VALLEY OF THE RIO DOCE COMPANY
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

May 2005

Valley of the Rio Doce Company

(Translation of Registrant’s name into English)

Avenida Graça Aranha, No. 26
20005-900 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 þ 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 þ

(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 þ

(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 þ

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

 
 

 


COMPANHIA VALE DO RIO DOCE
Report on Form 6-K
 
Table of Contents
   
PERFORMANCE OF COMPANHIA VALE DO RIO DOCE IN THE FIRST QUARTER OF 2005 (US GAAP)  
INDEX TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION (US GAAP)  
REPORT OF INDEPENDENT ACCOUNTANT (US GAAP)  
SUPPLEMENTAL FINANCIAL STATEMENTS (US GAAP)  
SIGNATURES  


Table of Contents

(CVRD LOGO)

(QUARTERLY INFORMATION USGAAP GRAPHICS)

Gerência Geral de Controladoria - GECOL

 


Table of Contents

(US GAAP LOGO)

(COMPANHIA VALE DO RIO DOCE LOGO)

BOVESPA: VALE3, VALE5

NYSE: RIO, RIOPR
LATIBEX: XVALO, XVALP

THE PERFORMANCE OF COMPANHIA VALE

DO RIO DOCE IN THE FIRST QUARTER OF 2005


Except where otherwise indicated, operational and financial information in this press release is based on the consolidated figures in accordance with generally accepted accounting principles in the United States (US GAAP). Except for the information on investments and market behavior, this information is based on quarterly financial statements reviewed by independent auditors. The main subsidiaries of CVRD that are consolidated are: Caemi, Alunorte, Albras, RDM, RDME, RDMN, Urucum Mineração, Docenave, Ferrovia Centro-Atlântica (FCA), Itaco, CVRD Overseas and Rio Doce International Finance.

DELIVERING A SOLID PERFORMANCE

www.cvrd.com.br
rio@cvrd.com.br

Departamento de Relações
com Investidores

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

Rio de Janeiro, May 11, 2005 - Companhia Vale do Rio Doce (CVRD) has just reported its net earnings for the first quarter of 2005 (1Q05): US$698 million, US$0.61 per share. This was 72.3% higher than the 1Q04 net earnings of US$405 million, and the third highest-ever quarterly earnings in the Company’s history.

Return on equity (ROE) reached 35.4% against 31.4 in 1Q04.

Gross revenue, at US$2.328 billion, was 34.5% higher year-on-year.

Operating profit – adjusted EBIT(1) – was US$795 million, 36.4% higher than the 1Q04 adjusted EBIT of US$583 million. Operating margin was 35.9%, higher than the operational margin of 35.2% in 1Q04.

Cash generation, measured as adjusted EBITDA(2), at US$993 million, was 33.6% higher than in 1Q04.

Last-12-month adjusted EBITDA to the end of March 2005, at US$3.972 billion, was a new record, 6.7% higher than the EBITDA for 2004, US$3.722 billion.

CVRD delivered very goods results in 1Q05 in spite of adverse conditions, caused by (i) the strengthening of the Brazilian Real against the US dollar, (ii) cyclical cost pressures in labor, energy, raw materials, parts and equipment, and (iii) most importantly, the strong seasonal impact of the summer rains on mining production and the performance of the railroads. The new prices of iron ore and pellets negotiated with clients for 2005 are not reflected in the figures for 1Q05.

(1Q05)

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(US GAAP LOGO)

The Company’s capital expenditure in 1Q05 was US$570.3 million, of which US$430.7 million, or 75.5%, was investment in growth – that is to say, greenfield and brownfield projects and research & development.

The Fábrica Nova mine started operating in April – adding one more platform for value creation. In the last 12 months CVRD has started up three iron ore capacity expansion projects: Carajás 70 Mtpy, Capão Xavier and Fábrica Nova.

Leverage and debt coverage indices continue to improve. Total debt/adjusted EBITDA for the last 12 months(3) reached its lowest level of the last 10 years, 1.05x, and LTM adjusted EBITDA/interest paid(4) reached its highest level, 13.24x.

SELECTED FINANCIAL INDICATORS

                                         
US$ million  
    1Q04     4Q04     1Q05     %     %  
    (A)     (B)     (C)     (C/A)     (C/B)  
Gross revenues
    1,731       2,428       2,328       34.5       -4.1  
Gross margin (%)
    45.2       47.9       43.7                  
Adjusted EBIT
    583       822       795       36.4       -3.3  
Adjusted EBIT margin (%)
    35.2       35.5       35.9                  
Adjusted EBITDA
    743       1,001       993       33.6       -0.8  
Net earnings
    405       721       698       72.3       -3.2  
Annualized ROE (%)
    31.4       34.8       35.4                  
Total debt/ adjusted LTM EBITDA(x)
    1.86       1.10       1.05                  
Capex *
    358.0       685.7       570.3       59.3       -16.8  
* including acquisitions
                                       

(LOGO) BUSINESS OUTLOOK

The world economy continues to expand. After averaging 6% per year between late 2003 and early 2004, global GDP growth slowed, in the context of a natural transition to a sustainable path.

The current expansion present some imbalances, with the US and China being the engines of the growth. The Chinese economy continues to expand more strongly than expected, in spite of the restraining measures. China’s GDP growth rate was 9.5% in 1Q05, its seventh successive quarter of expansion at a higher rate than 9%.

The economies of Europe and Japan are growing much less than previously expected. Their performance is excessively dependent on exports, which suffer the adverse effect of the strengthening of the euro and the yen, since domestic demand in the Euro Zone and Japan is growing very slowly.

The emerging economies continue to grow at higher rates than in prior recent years, although more slowly than in 2004.

Brazil accompanies the general trend of these economies, with its Central Bank responding to an increase in inflation rates by applying a contractionary monetary policy, and a fiscal policy that continues to post higher than expected primary surpluses. The increase in the current account surplus of the balance of payments, the result of vigorous growth of exports, will result in the Brazilian Real remaining strong in the coming months even while the current tightening cycle in domestic interest rates is gradually eased.

(1Q05)

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(US GAAP LOGO)

In spite of the moderation of global growth, oil prices remain high, with considerable volatility – reflecting strong demand, the uncertainties on Opec’s output plans, declines in production in the rest of the world and the low level of idle capacity.

The fundamentals of the global economy do not, however, justify pessimistic forecasts for the near future. Inflation rates continue to be contained, real interest rates are close to zero, and unless some supply shock and/or acceleration of economic growth takes place, the probability of a further sharp increase in oil prices is low.

World crude steel production was 6.5% higher year-on-year in first quarter 2005, compared to 8.8% growth in the whole of 2004. Chinese production was 23.8% higher year-on-year – accounting for 91% of worldwide expansion in this period.

We now expect to see some slowdown in the world steel production growth rate, reflecting forecasts of slower expansion of demand for finished steel products. The IISI expects consumption of these products to exceed 1 billion tons/year in 2005 for the first time in history, 3.7% higher than in 2004. In 1994-2004 apparent steel consumption, worldwide, grew at an annual average rate of 4.4%, increasing to 7.9% in the recent phase of 2001-2004.

The continuing substantial growth of China’s steel production contributed to an increase in its iron ore imports by 24% year-on-year in the first quarter, to an annualized level of 256 million tons, compared to 208 million tons in 2004. Iron ore inventories are at levels considered to be normal, and the differential between Brazil-Asia and Australia-Asia maritime freight rates, an indicator of demand, continues to break records.

China’s fixed assets investment is increasing at a rate of approximately 25%, much higher than the 16% target established by the Chinese government for 2005. Since investment in fixed assets is a good leading indicator for Chinese steel consumption, derivative demand for iron ore is expected to continue to expand significantly.

In alumina, the disequilibrium between demand and supply continues, reflected in the high spot price levels, around US$400 per ton FOB. The additional capacity programmed to come on stream does not make it possible to forecast correction of this imbalance at least until the end of 2005.

Aluminum inventories continued to decline, and are currently at eight weeks’ consumption, compared to almost 11 weeks at the beginning of 2004, and the high prices of alumina restrains expansion of output.

The increase in copper concentrate production since the second half of 2004, and the slow ramp-up of smelters’ production, is contributing to the considerable increase in prices charged (TC/RC) for transformation into metal. Refined copper stocks are at historically very low levels and, we believe, unlikely to change significantly during the year, tending to sustain copper prices.

CVRD continues to develop capacity expansion projects and seek increases in productivity, to benefit from the favorable world situation.

The Fábrica Nova iron ore mine, with nominal production capacity of 15 million tons/year, began operating in April. It is the third CVRD iron ore project to come on stream over the last twelve months.

(1Q05)

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(US GAAP LOGO)

Over time, the Company has succeeded in growing and providing good results independently of economic cycles. According to CRU, CVRD is number one metals and mining company in total shareholder return over the last ten years. To maintain this performance in the future, CVRD has developed a complete program to promote excellence in project execution, maintenance and operation.

TEOR, one of the programs in this initiative, aims to assess the operation of each of CVRD’s mines, identifying any inefficiencies and correcting them, so as to achieve marginal increases in production in each one, without incurring the cost of investments in additional capacity.

(LOGO)   IMPORTANT RECENT EVENTS

Improving risk perception

CVRD increased its committed bank facilities, to US$750 million from US$500 million, building in lengthened maturities and lower costs.

A US$400 million line, with availability of one year for drawdown and one year for payment, was replaced by another of US$650 million, with availability for two years and payment time of two years. The cost consists of a commitment fee of 0.3%, and in the event of use of the line, Libor plus 0.75% p.a.

The Company has not used this credit line since the program began in May 2004.

The facility allows greater efficiency in cash management and increases risk perception, consistently with the strategy focus on reduction of cost of capital. There are no restrictions to the use of the facility linked to country risk.

Remuneration of shareholders and debenture holders

On April 29 CVRD paid R$ 1.11 per share to its common and preferred shareholders, the first installment of the minimum dividend for 2005, as announced on January 31. The total distributed was R$ 1.28 billion.

The remuneration to holders of CVRD’s “shareholders debentures”, R$0.019005992 per debenture, totaling R$ 7 million, was paid on April 1.

Ferrous minerals

•   Iron ore price negotiation for 2005 completed

With the agreement made on March 31 with ThyssenKrupp, Germany’s largest steelmaker, to increase the price of Carajás lumps by 79%, negotiation of prices for the principal iron ore products for 2005 was completed.

•   New contracts for supply of pellets and ferro-alloys

CVRD signed a contract to supply 2.66 million tons of direct reduction pellets for six years to Qatar Iron and Steel company (QASCO), one of the largest steel producers in the Middle East. A contract with Huttenwerke Krupp Mannesmann GmbH, a subsidiary of ThyssenKrupp, was signed for supply of 20,000 tons/year of manganese ferro-alloys, for two years. This contract follows the new trend in the commercial relationship between producers of ferro-alloys and their clients, aiming to optimize planning of output by both parties.

(1Q05)

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(US GAAP LOGO)

•   Fábrica Nova mine starts up

The Fábrica Nova iron ore mine, in the Mariana region of Minas Gerais state, in the Brazilian Southern System, began operating in April. Its production capacity is 15 million tons/year; estimated production for 2005 is 10 million tons.

•   Carajás 100 Mtpy

CVRD’s Board of Directors approved the project to increase Carajás iron ore production capacity to 100 million tons/year. This project is in the phase of detailed planning of engineering and initiating the equipment, works and services supply processes. Conclusion is scheduled for 2007.

•   Mining rights

The Company bought Mineração Estrela do Apolo, holder of mining rights on the reserves at Maquiné, in the iron ore quadrangle in Minas Gerais State, for US$9.3 million. Maquiné has resources of iron ore and bauxite.

(LOGO)   STRONG GROWTH IN SALES VOLUME AND REVENUE

CVRD’s gross revenue in 1Q05 was US$2.328 billion, 34.5% more than in 1Q04. In spite of the seasonal effects on production and almost non-existent inventories, it was only US$100 million less than in 4Q04 – when gross revenue was a record US$2.428 billion – and was, indeed, the Company’s second highest-ever quarterly gross revenue.

1Q05 gross revenue was US$597 million higher than in 1Q04, mainly due to higher prices, which contributed with US$417 million of the increase. The remaining US$75 million is attributable to the startup of the Sossego copper mine in June 2004.

The highest proportion of the Company’s sales went to Europe (28.1%), followed by the Brazilian market (28.0%), then Asia (26.6%). Of the US$652 million total revenue from sales to the domestic market, US$102 million came from pellet feed sales to the joint ventures at Tubarão (Nibrasco, Itabrasco, Hispanobras and Kobrasco), which after transformation into pellets are shipped to export markets. After the Brazilian market, China is the main destination of the Company’s sales, providing 12.0% of total revenue in 1Q05.

•   Ferrous minerals

Revenue from sales of ferrous minerals products – iron ore, pellets, manganese and ferro-alloys – in 1Q05 was US$1.604 billion, 34.5% more than the revenue of US$1.192 billion generated from the same products in 1Q04 – but slightly (2.6%) lower than in 4Q04 (US$1.647 billion).

Iron ore shipments resulted in revenue of US$1.088 billion, pellets US$321 million, operational services for the pelletization plants of Tubarão US$20 million, manganese ores US$20 million and ferro-alloys US$142 million.

The figures for revenue from shipments of iron ore and pellets do not reflect the new prices agreed for 2005.

(1Q05)

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(US GAAP LOGO)

In spite of the heavy rains that affected the iron ore production of Carajás, iron ore and pellet shipments in 1Q05, at 59.796 million tons, were 12.9% higher than in the first quarter of 2004 – and 3.3% lower than the record quarterly output achieved in 4Q04.

Shipments summed 52.483 million tons of iron ore and 7.313 million tons of pellets. Pellets increased as a percentage of total volume sold, to 12.2% from 11.6% in 1Q04 and 11.4% in 4Q4 – contributing to the increase in total revenue.

During the quarter, CVRD acquired 4.356 million tons of iron ore from other mining companies located in the Iron Ore Quadrangle in Brazil’s State of Minas Gerais, to complement its production and meet commitments under contracts with clients. These purchases totaled 15.9 million tons in 2004, from which 3.3 million tons were acquired in 1Q04.

Average sale prices in 1Q05 were US$20.73 per ton for iron ore, and US$43.89 per ton for pellets.

Of CVRD’s total volume of iron ore and pellets sold in 1Q05, 10.857 million tons, or 18.2% of the total, was sold to China, 9.7% to Germany, 9.5% to Japan, 4.1% to France and 4.1% to South Korea.

Sales to steel makers and pig iron producers in Brazil totaled 8.820 million tons, 14.8% of total volume, and sales to the Tubarão joint ventures totaled 9.0%, 5.390 million tons.

Sales of manganese ore reached 198,000 tons, 21.5% more than in 1Q04, though 38.7% lower than in 4Q04. The output of the Azul and Urucum mines was prejudiced by the seasonal rains in the first quarter, resulting in the reduction in volume – while global demand continued to be very high.

Ferro-alloy sales volume totaled 132,000 tons, 6.5% more than in the previous quarter, but 33.7% lower than in 1Q04 – in that quarter, ferro-alloy shipments were a record 199,000 tons, due to a combination of full-capacity operation of the Mo I Rana plant in Norway, and use of inventories.

After the substantial increase during 2004, ferro-alloy prices fell back significantly this year. The higher prices brought high-cost plants back into production, resulting in a strong increase in supply. The average price of CVRD’s shipments in 1Q05 was US$1,076 per ton, against US$573 in 1Q04 and US$1,347 in 4Q04.

•   Aluminum

The products in the aluminum chain – bauxite, alumina and primary aluminum – generated revenue of US$346 million, 14.9% of CVRD’s total revenue in the quarter, 23.6% more than in 1Q04, and 2.3% less than in 4Q04.

The Company sold 478,000 tons of alumina in the quarter, similar to the 1Q04 volume of 482,000 tons, and 3.5% more than in 4Q04. We do not expect significant changes in volume shipped over the forthcoming quarters until stages 4 and 5 of the Alunorte refinery come into operation. This is expected to happen in the second half of 2006, increasing production capacity by 1.8 million tons/year.

CVRD’s average sale price of alumina in 1Q05 was US$285 per ton, vs. US$218 in 1Q04 and US$305 in 4Q04. The reduction reflects lower volume of spot sales, since market prices of alumina did not change significantly.

Volume sold of primary aluminum was 109,000 tons, in line with the 113,000 tons sold in 4Q04, and 12.4% higher than in 1Q04. The average sale price was

(1Q05)

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(US GAAP LOGO)

US$1,835 per ton, reflecting the record levels on the LME, compared with US$1,608 in 1Q04 and US$1,726 in 4Q04.

•   Copper

In this quarter, the output of the Sossego copper mine was negatively affected by the rainy season and by operational problems with mining equipment. In spite of the increase in average price – from US$770 per ton of concentrate in 4Q04 to US$882 in 1Q05 – revenue, at US$75 million, was lower than the US$107 million generated in the previous quarter.

In 1Q05 CVRD sold 85,000 tons of copper concentrate vs. 139,000 tons in 4Q04.

•   Industrial minerals

Sales of potash contributed US$30 million to CVRD’s revenue in 1Q05, 30.4% more than in 1Q04, and 14.3% less than in 4Q04. Volume shipped was 138,000 tons, equal to 1Q04, but 16.4% less than in 4Q04. The seasonal pattern in agricultural production is transmitted to sales of potash, which tend to increase in the second half of the year.

CVRD’s average selling price of potash in 1Q05 was US$217 per ton, 30.0% more than in 1Q04 and 2.4% more than in 4Q04.

Kaolin sales revenue was US$39 million, equal to 1Q04, and 13.3% less than in 4Q04. Volume sold was 280,000 tons, vs. 285,000 in 1Q04 and 311,000 in 4Q04. Due to new contracts, kaolin sales are expected to show an increase from 2Q05 onwards.

•   Logistics services

CVRD’s logistics services provided revenue of US$232 million in 1Q05, 21.5% more than in 1Q04 (US$191 million), and slightly lower than the 4Q04 sales revenue of US$234 million. Logistics services provided 10.0% of the Company’s revenue in the quarter.

Third party general cargo transported by the Carajás Railroad (EFC), the Vitória-Minas Railroad (EFVM) and the Centro-Atlântica Railroad (FCA) contributed with revenue of US$159 million, and revenue from port services was US$47 million. Coastal shipping and port support services provided a further US$26 million.

CVRD’s railroads transported 5.679 billion ntk of general cargo for clients, 8.6% less than in 1Q04, and 16.3% less than in 4Q04. The strong rains in the Southeast Region caused landslides which restricted movement of general cargo on the EFVM, CVRD’s principal railroad. The main cargos handled were steel industry inputs and products, 49.7% of the total, agricultural products, 26.2%, and fuels, 10.5%.

The Company’s ports and maritime terminals handled 6.355 million tons of general cargo for clients, compared with 6.396 million tons in 1Q04 and 7.097 million tons in 4Q04.

(1Q05)

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(US GAAP LOGO)

VOLUME SOLD: IRON ORE AND PELLETS

                                                 
Thousands of tons  
    1Q04     %     4Q04     %     1Q05     %  
Iron ore
    46,825       88.4       54,748       88.6       52,483       87.8  
Pellets
    6,125       11.6       7,076       11.4       7,313       12.2  
Total
    52,950       100.0       61,824       100.0       59,796       100.0  

VOLUME SOLD: MINERALS AND METALS

                         
Thousands of tons  
    1Q04     4Q04     1Q05  
Manganese ore
    163       323       198  
Ferroalloys
    199       124       132  
Alumina
    482       462       478  
Primary aluminum
    97       113       109  
Bauxite
    545       514       361  
Potash
    138       165       138  
Kaolin
    285       311       280  
Copper concentrates
    0       139       85  

IRON ORE AND PELLET SALES BY DESTINATION

                                                 
Thousands of tons  
    1Q04     %     4Q04     %     1Q05     %  
European Union
    15,288       28.9 %     18,356       29.7 %     17,403       29.1 %
Germany
    5,087       9.6 %     7,022       11.4 %     5,816       9.7 %
France
    2,616       4.9 %     2,806       4.5 %     2,424       4.1 %
Belgium
    1,669       3.2 %     2,021       3.3 %     1,907       3.2 %
Italy
    2,165       4.1 %     2,091       3.4 %     1,920       3.2 %
Other
    3,751       7.1 %     4,416       7.1 %     5,336       8.9 %
China
    8,632       16.3 %     12,673       20.5 %     10,857       18.2 %
Japan
    5,698       10.8 %     2,515       4.1 %     5,693       9.5 %
South Korea
    2,501       4.7 %     2,477       4.0 %     2,455       4.1 %
Middle East
    1,866       3.5 %     2,155       3.5 %     1,314       2.2 %
USA
    995       1.9 %     1,384       2.2 %     1,276       2.1 %
Brazil
    13,140       24.8 %     14,370       23.2 %     14,210       23.8 %
Steel and pig iron producers
    8,281       15.6 %     9,232       14.9 %     8,820       14.8 %
Pelletizing joint ventures
    4,859       9.2 %     5,138       8.3 %     5,390       9.0 %
RoW
    4,830       9.1 %     7,894       12.8 %     6,588       11.0 %
Total
    52,950       100.0 %     61,824       100.0 %     59,796       100.0 %

LOGISTICS SERVICES – GENERAL CARGO

                         
    1Q04   4Q04   1Q05
Railroads (million ntk)
    6,215       6,783       5,679  
Ports (thousand tons)
    6,396       7,097       6,355  

(1Q05)

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(US GAAP LOGO)

AVERAGE PRICES REALIZED

                         
US$ / ton  
    1Q04     4Q04     1Q05  
Iron ore
    17.64       20.69       20.73  
Pellets
    36.41       40.56       43.89  
Manganese ore
    55.21       111.46       101.01  
Ferroalloys
    572.86       1,346.77       1,075.76  
Alumina
    217.84       305.19       284.52  
Pimary aluminum
    1,608.25       1,725.66       1,834.86  
Bauxite
    27.52       25.29       27.70  
Potash
    166.67       212.12       217.39  
Kaolin
    136.84       144.69       139.29  
Copper concentrates
          769.78       882.35  

GROSS REVENUE BY PRODUCT

                                                 
US$ million  
    1Q04     %     4Q04     %     1Q05     %  
Ferrous minerals
    1,193       68.9       1,647       67.8       1,604       68.9  
Iron ore
    826       47.7       1,133       46.7       1,088       46.7  
Pellet plant operation services
    12       0.7       14       0.6       20       0.9  
Pellets
    223       12.9       287       11.8       321       13.8  
Manganese ore
    9       0.5       36       1.5       20       0.9  
Ferroalloys
    114       6.6       167       6.9       142       6.1  
Others
    8       0.5       10       0.4       13       0.6  
Non ferrous minerals
    62       3.6       187       7.7       144       6.2  
Potash
    23       1.3       35       1.4       30       1.3  
Kaolin
    39       2.3       45       1.9       39       1.7  
Copper concentrates
    0               107       4.4       75       3.2  
Aluminum products
    280       16.2       354       14.6       346       14.9  
Primary aluminum
    156       9.0       195       8.0       200       8.6  
Alumina
    105       6.1       141       5.8       136       5.8  
Bauxite
    15       0.9       13       0.5       10       0.4  
Others
    4       0.2       5       0.2       0          
Logistics services
    191       11.0       234       9.6       232       10.0  
Railroads
    133       7.7       162       6.7       159       6.8  
Ports
    38       2.2       47       1.9       47       2.0  
Shipping
    20       1.2       25       1.0       26       1.1  
Others
    6       0.3       6       0.2       2       0.1  
Total
    1,731       100.0       2,428       100.0       2,328       100.0  

GROSS REVENUE BY DESTINATION

                                                 
US$ million  
    1Q04     %     4Q04     %     1Q05     %  
Europe
    522       30.2       625       25.7       653       28.1  
Brazil
    488       28.2       678       27.9       652       28.0  
China
    171       9.9       345       14.2       279       12.0  
Japan
    171       9.9       220       9.1       216       9.3  
Emerging Asia (exChina)
    97       5.6       134       5.5       125       5.3  
USA
    79       4.6       134       5.5       98       4.2  
Rest of the world
    203       11.7       292       12.0       305       13.1  
Total
    1,731       100.0       2,428       100.0       2,328       100.0  

(1Q05)

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(US GAAP LOGO)

(LOGO)   AN ABOVE AVERAGE OPERATING MARGIN

CVRD’s operating margin, measured as adjusted EBIT, was US$795 million, 36.4% more than the first quarter of 2004, and 3.3% lower than in 4Q04. Adjusted EBIT margin was 35.9%, greater than in 1Q04 (35.2%) and in 4Q04 (35.5%).

Adjusted EBIT was US$212 million higher than in 1Q04, on net revenue US$557 million higher, partially offset by an increase of US$339 million in cost of goods sold (COGS).

In general terms, the increase in COGS was due to higher prices determined by the current economic cycle, the weakening of the US dollar vis-à-vis the Brazilian real, the start-up of the Sossego copper mine in mid-2004 and of course by the expansion in production.

The specific sources of the higher 1Q05 COGS relatively to 1Q04 were the growth in expenses with: (a) materials, US$107 million; (b) outsourced services, US$96 million; (c) energy, US$66 million; and (d) depreciation, US$27 million.

Higher prices of parts and components contributed to the increase of costs of materials. Energy costs were impacted by a 31% rise in fuel prices, and various increases in electricity rates. The increase in expenditure on contracted services is mainly due to price increases already scheduled in existing contracts, while the increased depreciation expense reflects the larger Company’s assets.

Demurrage expenses totaled US$21 million. Annualized, this is almost exactly the same figure as for the whole of 2004, US$83 million, indicating the demand pressure on the logistics infrastructure. Simultaneously with the investments in expansion of loading capacity at the Ports of Ponta da Madeira, Tubarão and Sepetiba, CVRD is making efforts to optimize interaction between production, rail transport and shipment timing, to reduce waiting time suffered by ships in ports.

With the objective of improving the Company’s COGS analysis, we performed reclassifications among 2004 COGS components. There was no change in the total quarterly COGS figure and/or in the total figure of the year. The lines that were changed were “Material”, “Acquisition of iron ore and pellets” and “Acquisition of other products”. The following table indicates the changes, showing the previous and new figures.

CHANGES IN COGS COMPOSITION

                                                                                 
US$ million  
    1Q04     2Q04     3Q04     4Q04     2004  
    previous     new     previous     new     previous     new     previous     new     previous     new  
Material
    103       124       149       149       173       188       191       203       616       664  
Acquisition of iron ore and pellets
    102       110       116       116       123       123       125       125       466       474  
Acquisition of other products
    116       87       83       83       102       87       110       98       411       355  
CPV Total
    908       908       912       912       1,053       1,053       1,208       1,208       4,081       4,081  

(1Q05)

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(US GAAP LOGO)

COST OF GOODS SOLD – BREAKDOWN

                                                 
US$ million  
    1Q04     %     4Q04     %     1Q05     %  
Personnel
    88       9.7       108       8.9       98       7.9  
Material
    124       13.7       203       16.8       231       18.5  
Fuels
    97       10.7       128       10.6       130       10.4  
Electric energy
    64       7.0       116       9.6       97       7.8  
Outsourced services
    194       21.4       217       18.0       290       23.3  
Acquisition of iron ore and pellets
    110       12.1       125       10.3       115       9.2  
Acquisition of other products
    87       9.6       98       8.1       87       7.0  
Depreciation and exhaustion
    95       10.5       100       8.3       122       9.8  
Others
    49       5.4       113       9.4       77       6.2  
Total
    908       100.0       1,208       100.0       1,247       100.0  

Negative factors in 1Q05 adjusted EBIT – compared to 1Q04 – were: (a) SG&A expenses US$12 million higher, basically due to the annual increase in salaries in July 2004, and increased commissions on sales – resulting from increased sales volume; and (b) an increase of US$11 million in research and development expenditure, reflecting intensified exploration activities.

The adjusted EBIT margin of the ferrous minerals division was 38.8%, 190 basis points (bp) higher than the 36.9% adjusted EBIT margin of 1Q04.

The adjusted EBIT margin of the aluminum business was 38.9%, compared to 40.0% in 1Q04. The increase in the cost of electricity for production of primary aluminum, caused by the terms of the new long-term contract that came into effect in May 2004, was the main reason for the reduction.

Adjusted EBIT margin of the logistics services was 22.2%, 250 bp less than the 24.7% margin achieved in 1Q04 – reflecting the increase in fuel prices, higher expenditure on maintenance and parts in FCA, and reduction in the volumes of general cargo handled by the railroads and the ports.

ADJUSTED EBIT MARGIN BY BUSINESS AREA

                         
    1Q04     4Q04     1Q05  
Ferrous minerals
    36.9 %     40.5 %     38.8 %
Non ferrous minerals
    36.8 %     46.2 %     30.9 %
Aluminum
    40.0 %     35.3 %     38.6 %
Logistics
    24.7 %     8.2 %     22.2 %
Total
    35.2 %     35.5 %     35.9 %

(LOGO)   TWELVE CONSECUTIVE QUARTERS OF ADJUSTED EBITDA GROWTH

In the last twelve months to March 2005, cash flow as measured by adjusted EBITDA was US$3.972 billion. First quarter 2005 is the twelfth consecutive quarter of growth in CVRD’s LTM adjusted EBITDA. This figure was 63.4% higher than 1Q04.

1Q05 adjusted EBITDA, at US$993 million, was 33.6% higher than in 1Q04 – and slightly (0.8%) lower than in 4Q04.

The US$250 million increase in cash flow from 1Q04 to 1Q05 reflects the US$212 million increase in adjusted EBIT, depreciation US$30 million higher, and US$8 million of dividends received.

(1Q05)

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(US GAAP LOGO)

In 1Q05 CVRD received dividends from affiliated companies and joint ventures totaling US$69 million, of which US$28 million came from MRN, US$20 million from CSI, US$20 million from Samarco and US$1 million from Hispanobras.

The breakdown of cash flow by business area in 1Q05 was: ferrous minerals 67.9%, aluminum 17.0%, logistics 9.1% and non-ferrous ores 4.0%.

QUARTERLY ADJUSTED EBITDA

                         
US$ million  
    1Q04     4Q04     1Q05  
Net operating revenues
    1,656       2,317       2,213  
COGS
    (908 )     (1,208 )     (1,247 )
SG&A
    (101 )     (133 )     (113 )
Research and development
    (23 )     (67 )     (34 )
Other operational expenses
    (41 )     (87 )     (24 )
Adjusted EBIT
    583       822       795  
 
Depreciation
    99       119       129  
Dividends received from affiliates and JVs
    61       60       69  
 
Adjusted EBITDA
    743       1,001       993  

ADJUSTED EBITDA BY BUSINESS AREA

                                                 
US million  
    1Q04     %     4Q04     %     1Q05     %  
Ferrous minerals
    506       68.1       720       71.9       674       67.9  
Non ferrous minerals
    8       1.1       59       5.9       40       4.0  
Logistics
    75       10.1       67       6.7       90       9.1  
Aluminum
    141       19.0       149       14.9       169       17.0  
Others
    13       1.7       6       0.6       20       2.0  
Total
    743       100.0       1,001       100.0       993       100.0  

(LOGO)   EXCELLENT EARNINGS PERFORMANCE: LARGE SIZE AND HIGH QUALITY

CVRD earned a net profit of US$698 million in 1Q05, 72.3% more than in 1Q04. Adjusting 4Q04 earnings for gains in asset sales, 1Q05 shows a 10.6% qoq increase.

Earnings performance in 1Q05 has a very high quality since it was not influenced by gains with asset sales and/or the impact of monetary variations – the BRL/USD exchange stayed at approximately the same level between Dec 31, 2004 and March 3, 2005.

The higher result reflected better operational performance resulting from growth in practically all the Company’s business areas.

Net financial revenues, US$107 million higher than in 1Q04, also contributed to the improvement. Financial revenues increased by US$17 million; financial expenses were US$50 million lower; and monetary variations were US$40 million lower. The lower financial expenses reflected an improved result from hedge transactions – a gain of US$5 million, compared to a loss of US$59 million in 1Q04.

Equity income from subsidiaries was US$133 million, 54.6% (US$47 million) higher than in 1Q04. The non-consolidated ferrous minerals companies contributed US$52 million, and US$34 million of this total came from Samarco.

(1Q05)

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(US GAAP LOGO)

Equity income from the steel sector was US$53 million, US$19 million more than in 1Q04, in spite of the sale of CST. In the aluminum chain, MRN provided US$15 million, and Valesul US$3 million.

The good financial result and equity income more than compensated the US$48 million increase in provisions for income tax and Social Contribution, arising from higher taxable profit.

EQUITY INCOME

                         
US$ million  
    1Q04     4Q04     1Q05  
Iron Ore and Pellets
    33       55       52  
Aluminum, Alumina and Bauxite
    14       19       18  
Logistics
    6       11       10  
Steel
    34       95       53  
Others
    (1 )     (1 )      
Total
    86       179       133  

(LOGO)   DEBT INDICATORS CONTINUE TO IMPROVE

CVRD’s total debt at March 31, 2005 was US$4.182 billion, US$94 million more than at December 31, 2004 (US$4.088 billion). Net debt(5) at the end of March 2005 was US$3.060 billion, vs. US$2.839 billion at the end of December 2004.

LTM gross debt/adjusted EBITDA increased from 1.10 on December 31, 2004 to 1.05 on March 31, 2005. The ratio of gross debt to enterprise value (6) was stable, with a change from 11.8% to 11.1%. Interest coverage as measured by LTM adjusted EBITDA/interest paid increased, from 12.41 at the end of 2004 to 13.24 on March 31, 2005. The changes in these indicators show the Company’s powerful cash flow and the strategic focus on preserving a healthy balance sheet.

FINANCIAL EXPENSES

                         
US$ million  
    1Q04     4Q04     1Q05  
Financial expenses:
                       
Debt with third parties
    (56 )     (63 )     (48 )
Debt with related parties
    (2 )           (2 )
Total debt-related financial expenses
    (58 )     (63 )     (50 )
                         
    1Q04     4Q04     1Q05  
Gross interest on:
                       
Tax and labour contingencies
    (6 )     (11 )     (11 )
Tax on financial transactions (CPMF)
    (4 )     (11 )     (9 )
Derivatives
    (59 )     (67 )     5  
Others
    (15 )     (106 )     (27 )
Total gross interest
    (84 )     (195 )     (42 )
 
Total
    (142 )     (258 )     (92 )

DEBT INDICATORS

                         
US$ million  
    1Q04     4Q04     1Q05  
Gross debt
    4,526       4,088       4,182  
Net debt
    3,443       2,839       3,060  
Gross debt / adjusted LTM EBITDA (x)
    1.86       1.10       1.05  
Adjusted LTM EBITDA / LTM interest expenses (x)
    11.69       12.41       13.24  
Gross debt / EV (x)
    0.19       0.12       0.11  

Enterprise Value = market capitalization + net debt

(1Q05)

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(US GAAP LOGO)

(LOGO)   CAPEX: FÁBRICA NOVA, A NEW VALUE CREATION PLATFORM

CVRD’s capital expenditure in 1Q05 totaled US$570.3 million, of which US$430.7 million was spent on organic growth — projects and R&D, and US$139.6 million on “stay-in-business Capex” – maintenance of existing operations1.

Expenditure on R&D was US$28.2 million. Ore exploration was concentrated on looking for deposits of copper, nickel, gold, bauxite and manganese.

The feasibility study for the Vermelho project – to be CVRD’s first nickel mine – was completed. A feasibility study for development of the Moatize coal deposit in Mozambique was started at the beginning of 2005 and is expected to be completed in June 2006.

The Fábrica Nova mine, which is part of the CVRD Southern System, started to operate in April, and its 2005 output is expected to reach 10 million tons. Fabrica Nova has a nominal capacity of 15 million tons per year. It is the third Company’s iron ore project to come on stream over the last twelve months.

Total capex with the development of Fabrica Nova is US$ 106 million. It will add approximately 15% to the Southern System total production capacity of iron ore. In 2004, the Southern System mines produced 98.8 million tons of iron ore.

  •   Main projects in progress
                                               
     
  Area     Project     Realized   Budgeted     Status  
              US million        
              1Q05     2005     Total        
                                   
 
Ferrous minerals
    Expansion of the Carajás iron ore mines to 85 Mtpa – Northern System       41         140         296       This project will increase CVRD’s production capacity by 15 million tons/year, and is scheduled for completion in 2006. Works on the plant and port are in progress. Conclusion of works on the second phase of Pier III of the Ponta da Madeira Port terminal – an additional ship loading facility – is planned for July 2005, for total investment of US$70 million.  
                                   
 
    Brucutu iron ore
mine – Southern
System
      24         205         448       We expect Brucutu to produce 6.5 million tons this year. Phase I should be completed in 2006, bringing nominal production capacity to 15 million tons/year. Phase II is scheduled for completion in 2007, bringing production capacity to 24 million tons/year. Works on Phase I are 55% completed.  
                                   
 
    Fábrica Nova iron
ore mine – Southern
System
      7         37         106       Started operating in April. Reallocation of the Samarco ore pipeline is currently in progress – this will increase the workable area. Project conclusion scheduled for the end of this year.  
                                   
 
    Expansion of the Itabira iron ore mines – Southern System       3         16         75       Modernization of operations and expansion of production capacity of the Itabira mines to 46 million tons/year. Conclusion and startup planned for 2006. Surface removal has been completed. Work on processing facilities scheduled to start 2Q05.  
                                   
 
    Fazendão iron ore
mine – Southern
System
              52         100       Project to produce 14 million of ROM iron ore/year. Works planned to start in second half 2005, with completion and startup in 2006.  
                                   
 
    Fábrica iron ore
mine – Southern
System
              38         144       Project to expand production capacity at the Fábrica mine by 5 million tons, from 12 million to 17 million tons/year. Startup planned for 2007.  
                                   


1   Capex data is based on effective financial disbursements.

(1Q05)

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(US GAAP LOGO)

                                               
     
  Area     Project     Realized   Budgeted     Status  
              US million        
              1Q05     2005     Total        
                                   
 
    Timbopeba iron ore
mine
              25         25       Extension of the useful life of this mine to 2008, with estimated annual production of 2.7 million tons. US$7.8 million will be invested in development, purchase of small-scale equipment and new access to the rock face. US$17.6 million will be invested in acquisition of rolling stock for the EFVM railroad.  
                                   
 
    Tubarão Port
expansion –
Southern System
      5         22         65       Project to expand the conveyor belt systems and loading machinery, and building of new stockyard. Half the works have been completed. Conclusion planned for 2006.  
                                   
 
    São Luis
pelletizing plant –
expansion
      3         18         18       Expansion of the plant capacity to 7 million tons/year, with startup planned for second half 2005.  
                                   
 
Coal
    Anthracite           86         86       Agreement to acquire 25% stake in the Chinese anthracite producer Henan Longyu Energy Resources Ltd., in partnership with Yoncheng and Baosteel. In 2005 the mine will produce 1.7 million tons of high quality anthracite.  
                                   
 
    Coking coal               16         26       Acquisition, in association with the Chinese coal producer Yankuang, of 25% of Shandong Yankuang International Coking Ltd, for production of coking coal. Production capacity is estimated at 2 million tons/year of coke and 200,000 tons/year of methanol. The coke plant is being assembled, and startup is timetabled for 2006.  
                                   
 
Non-ferrous minerals
    Expansion of the Taquari-Vassouras potash mine       3         9         78       Project to expand nominal potash production capacity from 600,000 to 850,000 tons/year. Approximately 90% of works completed. Operation scheduled to start in second half 2005.  
                                   
 
    118 copper mine               32         218       Project to produce 36,000 tons of copper cathode. Planning at assessment phase.  
                                   
 
    Vermelho nickel mine               34         875       Project to produce 45,000 tons of nickel cathode and 2,000 tons of cobalt per year. Planning at assessment stage.  
                                   
 
Aluminum
    Modules 4 and 5 of Alunorte – alumina       83         306         583       The project for construction of modules 4 and 5 will increase the refinery’s production capacity to 4.2 million tons of alumina per year. Conclusion scheduled for 2006. Approximately 70% of works completed.  
                                   
 
    Paragominas I
bauxite mine
      14         154         352       We expect this mine to start producing 4.5 million of bauxite/year at the end of 2006. The tubes for the 244 km pipeline to transport bauxite from Paragominas to the alumina refinery in Barcarena, in the State of Pará, have been purchased, and production startup is programmed for June 2005. Approximately 20% of works have been completed.  
                                   
 
Logistics
    Acquisition of locomotives and wagons for the EFVM/EFC/FCA railroads       86         559         559       1,067 wagons and 26 locomotives were bought in the first quarter of 2005.  
                                   
 
Electric energy
    Aimorés
hydroelectric power
plant
      5         12         144       This plant, on the Rio Doce River in the Brazilian state of Minas Gerais, will have generating capacity of 330MW with startup scheduled for 3Q05. By the end of 1Q05, 95% of the works had been completed. CVRD’s share in the project is 51.0%.  
                                   
 
    Capim Branco I and II hydroelectric plants       16         73         181       Both plants are located on the Araguari River in Brazil’s State of Minas Gerais. They will have generation capacity of 240MW and 210MW respectively. Startup of the projects is scheduled for 2006. 57% of the works on Capim Branco I have been concluded, and 31% for Capim Branco II. CVRD’s stake in these project is 48.4%.  
                                   

(1Q05)

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(US GAAP LOGO)

CAPEX BY BUSINESS AREA

                                 
US$ million  
    Realized 1Q05     Budgeted 2005  
Ferrous minerals
    200       35.1 %     1,266       38.0 %
Non-ferrous minerals
    36       6.3 %     303       9.1 %
Logistics
    154       27.0 %     760       22.8 %
Aluminum
    127       22.3 %     537       16.1 %
Coal
    3       0.5 %     136       4.1 %
Electric energy
    24       4.2 %     109       3.3 %
Other
    26       4.6 %     221       6.6 %
Total
    570       100.0 %     3,332       100.0 %

(LOGO)   SELECTED FINANCIAL INDICATORS FOR THE MAIN NON-CONSOLIDATED COMPANIES

These are available in the quarterly financial statements of CVRD, on the Company’s website www.cvrd.com.br, in the sub-section Investor Relations.

(LOGO)   CONFERENCE CALL/WEBCAST

A conference call and webcast will be held on Friday, May 13, at 10 a.m. Rio de Janeiro time, 9 am US Eastern Standard Time and 1 pm United Kingdom time. Instructions for participation are on the CVRD website www.cvrd.com.br, under Investor Relations. A recording of the conference call and webcast will be available on CVRD’s website for 90 days after May 13, 2005.

(1Q05)

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(US GAAP LOGO)

FINANCIAL STATEMENTS

                         
US$ million  
    1Q04     4Q04     1Q05  
Gross operating revenues
    1,731       2,428       2,328  
Taxes
    (75 )     (111 )     (115 )
Net operating revenue
    1,656       2,317       2,213  
Cost of goods sold
    (908 )     (1,208 )     (1,247 )
Gross profit
    748       1,109       966  
Gross margin (%)
    45.2       47.9       43.7  
Selling, general and administrative expenses
    (101 )     (133 )     (113 )
Research and development expenses
    (23 )     (67 )     (34 )
Employee profitsharing
    (13 )     (22 )     (17 )
Others
    (28 )     (65 )     (7 )
Operating profit
    583       822       795  
Financial revenues
    12       41       29  
Financial expenses
    (142 )     (258 )     (92 )
Monetary variation
    (42 )     275       (2 )
Gains on sale of affiliates
          90        
Tax and social contribution (Current)
    (97 )     (10 )     (160 )
Tax and social contribution (Deferred)
    32       (386 )     47  
Equity income and provision for losses
    86       179       133  
Minority shareholding participation
    (27 )     (32 )     (52 )
Net earnings
    405       721       698  
Earnings per share (US$)
    0.35       0.63       0.61  

BALANCE SHEET

                         
US$ million  
    03/31/04     12/31/04     03/31/05  
Assets
                       
Current
    3,117       3,890       3,923  
Longterm
    1,574       1,603       1,688  
Fixed
    7,971       10,222       10,763  
Total
    12,662       15,715       16,374  
Liabilities
                       
Current
    2,301       2,455       2,391  
Long term
    5,262       5,869       5,895  
Shareholders’ equity
    5,099       7,391       8,088  
Paidup capital
    3,367       3,707       3,707  
Reserves
    1,732       3,684       4,381  
Total
    12,662       15,715       16,374  

(1Q05)

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(US GAAP LOGO)

CASH FLOW STATEMENT

                         
US$ million  
    1Q04     4Q04     1Q05  
Cash flows from operating activities:
                       
Net income
    405       721       698  
Adjustments to reconcile net income with cash provided by operating activities:
                       
Depreciation, depletion and amortization
    99       119       129  
Dividends received
    61       60       69  
Equity in results of affiliates and joint ventures and change in provision for losses on equity investments
    (86 )     (179 )     (133 )
Deferred income taxes
    (32 )     386       (47 )
Provisions for contingencies
    16       42       (3 )
Impairment of property, plant and equipment
          4       4  
Gain on sale of investment
          (90 )      
Foreign exchange and monetary losses
    45       (106 )     27  
Net unrealized derivative losses
    54       66       (5 )
Minority interest
    27       32       52  
Juros pagáveis, líquidos
    0       38       (2 )
Others
    (48 )     (70 )     (17 )
Decrease (increase) in assets:
                       
Accounts receivable
    (23 )     57       (92 )
Inventories
    (15 )     (95 )     (20 )
Others
    (25 )     (76 )     (74 )
Increase (decrease) in liabilities:
                       
Suppliers
    (25 )     288       45  
Payroll and related charges
    (3 )     22       (35 )
Income Tax
    0       (22 )     (79 )
Others
    147       (126 )     (86 )
Net cash provided by operating activities
    597       1,071       431  
Cash flows from investing activities:
                       
Loans and advances receivable
    56       (14 )     4  
Guarantees and deposits
    (24 )     (21 )     (17 )
Additions to investments
    (9 )     (15 )     (1 )
Additions to property, plant and equipment
    (381 )     (877 )     (661 )
Proceeds from disposals of investment
          164        
Proceeds from disposals of property, plant and equipment
          7       2  
Net cash used to acquire subsidiaries
                 
Net cash used in investing activities
    (358 )     (756 )     (673 )
Cash flows from financing activities:
                       
Short term debt, net issuances (repayments)
    44       (100 )     21  
Loans
    (3 )     (18 )     (13 )
Long term debt
    665       116       239  
Repayments of long term debt
    (470 )     (390 )     (156 )
Interest attributed to stockholders
          (518 )      
Net cash used in financing activities
    236       (910 )     91  
Increase (decrease) in cash and cash equivalents
    475       (595 )     (151 )
Effect of exchange rate changes on cash and cash equivalents
    (3 )     (95 )     24  
Initial cash in new consolidated subsidiaries
    26       0        
Cash and cash equivalents, beginning of period
    585       1,939       1,249  
Cash and cash equivalents, end of period
    1,083       1,249       1,122  
Cash paid during the period for:
                       
Interest on short term debt
    (2 )     (3 )     0  
Interest on long term debt
    (80 )     (82 )     (82 )
Income tax
          (108 )     (79 )
Noncash transactions
                       
Conversion of loans receivable to investments
          (67 )     0  
Interest capitalized
    (5 )     (9 )     (15 )
Income tax paid with credits
            0       (27 )

(1Q05)

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Table of Contents

(US GAAP LOGO)

(LOGO) APPENDIX

Reconciliation of “non-GAAP” information with corresponding US GAAP figures

(1) Adjusted EBIT

                         
US$ million  
    1Q04     4Q04     1Q05  
Net operating revenues
    1,656       2,317       2,213  
COGS
    (908 )     (1,208 )     (1,247 )
SG&A
    (101 )     (133 )     (113 )
Research & development
    (23 )     (67 )     (34 )
Other operating expenses
    (41 )     (87 )     (24 )
Adjusted EBIT
    583       822       795  

(2) 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  
    1Q04     4Q04     1Q05  
Operating cash flow
    597       1,071       431  
Income tax
    97       10       160  
Monetary and foreign exchange losses
    (3 )     (169 )     (25 )
Financial expenses
    144       179       65  
Net working capital
    (56 )     (48 )     341  
Others
    (36 )     (42 )     21  
Adjusted EBITDA
    743       1,001       993  

(3) Gross debt / last 12 months adjusted EBITDA

                         
    1Q04     4Q04     1Q05  
Total debt / adjusted LTM EBITDA (x)
    1.86       1.10       1.05  
Total debt / LTM operating cash flow (x)
    2.26       1.18       1.27  

(1Q05)

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Table of Contents

(US GAAP LOGO)

(4) Adjusted LTM EBITDA / LTM interest expenses

                         
    1Q04     4Q04     1Q05  
Adjusted LTM EBITDA / LTM interest expenses (x)
    11.69       12.41       13.24  
LTM operating income / LTM interest expenses (x)
    8.96       10.41       11.12  

(5) Net debt

RECONCILIATION BETWEEN GROSS DEBT VS, NET DEBT

                         
US$ million  
    1Q04     4Q04     1Q05  
Gross debt
    4,526       4,088       4,182  
Cash and cash equivalents
    1,083       1,249       1,122  
Net debt
    3,443       2,839       3,060  

(6) Total debt / enterprise value

                         
    1Q04     4Q04     1Q05  
Total debt / EV (x)
    0.19       0.12       0.11  
Total debt / total assets (x)
    0.36       0.26       0.25  

Entreprise value = net debt + market capitalization


“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 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.”

(1Q05)

20


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 March 31, 2005 and December 31, 2004
    F-3  
 
       
Consolidated Statements of Income for the three-month periods ended March 31, 2005, December 31, 2004 and March 31,2004
    F-5  
 
       
Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2005, December 31, 2004 and March 31, 2004
    F-6  
 
       
Consolidated Statements of Changes in Stockholders’ Equity for the three-month periods ended March 31, 2005, December 31, 2004 and March 31, 2004
    F-7  
 
       
Notes to the Consolidated Financial Information
    F-8  
 
       
Supplemental Financial Information
    S-1  

F-1


Table of Contents

Report of Independent Registered
Public Accounting Firm

To the Board of Directors and Stockholders
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 March 31, 2005, and the unaudited condensed consolidated statements of income, of cash flows and of changes in stockholders’ equity for the three-month periods ended March 31, 2005, December 31, 2004 and March 31, 2004, respectively. This interim financial information is the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 the standards of the Public Company Accounting Oversight Board, 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, we are not aware of any material modifications that should be made to the condensed consolidated interim financial information referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Companhia Vale do Rio Doce and subsidiaries as of December 31, 2004, and the related consolidated statements of income, of cash flows and of changes in stockholders’ equity for the year then ended (not presented herein) and in our report dated March 21, 2005, 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, 2004 is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

PricewaterhouseCoopers
Auditores Independentes

Rio de Janeiro, Brazil
May 6, 2005

F-2


Table of Contents

Condensed Consolidated Balance Sheets
Expressed in millions of United States dollars

                 
    March     December  
    31, 2005     31, 2004  
    (unaudited)          
Assets
               
 
               
Current assets
               
 
               
Cash and cash equivalents
    1,122       1,249  
Accounts receivable
               
Related parties
    143       124  
Unrelated parties
    970       905  
Loans and advances to related parties
    24       56  
Inventories
    867       849  
Deferred income tax
    231       203  
Recoverable taxes
    272       285  
Others
    294       219  
 
           
 
    3,923       3,890  
 
           
 
               
Property, plant and equipment, net
    9,541       9,063  
 
               
Investments in affiliated companies and joint ventures and other investments, net of provision for losses on equity investments
    1,222       1,159  
 
               
Other assets
               
Goodwill on acquisition of subsidiaries
    485       486  
Loans and advances
               
Related parties
    57       55  
Unrelated parties
    55       56  
Prepaid pension cost
    193       170  
Deferred income tax
    87       70  
Judicial deposits
    546       531  
Unrealized gain on derivative instruments
    3       4  
Others
    262       231  
 
           
 
    1,688       1,603  
 
           
 
               
TOTAL
    16,374       15,715  
 
           

F-3


Table of Contents

Condensed Consolidated Balance Sheets
Expressed in millions of United States dollars
(Except number of shares)

(Continued)

                 
    March     December  
    31, 2005     31, 2004  
    (unaudited)          
Liabilities and stockholders’ equity
               
 
               
Current liabilities
               
 
               
Suppliers
    732       689  
Payroll and related charges
    105       141  
Interest attributed to stockholders
          11  
Current portion of long-term debt — unrelated parties
    711       730  
Short-term debt
    118       74  
Loans from related parties
    51       52  
Provision for taxes
    352       433  
Others
    322       325  
 
           
 
    2,391       2,455  
 
           
 
               
Long-term liabilities
               
Employees post-retirement benefits
    217       215  
Long-term debt — unrelated parties
    3,290       3,214  
Loans from related parties
    12       18  
Provisions for contingencies (Note 9)
    927       914  
Unrealized loss on derivative instruments
    206       236  
Others
    470       484  
 
           
 
    5,122       5,081  
 
           
Minority interests
    773       788  
 
           
 
               
Stockholders’ equity
               
Preferred class A stock - 1,800,000,000 no-par-value shares authorized and 415,727,739
    1,176       1,176  
Common stock - 900,000,000 no-par-value shares authorized and 749,949,429 issued
    2,121       2,121  
Treasury stock - 11,815 (2004 - 11,951) preferred and 14,145,510 common shares
    (88 )     (88 )
Additional paid-in capital
    498       498  
Other cumulative comprehensive loss
    (3,775 )     (3,774 )
Appropriated retained earnings
    4,126       4,143  
Unappropriated retained earnings
    4,030       3,315  
 
           
 
    8,088       7,391  
 
           
TOTAL
    16,374       15,715  
 
           

See notes to condensed consolidated financial information.

F-4


Table of Contents

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

                         
    Three months ended  
    March     March     December  
    31, 2005     31, 2004     31, 2004  
Operating revenues, net of discounts, returns and allowances
                       
Sales of ores and metals
    1,748       1,254       1,834  
 
                       
Revenues from logistic services
    232       191       234  
Aluminum products
    346       280       354  
Other products and services
    2       6       6  
 
                 
 
    2,328       1,731       2,428  
 
                       
Value-added tax
    (115 )     (75 )     (111 )
 
                 
Net operating revenues
    2,213       1,656       2,317  
 
                 
 
                       
Operating costs and expenses
                       
Cost of ores and metals sold
    (912 )     (643 )     (840 )
Cost of logistic services
    (143 )     (115 )     (155 )
Cost of aluminum products
    (191 )     (147 )     (210 )
Others
    (1 )     (3 )     (3 )
 
                 
 
    (1,247 )     (908 )     (1,208 )
Selling, general and administrative expenses
    (113 )     (101 )     (133 )
Research and development
    (34 )     (23 )     (67 )
Employee profit sharing plan
    (17 )     (13 )     (22 )
Others
    (7 )     (28 )     (65 )
 
                 
 
    (1,418 )     (1,073 )     (1,495 )
 
                 
Operating income
    795       583       822  
 
                 
 
                       
Non-operating income (expenses)
                       
Financial income
    29       12       41  
Financial expenses
    (92 )     (142 )     (258 )
Foreign exchange and monetary gains (losses), net
    (2 )     (42 )     275  
Gain on sale of investments
                90  
 
                 
 
    (65 )     (172 )     148  
 
                 
Income before income taxes, equity results and minority interests
    730       411       970  
 
                 
Income taxes
                       
Current
    (160 )     (97 )     (10 )
Deferred
    47       32       (386 )
 
                 
 
    (113 )     (65 )     (396 )
 
                 
 
                       
Equity in results of affiliates and joint ventures and change in provision for losses on equity investments
    133       86       179  
Minority interests
    (52 )     (27 )     (32 )
 
                 
Net income
    698       405       721  
 
                 
 
                       
Income available to preferred stockholders
    252       146       260  
Income available to common stockholders
    446       259       461  
 
                       
Basic and diluted earnings per Preferred Class A Share
    0.61       0.35       0.63  
 
                 
Basic and diluted earnings per Common Share
    0.61       0.35       0.63  
 
                 
Weighted average number of shares outstanding (thousands of shares)
                       
Preferred Class A shares
    415,716       415,713       415,716  
Common shares
    735,804       735,804       735,804  

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)

                         
    Three months ended  
    March     March     December  
    31, 2005     31, 2004     31, 2004  
Cash flows from operating activities:
                       
Net income
    698       405       721  
Adjustments to reconcile net income to cash provided by operating activities:
                       
Depreciation, depletion and amortization
    129       99       119  
Dividends received
    69       61       60  
Equity in results of affiliates and joint ventures and change in provision for losses on equity investments
    (133 )     (86 )     (179 )
Deferred income taxes
    (47 )     (32 )     386  
Provisions for other contingencies
    (3 )     16       42  
Impairment of property, plant and equipment
    4             4  
Gain on sale of investments
                (90 )
Foreign exchange and monetary losses (gains)
    27       45       (106 )
Net unrealized derivative losses (gains)
    (5 )     54       66  
Minority interests
    52       27       32  
Interest payable, net
    (2 )           38  
Others
    (17 )     (48 )     (70 )
Decrease (increase) in assets:
                       
Accounts receivable
    (92 )     (23 )     57  
Inventories
    (20 )     (15 )     (95 )
Others
    (74 )     (25 )     (76 )
Increase (decrease) in liabilities:
                       
Suppliers
    45       (25 )     288  
Payroll and related charges
    (35 )     (3 )     22  
Income taxes
    (79 )           (22 )
Others
    (86 )     147       (126 )
 
                 
Cash provided by operating activities
    431       597       1,071  
 
                 
Cash flows from investing activities:
                       
Loans and advances receivable
                       
Related parties
                       
Additions
                (21 )
Repayments
    3       41       5  
Others
    1       15       2  
Guarantees and deposits
    (17 )     (24 )     (21 )
Additions to investments
    (1 )     (9 )     (15 )
Additions to property, plant and equipment
    (661 )     (381 )     (877 )
Proceeds from disposal of investments
                164  
Proceeds from disposals of property, plant and equipment
    2             7  
 
                 
Cash used in investing activities
    (673 )     (358 )     (756 )
 
                 
Cash flows from financing activities:
                       
Short-term debt, net issuances (repayments)
    21       44       (100 )
Loans
                       
Related parties
                       
Additions
    4       3        
Repayments
    (17 )     (6 )     (18 )
Issuances of long-term debt
                       
Related parties
    4             20  
Others
    235       665       96  
Repayments of long-term debt
                       
Others
    (156 )     (470 )     (390 )
Interest attributed to stockholders
                (518 )
 
                 
Cash provided by (used in) financing activities
    91       236       (910 )
 
                 
Increase (decrease) in cash and cash equivalents
    (151 )     475       (595 )
Effect of exchange rate changes on cash and cash equivalents
    24       (3 )     (95 )
Initial cash in new consolidated subsidiary
          26        
Cash and cash equivalents, beginning of period
    1,249       585       1,939  
 
                 
Cash and cash equivalents, end of period
    1,122       1,083       1,249  
 
                 
Cash paid during the period for:
                       
Interest on short-term debt
          (2 )     (3 )
Interest on long-term debt
    (82 )     (80 )     (82 )
Income tax
    (79 )           (108 )
Non-cash transactions
                       
Interest capitalized
    (15 )     (5 )     (9 )
Income tax paid with credits
    (27 )            

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)

                         
    Three months ended  
    March     March     December 31,  
    31, 2005     31, 2004     2004  
Preferred class A stock (including three special share)
                       
 
                 
End of the period
    1,176       1,055       1,176  
 
                 
Common stock
                       
 
                 
End of the period
    2,121       1,902       2,121  
 
                 
Treasury stock
                       
 
                 
End of the period
    (88 )     (88 )     (88 )
 
                 
Additional paid-in capital
                       
End of the period
    498       498       498  
 
                 
Other cumulative comprehensive loss
                       
Cumulative translation adjustments
                       
Beginning of the period
    (3,869 )     (4,449 )     (4,296 )
Change in the period
    (22 )     (31 )     427  
 
                 
End of the period
    (3,891 )     (4,480 )     (3,869 )
 
                 
Unrealized gain on available-for-sale securities
                       
Beginning of the period
    95       74       82  
Change in the period
    21       3       13  
 
                 
End of the period
    116       77       95  
 
                 
Total other cumulative comprehensive loss
    (3,775 )     (4,403 )     (3,774 )
 
                 
Appropriated retained earnings
                       
Beginning of the period
    4,143       3,035       2,719  
Transfer (to) from retained earnings
    (17 )     (19 )     1,424  
 
                 
End of the period
    4,126       3,016       4,143  
 
                 
Retained earnings
                       
Beginning of the period
    3,315       2,857       4,268  
Net income
    698       405       721  
Interest attributed to stockholders
                       
Preferred class A stock
          (58 )     (90 )
Common stock
          (104 )     (160 )
Appropriation (to) from reserves
    17       19       (1,424 )
 
                 
End of the period
    4,030       3,119       3,315  
 
                 
Total stockholders’ equity
    8,088       5,099       7,391  
 
                 
 
                       
Comprehensive income is comprised as follows:
                       
Net income
    698       405       721  
Cumulative translation adjustments
    (22 )     (31 )     427  
Unrealized gain on available-for-sale securities
    21       3       13  
 
                 
Total comprehensive income
    697       377       1,161  
 
                 
 
                       
Shares
                       
Preferred class A stock (including three special shares)
    415,727,739       415,727,739       415,727,739  
 
                 
Common stock
    749,949,429       749,949,429       749,949,429  
 
                 
Treasury stock (1)
                       
Beginning of the period
    (14,157,461 )     (14,158,059 )     (14,157,477 )
Sales
    136             16  
 
                 
End of the period
    (14,157,325 )     (14,158,059 )     (14,157,461 )
 
                 
 
    1,151,519,843       1,151,519,109       1,151,519,707  
 
                 
 
                       
Interest attributed to stockholders (per share)
                       
Preferred class A stock (including three special shares)
          0.14       0.22  
Common stock
          0.14       0.22  


(1)   As of March 31, 2005, 14,145,510 common shares and 11,815 preferred shares were held in treasury in the amount of $ 88. The 14,145,510 common shares guarantee a loan of 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 7.
 
    The main operating subsidiaries we consolidate are as follows:
                         
            % voting          
Subsidiary   % ownership     capital     Head office location   Principal activity
Alumina do Norte do Brasil S.A. — Alunorte (“Alunorte”)
    57       61     Brazil   Alumina
Alumínio Brasileiro S.A. — Albras (“Albras”)
    51       51     Brazil   Aluminum
CADAM S.A (CADAM) (1)
    37       100     Brazil   Kaolin
CVRD Overseas Ltd.
    100       100     Cayman Island   Trading
Ferrovia Centro-Atlântica S. A.
    100       100     Brazil   Logistics
Itabira Rio Doce Company Ltd. — ITACO
    100       100     Cayman Island   Trading
Minerações Brasileiras Reunidas S.A. — MBR (2)
    56       90     Brazil   Iron ore
Navegação Vale do Rio Doce S.A. — DOCENAVE
    100       100     Brazil   Shipping
Pará Pigmentos S.A. (1)
    76       86     Brazil   Kaolin
Rio Doce International Finance Ltd. — RDIF
    100       100     Bahamas   International finance
Rio Doce Manganês S.A.
    100       100     Brazil   Manganese and Ferroalloys
Rio Doce Manganèse Europe — RDME
    100       100     France   Ferroalloys
Rio Doce Manganese Norway — RDMN
    100       100     Norway   Ferroalloys
Salobo Metais S.A.
    100       100     Brazil   Copper
Urucum Mineração S.A.
    100       100     Brazil   Iron ore, Ferroalloys and
 
                      Manganese


(1)   Through Caemi Mineração e Metalurgia S.A. CVRD holds 60.2% of the total capital and 100% of the voting capital.
 
(2)   Through Caemi Mineração e Metalurgia S.A. and Belém Administrações e Participações Ltda.

2   Basis of consolidation
 
    All majority-owned subsidiaries where we have both share and management control are consolidated, with elimination of all significant intercompany accounts and transactions. Additionally variable interest entities in which are the primary beneficiary (FASB Interpretation (FIN No. 46) “Consolidation of Variable Interest Entities (revised December 2003)”) are consolidated as from January 1, 2004. Investments in unconsolidated affiliates and joint ventures are reported at cost plus our equity in undistributed earnings or losses. Included in this category are certain joint ventures in which we have majority ownership but, by force of shareholders’ agreements, do not have effective management control. We provide for losses on equity investments with negative stockholders’ equity where applicable (Note 7).
 
    We evaluate the carrying value of our listed investments relative to publicly available quoted market prices. If the quoted market price is below book value, and such decline is considered other than temporary, we write-down our equity investments to quoted market value.
 
    We define joint ventures as businesses in which we and a small group of other partners each participate actively in the overall entity management, based on a shareholders agreement. We define affiliates as businesses in which we participate as a minority stockholder but with significant influence over the operating and financial policies of the investee.
 
    Investments in unincorporated joint ventures, formed for the purpose of investing in hydroelectric power projects, are proportionately consolidated.

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Table of Contents

3   Summary of significant accounting policies
 
    Our condensed consolidated interim financial information for the three-month periods ended March 31, 2005, December 31, 2004 and March 31, 2004 is unaudited. However, in our opinion, such condensed consolidated financial information includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for interim periods. The results of operations for the three month period ended March 31, 2005 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2005.
 
    In preparing the consolidated financial statements, we are required to use estimates to account for certain assets, liabilities, revenues and expenses. Our consolidated financial statements therefore include various estimates concerning the selection of useful lives of property, plant and equipment, provisions necessary for contingent liabilities, fair values assigned to assets and liabilities acquired in business combinations, income tax valuation allowances, employee post-retirement benefits and other similar evaluations, actual results may vary from our estimates.
 
    Exchange rates at March 31, 2005, December 31, 2004 and March 31, 2004 were R$2.6662: US$1.00, R$2.6544: US$1.00 and R$2.9086: US$1.00, respectively.
 
4   Recently-issued accounting pronouncements
 
    In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment” which sets accounting requirements for “share-based” compensation to employees, including employee-stock-purchase-plans (ESPPs) and provides guidance on accounting for awards to non-employees. We do not expect FASB No. 123R to have a significant impact on its financial position, results of operations or cash flows.
 
    In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets an amendment of APB No. 29. We will apply this Statement in the event exchanges of nonmonetary assets occur in fiscal periods beginning after June 15, 2005.
 
    In November 2004, the FASB issued SFAS No. 151, Inventory Costs an amendment of ARB No. 43, Chapter 4 that deals with inventory pricing. We have already adopted this new Statement, which did not have a significant impact on the Company’s financial position, results of operations or cash flows.
 
    In September 2004, the FASB issued FSP EITF Issue 03-1-1, which delayed the effective date of paragraphs 10-20 of EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. We do not expect EITF Issue No. 03-01 to have any impact on its financial position, results of operations or cash flows.
 
5   Income taxes
 
    Income taxes in Brazil comprise federal income tax and social contribution, which is an additional federal tax. The statutory composite enacted tax rate applicable in the periods presented is 34% represented by a 25% federal income tax rate plus a 9% social contribution rate.
 
    The amount reported as income tax expense in our consolidated financial statements is reconciled to the statutory rates as follows:

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Table of Contents

                         
    Three months ended  
    March     March     December  
    31, 2005     31, 2004     31, 2004  
Income before income taxes, equity results and minority interests
    730       411       970  
 
                 
 
                       
Federal income tax and social contribution expense at statutory enacted rates
    (248 )     (139 )     (330 )
Adjustments to derive effective tax rate:
                       
Tax benefit on interest attributed to stockholders
    54       55       65  
Exempt foreign income (expenses)
    46       14       69  
Difference on tax basis of equity investees
    (4 )     (14 )     (135 )
Tax incentives
    22       9       9  
Valuation allowance reversal (provision)
                6  
Non-taxable losses on derivative
                (57 )
Other non-taxable gains (losses)
    17       10       (23 )
 
                 
Federal income tax and social contribution expense in consolidated statements of income
    (113 )     (65 )     (396 )
 
                 

    We have certain tax incentives relative to our iron ore and manganese operations in Carajás, potash in Sergipe and relative to alumina and aluminum in Barcarena. The incentives relative to iron ore and manganese comprise full income tax exemption on defined production levels up to 2005 and partial exemption up to 2013. The incentive relating to potash and aluminum expires in 2013, while incentives relative to alumina expire 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.
 
6   Inventories
                 
    March     December  
    31, 2005     31, 2004  
Finished products
               
Iron ore and pellets
    187       205  
Manganese and ferroalloys
    158       156  
Aluminum
    51       54  
Alumina
    16       20  
Kaolin
    17       17  
Others
    20       11  
Spare parts and maintenance supplies
    418       386  
 
           
 
    867       849  
 
           

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7   Investments in affiliated companies and joint ventures
                                                                                                         
    March 31, 2005     Investments     Equity Adjustments     Dividends received        
                                                                                                    Quoted  
                                                                                                    market  
                                                    Three months ended     Three months ended     value  
    Participation in     Net     Net income for     March 31,     December     March 31,     March 31,     December     March 31,     March 31,     December     March 31,  
    capital (%)     equity     the period     2005     31, 2004     2005     2004     31, 2004     2005     2004     31, 2004     2005  
    voting     total                                                                                          
Steel
                                                                                                       
Usinas Siderúrgicas de Minas Gerais S.A. — USIMINAS
    22.99       11.46       1,588       370       182       140       42       18       62             13             497  
Companhia Siderúrgica de Tubarão — CST (1)
                                                      17       15                          
California Steel Industries Inc. — CSI
    50.00       50.00       280       22       140       149       11       (1 )     18       20             7        
SIDERAR (cost $15) — available for sale investments
    4.85       4.85                   131       110                                           131  
 
                                                                                     
 
                                    453       399       53       34       95       20       13       7       628  
 
                                                                                                       
Aluminum and bauxite
                                                                                                       
Mineração Rio do Norte S.A. — MRN
    40.00       40.00       396       38       159       171       15       11       16       28       21       13        
Valesul Alumínio S.A. — VALESUL
    54.51       54.51       106       5       58       55       3       3       3             2       3        
 
                                                                                     
 
                                    217       226       18       14       19       28       23       16        
 
                                                                                                       
Ferrous
                                                                                                       
Companhia Nipo-Brasileira de Pelotização — NIBRASCO (2)
    51.11       51.00       65       5       33       30       2       2       4                          
Companhia Hispano-Brasileira de Pelotização — HISPANOBRÁS (2)
    51.00       50.89       51       4       26       26       2       1       3       1             1        
Companhia Coreano-Brasileira de Pelotização — KOBRASCO
    50.00       50.00       31       6       16       13       3       1       4                          
Companhia Ítalo-Brasileira de Pelotização — ITABRASCO (2)
    51.00       50.90       37       1       19       18       1       1       2                          
Gulf Industrial Investment Company — GIIC
    50.00       50.00       114       23       57       45       12       4       6             6       4        
SAMARCO Mineração S.A. — SAMARCO (3)
    50.00       50.00       468       69       274       261       34       25       37       20       19       32        
Minas da Serra Geral S.A. — MSG
    50.00       50.00       40       (1 )     20       18                   (1 )                        
Others
                            21       24       (2 )     (1 )                              
 
                                                                                     
 
                                    466       435       52       33       55       21       25       37        
 
                                                                                                       
Logistics
                                                                                                       
MRS Logística S.A.
    37.23       29.35       223             65       78       10       6       11                          
Others
                            1       1                                            
 
                                                                                     
 
                                    66       79       10       6       11                          
 
                                                                                                       
Other affiliates and joint ventures
                                                                                                       
Others
                            20       20             (1 )     (1 )                        
 
                                                                                     
 
                                    20       20             (1 )     (1 )                        
 
                                                                                     
Total
                                    1,222       1,159       133       86       179       69       61       60       628  
 
                                                                                     


(1)   During 2004 CVRD sold its interest in CST;
 
(2)   CVRD held a majority of the voting power of several entities that were accounted for under the equity method in accordance with EITF 96-16 due to veto rights held by minority under shareholders agreements;
 
(3)   Investment includes goodwill of $40 in periods presented.

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Table of Contents

     
 
8   Pension costs
                         
    Three months ended  
    March     March     December  
    31, 2005     31, 2004(*)     31, 2004(*)  
Service cost — benefits earned during the period
          1        
Interest cost on projected benefit obligation
    56       47       47  
Expected return on assets
    (69 )     (53 )     (53 )
Amortization of initial transitory obligation
    3       2       2  
Net deferral
    (4 )     (6 )     (6 )
 
                 
Net periodic pension cost
    (14 )     (9 )     (10 )
 
                 


(*) Based on 2004 annual periodic pension cost.

    In addition to benefits provided under the Pension Plan, accruals have been made relative to supplementary health care benefits extended in previous periods as part of early-retirement programs. Such accruals included in long-term liabilities totaled US$217 and US$215, at March 31, 2005 and December 31, 2004, respectively, plus US$34 and US$34, respectively, in current liabilities.
 
    The cost recognized for the three-month ended March 31, 2005, March 31, 2004, and December 31, 2004 relative to the defined contribution element of the New Plan was US$2, in each period.
 
    We previously disclosed in our consolidated financial statements for the year ended December 31, 2004, that we expected to contribute US$16 to our difained benefit pension plan in 2005. As of March 31, 2005, US$5 of our contributions have been made. We do not expect any change in our previous estimate.
 
9   Commitments and contingencies
 
(a)   At March 31, 2005, we had extended guarantees for borrowings obtained by affiliates and joint ventures in the amount of $7, as follows:
                             
    Amount of   Denominated       Final   Counter
Affiliate or Joint Venture   guarantee   currency   Purpose   maturity   guarantees
SAMARCO
    6     US$   Debt guarantee     2008     None
VALESUL
    1     R$   Debt guarantee     2007     None
                         
    7                      
                         

    We expect no losses to arise as a result of the above guarantees. We charge commission for extending these guarantees in the case of Samarco.
 
    We have not provided any significant guarantees since January 1, 2003 which would require fair value adjustments under FIN 45 — “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”.
 
(b)   CVRD and its subsidiaries are defendants in numerous legal actions in the normal course of business. Based on the advice of our legal counsel, management believes that the provision made against contingent losses is sufficient to cover probable losses in connection with such actions.
 
    The provision for contingencies and the related judicial deposits are composed as follows:

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Table of Contents

                                 
    March 31, 2005     December 31, 2004  
    Provision for     Judicial     Provision for     Judicial  
    contingencies     deposits     contingencies     deposits  
Labor claims
    217       109       221       109  
Civil claims
    180       77       185       72  
Tax — related actions
    529       354       502       344  
Others
    1       6       6       6  
 
                       
                                 
 
    927       546       914       531  
 
                       

    Labor — related actions principally comprise employee claims for (i) payment of time spent travelling from their residences to the work-place, (ii) additional payments for alleged dangerous or unhealthy working conditions and (iii) various other matters, often in connection with disputes about the amount of indemnities paid upon dismissal.
 
    Civil actions principally relate to claims made against us by contractors in connection with losses alleged to have been incurred by them as a result of various past government economic plans during which full indexation of contracts for inflation was not permitted.
 
    Tax — related actions principally comprise our challenges of certain revenue taxes, VAT and of the tax on financial movements — CPMF.
 
    We continue to vigorously pursue our interests in all the above actions but recognize that probably will incur some losses in the final instance, for which we have made provisions.
 
    Our judicial deposits are made as required by the courts for us to be able to enter or continue a legal action. When judgment is favorable to us, we receive the deposits back; when unfavorable, the deposits are released to the prevailing party.
 
    Contingencies settled in the three-month period ended March 31, 2005, and 2004 and December 31, 2004 aggregated US$4, US$23 and US$67, respectively, and additional provisions aggregated US$14, US$13 and US$55, respectively.
 
    Additionally we have possible losses in connection with tax contingencies totaling US$724 at March 31, 2005, for which no provision is maintained.
 
(c)   We and BNDES entered into a contract, known as the Mineral Risk Contract, in March 1997, relating to prospecting authorizations for mining regions where drilling and exploration are still in their early stages. The Mineral Risk Contract provides for the joint development of certain unexplored mineral deposits in approximately two million identified hectares of land in the Carajás region, as well as proportional participation in any financial benefits earned from the development of such resources. Iron ore and manganese deposits already identified and subject to development are specifically excluded from the Mineral Risk Contract.
 
    Pursuant to the Mineral Risk Contract, we and BNDES each agreed to provide US$205, which represents half of the US$410 in expenditures estimated as necessary to complete geological exploration and mineral resource development projects in the region. We will oversee these projects and BNDES will advance us half of our costs on a quarterly basis. Under the Mineral Risk Contract, as of March 31, 2005, the remaining contributions towards exploration and development activities totaled $49. In the event that either of us wishes to conduct further exploration and development after having spent such US$205, the contract provides that each party may either choose to match the other party’s contributions, or may choose to have its financial interest proportionally diluted. If a party’s participation in the project is diluted to an amount lower than 40% of the amount invested in connection with exploration and development projects, then the Mineral Risk Contract provides that the diluted party will lose all the rights and benefits provided for in the Mineral Risk Contract and any amounts previously contributed to the project.

    Under the Mineral Risk Contract, BNDES has agreed to compensate us through a finder’s fee

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    production royalty on their share of mineral resources that are discovered and placed into production. This finder’s fee is equal to 3.5% of the revenues derived from the sale of gold, silver and platinum group metals and 1.5% of the revenues derived from the sale of other minerals, including copper, except for gold and other minerals discovered at Serra Leste, for which the finder’s fee is equal to 6.5% of revenues.
 
(d)   At the time of our privatization in 1997, we issued shareholder revenue interests known in Brazil as “debentures” to our then-existing shareholders, including the Brazilian Government. The terms of the “debentures”, were set to ensure that our pre-privatization shareholders, including the Brazilian Government, would participate alongside us in potential future financial benefits that we are able to derive from exploiting our mineral resources.
 
    On March 22, 2005 we declared a distribution on these “debentures” in the amount of $3, payable as from April 1, 2005.
 
(e)   We use various judgments and assumptions when measuring our environmental liabilities and asset retirement obligations. Changes in circumstances, law or technology may affect our estimates and we periodically review the amounts accrued and adjust them as necessary. Our accruals do not reflect unasserted claims because we are currently not aware of any such issues. Also the amounts provided are not reduced by any potential recoveries under cost sharing, insurance or indemnification arrangements because such recoveries are considered uncertain. The changes are demonstrated as follows:
                         
    Three months ended (unaudited)  
    March     March     December  
    31, 2005     31, 2004     31, 2004  
Environmental liabilities beginning of period
    134       81       91  
Accretion expense
    4       2       5  
Revisions in estimated cash flows
                31  
Cumulative translation adjustment
    (1 )     (1 )     7  
 
                 
Environmental liabilities end of period
    137       82       134  
 
                 

10   Segment and geographical information
 
    In 1999 we adopted SFAS 131 “Disclosures about Segments of an Enterprise and Related Information” with respect to the information we present about our operating segments. SFAS 131 introduced a “management approach” concept for reporting segment information, whereby such information is required to be reported on the basis that the chief decision-maker uses internally for evaluating segment performance and deciding how to allocate resources to segments. Our business segments are currently organized as follows:
 
    Ferrous products — comprises iron ore mining and pellet production, as well as the Northern and Southern transportation systems, including railroads, ports and terminals, as they pertain to mining operations. Manganese mining and ferroalloys are also included in this segment.
 
    Non-ferrous products – comprises the production of non-ferrous minerals, including potash, kaolin and copper.

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    Logistics – comprises our transportation systems as they pertain to the operation of our ships, ports and railroads for third-party cargos.
 
    Holdings – divided into the following sub-groups:

  •   Aluminum – comprises aluminum trading activities, alumina refining and aluminum metal smelting and investments in joint ventures and affiliates engaged in bauxite mining.
 
  •   Steel — comprises our investments in joint ventures and affiliates operating in the steel industry.
 
  •   Others — comprises our investments in joint ventures and affiliates engaged in other businesses.

    Information presented to top management with respect to the performance of each segment is generally derived directly from the accounting records maintained in accordance with accounting practices adopted in Brazil together with certain minor inter-segment allocations.

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Consolidated net income and principal assets are reconciled as follows:

Results by segment — before eliminations (Unaudited)

                                                                                                                                                                         
    As of and for the three months ended  
    March 31, 2005     March 31, 2004     December 31, 2004  
                            Holdings                                             Holdings                                             Holdings              
            Non                                                     Non                                                     Non                                
    Ferrous     ferrous     Logistics     Aluminum     Others     Eliminations     Consolidated     Ferrous     ferrous     Logistics     Aluminum     Others     Eliminations     Consolidated     Ferrous     ferrous     Logistics     Aluminum     Others     Eliminations     Consolidated  
Gross revenues — Export
    2,059       153       20       445             (1,001 )     1,676       1,562       34       19       363             (735 )     1,243       2,111       256       27       455             (1,099 )     1,750  
Gross revenues — Domestic
    386       49       228       93             (104 )     652       287       28       184       59             (70 )     488       397       45       234       68             (66 )     678  
Cost and expenses
    (1,792 )     (162 )     (158 )     (397 )           1,105       (1,404 )     (1,369 )     (53 )     (128 )     (304 )           805       (1,049 )     (1,825 )     (242 )     (194 )     (390 )     (1 )     1,165       (1,487 )
Depreciation, depletion and amortization
    (97 )     (13 )     (9 )     (10 )                 (129 )     (78 )     (6 )     (7 )     (8 )                 (99 )     (94 )     (11 )     (5 )     (9 )                 (119 )
 
                                                                                                                             
Operating (loss) income
    556       27       81       131                   795       402       3       68       110                   583       589       48       62       124       (1 )           822  
Financial income
    69       1       8       2             (51 )     29       44             4       (17 )     1       (20 )     12       105       2       4       7       1       (78 )     41  
Financial expenses
    (129 )     (1 )     (3 )     (10 )           51       (92 )     (116 )     (1 )     (4 )     (41 )           20       (142 )     (232 )     (3 )     (2 )     (99 )           78       (258 )
Foreign exchange and monetary gains (losses), net
    (5 )     3                               (2 )     (32 )           (5 )     (6 )     1             (42 )     232       4       (1 )     41       (1 )           275  
Gain on sale of investments
                                                                                                    8             82             90  
Equity in results of affiliates and joint ventures and change in provision for losses on equity investments
    52             10       18       53             133       33             6       14       33             86       55             11       19       94             179  
Income taxes
    (67 )     (2 )     (5 )     (39 )                 (113 )     (54 )           (2 )     (9 )                 (65 )     (388 )     (3 )     (3 )     (3 )     1             (396 )
Minority interests
    (24 )                 (28 )                 (52 )     (14 )     (1 )           (12 )                 (27 )     (17 )                 (15 )                 (32 )
 
                                                                                                                             
Income from continuing operations
    452       28       91       74       53             698       263       1       67       39       35             405       344       48       79       74       176             721  
 
                                                                                                                             
Net income
    452       28       91       74       53             698       263       1       67       39       35             405       344       48       79       74       176             721  
 
                                                                                                                             
 
                                                                                                                                                                       
Sales classified by geographic destination:
                                                                                                                                                                       
Export market
                                                                                                                                                                       
America, except United States
    216             11       106             (145 )     188       158             15       70             (103 )     140       207       1       19       81             (123 )     185  
United States
    126             3       78             (109 )     98       107                   38             (66 )     79       173             6       77             (122 )     134  
Europe
    824       50       6       132             (359 )     653       659       22       4       149             (312 )     522       836       24       2       164             (401 )     625  
Middle East/Africa/Oceania
    124       38             6             (51 )     117       89                               (26 )     63       104       43             8             (48 )     107  
Japan
    192       6             97             (79 )     216       150       8             80             (67 )     171       182       17             95             (74 )     220  
China
    399       28             26             (174 )     279       238       4             26             (97 )     171       453       72             30             (210 )     345  
Asia, other than Japan and China
    178       31                         (84 )     125       161                               (64 )     97       156       99                         (121 )     134  
 
                                                                                                                             
 
    2,059       153       20       445             (1,001 )     1,676       1,562       34       19       363             (735 )     1,243       2,111       256       27       455             (1,099 )     1,750  
Domestic market
    386       49       228       93             (104 )     652       287       28       184       59             (70 )     488       397       45       234       68             (66 )     678  
 
                                                                                                                             
 
    2,445       202       248       538             (1,105 )     2,328       1,849       62       203       422             (805 )     1,731       2,508       301       261       523             (1,165 )     2,428  
 
                                                                                                                             
 
                                                                                                                                                                       
Assets:
                                                                                                                                                                       
 
Property, plant and equipment, net
    6,192       1,403       690       1,255       1             9,541       4,646       1,060       455       854       1             7,016       5,838       1,386       674       1,164       1             9,063  
Additions to Property, plant and equipment
    368       29       42       109                   548       156       71       132       22                   381       406       208       180       82       1             877  
Investments in affiliated companies and joint ventures and other investments, net of provision
    466             66       217       473             1,222       353             51       207       343             954       435             79       226       419             1,159  
 
                                                                                                                             
Capital employed
    5,275       918       682       975       (27 )           7,823       4,298       245       404       819       28             5,794       4,544       1,099       680       976       27             7,326  

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Operating income by product – after eliminations (unaudited)

                                                                                                                                                                                                                         
                As of and for the three months ended  
    March 31, 2005     March 31, 2004     December 31, 2004  
            Revenues     Value                             Depreciation,                     Revenues     Value                             Depreciation,                     Revenues     Value                             Depreciation,        
                            added     Net     Cost and             depletion and     Operating                             added     Net     Cost and             depletion and     Operating                             added     Net     Cost and             depletion and     Operating  
    Export     Domestic     Total     tax     revenues     expenses     Net     amortization     income     Export     Domestic     Total     tax     revenues     expenses     Net     amortization     income     Export     Domestic     Total     tax     revenues     expenses     Net     amortization     income  
Ferrous
                                                                                                                                                                                                                       
Iron ore
    865       225       1,090       (30 )     1,060       (529 )     531       (84 )     447       652       174       826       (23 )     803       (385 )     418       (70 )     348       882       251       1,133       (33 )     1,100       (519 )     581       (78 )     503  
Pellets
    267       74       341       (11 )     330       (237 )     93       (3 )     90       183       52       235       (8 )     227       (172 )     55       (3 )     52       230       71       301       (13 )     288       (206 )     82       (7 )     75  
Manganese
    16       4       20       (2 )     18       (9 )     9             9       6       3       9       (1 )     8       (7 )     1             1       31       5       36       1       37       (15 )     22             22  
Ferroalloys
    102       51       153       (14 )     139       (82 )     57       (3 )     54       91       31       122       (8 )     114       (86 )     28       (4 )     24       116       61       177       (16 )     161       (114 )     47       (5 )     42  
 
                                                                                                                                                                 
 
    1,250       354       1,604       (57 )     1,547       (857 )     690       (90 )     600       932       260       1,192       (40 )     1,152       (650 )     502       (77 )     425       1,259       388       1,647       (61 )     1,586       (854 )     732       (90 )     642  
 
                                                                                                                                                                                                                       
Non ferrous
                                                                                                                                                                                                                       
Gold
                                                                                                                                              (2 )     (2 )           (2 )
Potash
          30       30       (3 )     27       (14 )     13       (2 )     11             23       23       (3 )     20       (9 )     11       (2 )     9             35       35       (1 )     34       (13 )     21       (1 )     20  
Kaolin
    34       5       39       (2 )     37       (20 )     17       (10 )     7       34       5       39       (2 )     37       (22 )     15       (3 )     12       38       7       45       (2 )     43       (27 )     16       (3 )     13  
Copper
    61       14       75       (3 )     72       (40 )     32       (8 )     24                                                             104       3       107             107       (46 )     61       (7 )     54  
 
                                                                                                                                                                 
 
    95       49       144       (8 )     136       (74 )     62       (20 )     42       34       28       62       (5 )     57       (31 )     26       (5 )     21       142       45       187       (3 )     184       (88 )     96       (11 )     85  
 
                                                                                                                                                                                                                       
Aluminum
                                                                                                                                                                                                                       
Alumina
    114       22       136       (8 )     128       (98 )     30       (6 )     24       98       6       104       (5 )     99       (90 )     9       (4 )     5       131       10       141       (5 )     136       (92 )     44       (5 )     39  
Aluminum
    191       9       200       (1 )     199       (90 )     109       (4 )     105       150       11       161             161       (54 )     107       (4 )     103       191       9       200       (1 )     199       (111 )     88       (4 )     84  
Bauxite
    10             10             10       (9 )     1             1       15             15             15       (13 )     2             2       13             13             13       (13 )                  
 
                                                                                                                                                                 
 
    315       31       346       (9 )     337       (197 )     140       (10 )     130       263       17       280       (5 )     275       (157 )     118       (8 )     110       335       19       354       (6 )     348       (216 )     132       (9 )     123  
 
                                                                                                                                                                                                                       
Logistics
                                                                                                                                                                                                                       
Railroads
          159       159       (27 )     132       (91 )     41       (8 )     33             133       133       (19 )     114       (66 )     48       (8 )     40             162       162       (29 )     133       (99 )     34       (7 )     27  
Ports
          46       46       (9 )     37       (26 )     11       (1 )     10             38       38       (3 )     35       (23 )     12       (1 )     11             47       47       (8 )     39       (25 )     14       (1 )     13  
Ships
    15       12       27       (2 )     25       (25 )                       11       9       20       (3 )     17       (27 )     (10 )           (10 )     15       10       25       (2 )     23       (46 )     (23 )     (1 )     (24 )
 
                                                                                                                                                                 
 
                                                                                                                                                                                                                       
 
    15       217       232       (38 )     194       (142 )     52       (9 )     43       11       180       191       (25 )     166       (116 )     50       (9 )     41       15       219       234       (39 )     195       (170 )     25       (9 )     16  
Others
    1       1       2       (3 )     (1 )     (19 )     (20 )           (20 )     3       3       6             6       (20 )     (14 )           (14 )           6       6       (2 )     4       (48 )     (44 )           (44 )
 
                                                                                                                                                                 
 
    1,676       652       2,328       (115 )     2,213       (1,289 )     924       (129 )     795       1,243       488       1,731       (75 )     1,656       (974 )     682       (99 )     583       1,751       677       2,428       (111 )     2,317       (1,376 )     941       (119 )     822  
 
                                                                                                                                                                 

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11   Derivative financial instruments
 
    Volatility of interest rates, exchange rates and commodity prices are the main market risks to which we are exposed — all three are managed through derivative operations. These have the exclusive aim of reducing exposure to risk. We do not use derivatives for speculation purposes.
 
    We monitor and evaluate our derivative positions on a regular basis and adjust our strategy in response to market conditions. We also periodically review the credit limits and credit worthiness of our counter-parties in these transactions. In view of the policies and practices established for operations with derivatives, management considers the occurrence of non- measurable risk situations as unlikely.
 
    The asset (liability) balances and the movement in fair value of derivative financial instruments are as follows (the quarterly information is unaudited):
                                                 
            Interest                          
            rates                          
    Gold     (LIBOR)     Currencies     Alumina     Aluminum     Total  
Unrealized gains (losses) at January 1, 2005
    (37 )     (17 )     4       (55 )     (127 )     (232 )
Financial settlement
    2       3             8       10       23  
Unrealized gains (losses) in the period
    3       2       (1 )     (3 )     4       5  
Effect of exchange rate changes
    1                               1  
 
                                   
 
                                               
Unrealized gains (losses) at March 31, 2005
    (31 )     (12 )     3       (50 )     (113 )     (203 )
 
                                   
 
                                               
Unrealized gains (losses) at January 1, 2004
    (32 )     (46 )     5       (18 )           (91 )
Initial consolidation of Albras
                            (20 )     (20 )
Financial settlement
          3       (2 )                 1  
Unrealized gains (losses) in the period
    (5 )     (6 )     (2 )     (18 )     (23 )     (54 )
Effect of exchange rate changes
          1                         1  
 
                                   
 
                                               
Unrealized gains (losses) at March 31, 2004
    (37 )     (48 )     1       (36 )     (43 )     (163 )
 
                                   
 
                                               
Unrealized gains (losses) at October 1, 2004
    (32 )     (31 )     1       (37 )     (65 )     (164 )
Financial settlement
    4       12                         16  
Unrealized gains (losses) in the period
    (5 )     3       3       (14 )     (54 )     (67 )
Effect of exchange rate changes
    (4 )     (1 )           (4 )     (8 )     (17 )
 
                                   
 
                                               
Unrealized gains (losses) at December 31, 2004
    (37 )     (17 )     4       (55 )     (127 )     (232 )
 
                                   

Unrealized gains (losses) in the period are included in our income statement under the caption of financial expenses.

Final maturity dates for the above instruments are as follows:

         
Gold
  Dec 2008
Interest rates (LIBOR)
  Oct 2007
Currencies
  Dec 2011
Alumina
  Dec 2008
Aluminum
  Dec 2008

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12   Subsequent Event

  a)   On April 7, 2005, we increased our Program of Committed Bank Facilities from US$500 to US$750. However, since the beginning of the Program, in May 2004, we have never made use of the credit lines available.
 
  b)   On April 27, 2005, in an extraordinary shareholders’ meeting, a capital increase of $ 2,659 was approved without issue new shares, via a transfer from appropriated retained earnings.
 
  c)   On April 29, 2005 we paid the first installment of the minimum mandatory dividend for 2005 of US$ 506, equivalent to US$ 0.438 per outstanding preferred and common share. The distribution was made in the form of interest on stockholders’ equity.

* * *

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Supplemental Financial Statements

The following unaudited information provides additional details in relation to certain financial ratios.

EBITDA – Earnings Before Interest, Income Tax, Depreciation and Amortization

(a)   EBITDA represents operating income plus depreciation, amortization and depletion plus impairment/gain on sale of property, plant and equipment plus dividends received from equity investees.
 
(b)   EBITDA is not a US GAAP measure and does not represent cash flow for the periods presented and should not be considered as an alternative to net income (loss), as an indicator of our operating performance or as an alternative to cash flow as a source of liquidity.
 
(c)   Our definition of EBITDA may not be comparable with EBITDA as defined by other companies.
 
(d)   Although EBITDA, as defined above, does not provide a US GAAP measure of operating cash flows, our management uses it to measure our operating performance and it is commonly used by financial analysts in evaluating our business.

Selected financial indicators for the main affiliates and joint ventures are available on the Company ´s website, www.cvrd.com.br, under “investor relations”

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CVRD’s Consolidated Debt Indices(Additional information — Unaudited)


                         
    As of and for the three months ended  
    March 31,             December 31,  
    2005     March 31, 2004     2004  
Current debt
                       
Current portion of long-term debt — unrelated parties
    711       844       730  
Short-term debt
    118       171       74  
Loans from related parties
    51       50       52  
 
                 
 
    880       1,065       856  
 
                       
Long-term debt
                       
Long-term debt — unrelated parties
    3,290       3,458       3,214  
Loans from related parties
    12       3       18  
 
                 
 
    3,302       3,461       3,232  
 
                 
Gross debt (current plus long-term debt)
    4,182       4,526       4,088  
 
                 
 
                       
Interest paid over:
                       
Short-term debt
          (2 )     (3 )
Long-term debt
    (82 )     (80 )     (82 )
 
                 
Interest paid
    (82 )     (82 )     (85 )
 
                       
EBITDA
    993       743       1,001  
Stockholders’ equity
    8,088       5,099       7,391  
EBITDA / LTM Interest paid
    13.24       11.69       12.41  
Gross Debt / LTM EBITDA
    1.05       1.86       1.10  
Gross debt / Equity Capitalization (%)
    36       47       36  
 
                       
Financial expenses
                       
Third party — local debt
    (10 )     (13 )     (11 )
Third party — foreign debt
    (38 )     (43 )     (52 )
Related party debt
    (2 )     (2 )      
 
                 
Gross interest
    (50 )     (58 )     (63 )
Labor and civil claims and tax-related actions
    (11 )     (6 )     (11 )
Tax on financial transactions — CPMF
    (9 )     (4 )     (11 )
Derivatives (Interest rate / Currencies)
    2       (34 )     6  
Derivatives (gold / alumina / aluminum)
    3       (25 )     (73 )
Others
    (27 )     (15 )     (106 )
 
                 
 
    (92 )     (142 )     (258 )
 
                 
 
                       
Financial income
                       
Cash and cash equivalents
    14       9       20  
Others
    15       3       21  
 
                 
 
    29       12       41  
 
                 
Financial expenses, net
    (63 )     (130 )     (217 )
 
                 
 
                       
Foreign exchange and monetary gain (losses) on liabilities
    (30 )     (65 )     370  
Foreign exchange and monetary gain (losses) on assets
    28       23       (95 )
 
                 
Foreign exchange and monetary gain (losses), net
    (2 )     (42 )     275  
 
                 
Financial result, net
    (65 )     (172 )     58  
 
                 

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Calculation of EBITDA (Additional information — Unaudited)


                         
    As of and for the three months ended  
    March     March     December 31,  
    31, 2005     31, 2004     2004  
Operating income
    795       583       822  
Depreciation
    129       99       119  
 
                 
 
    924       682       941  
 
                       
Write-down of assets
                 
Dividends received
    69       61       60  
 
                 
EBITDA
    993       743       1,001  
 
                 
 
                       
Net operating revenues
    2,213       1,656       2,317  
Margin EBITDA
    44.9 %     44.9 %     43.2 %
Margin EBIT
    35.9 %     35.2 %     35.5 %

Adjusted EBITDA x Operating Cash Flows (Additional information — Unaudited)


                                                 
    As of and for the three months ended  
    March 31, 2005     March 31, 2004     December 31, 2004  
            Operating             Operating             Operating  
            cash             cash             cash  
    EBITDA     flows     EBITDA     flows     EBITDA     flows  
Net income
    698       698       405       405       721       721  
Income tax
    (47 )     (47 )     (32 )     (32 )     386       386  
Income tax cash
    160             97             10        
Equity in results of affiliates and joint ventures and change in provision for losses on equity investments
    (133 )     (133 )     (86 )     (86 )     (179 )     (179 )
Foreign exchange and monetary losses
    2       27       42       45       (275 )     (106 )
Financial expenses
    63       (2 )     130       (14 )     217       38  
Minority interests
    52       52       27       27       32       32  
Gain on sold of investments
                            (90 )     (90 )
Net working capital
          (341 )           56             48  
Others
          (21 )           36             42  
 
                                   
 
                                               
Operating income
    795       233       583       437       822       892  
Depreciation, depletion and amortization
    129       129       99       99       119       119  
Dividends received
    69       69       61       61       60       60  
Impairment of property, plant and equipment
                                   
 
                                   
 
    993       431       743       597       1,001       1,071  
 
                                   
 
                                               
Operating cash flows
            431               597               1,071  
 
                                         
Income tax
            160               97               10  
Foreign exchange and monetary losses
            (25 )             (3 )             (169 )
Financial expenses
            65               144               179  
Net working capital
            341               (56 )             (48 )
Others
            21               (36 )             (42 )
 
                                         
EBITDA
            993               743               1,001  
 
                                         

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Board of Directors, Fiscal Council and Executive Officers

     
Board of Directors   Fiscal Council
     
Sérgio Ricardo Silva Rosa
  José Bernardo de Medeiros Neto
Chairman
   
 
   
Arlindo Magno de Oliveira
  Marcelo Amaral Moraes
 
   
Eduardo Fernando Jardim Pinto
  Oswaldo Mário Pêgo de Amorim Azevedo
 
   
Erik Persson
  Joaquim Vieira Ferreira Levy
 
   
Francisco Augusto da Costa e Silva
   
 
   
Jaques Wagner
   
  Executive Officers
Hiroshi Tada
   
  Roger Agnelli
Mário da Silveira Teixeira Júnior
  Chief Executive Officer
 
   
Oscar Augusto de Camargo Filho
  Murilo de Oliveira Ferreira
  Executive Officer for Equity Holdings and
Renato da Cruz Gomes
  Business Development
 
   
Jorge Luiz Pacheco
  José Carlos Martins
  Executive Officer for Ferrous Minerals
 
   
Advisory Committees of the Board of Directors
  Carla Grasso
  Executive Officer for Human Resources and
Audit Committee
  Corporate Services
Antonio José de Figueiredo Ferreira
   
Heitor Ribeiro Filho
  José Lancaster
Inácio Clemente da Silva
  Executive Officer for Non-Ferrous Minerals
Paulo Roberto Ferreira de Medeiros
   
  Fábio de Oliveira Barbosa
Executive Development Committee
  Chief Financial Officer
Arlindo Magno de Oliveira
   
Francisco Valadares Póvoa
  Gabriel Stoliar
João Moisés de Oliveira
  Executive Officer for Planning
Olga Nietta Loffredi
   
Oscar Augusto de Camargo Filho
  Guilherme Rodolfo Laager
  Executive Officer for Logistics
Strategic Committee
   
Roger Agnelli
   
Gabriel Stoliar
   
Cézar Manoel de Medeiros
   
José Roberto Mendonça de Barros
   
Luciano Coutinho
   
  Otto de Souza Marques Junior
Finance Committee
  Chief Officer of Control Department
Roger Agnelli
   
Fábio de Oliveira Barbosa
   
Rômulo de Mello Dias
  Marcus Vinícius Dias Severini
Wanderlei Viçoso Fagundes
  Chief Accountant
Wanderley Rezende de Souza
  CRC-RJ 093892/O-3
 
   
Governance and Ethics Committee
   
Renato da Cruz Gomes
   
Ricardo Simonsen
   
Ricardo Carvalho Giambroni
   

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

         
  COMPANHIA VALE DO RIO DOCE
      (Registrant)
 
 
  By:   /s/ Fabio de Oliveira Barbosa    
Date: May 17, 2005    Fabio de Oliveira Barbosa   
    Chief Financial Officer