Companhia Vale do Rio Doce Pursuing long-term value growth

Transcription

1 Companhia Vale do Rio Doce Pursuing long-term value growth 1 New York May 15, 2007

2 Disclaimer 2 This presentation may contain statements that express management s expectations about future events or results rather than historical facts. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected in forward-looking statements, and CVRD cannot give assurance that such statements will prove correct. These risks and uncertainties include factors: relating to the Brazilian and Canadian economies and securities markets, which exhibit volatility and can be adversely affected by developments in other countries; relating to the iron ore and nickel businesses and their dependence on the global steel industry, which is cyclical in nature; and relating to the highly competitive industries in which CVRD operates. For additional information on factors that could cause CVRD s actual results to differ from expectations reflected in forward-looking statements, please see CVRD s reports filed with the Brazilian Comissão de Valores Mobiliários and the U.S. Securities and Exchange Commission.

3 Agenda A multilane road to value creation Continuous improvement Growth outlook remains strong 3

4 A multilane road to value creation 4

5 Over the last years we delivered 20 major projects creating new platforms of value creation Carajás 100 Mtpa São Luís Mo I Rana Capão Xavier Taquari- Vassouras Brucutu Trombetas Pier III PDM Fábrica Nova Capim Branco I 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 Alunorte 3 Sossego Aimorés Carajás 85 Mtpa Funil Carajás 70 Mtpa Candonga Alunorte 4&5 Capim Branco II 5 Paragominas

6 Portfolio management has been an important source of value creation Acquisitions: : US$ 25.4 billion Consolidation of iron ore leadership Becoming a global leader in nickel Growth plataform in coal 6 Divestitures of non-core assets US$ 3.6 billion - Unlocking value - Improving capital allocation

7 The pursuit of discipline in capital allocation pays off: pre-tax ROIC stays above 50% Capital invested (US$ billion) ROIC (%) 2 Return on capital invested % % 54.3% 53.4% 46.8% T07 ¹ PP&E + working capital + R&D 2 before income taxes 3 excludes effect of extraordinary inventory adjustments 3 3

8 Coal, our newest growth platform Investment in coal is consistent with our growth and diversification strategy, supported by a strong long-term outlook on coking and thermal coal Acquisition of AMCI Australia for US$ 656 million provides ongoing operations, experience in coal mining & marketing and diversification into one of the best geographies Projects Moatize, Mozambique to be approved Belvedere, Australia pre-feasibility JVs Longyu, China anthracite coal Yankuang, China coke & coking coal 8

9 Maximizing returns from a world-class iron ore asset Purchase & usufruct agreements gave CVRD 100% effective control over MBR for the next 30 years Exposure to MBR performance increases to 100% from 89.8% Estimated NPV of synergies of US$ 500 million arising from mine/mill, port & corporate activities integration and sharing of operational best practices 9

10 Redefining market boundaries in iron ore We intend to become a player in the Chinese domestic market focusing on a new customer segment Our strategy is supported by: A massive increase in iron ore capacity to 450 million mtpy in 2011 from 300 million in 2007, to meet the rising demand from current clients and the new segment Distribution centers and blending capacity at Chinese ports 10 A dedicated Brazil-China shuttle line serviced by very large ore carriers under long-term contracts of afreightment, which will contribute to reduce average level and volatility of freight rates

11 Continuing to develop options for profitable growth An all-time high capex budget (revised) of US$ 7.4 billion for 2007 US$ 5.4 billion allocated to organic growth US$ 4.9 billion allocated to projects 11

12 An exciting project portfolio is under development Iron ore & pellets Carajás Fazendão Itabiritos Samarco Bauxite & Alumina Paragominas II Alunorte 6 & 7 Nickel Onça Puma Goro Vermelho Voisey s Bay Copper 118 Salobo I Coal Moatize 12

13 A new execution strategy was developed for Goro Focus on risk management of political, environmental, technological and operational factors CVRD s proactive relationship with communities and pollution control technology transferred to Goro Key technical parameters resetted to reduce risks A new team with a focus on discipline on execution 13

14 Goro is a long-term growth platform One of the best nickel deposits in the world: 120 million metric tons of P&P 1.48% Ni, 0.11% Co Strategic positioning to meet Asian demand growth Low cost incremental production of nickel Capex of US$ 3.2 billion. Estimated production of 60,000 mtpy of nickel and 4,600 mtpy of cobalt to be commissioned in 4Q08 14

15 Onça Puma, another world-class asset, is being developed smoothly US$ 1.4 billion project estimated to produce 58,000 mtpy of nickel in ferronickel to be commissioned in 4Q08 Production supported by a 78 million mt P&P 1.80% Ni (saprolite nickel) Limonite nickel seam located above the saprolite nickel deposit. Feasibility in progress to be concluded by the end of

16 Continuous improvement 16

17 Record year to date sales underpinned by strong demand growth 1Q Records 000 metric tons YoY 1Q07 change Iron ore 58, % Pellets 7, % Finished nickel % Copper % Alumina % Aluminum % Potash % Cobalt (mt) % Railroad cargo¹ 6, % 17 1 general cargo transportation measured in net ton kilometers (ntk)

18 One of our priorities: the battle against rising costs. Winning another round Adjusted COGS 1 variation US$ million 3, ER change (73) Volume (72) 3,020 Cost reduction 4Q06 1Q COGS less depreciation charges, excluding inventory adjustment

19 High performance leveraged by asset portfolio diversification Adjusted EBIT margin ¹ 1Q07² Ferrous minerals 49.7% 47.3% 50.9% Non-ferrous minerals 23.7% 47.3% 52.2% Aluminum 31.7% 39.5% 39.1% Logistics 22.4% 28.9% 28.3% Total 42.5% 43.7% 49.2% 19 1 pro forma and excluding extraordinary effect of inventory adjustment ² excluding extraordinary effect of inventory adjustment

20 Net earnings remain on a strong upward trend for the fifth year LTM net earnings US$ billion Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06¹ 1Q07¹ 20 ¹ excluding extraordinary effect of inventory adjustment

21 Twenty consecutive quarters of EBITDA growth Composition 1Q07 1 LTM adjusted EBITDA US$ billion 12.5 Logistics 2.9% Aluminum 7.1% Ferrous minerals 42.8% Non-ferrous minerals 47.1% Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06¹ 1Q07¹ 21 1 excluding extraordinary effect of inventory adjustment

22 Growth outlook remains strong 22

23 The global economy remains on track for continued robust growth in 2007/2008 Global GDP growth 5.3% 5.4% 4.1% 4.2% 3.6% 3.7% 4.8% 4.0% 4.9% 4.5% 4.5% 2.8% 2.5% 3.1% E 2008E 23 Source: IMF and CVRD

24 Global manufacturing PMI rebounded to the highest level in seven months 58 Global PMI 57 points Apr-04 Aug-04 Dec-04 Apr-05 Aug-05 Dec-05 Apr-06 Aug-06 Dec-06 Apr-07 A rising new orders to inventory ratio is signaling an acceleration of global IP growth 24 Source: JPMorgan

25 We revised our medium-term forecast for iron ore seaborne demand: a stronger growth is expected Global seaborne demand million metric tons 1,010 China RoW E 2011E World China RoW CAGR % 28.3% 2.4% CAGR E 6.9% 11.2% 2.8% 25

26 There is a structural change in nickel supply Current production depends on nickel sulphide deposits => lower costs, well known technology Production expansion is dependent on nickel laterites => higher cost, technological and operational challenges New projects ramping up only in

27 Medium term view of nickel demand China will drive global stainless steel production increase with India also growing fast Solid demand growth from aerospace, energy and batteries Substitution of high Ni steels (300 series) to less Ni content (200 series) or no Ni (400 series) limited by technology, costs of substitutes and costs for consumers to change specifications and production equipment NiCr pig iron production increase lessens incentives to substitution but also faces several challenges: costs, quality, high energy consumption and environmental problems 27

28 Tight market conditions for nickel expected to continue in 2007 due to a strong global demand growth even in face of a rising NiCr pig iron output and some substitution Inventories - LME nickel - 3 month LME mt US$/mt Source: LME

29 Aluminum prices fairly stable supported by strong demand growth. Risk is on the upside given an expected acceleration of global IP growth 1800 Aluminum inventories Aluminum price LME 3 months 3, , ,000 mt ,500 US$/mt 600 1, Source: LME

30 Chinese import resumption reverted the downward trend of copper prices. Multiple supply constraints also contribute to market tightness Inventories - LME + Comex + SHFE Copper - LME 3 months mt US$/mt Source: LME, Comex and SHFE

31 CVRD A global leader 31 rio@cvrd.com.br