statements

 

As per Notes 17,18 and 19 to the financial statements

 

Matter

 

The assessment with respect to the recoverability of property, plant and equipment (“PP&E”), intangible assets and goodwill, and definition of Cash-Generating Units (CGUs) encompasses significant judgments concerning factors related to the level of future production, commodities price, production cost and economic assumptions such as discount rates, inflation rates and exchange rates of the countries where the Company and its subsidiaries operates. Due to the materiality of PP&E, intangible assets and goodwill, and to the level of uncertainty for determining the related impairment, which may impact the value of those assets in the individual and consolidated financial statements and the value of the investment recorded under the equity pick-up method in the parent company’s financial statements, we considered this subject as a significant matter for the audit.

 

Our procedures included, among others:

 

·                  Design, implementation and operating effectiveness testing of the key internal controls on the valuation of the Company’s assets, including those aimed at identifying any indication of loss and/or the need for recording or reversing impairment;

 

·                  Assessment of the Company’s assumptions and estimates to determine the recoverable value of its assets, including the ones related to production, production cost, capital investments, discount rates and exchange rates;

 

·                  Assessment of the definition and identification criteria for Cash-Generating Units (CGUs);

 

·                  Assessment, with the support of our specialists in economic and financial assumptions, of the cash flow forecast and the assumptions used in the preparation of the cash flow forecasts and comparasion of those assumptions with market information and based on our knowledge of the Company and Industry, preparation of sensitivity analysis;

 

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·                  Arithmetic checking of the economic models regarding future cash flows and forecast results, combining them with accounting information and management reports and approved business plans; and

 

·                  Assessment of the disclosure in relation to the testing of the value in use and the comparison of the latter with the fair value, net of costs to sell, in the applicable cases.

 

Based on the evidence obtained through the summarized procedures above, we considered acceptable the balances presented for property, plant and equipment, intangible assets and goodwill, as well as the respective disclosures in the accompanying notes, in the context of the individual and consolidated financial statements taken as a whole, for the year ended December 31, 2018.

 

2.              Asset Retirement Obligation (ARO) - Individual and consolidated financial statements

 

As per Notes 25 and 26 to the financial statements

 

Matter

 

As a result of its operations, the Company and its subsidiaries incurs in obligations to restore and rehabilitate the environment on retiring the areas. The areas and environment rehabilitation is required by the combination of both the legislation in force and the Company’s and its subsidiaries’s policies. Estimating costs related to those future activities requires considerable judgment in relation to factors such as how long a certain area will be used, the time required to rehabilitate and certain economic assumptions such as the discount rate and foreign currency exchange rates. Due to the relevance of the asset retirement obligations and the level of uncertainty for the determination of its estimate, which may impact the amount of this provision in the individual and consolidated financial statements and the amount of the investment recorded under the equity pick-up method in the financial statements of the parent company, we consider this subject as a significant matter for the audit.

 

Our procedures included, among others:

 

·                  Design, implementation and operating effectiveness testing of the key internal controls related to the determination of estimates for the asset retirement obligation provision to restore and rehabilitate areas commercially exploited by the Company;

 

·                  Analysis of assumptions used, including the base cost of the areas to be left, inflation rates, discount rates and risk rates;

 

·                  Analysis of the provision movement for the year related to the retired, restored/rehabilitated areas, and the relevant environmental obligation, aiming at verifying the primary inputs such as costs, inflation and discount rates, as well as an approved retirement plan;

 

·                  Assessment, with the support of our corporate finance specialists, the assumptions used in preparation of the estimative of the asset retirement obligation provision to restore and rehabilitate areas commercially exploited by the Company;

 

·                  Arithmetic review of the estimative results, comparing them with the accounting information and management reports; and

 

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·                  Assessement of the disclosure in relation to the obligations to rehabilitate the environment on retiring the areas.

 

Based on the evidence obtained through the procedures described above, we considered acceptable the balance of the asset retirement obligation provision to restore and rehabilitate areas commercially exploited by the Company and its respectives disclosures, in the context of the individual and consolidated financial statements taken as a whole, for the year ended December 31, 2018.

 

3.              Income taxes - Individual and consolidated financial statements

 

As per Note 8 to the financial statements.

 

Matter

 

The Company and its subsidiaries have operations in various countries, each one with its own taxation regime. The nature of the Company’s activities triggers various tax liabilities, including tax on income, and social contributions. The nature of the Company’s commodities export operations also create complexities related to international transfer pricing issues. Applying tax legislation is a complex and highly specialized activity, which requires judgment for the assessment of tax exposure estimates and for quantification of contingent liabilities. Due to the level of uncertainty and judgment involved in determining this estimate that may impact the amount recorded in the individual and consolidated financial statements and the amount of the investment recorded under the equity pick-up method in the parent company’s financial statements, we consider this subject as a significant matter for the audit.

 

Our procedures included, among others:

 

·                  Design, implementation and operating effectiveness testing of the key internal controls related to the determination of estimates for recording the amounts of provisions for taxes and contributions payable and taxes to be offset by the Company and its subsidiaries;

 

·                  With the support of our specialists from the tax department, we assess the criteria used for determining and paying taxes and contributions and the assumptions used by the Company and its subsidiaries to determine the provisions and amounts disclosed as tax exposure and contingencies;

 

·                  We compare the assumptions used by the Company and its subsidiaries with the tax legislation applicable to each jurisdiction, and in relation to market practices and assessments performed by ourselves, based on our knowledge of and experience in the Company’s operations in the use of the aforementioned legislation and on applicable precedents and sentences; and

 

·                  Assessment of the Company and its subsidiaries’s disclosures in particular of current and deferred taxes and contributions and possible tax exposure.

 

Based on the evidence obtained through the summarized procedures above, we considered acceptable the balance of deferred taxes and contributions payable on income and its respectives disclosures, in the context of the individual and consolidated financial statements taken as a whole, for the year ended December 31, 2018.

 

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Other Information - Statement of Added Value

 

The individual and consolidated statements of value added (DVA) for the year ended December 31, 2018, prepared under the responsibility of the Company’s management, and presented as supplementary information for IFRS purposes, was submitted for the auditing procedures jointly with audit of the Company’s financial statements. For the purposes of forming our opinion, we evaluate whether these statements are reconciled with the financial statements and accounting records, as applicable, and if their form and content are in accordance with the criteria as defined in Technical Pronouncement CPC 09 - Statement of Added Value. In our opinion, this statement of value added have been properly prepared, in all material respects, in accordance with the criteria defined in this Technical Pronouncement and is consistent with the individual and consolidated financial statements taken as a whole.

 

Other information accompanying the individual and consolidated financial statements and the auditor’s report

 

Management is responsible for the other information, which comprises the Management report.

 

Our opinion on the individual and consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

 

In connection with our audit of the individual and consolidated financial statements, our responsibility is to read the Management Report and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this Management Report, we are required to report that fact. We have nothing to report regarding this matter.

 

Responsibilities of management and those charged with governance for the individual and consolidated financial statements

 

Management is responsible for the preparation and fair presentation of the individual and consolidated financial statements in accordance with accounting practices adopted in Brazil and in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB) , and for such internal control as management determines is necessary to enable the preparation of individual and consolidated financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the individual and consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company and subsidiaries or to cease operations, or has no realistic alternative but to do so.

 

Those charged with governance are responsible for overseeing the Company’s and its subsidiaries financial reporting process.

 

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Auditors’ responsibilities for the audit of the individual and consolidated financial statements

 

Our objectives are to obtain reasonable assurance about whether the individual and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Brazilian and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these individual and consolidated financial statements.

 

As part of an audit in accordance with Brazilian and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 

·                  Identify and assess the risks of material misstatement of the individual and consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 

·                  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s and its subsidiaries’ internal control.

 

·                  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

 

·                  Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s and its subsidiaries’ ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the individual and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company and its subsidiaries’ to cease to continue as a going concern.

 

·                  Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the individual and consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

·                  Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the individual and the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

 

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

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We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

 

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter, or, when in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

 

Rio de Janeiro, March 27, 2019

 

KPMG Auditores Independentes

CRC SP-014428/O-6 F-RJ

 

(Original report in Portuguese signed by)

Bernardo Moreira Peixoto Neto

Accountant CRC RJ-064887/O-8

 

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Income Statement

In millions of Brazilian reais, except earnings per share data

 

 

 

 

 

Consolidated

 

Parent company

 

 

 

 

 

Year ended December 31

 

 

 

Notes

 

2018

 

2017

 

2016

 

2018

 

2017

 

Continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenue

 

4(e)

 

134,483

 

108,532

 

94,633

 

81,133

 

64,037

 

Cost of goods sold and services rendered

 

5(a)

 

(81,201

)

(67,257

)

(61,143

)

(39,051

)

(33,327

)

Gross profit

 

 

 

53,282

 

41,275

 

33,490

 

42,082

 

30,710

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

5(b)

 

(1,917

)

(1,697

)

(1,755

)

(959

)

(959

)

Research and evaluation expenses

 

 

 

(1,376

)

(1,086

)

(1,098

)

(839

)

(679

)

Pre operating and operational stoppage

 

 

 

(984

)

(1,317

)

(1,570

)

(754

)

(941

)

Equity results from subsidiaries

 

 

 

 

 

 

4,195

 

5,277

 

Other operating expenses, net

 

5(c)

 

(1,613

)

(1,338

)

(937

)

(1,163

)

(893

)

 

 

 

 

(5,890

)

(5,438

)

(5,360

)

480

 

1,805

 

Impairment and disposal of non-current assets

 

16, 19 and 20

 

(3,523

)

(1,025

)

(4,168

)

(792

)

(549

)

Operating income

 

 

 

43,869

 

34,812

 

23,962

 

41,770

 

31,966

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial income

 

6

 

1,549

 

1,532

 

606

 

282

 

364

 

Financial expenses

 

6

 

(8,394

)

(10,512

)

(9,295

)

(7,673

)

(9,503

)

Other financial items

 

6

 

(11,213

)

(670

)

14,991

 

(10,059

)

(222

)

Equity results and other results in associates and joint ventures

 

16 and 22

 

(693

)

(277

)

(3,242

)

(693

)

(277

)

Income before income taxes

 

 

 

25,118

 

24,885

 

27,022

 

23,627

 

22,328

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

8

 

 

 

 

 

 

 

 

 

 

 

Current tax

 

 

 

(2,806

)

(2,664

)

(3,307

)

(1,172

)

(1,158

)

Deferred tax

 

 

 

3,772

 

(1,943

)

(6,260

)

3,512

 

(957

)

 

 

 

 

966

 

(4,607

)

(9,567

)

2,340

 

(2,115

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income from continuing operations

 

 

 

26,084

 

20,278

 

17,455

 

25,967

 

20,213

 

Net income (loss) attributable to noncontrolling interests

 

 

 

117

 

65

 

(6

)

 

 

Net income from continuing operations attributable to Vale’s stockholders

 

 

 

25,967

 

20,213

 

17,461

 

25,967

 

20,213

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations

 

14

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

 

 

(310

)

(2,608

)

(4,159

)

(310

)

(2,586

)

Loss attributable to noncontrolling interests

 

 

 

 

(22

)

(9

)

 

 

Loss from discontinued operations attributable to Vale’s stockholders

 

 

 

(310

)

(2,586

)

(4,150

)

(310

)

(2,586

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

25,774

 

17,670

 

13,296

 

25,657

 

17,627

 

Net income (loss) attributable to noncontrolling interests

 

 

 

117

 

43

 

(15

)

 

 

Net income attributable to Vale’s stockholders

 

 

 

25,657

 

17,627

 

13,311

 

25,657

 

17,627

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Vale’s stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share:

 

9

 

 

 

 

 

 

 

 

 

 

 

Common share (R$)

 

 

 

4.95

 

3.39

 

2.56

 

4.95

 

3.39

 

 

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

 

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Statement of Comprehensive Income

In millions of Brazilian reais

 

 

 

Consolidated

 

Parent company

 

 

 

Year ended December 31

 

 

 

2018

 

2017

 

2016

 

2018

 

2017

 

Net income

 

25,774

 

17,670

 

13,296

 

25,657

 

17,627

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

Items that will not be reclassified subsequently to the income statement

 

 

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

142

 

(164

)

(266

)

(112

)

(125

)

Fair value adjustment to investment in equity securities

 

275

 

 

 

228

 

 

Equity results in associates and joint ventures

 

 

 

 

301

 

(39

)

Transfer to reserve

 

(51

)

 

 

(51

)

 

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

 

366

 

(164

)

(266

)

366

 

(164

)

 

 

 

 

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to the income statement

 

 

 

 

 

 

 

 

 

 

 

Translation adjustments

 

14,541

 

3,337

 

(14,188

)

14,244

 

3,309

 

Cash flow hedge

 

 

 

36

 

 

 

Net investments hedge

 

(1,958

)

(310

)

4

 

(1,958

)

(310

)

Transfer of realized results to net income

 

(257

)

(34

)

(276

)

(112

)

 

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

 

12,326

 

2,993

 

(14,424

)

12,174

 

2,999

 

Total comprehensive income (loss)

 

38,466

 

20,499

 

(1,394

)

38,197

 

20,462

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss) attributable to noncontrolling interests

 

269

 

37

 

(923

)

 

 

 

 

Comprehensive income (loss) attributable to Vale’s stockholders

 

38,197

 

20,462

 

(471

)

 

 

 

 

From continuing operations

 

38,181

 

20,568

 

(13

)

 

 

 

 

From discontinued operations

 

16

 

(106

)

(458

)

 

 

 

 

 

 

38,197

 

20,462

 

(471

)

 

 

 

 

 

Items above are stated net of tax and the related taxes are disclosed in note 8.

 

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

 

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Statement of Cash Flows

In millions of Brazilian reais

 

 

 

Consolidated

 

Parent company

 

 

 

Year ended December 31

 

 

 

2018

 

2017

 

2016

 

2018

 

2017

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes from continuing operations

 

25,118

 

24,885

 

27,022

 

23,627

 

22,328

 

Adjusted for:

 

 

 

 

 

 

 

 

 

 

 

Equity results from subsidiaries

 

 

 

 

(4,195

)

(5,277

)

Equity results and other results in associates and joint ventures

 

693

 

277

 

3,242

 

693

 

277

 

Impairment and disposal of non-current assets

 

3,523

 

1,025

 

4,168

 

792

 

549

 

Depreciation, amortization and depletion

 

12,240

 

11,842

 

12,107

 

6,059

 

5,604

 

Financial results, net

 

18,058

 

9,650

 

(6,302

)

17,450

 

9,361

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

(1,012

)

3,983

 

(9,863

)

(5,762

)

15,301

 

Inventories

 

(2,994

)

(1,030

)

616

 

(174

)

(612

)

Suppliers and contractors

 

(1,414

)

691

 

768

 

(642

)

670

 

Provision - Payroll, related charges and others remunerations

 

349

 

1,236

 

435

 

514

 

980

 

Proceeds from cobalt and gold stream transactions

 

2,603

 

 

1,683

 

 

 

Other assets and liabilities, net

 

(482

)

(2,702

)

1,854

 

717

 

163

 

 

 

56,682

 

49,857

 

35,730

 

39,079

 

49,344

 

Interest on loans and borrowings paid (note 21)

 

(4,023

)

(5,373

)

(5,894

)

(5,769

)

(5,911

)

Derivatives paid, net

 

(250

)

(763

)

(5,604

)

(381

)

(577

)

Interest on participative stockholders’ debentures paid

 

(400

)

(428

)

(268

)

(400

)

(428

)

Income taxes (including settlement program)

 

(4,089

)

(3,322

)

(2,827

)

(1,932

)

(2,351

)

Net cash provided by operating activities from continuing operations

 

47,920

 

39,971

 

21,137

 

30,597

 

40,077

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

(13,899

)

(12,236

)

(17,343

)

(8,200

)

(8,413

)

Additions to investments

 

(79

)

(292

)

(875

)

(1,515

)

(1,895

)

Proceeds from disposal of assets and investments

 

4,959

 

2,926

 

1,785

 

492

 

23

 

Dividends and interest on capital received

 

922

 

739

 

669

 

2,836

 

2,645

 

Others investments activities, net (1)

 

7,173

 

(1,827

)

(794

)

5,810

 

(8,435

)

Proceeds from gold stream transaction

 

 

 

885

 

 

 

Net cash used in investing activities from continuing operations

 

(924

)

(10,690

)

(15,673

)

(577

)

(16,075

)

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

 

 

 

 

 

 

Loans and borrowings from third-parties (note 21)

 

4,584

 

6,223

 

25,667

 

4,584

 

2,014

 

Payments of loans and borrowings from third-parties (note 21)

 

(28,149

)

(28,878

)

(26,630

)

(15,372

)

(21,058

)

Dividends and interest on capital paid to stockholders

 

(12,415

)

(4,667

)

(857

)

(12,415

)

(4,667

)

Dividends and interest on capital paid to noncontrolling interest

 

(635

)

(404

)

(972

)

 

 

Share buyback program (note 30)

 

(3,858

)

 

 

(3,858

)

 

Transactions with noncontrolling stockholders

 

(56

)

(305

)

(69

)

 

 

Net cash used in financing activities from continuing operations

 

(40,529

)

(28,031

)

(2,861

)

(27,061

)

(23,711

)

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in discontinued operations (note 14)

 

(157

)

(817

)

(527

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase in cash and cash equivalents

 

6,310

 

433

 

2,076

 

2,959

 

291

 

Cash and cash equivalents in the beginning of the year

 

14,318

 

13,891

 

14,022

 

1,876

 

1,203

 

Effect of exchange rate changes on cash and cash equivalents

 

2,170

 

38

 

(2,207

)

 

 

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

 

(385

)

(44

)

 

 

382

 

Cash and cash equivalents at end of the year

 

22,413

 

14,318

 

13,891

 

4,835

 

1,876

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash transactions:

 

 

 

 

 

 

 

 

 

 

 

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

 

704

 

1,179

 

2,291

 

700

 

1,176

 

 


(1) Includes loans and advances from/to related parties. For the year ended December 31, 2018, includes proceeds received from Nacala project finance (note 31b) in the amount of R$8,434.

 

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

 

12


Table of Contents

 

 

Statement of Financial Position

In millions of Brazilian reais

 

 

 

 

 

Consolidated

 

Parent company

 

 

 

Notes

 

December 31, 2018

 

December 31, 2017

 

December 31, 2018

 

December 31, 2017

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

22,413

 

14,318

 

4,835

 

1,876

 

Accounts receivable

 

10

 

10,261

 

8,602

 

17,333

 

9,560

 

Other financial assets

 

13

 

1,683

 

6,689

 

360

 

409

 

Inventories

 

11

 

17,216

 

12,987

 

4,775

 

4,601

 

Prepaid income taxes

 

 

 

2,104

 

2,584

 

1,938

 

2,378

 

Recoverable taxes

 

12

 

3,422

 

3,876

 

2,024

 

2,091

 

Others

 

 

 

2,157

 

1,780

 

2,096

 

1,542

 

 

 

 

 

59,256

 

50,836

 

33,361

 

22,457

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets held for sale

 

14

 

 

11,865

 

 

7,082

 

 

 

 

 

59,256

 

62,701

 

33,361

 

29,539

 

Non-current assets

 

 

 

 

 

 

 

 

 

 

 

Judicial deposits

 

28(c)

 

6,649

 

6,571

 

6,274

 

6,110

 

Other financial assets

 

13

 

12,180

 

10,690

 

5,276

 

1,865

 

Prepaid income taxes

 

 

 

2,107

 

1,754

 

 

 

Recoverable taxes

 

12

 

2,913

 

2,109

 

2,281

 

2,062

 

Deferred income taxes

 

8(a)

 

26,767

 

21,959

 

17,536

 

14,200

 

Others

 

 

 

1,015

 

882

 

1,163

 

810

 

 

 

 

 

51,631

 

43,965

 

32,530

 

25,047

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

16

 

12,495

 

11,802

 

139,510

 

117,387

 

Intangibles

 

18

 

30,850

 

28,094

 

15,622

 

13,471

 

Property, plant and equipment

 

19

 

187,481

 

181,535

 

103,816

 

102,978

 

 

 

 

 

282,457

 

265,396

 

291,478

 

258,883

 

Total assets

 

 

 

341,713

 

328,097

 

324,839

 

288,422

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

Suppliers and contractors

 

 

 

13,610

 

13,367

 

7,342

 

7,503

 

Loans and borrowings

 

21

 

3,889

 

5,633

 

2,523

 

4,378

 

Other financial liabilities

 

13

 

6,213

 

3,260

 

5,083

 

4,413

 

Taxes payable

 

8(d)

 

2,519

 

2,307

 

2,238

 

1,991

 

Provision for income taxes

 

 

 

813

 

1,175

 

206

 

 

Liabilities related to associates and joint ventures

 

22

 

1,120

 

1,080

 

1,120

 

1,080

 

Provisions

 

26

 

5,278

 

4,610

 

3,331

 

2,904

 

Dividends and interest on capital

 

30(d)

 

 

4,742

 

 

4,439

 

Others

 

 

 

1,843

 

3,284

 

2,743

 

2,552

 

 

 

 

 

35,285

 

39,458

 

24,586

 

29,260

 

Liabilities associated with non-current assets held for sale

 

14

 

 

3,899

 

 

 

 

 

 

 

35,285

 

43,357

 

24,586

 

29,260

 

Non-current liabilities

 

 

 

 

 

 

 

 

 

 

 

Loans and borrowings

 

21

 

56,039

 

68,759

 

23,082

 

28,966

 

Other financial liabilities

 

13

 

10,511

 

9,575

 

71,740

 

54,955

 

Taxes payable

 

8(d)

 

15,179

 

16,176

 

14,876

 

15,853

 

Deferred income taxes

 

8(a)

 

5,936

 

5,687

 

 

 

Provisions

 

26

 

27,491

 

23,243

 

9,758

 

6,900

 

Liabilities related to associates and joint ventures

 

22

 

3,226

 

2,216

 

3,226

 

2,216

 

Deferred revenue - Gold stream

 

 

 

6,212

 

6,117

 

 

 

Others

 

 

 

8,151

 

4,861

 

7,168

 

6,514

 

 

 

 

 

132,745

 

136,634

 

129,850

 

115,404

 

Total liabilities

 

 

 

168,030

 

179,991

 

154,436

 

144,664

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

30

 

 

 

 

 

 

 

 

 

Equity attributable to Vale’s stockholders

 

 

 

170,403

 

143,758

 

170,403

 

143,758

 

Equity attributable to noncontrolling interests

 

 

 

3,280

 

4,348

 

 

 

Total stockholders’ equity

 

 

 

173,683

 

148,106

 

170,403

 

143,758

 

Total liabilities and stockholders’ equity

 

 

 

341,713

 

328,097

 

324,839

 

288,422

 

 

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

 

13


Table of Contents

 

 

Statement of Changes in Equity

In millions of Brazilian reais

 

 

 

Share
capital

 

Results on
conversion
of shares

 

Capital
reserve

 

Net ownership
changes in
subsidiaries

 

Profit
reserves

 

Treasury
stocks

 

Unrealized
fair value
gain (losses)

 

Cumulative
translation
adjustments

 

Retained
earnings

 

Equity attributable
to Vale’s
stockholders

 

Equity attributable
to noncontrolling
interests

 

Total
stockholders’
equity

 

Balance at December 31, 2015

 

77,300

 

50

 

 

(1,881

)

3,846

 

(2,746

)

(3,873

)

58,464

 

 

131,160

 

8,259

 

139,419

 

Net income (loss)

 

 

 

 

 

 

 

 

 

13,311

 

13,311

 

(15

)

13,296

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

 

 

 

(263

)

 

 

(263

)

(3

)

(266

)

Cash flow hedge

 

 

 

 

 

 

 

26

 

 

 

26

 

 

26

 

Available-for-sale financial instruments

 

 

 

 

 

 

 

4

 

 

 

4

 

 

4

 

Translation adjustments

 

 

 

 

 

 

 

367

 

(13,916

)

 

(13,549

)

(905

)

(14,454

)

Transactions with stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends and interest on capital of Vale’s stockholders

 

 

 

 

 

 

 

 

 

(3,459

)

(3,459

)

 

(3,459

)

Dividends of noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

(961

)

(961

)

Acquisitions and disposal of noncontrolling interest

 

 

 

 

11

 

 

 

 

 

 

11

 

(4

)

7

 

Capitalization of noncontrolling interest advances

 

 

 

 

 

 

 

 

 

 

 

90

 

90

 

Appropriation to undistributed retained earnings

 

 

 

 

 

9,852

 

 

 

 

(9,852

)

 

 

 

Balance at December 31, 2016

 

77,300

 

50

 

 

(1,870

)

13,698

 

(2,746

)

(3,739

)

44,548

 

 

127,241

 

6,461

 

133,702

 

Net income

 

 

 

 

 

 

 

 

 

17,627

 

17,627

 

43

 

17,670

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

 

 

 

(164

)

 

 

(164

)

 

(164

)

Net investments hedge

 

 

 

 

 

 

 

 

(310

)

 

(310

)

 

(310

)

Translation adjustments

 

 

 

 

 

 

 

(9

)

3,318

 

 

3,309

 

(6

)

3,303

 

Transactions with stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends and interest on capital of Vale’s stockholders

 

 

 

 

 

(2,065

)

 

 

 

(4,721

)

(6,786

)

 

(6,786

)

Dividends of noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

(627

)

(627

)

Acquisitions and disposal of noncontrolling interest

 

 

 

 

(793

)

 

 

 

 

 

(793

)

(1,629

)

(2,422

)

Capitalization of noncontrolling interest advances

 

 

 

 

 

 

 

 

 

 

 

106

 

106

 

Appropriation to undistributed retained earnings

 

 

 

 

 

12,906

 

 

 

 

(12,906

)

 

 

 

Merger of Valepar (note 30)

 

 

 

3,634

 

 

 

 

 

 

 

3,634

 

 

3,634

 

Balance at December 31, 2017

 

77,300

 

50

 

3,634

 

(2,663

)

24,539

 

(2,746

)

(3,912

)

47,556

 

 

143,758

 

4,348

 

148,106

 

Net income

 

 

 

 

 

 

 

 

 

25,657

 

25,657

 

117

 

25,774

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

(51

)

 

 

142

 

 

 

91

 

 

91

 

Fair value adjustment to investment in equity securities

 

 

 

 

 

 

 

275

 

 

 

275

 

 

275

 

Net investments hedge

 

 

 

 

 

 

 

 

(1,958

)

 

(1,958

)

 

(1,958

)

Translation adjustments

 

 

 

 

 

 

 

247

 

13,885

 

 

14,132

 

152

 

14,284

 

Transactions with stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends and interest on capital of Vale’s stockholders

 

 

 

 

 

 

 

 

 

(7,694

)

(7,694

)

 

(7,694

)

Dividends of noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

(629

)

(629

)

Acquisitions and disposal of noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

(757

)

(757

)

Capitalization of noncontrolling interest advances

 

 

 

 

 

 

 

 

 

 

 

49

 

49

 

Appropriation to undistributed retained earnings

 

 

 

 

 

17,963

 

 

 

 

(17,963

)

 

 

 

Share buyback program

 

 

 

 

 

 

(3,858

)

 

 

 

(3,858

)

 

(3,858

)

Balance at December 31, 2018

 

77,300

 

50

 

3,634

 

(2,714

)

42,502

 

(6,604

)

(3,248

)

59,483

 

 

170,403

 

3,280

 

173,683

 

 

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

 

14


Table of Contents

 

 

Value Added Statement

In millions of Brazilian Reais

 

 

 

Consolidated

 

Parent company

 

 

 

Year ended December 31

 

 

 

2018

 

2017

 

2018

 

2017

 

Generation of value added from continuing operations

 

 

 

 

 

 

 

 

 

Gross revenue

 

 

 

 

 

 

 

 

 

Revenue from products and services

 

136,005

 

110,007

 

82,301

 

65,049

 

Impairment and disposal of non-current assets

 

(3,523

)

(1,025

)

(792

)

(549

)

Revenue from the construction of own assets

 

12,620

 

6,449

 

8,031

 

5,857

 

Expected credit losses

 

(26

)

(14

)

(5

)

4

 

Other revenues

 

7,639

 

663

 

3,338

 

419

 

Less:

 

 

 

 

 

 

 

 

 

Acquisition of products

 

(1,901

)

(1,728

)

(761

)

(652

)

Material, service and maintenance

 

(35,592

)

(27,022

)

(19,878

)

(16,796

)

Oil and gas

 

(5,682

)

(4,199

)

(3,725

)

(2,872

)

Energy

 

(3,335

)

(3,108

)

(1,700

)

(1,470

)

Freight

 

(15,972

)

(10,717

)

(158

)

(106

)

Other costs and expenses

 

(10,172

)

(7,681

)

(7,158

)

(3,027

)

Gross value added

 

80,061

 

61,625

 

59,493

 

45,857

 

Depreciation, amortization and depletion

 

(12,240

)

(11,842

)

(6,059

)

(5,604

)

Net value added

 

67,821

 

49,783

 

53,434

 

40,253

 

 

 

 

 

 

 

 

 

 

 

Received from third parties

 

 

 

 

 

 

 

 

 

Equity results from entities

 

(693

)

(277

)

3,502

 

5,366

 

Equity results from discontinued operations

 

 

 

 

(2,952

)

Financial income

 

1,549

 

1,532

 

282

 

364

 

Monetary and exchange variation of assets

 

1,455

 

500

 

2,242

 

443

 

Total value added from continuing operations to be distributed

 

70,132

 

51,538

 

59,460

 

43,474

 

Value added from discontinued operations to be distributed

 

58

 

1,534

 

 

 

Total value added to be distributed

 

70,190

 

53,072

 

59,460

 

43,474

 

 

 

 

 

 

 

 

 

 

 

Personnel

 

9,367

 

7,673

 

4,975

 

3,702

 

Taxes and contributions

 

11,543

 

6,553

 

5,866

 

6,528

 

Current income tax

 

2,806

 

2,664

 

1,172

 

1,158

 

Deferred income tax

 

(3,772

)

1,943

 

(3,512

)

957

 

Financial expense (excludes capitalized interest)

 

9,244

 

11,325

 

8,176

 

8,483

 

Monetary and exchange variation of liabilities

 

11,662

 

2,630

 

11,712

 

1,950

 

Other remunerations of third party funds

 

3,508

 

1,058

 

5,414

 

3,069

 

Reinvested net income

 

25,657

 

17,627

 

25,657

 

17,627

 

Net income attributable to noncontrolling interest

 

117

 

65

 

 

 

Distributed value added from continuing operations

 

70,132

 

51,538

 

59,460

 

43,474

 

Distributed value added from discontinued operations

 

58

 

1,534

 

 

 

Distributed value added

 

70,190

 

53,072

 

59,460

 

43,474

 

 

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

 

15


Table of Contents

 

 

Notes to the Financial Statements

Expressed in millions of Brazilian reais, unless otherwise stated

 

1.                                     Corporate information

 

Vale S.A. and its direct and indirect subsidiaries (“Vale” or “Company”) are global producers of iron ore and iron ore pellets, key raw materials for steelmaking, and producers of nickel, which is used to produce stainless steel and metal alloys employed in the production of several products. The Company also produces copper, metallurgical and thermal coal, manganese ore, ferroalloys, platinum group metals, gold, silver and cobalt. The information by segment is presented in note 4.

 

Vale S.A. (the “Parent Company”) is a public company headquartered in the city of Rio de Janeiro, Brazil with securities traded on the stock exchanges of São Paulo — B3 S.A. (VALE3), New York - NYSE (VALE), Paris - NYSE Euronext (VALE3) and Madrid — LATIBEX (XVALO).

 

On December 22, 2017 after the conversion of the class “A” preferred shares into common shares, the Company migrated to the special listing segment of B3 S.A. (“Novo Mercado”) (further details in note 30).

 

2.                                      Basis for preparation of the financial statements

 

a)        Statement of compliance

 

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

 

b)        Basis of presentation

 

The financial statements have been prepared under the historical cost convention as adjusted to reflect: (i) the fair value of financial instruments measured at fair value through income statement or at fair value through the statement of comprehensive income; and (ii) impairment of assets.

 

The issue of these financial statements was authorized by the Board of Directors on March 27, 2019.

 

c)         Functional currency and presentation currency

 

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

 

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

 

 

 

Closing rate

 

Average rate for the year ended

 

 

 

2018

 

2017

 

2016

 

2018

 

2017

 

2016

 

US Dollar (“US$”)

 

3.8748

 

3.3080

 

3.2591

 

3.6558

 

3.1925

 

3.4833

 

Canadian dollar (“CAD”)

 

2.8451

 

2.6344

 

2.4258

 

2.8190

 

2.4618

 

2.6280

 

Euro (“EUR” or “€”)

 

4.4390

 

3.9693