Goncalves: Cliffs positioned to succeed, despite irrational cycles
Cleveland-Cliffs Inc. reported consolidated revenues of $556 million compared with the prior year's third-quarter consolidated revenues of $742 million. Cost of goods sold was $401 million compared with $480 million reported in the third quarter of 2018.
The company recorded net income of $91 million, or 33 cents per diluted share versus $438 million, or $1.41 per diluted share, recorded in the prior-year quarter, which included a one-time gain of $228 million related to historical changes in foreign currency translation.
For the nine months ended Sept. 30, net income was $230 million, compared with $519 million during the same period in 2018.
The company has returned $325 million to shareholders this year via dividends. Cleveland-Cliffs added a special dividend to its regular quarterly dividend last week.
"This past quarter was a story of continued execution at both the operational level and at our HBI site under construction in Toledo. While irrational behavior by one major supplier in the pellet marketplace (Vale) has dampened the Atlantic Basin pellet premium, our business remains on solid footing with a very strong balance sheet supporting our world-class operations in Minnesota and in Michigan," Chairman, President and CEO Lourenco Goncalves said in the report. "We believe the currently weak steel prices in the United States are temporary, and the cyclicality associated with our business should be largely mitigated as we start-up HBI next year. With that, Cliffs is well-positioned to become an even stronger free-cash-flow generating enterprise, with limited cash needs and the ability to return even more capital to our shareholders."Mining and pelletizing
Sales volume in the third quarter of 2019 was 5.8 million long tons, an 11 percent decrease from the prior-year quarter on reduced customer nominations, partially offset by intercompany sales to the Toledo HBI plant.
Realized revenues were $96 per long ton in the third quarter of 2019. The quarter's results were negatively impacted by an unfavorable true-up of previously sold volumes due to lower pellet premiums and HRC prices.Outlook
Cliffs expects to realize mining and pelletizing revenue rates in the range of $101 to $106 per long ton. Assuming spot prices as of Oct. 22, including an iron ore price of $86 per metric ton, a hot-rolled coil steel price of $479 per short ton, and a pellet premium of $36 per metric ton, will average these levels for the remainder of 2019, Cliffs would expect to realize mining and pelletizing revenue rates in the range of $97 to $102 per long ton for the full-year 2019.
The 2019 sales volume expectation was revised from 20 million long tons to 19.5 million, driven by substandard seaborne export economics and timing. The company does not prefer volume to income, Goncalves said, so it did not export pellets when prices were unfavorable.
"What Vale has done negatively affects not only itself, but other merchants," he added, noting that it's 65 percent Atlantic Basin pellet premium "backfired badly." But he conceded Vale's "irrational behavior" can't be predicted.
He also condemned Chinese mills for creating excessive pollution. Those mills profit by ignoring pollution controls and by receiving governmental subsidies.
"China continues to get a free pass to pollute the world," Goncalves said. "They're making the planet a worse place to live," he added, saying Chinese mills should be criticized by the media and large corporations and institutional investors.
Cliffs' full-year 2019 mining and pelletizing cash cost of goods sold was maintained at $62 to $67 per long ton.
Cliffs' full-year 2019 SG&A expense expectation of $120 million is being maintained. Cliffs also notes that of the $120 million expectation, approximately $20 million is considered non-cash. The company's full-year 2019 net interest expense expectation is maintained at $100 million. Full-year 2019 depreciation, depletion and amortization is expected to be approximately $85 million.
The company has lowered its effective tax rate expectation for 2019 to approximately 10 percent, from its previous expectation of 12-14 percent. Due to the company's NOL position, its cash tax payments are expected to be zero.
Cliffs' 2019 total capital expenditures expectation was reduced to approximately $625-$675 million, from its previous expectation of $650-$700 million. When the plant is completed, CAPEX will be budgeted at about $100 million.HBI
The Cliffs HBI plant, now under construction in Toledo, is on track to be completed by mid-2020, Goncalves said, positioning the firm to serve both the blast furnace and electric arc furnace steel sectors.
This year, he explained, none of its customers have idled their blast furnaces.
More News in Business
Cigna Corporation (NYSE:CI) has its shares plummet by -24.81% or $56.22 from its all-time high of $226.6, with CI attaining that price back on December 03, 2018. The drop in the price of the shares
Cleveland-Cliffs (NYSE:CLF) posted its quarterly earnings results on Wednesday. The mining company reported $0.33 earnings per share (EPS) for the quarter, topping analysts' consensus estimates of $0.24 by $0.09, RTT News reports. The firm had
The Gluten Market report provides an unbiased and detailed analysis of the on-going trends, opportunities/ high growth areas, market drivers, which would help stakeholders to device and align Gluten market strategies according to the
Buckeye Partners, L.P. (BPL) making a luring appeal, share price swings at $41.43 with percentage change of -0.02% during Tuesday trading session . Along recent down drift, stock price presented -2.86% negative comparing value from
Tiffany's little blue box just got bigger as the luxury brand has just introduced a four-foot-tall advent calendar. Town&Country: [It] features a stylish screen-printed rendering of the façade of the brand's New York Flagship store,