(Adds executive's comments, company background, share price)
By Stephen Eisenhammer
RIO DE JANEIRO, July 30 (Reuters) - Vale SA, the world's biggest iron ore producer, returned to profit in the second quarter, bolstered by higher output and cost cuts as it kept up pressure on Australian rivals in its fight for market share.
But as the Brazilian miner battles to increase margins, Vale said iron ore production next year will likely be less than the 376 million tonnes it had previously forecast.
"Probably we'll be between the guidance we gave... and the 340 million tonnes we are producing in 2015," iron ore chief Peter Poppinga told analysts on a conference call, adding the company was phasing out higher-cost production.
Vale overcame a slump in iron ore prices to report a net profit of $1.68 billion on Thursday, moving into the black for the first time in a year. That was a jump of 17.3 percent from the same quarter a year ago, and more than four times the average forecast of $408 million of six analysts in a Reuters poll.
The performance "shows the company is prepared for the challenging commodities scenario," Chief Financial Officer Luciano Siani said.
A big part of the improved result was a reduction in cash costs, with Vale lowering its cost of producing a tonne of iron ore to $15.8 per tonne, from $18.3 per tonne in the first quarter.
With the iron ore price .IO62-CNI=SI about half of its year-ago level, mining companies have focused on reducing costs to survive the slump.
For Vale, one of the lowest-cost producers of the steelmaking raw material alongside Australia's Rio Tinto and BHP Billiton, the result was a welcome boost after a string of quarterly losses.
"Management is delivering on its promises," Citigroup analysts Alexander Hacking and Thiago Ojea said in a note.
The results come a week after the Rio de Janeiro-based company announced record mine output for the second quarter.
Crucially, Vale said its realized price, a measure of how much it earned on ore sales, rose to $50.6 per tonne, from $46 per tonne in the first quarter.
The company also sold a stake in its subsidiary MBR for 4 billion reais ($1.2 billion), helping to cover a cash shortfall as Vale invests in a new iron ore mine in the Amazon, the largest project in its history.
Vale shares rose as much as 5 percent but pared gains to trade up 0.3 percent at 15.16 reais at midday. ($1 = 3.37 Brazilian reais) (Reporting by Stephen Eisenhammer and Jeb Blount; Additional reporting by Marta Nogueira; Editing by Bernadette Baum and Matthew Lewis)