- Second-quarter revenue of $6.3 billion
- Second-quarter net income of $601 million
- Second-quarter Adjusted EBITDA1 of $1.1 billion
Cleveland-Cliffs Inc. (NYSE: CLF) today reported
second-quarter results for the period ended June 30, 2022.
Second-quarter 2022 consolidated revenues were $6.3 billion,
compared to the prior-year second-quarter revenues of $5.0
billion.
For the second quarter of 2022, the Company recorded net income
of $601 million, or $1.13 per diluted share attributable to Cliffs
shareholders. This included the following one-time charges totaling
$95 million, or $0.18 per diluted share:
- charges of $66 million, or $0.13 per diluted share, for debt
extinguishment costs;
- charges of $23 million, or $0.04 per diluted share, in
accelerated depreciation related to the indefinite idle of the
Middletown coke facility; and
- charges of $6 million, or $0.01 per diluted share, for
severance costs.
In the prior-year second quarter, the Company recorded net
income of $795 million, or $1.33 per diluted share.
For the six months ended June 30, 2022, the Company recorded
revenues of $12.3 billion and net income of $1.4 billion, or $2.64
per diluted share. In the first six months of 2021, the Company
recorded revenues of $9.1 billion and net income of $852 million,
or $1.42 per diluted share.
Second-quarter 2022 Adjusted EBITDA1 was $1.1 billion, compared
to Adjusted EBITDA1 of $1.4 billion in the second quarter of 2021.
For the first six months of 2022, the Company reported Adjusted
EBITDA1 of $2.6 billion, compared to $1.9 billion for the same
period in 2021.
(In Millions)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
Adjusted EBITDA1
Steelmaking
$
1,108
$
1,360
$
2,531
$
1,862
Other Businesses
20
8
49
19
Eliminations (A)
2
(8
)
1
(8
)
Total Adjusted EBITDA1
$
1,130
$
1,360
$
2,581
$
1,873
(A) Starting in 2022 the Company has
allocated Corporate SG&A to its operating segments. Prior
periods have been adjusted to reflect this change. The Eliminations
line now only includes sales between segments.
Lourenco Goncalves, Cliffs' Chairman, President, and CEO said:
“Our second quarter results demonstrate the continued execution of
our strategy. With free cash flow that more than doubled compared
to the first quarter, we were able to achieve our largest quarterly
debt reduction since our transformation began a couple years ago,
while delivering substantial capital returns via share repurchases.
As we move into the second half of the year, we expect this healthy
level of free cash flow to continue, as a result of declining capex
needs, the accelerating release of working capital, and the heavy
use of fixed price sales contracts. In addition, we expect to see
further significant increases in the average selling prices for
these fixed contracts resetting on October 1st.”
Mr. Goncalves continued: “Our industry leading exposure to the
automotive sector separates us from all other steel companies in
the United States. The health of the steel market over the past
year and a half has been largely driven by the construction sector,
with automotive lagging far behind -- mainly due to supply chain
issues unrelated to steel. Nevertheless, with automotive demand
outpacing production for more than two years now, the consumer
backlog for cars, SUVs and trucks has become enormous. As supply
chain problems continue to be resolved by our automotive clients,
pent-up demand for electric vehicles continues to increase, and
light vehicle manufacturing catches up with demand,
Cleveland-Cliffs will be the primary beneficiary among all steel
companies in the United States. This important distinction of our
business relative to other steel producers should become clear as
we progress through the remainder of this year and into next
year.”
Steelmaking
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
External Sales Volumes
Steel Products (net tons)
3,641
4,205
7,278
8,349
Selling Price - Per Net Ton
Average net selling price per net ton of
steel products
$
1,487
$
1,118
$
1,466
$
1,017
Operating Results - In Millions
Revenues
$
6,176
$
4,922
$
11,970
$
8,841
Cost of goods sold
(5,209
)
(3,730
)
(9,781
)
(7,374
)
Gross margin
$
967
$
1,192
$
2,189
$
1,467
Second-quarter 2022 steel product sales volumes of 3.6 million
net tons consisted of 33% coated, 28% hot-rolled, 16% cold-rolled,
7% plate, 5% stainless and electrical, and 11% other, including
slabs and rail.
Steelmaking revenues of $6.2 billion included $1.8 billion, or
30%, of sales to the distributors and converters market; $1.6
billion, or 27%, of direct sales to the automotive market; $1.6
billion, or 26%, of sales to the infrastructure and manufacturing
market; and $1.1 billion, or 17%, of sales to steel producers.
Steelmaking COGS included $242 million in excess/idle costs. The
largest portion of this was related to the expanded scope of the
Cleveland blast furnace #5 outage, which included additional
repairs to the wastewater treatment plant and powerhouse located
onsite. The Company also saw quarter-over-quarter and
year-over-year increases in costs including natural gas,
electricity, scrap and alloys.
Liquidity and Cash Flow
As of July 19, 2022, the Company had total liquidity of
approximately $2.3 billion.
During the second quarter of 2022, Cliffs completed open market
repurchases of $307 million aggregate principal amount of assorted
series of its outstanding senior notes at an average price of 92%
of par. Cliffs also completed the redemption of its 9.875% secured
notes due 2025, retiring all $607 million in principal notes
outstanding.
In addition, Cliffs repurchased 7.5 million shares at an average
price of $20.92 per share during the second quarter of 2022. As of
June 30, 2022, the company had approximately 517 million shares
outstanding.
The Company paid cash taxes of approximately $300 million during
the quarter.
Outlook
Based on the current 2022 futures curve, which implies an
average hot-rolled coil steel index price of $850 per net ton for
the remainder of the year, the Company would expect its full-year
2022 average selling price to be approximately $1,410 per net ton.
This incorporates the Company's expectation of substantial
increases in fixed price contracts resetting on October 1,
2022.
Conference Call Information
Cleveland-Cliffs Inc. will host a conference call this morning,
July 22, 2022, at 10 a.m. ET. The call will be broadcast live and
archived on Cliffs' website: www.clevelandcliffs.com.
About Cleveland-Cliffs Inc.
Cleveland-Cliffs is the largest flat-rolled steel producer in
North America. Founded in 1847 as a mine operator, Cliffs also is
the largest manufacturer of iron ore pellets in North America. The
Company is vertically integrated from mined raw materials, direct
reduced iron, and ferrous scrap to primary steelmaking and
downstream finishing, stamping, tooling, and tubing. We are the
largest supplier of steel to the automotive industry in North
America and serve a diverse range of other markets due to our
comprehensive offering of flat-rolled steel products. Headquartered
in Cleveland, Ohio, Cleveland-Cliffs employs approximately 27,000
people across its operations in the United States and Canada.
Forward-Looking Statements
This release contains statements that constitute
"forward-looking statements" within the meaning of the federal
securities laws. All statements other than historical facts,
including, without limitation, statements regarding our current
expectations, estimates and projections about our industry or our
businesses, are forward-looking statements. We caution investors
that any forward-looking statements are subject to risks and
uncertainties that may cause actual results and future trends to
differ materially from those matters expressed in or implied by
such forward-looking statements. Investors are cautioned not to
place undue reliance on forward-looking statements. Among the risks
and uncertainties that could cause actual results to differ from
those described in forward-looking statements are the following:
continued volatility of steel, iron ore and scrap metal market
prices, which directly and indirectly impact the prices of the
products that we sell to our customers; uncertainties associated
with the highly competitive and cyclical steel industry and our
reliance on the demand for steel from the automotive industry,
which has been experiencing a trend toward light weighting and
supply chain disruptions, such as the semiconductor shortage, that
could result in lower steel volumes being consumed; potential
weaknesses and uncertainties in global economic conditions, excess
global steelmaking capacity, oversupply of iron ore, prevalence of
steel imports and reduced market demand, including as a result of
the prolonged COVID-19 pandemic, conflicts or otherwise; severe
financial hardship, bankruptcy, temporary or permanent shutdowns or
operational challenges, due to the ongoing COVID-19 pandemic or
otherwise, of one or more of our major customers, including
customers in the automotive market, key suppliers or contractors,
which, among other adverse effects, could lead to reduced demand
for our products, increased difficulty collecting receivables, and
customers and/or suppliers asserting force majeure or other reasons
for not performing their contractual obligations to us; disruptions
to our operations relating to the ongoing COVID-19 pandemic,
including the heightened risk that a significant portion of our
workforce or on-site contractors may suffer illness or otherwise be
unable to perform their ordinary work functions; risks related to
U.S. government actions with respect to Section 232 of the Trade
Expansion Act of 1962 (as amended by the Trade Act of 1974), the
United States-Mexico-Canada Agreement and/or other trade
agreements, tariffs, treaties or policies, as well as the
uncertainty of obtaining and maintaining effective antidumping and
countervailing duty orders to counteract the harmful effects of
unfairly traded imports; impacts of existing and increasing
governmental regulation, including potential environmental
regulations relating to climate change and carbon emissions, and
related costs and liabilities, including failure to receive or
maintain required operating and environmental permits, approvals,
modifications or other authorizations of, or from, any governmental
or regulatory authority and costs related to implementing
improvements to ensure compliance with regulatory changes,
including potential financial assurance requirements; potential
impacts to the environment or exposure to hazardous substances
resulting from our operations; our ability to maintain adequate
liquidity, our level of indebtedness and the availability of
capital could limit our financial flexibility and cash flow
necessary to fund working capital, planned capital expenditures,
acquisitions, and other general corporate purposes or ongoing needs
of our business; our ability to reduce our indebtedness or return
capital to shareholders within the currently expected timeframes or
at all; adverse changes in credit ratings, interest rates, foreign
currency rates and tax laws; the outcome of, and costs incurred in
connection with, lawsuits, claims, arbitrations or governmental
proceedings relating to commercial and business disputes,
environmental matters, government investigations, occupational or
personal injury claims, property damage, labor and employment
matters, or suits involving legacy operations and other matters;
uncertain cost or availability of critical manufacturing equipment
and spare parts; supply chain disruptions or changes in the cost,
quality or availability of energy sources, including electricity,
natural gas and diesel fuel, or critical raw materials and
supplies, including iron ore, industrial gases, graphite
electrodes, scrap metal, chrome, zinc, coke and metallurgical coal;
problems or disruptions associated with transporting products to
our customers, moving manufacturing inputs or products internally
among our facilities, or suppliers transporting raw materials to
us; uncertainties associated with natural or human-caused
disasters, adverse weather conditions, unanticipated geological
conditions, critical equipment failures, infectious disease
outbreaks, tailings dam failures and other unexpected events;
disruptions in, or failures of, our information technology systems,
including those related to cybersecurity; liabilities and costs
arising in connection with any business decisions to temporarily or
indefinitely idle or permanently close an operating facility or
mine, which could adversely impact the carrying value of associated
assets and give rise to impairment charges or closure and
reclamation obligations, as well as uncertainties associated with
restarting any previously idled operating facility or mine; our
ability to realize the anticipated synergies and benefits of our
recent acquisition transactions and to successfully integrate the
acquired businesses into our existing businesses, including
uncertainties associated with maintaining relationships with
customers, vendors and employees and known and unknown liabilities
we assumed in connection with the acquisitions; our level of
self-insurance and our ability to obtain sufficient third-party
insurance to adequately cover potential adverse events and business
risks; challenges to maintaining our social license to operate with
our stakeholders, including the impacts of our operations on local
communities, reputational impacts of operating in a
carbon-intensive industry that produces greenhouse gas emissions,
and our ability to foster a consistent operational and safety track
record; our ability to successfully identify and consummate any
strategic capital investments or development projects,
cost-effectively achieve planned production rates or levels, and
diversify our product mix and add new customers; our actual
economic mineral reserves or reductions in current mineral reserve
estimates, and any title defect or loss of any lease, license,
easement or other possessory interest for any mining property;
availability of workers to fill critical operational positions and
potential labor shortages caused by the ongoing COVID-19 pandemic,
as well as our ability to attract, hire, develop and retain key
personnel; our ability to maintain satisfactory labor relations
with unions and employees; unanticipated or higher costs associated
with pension and OPEB obligations resulting from changes in the
value of plan assets or contribution increases required for
unfunded obligations; the amount and timing of any repurchases of
our common shares; and potential significant deficiencies or
material weaknesses in our internal control over financial
reporting.
For additional factors affecting the business of Cliffs, refer
to Part I – Item 1A. Risk Factors of our Annual Report on Form 10-K
for the year ended December 31, 2021, and other filings with the
SEC.
FINANCIAL TABLES FOLLOW
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED OPERATIONS
(In Millions, Except Per Share
Amounts)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
Revenues
$
6,337
$
5,045
$
12,292
$
9,094
Operating costs:
Cost of goods sold
(5,356
)
(3,848
)
(10,062
)
(7,609
)
Selling, general and administrative
expenses
(107
)
(105
)
(229
)
(213
)
Miscellaneous – net
(34
)
(25
)
(67
)
(28
)
Total operating costs
(5,497
)
(3,978
)
(10,358
)
(7,850
)
Operating income
840
1,067
1,934
1,244
Other income (expense):
Interest expense, net
(64
)
(85
)
(141
)
(177
)
Loss on extinguishment of debt
(66
)
(22
)
(80
)
(88
)
Net periodic benefit credits other than
service cost component
50
46
99
93
Other non-operating income (expense)
(3
)
4
(5
)
4
Total other expense
(83
)
(57
)
(127
)
(168
)
Income from continuing operations
before income taxes
757
1,010
1,807
1,076
Income tax expense
(157
)
(216
)
(394
)
(225
)
Income from continuing
operations
600
794
1,413
851
Income from discontinued operations, net
of tax
1
1
2
1
Net income
601
795
1,415
852
Income attributable to noncontrolling
interest
(5
)
(15
)
(18
)
(31
)
Net income attributable to Cliffs
shareholders
$
596
$
780
$
1,397
$
821
Earnings per common share attributable
to Cliffs shareholders - basic
Continuing operations
$
1.14
$
1.40
$
2.67
$
1.48
Discontinued operations
—
—
—
—
$
1.14
$
1.40
$
2.67
$
1.48
Earnings per common share attributable
to Cliffs shareholders - diluted
Continuing operations
$
1.13
$
1.33
$
2.64
$
1.42
Discontinued operations
—
—
—
—
$
1.13
$
1.33
$
2.64
$
1.42
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL POSITION
(In Millions)
June 30, 2022
December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents
$
47
$
48
Accounts receivable, net
2,571
2,154
Inventories
5,784
5,188
Other current assets
366
263
Total current assets
8,768
7,653
Non-current assets:
Property, plant and equipment, net
9,047
9,186
Goodwill
1,149
1,116
Other non-current assets
1,075
1,020
TOTAL ASSETS
$
20,039
$
18,975
LIABILITIES
Current liabilities:
Accounts payable
$
2,594
$
2,073
Accrued employment costs
536
585
Other current liabilities
857
903
Total current liabilities
3,987
3,561
Non-current liabilities:
Long-term debt
4,668
5,238
Pension liability, non-current
527
578
OPEB liability, non-current
2,314
2,383
Other non-current liabilities
1,549
1,441
TOTAL LIABILITIES
13,045
13,201
TOTAL EQUITY
6,994
5,774
TOTAL LIABILITIES AND EQUITY
$
20,039
$
18,975
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED CASH FLOWS
(In Millions)
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
OPERATING ACTIVITIES
Net income
$
601
$
795
$
1,415
$
852
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and
amortization
250
208
551
425
Impairment of long-lived assets
—
—
29
—
Deferred income taxes
94
215
151
225
Pension and OPEB credits
(27
)
(20
)
(54
)
(41
)
Loss on extinguishment of debt
66
22
80
88
Amortization of inventory step-up
—
37
—
118
Other
30
49
55
65
Changes in operating assets and
liabilities, net of business combination:
Receivables and other assets
58
(419
)
(445
)
(914
)
Inventories
(222
)
(385
)
(594
)
(557
)
Income taxes
(235
)
(6
)
(55
)
9
Pension and OPEB payments and
contributions
(54
)
(48
)
(114
)
(223
)
Payables, accrued expenses and other
liabilities
304
63
379
85
Net cash provided by operating
activities
865
511
1,398
132
INVESTING ACTIVITIES
Purchase of property, plant and
equipment
(232
)
(162
)
(468
)
(298
)
Acquisition of ArcelorMittal USA, net of
cash acquired
—
54
—
54
Other investing activities
—
1
1
2
Net cash used by investing activities
(232
)
(107
)
(467
)
(242
)
FINANCING ACTIVITIES
Proceeds from issuance of common
shares
—
—
—
322
Repurchase of common shares
(157
)
—
(176
)
—
Proceeds from issuance of debt
—
—
—
1,000
Repayments of debt
(959
)
(437
)
(1,319
)
(1,339
)
Borrowings under credit facilities
1,545
1,522
3,260
2,680
Repayments under credit facilities
(1,015
)
(1,480
)
(2,624
)
(2,490
)
Other financing activities
(35
)
(46
)
(73
)
(102
)
Net cash provided (used) by financing
activities
(621
)
(441
)
(932
)
71
Net increase (decrease) in cash and cash
equivalents
12
(37
)
(1
)
(39
)
Cash and cash equivalents at beginning of
period
35
110
48
112
Cash and cash equivalents at end of
period
$
47
$
73
$
47
$
73
1 CLEVELAND-CLIFFS INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION - EBITDA AND ADJUSTED EBITDA
In addition to the consolidated financial statements presented
in accordance with U.S. GAAP, the Company has presented EBITDA and
Adjusted EBITDA on a consolidated basis. EBITDA and Adjusted EBITDA
are non-GAAP financial measures that management uses in evaluating
operating performance. The presentation of these measures is not
intended to be considered in isolation from, as a substitute for,
or as superior to, the financial information prepared and presented
in accordance with U.S. GAAP. The presentation of these measures
may be different from non-GAAP financial measures used by other
companies. A reconciliation of these consolidated measures to their
most directly comparable GAAP measures is provided in the table
below.
(In Millions)
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
Net income
$
601
$
795
$
1,415
$
852
Less:
Interest expense, net
(64
)
(85
)
(141
)
(177
)
Income tax expense
(157
)
(216
)
(394
)
(225
)
Depreciation, depletion and
amortization
(250
)
(208
)
(551
)
(425
)
Total EBITDA
$
1,072
$
1,304
$
2,501
$
1,679
Less:
EBITDA of noncontrolling interests
$
13
$
21
$
35
$
43
Asset impairment
—
—
(29
)
—
Loss on extinguishment of debt
(66
)
(22
)
(80
)
(88
)
Severance costs
(6
)
(1
)
(7
)
(12
)
Acquisition-related costs excluding
severance costs
—
—
(1
)
(2
)
Acquisition-related loss on equity method
investment
—
(18
)
—
(18
)
Amortization of inventory step-up
—
(37
)
—
(118
)
Impact of discontinued operations
1
1
2
1
Total Adjusted EBITDA
$
1,130
$
1,360
$
2,581
$
1,873
EBITDA of noncontrolling interests
includes the following:
Net income attributable to noncontrolling
interests
$
5
$
15
$
18
$
31
Depreciation, depletion and
amortization
8
6
17
12
EBITDA of noncontrolling interests
$
13
$
21
$
35
$
43
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220722005085/en/
MEDIA CONTACT: Patricia Persico Senior Director,
Corporate Communications (216) 694-5316
INVESTOR CONTACT: James Kerr Manager, Investor Relations
(216) 694-7719
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