Cleveland-Cliffs Inc. (NYSE: CLF) today reported
third-quarter results for the period ended September 30, 2023.
Selected financial results for the third quarter of 2023
include:
- Revenues of $5.6 billion
- Steel shipments of 4.1 million net tons, including record
automotive shipments
- Net income of $275 million
- Earnings per diluted share attributable to Cliffs shareholders
of $0.52
- Adjusted EBITDA1 of $614 million
- Cash flow from operations of $767 million
- Free cash flow2 of $605 million
- Net debt3 reduced to $3.4 billion
- Record liquidity of $4.4 billion
Third-quarter 2023 revenues were $5.6 billion, compared to $5.7
billion in the third quarter of 2022.
For the third quarter of 2023, the Company recorded net income
of $275 million, or $0.52 per diluted share attributable to Cliffs
shareholders. This included charges totaling $11 million, or $0.02
per diluted share, primarily related to acquisition-related costs,
asset disposals, and severance. This compares to net income of $165
million, or $0.29 per diluted share, in the third quarter of
2022.
Third-quarter 2023 Adjusted EBITDA1 was $614 million, compared
to $463 million in the third quarter of 2022.
Cliffs’ Chairman, President and CEO Lourenco Goncalves said: “Q3
2023 was our third consecutive quarter with steel shipments above 4
million tons. We generated over $600 million in free cash flow in
the quarter and, as we had announced we would do, we continued to
use this strong cash generation to pay down debt and buy back
shares. With that, our net debt and diluted share count have
reached new record lows since our full transformation from a
merchant mining to a steel company. Our liquidity is also now at an
all-time high.”
Mr. Goncalves added: “Q3 was specifically highlighted by
Cleveland-Cliffs achieving another record in automotive steel
shipments. This strength in shipments to our automotive clients has
been happening both before and also after the UAW strike affecting
three of our clients headquartered in Detroit was announced, with
our other major clients outside of Detroit picking up the slack.
Despite this continued strength in automotive shipments, the
service center sector collectively decided to buy steel from us at
very low volumes in Q3, prioritizing transactions among themselves
instead. This dynamic led to a higher value mix of shipments than
expected and, consequently, better-than-expected realized prices.
With underlying demand that is still strong and depleted
inventories among service centers, we were able to successfully
bring buyers off the sidelines with our price increase
announcements. We expect that in Q4 we will see the end of the UAW
strike and more normal buying patterns from service centers. That
should support us not only in Q4, but into 2024 as well."
Mr. Goncalves concluded: “Compared to the third quarter of last
year, our unit cost per ton of steel is down a staggering $165 per
net ton. With further cost decreases in place for next year,
including an approximate $250 million cost reduction locked in
related to our purchases of metallurgical coal, we have a lot to
look forward to. As we look to the future, it should be clear to
all of those who have followed us that very exciting and
transformational events are ahead.”
Steelmaking Segment Results
Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
2023
2022
2023
2022
June 30, 2023
External Sales
Volumes
Steel Products (net tons)
4,106
3,635
12,393
10,913
4,202
Selling Price -
Per Net Ton
Average net selling price per net ton of
steel products
$
1,203
$
1,360
$
1,196
$
1,431
$
1,255
Operating Results
- In Millions
Revenues
$
5,443
$
5,511
$
16,377
$
17,481
$
5,808
Cost of goods sold
(4,970
)
(5,167
)
(15,181
)
(14,948
)
(5,179
)
Gross margin
$
473
$
344
$
1,196
$
2,533
$
629
Third-quarter 2023 steel product sales volumes of 4.1 million
net tons consisted of 36% hot-rolled, 30% coated, 14% cold-rolled,
6% plate, 4% stainless and electrical, and 10% other, including
slabs and rail.
Steelmaking revenues of $5.4 billion included $2.0 billion, or
36%, of direct sales to the automotive market; $1.4 billion, or
26%, of sales to the infrastructure and manufacturing market; $1.3
billion, or 24%, of sales to the distributors and converters
market; and $737 million, or 14%, of sales to steel producers.
Liquidity and Cash Flow
Cliffs recorded operating cash flow of $767 million and free
cash flow2 of $605 million during the third quarter of 2023, the
majority of which was used toward debt repayment on the Company's
ABL facility, the outstanding balance of which was reduced by over
$500 million.
As of September 30, 2023, the Company's net debt was $3.4
billion, down from $3.9 billion in the second quarter of 2023. The
Company ended the third quarter of 2023 with total liquidity of
$4.4 billion.
During the third quarter of 2023, Cliffs also repurchased 3.9
million common shares at an average price of $15.09 per share.
Outlook
The Company's previously laid out cost reduction objectives
remain on target, and Cliffs currently expects another $15 per net
ton reduction in steel unit costs from the third quarter to the
fourth quarter of 2023, with additional cost reductions into 2024.
Working capital is expected to provide a significant benefit to
free cash flow in the fourth quarter of 2023.
Cliffs also lowered its full-year 2023 capital expenditures
expectation to $670 million, a reduction from the midpoint of its
previous guidance range of $700 million.
Conference Call Information
Cleveland-Cliffs Inc. will host a conference call on October 24,
2023, at 8:30 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.
Cleveland-Cliffs is the largest supplier of steel to the automotive
industry in North America and serves a diverse range of other
markets due to its 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 supply chain disruptions, such as the
semiconductor shortage, the UAW strike, and higher consumer
interest rates, which could result in lower steel volumes being
demanded; 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 inflationary pressures, infectious disease
outbreaks, conflicts or otherwise; severe financial hardship,
bankruptcy, temporary or permanent shutdowns or operational
challenges of one or more of our major customers, including
customers in the automotive market, key suppliers or contractors,
which, among other adverse effects, could disrupt our operations or
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 an
infectious disease outbreak, including workforce challenges and the
risk that novel variants will prove resistant to existing vaccines
or that new or continuing lockdowns in China will impact our
ability to source certain critical supplies in a timely and
predictable manner; 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, and
reclamation and remediation obligations; 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, including adverse impacts as a result of the
Inflation Reduction Act of 2022; the outcome of, and costs incurred
in connection with, lawsuits, claims, arbitrations or governmental
proceedings relating to commercial and business disputes, antitrust
claims, environmental matters, government investigations,
occupational or personal injury claims, property-related matters,
labor and employment matters, or suits involving legacy operations
and other matters; uncertain availability or cost, due to inflation
or otherwise, 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; the risk that the
cost or time to implement a strategic or sustaining capital project
may prove to be greater than originally anticipated; our ability to
consummate any public or private acquisition transactions and to
realize any or all of the anticipated benefits or estimated future
synergies, as well as to successfully integrate any acquired
businesses into our existing businesses; 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; cybersecurity incidents relating to, disruptions
in, or failures of, information technology systems that are managed
by us or third parties that host or have access to our data or
systems, including the loss, theft or corruption of sensitive or
essential business or personal information and the inability to
access or control systems; 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
level of self-insurance and our ability to obtain sufficient
third-party insurance to adequately cover potential adverse events
and business risks; uncertainties associated with our ability to
meet customers' and suppliers' decarbonization goals and reduce our
greenhouse gas emissions in alignment with our own announced
targets; 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 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; our ability to maintain satisfactory labor
relations with unions and employees; unanticipated or higher costs
associated with pension and other post-employment benefit
obligations resulting from changes in the value of plan assets or
contribution increases required for unfunded obligations; uncertain
availability or cost of skilled workers to fill critical
operational positions and potential labor shortages caused by
experienced employee attrition or otherwise, as well as our ability
to attract, hire, develop and retain key personnel; 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, 2022, and other filings with the
U.S. Securities and Exchange Commission.
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED OPERATIONS
Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
(In millions, except per share
amounts)
2023
2022
2023
2022
June 30, 2023
Revenues
$
5,605
$
5,653
$
16,884
$
17,945
$
5,984
Operating costs:
Cost of goods sold
(5,125
)
(5,305
)
(15,661
)
(15,367
)
(5,340
)
Selling, general and administrative
expenses
(144
)
(124
)
(420
)
(353
)
(149
)
Miscellaneous – net
(11
)
(37
)
(26
)
(104
)
(12
)
Total operating costs
(5,280
)
(5,466
)
(16,107
)
(15,824
)
(5,501
)
Operating income
325
187
777
2,121
483
Other income (expense):
Interest expense, net
(70
)
(64
)
(226
)
(205
)
(79
)
Gain (loss) on extinguishment of debt
—
4
—
(76
)
—
Net periodic benefit credits other than
service cost component
50
49
150
148
50
Other non-operating income (expense)
(2
)
(1
)
4
(6
)
4
Total other expense
(22
)
(12
)
(72
)
(139
)
(25
)
Income from continuing operations
before income taxes
303
175
705
1,982
458
Income tax expense
(29
)
(10
)
(118
)
(404
)
(102
)
Income from continuing
operations
274
165
587
1,578
356
Income from discontinued operations, net
of tax
1
—
2
2
—
Net income
275
165
589
1,580
356
Income attributable to noncontrolling
interest
(11
)
(13
)
(35
)
(31
)
(9
)
Net income attributable to Cliffs
shareholders
$
264
$
152
$
554
$
1,549
$
347
Earnings per common share attributable
to Cliffs shareholders - basic
Continuing operations
$
0.52
$
0.30
$
1.08
$
2.98
$
0.68
Discontinued operations
—
—
—
—
—
$
0.52
$
0.30
$
1.08
$
2.98
$
0.68
Earnings per common share attributable
to Cliffs shareholders - diluted
Continuing operations
$
0.52
$
0.29
$
1.08
$
2.95
$
0.67
Discontinued operations
—
—
—
—
—
$
0.52
$
0.29
$
1.08
$
2.95
$
0.67
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL POSITION
(In millions)
September 30,
2023
December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
31
$
26
Accounts receivable, net
2,122
1,960
Inventories
4,592
5,130
Other current assets
196
306
Total current assets
6,941
7,422
Non-current assets:
Property, plant and equipment, net
8,837
9,070
Goodwill
1,130
1,130
Pension and OPEB, asset
392
356
Other non-current assets
759
777
TOTAL ASSETS
$
18,059
$
18,755
LIABILITIES
Current liabilities:
Accounts payable
$
2,076
$
2,186
Accrued employment costs
467
429
Accrued expenses
263
383
Other current liabilities
488
551
Total current liabilities
3,294
3,549
Non-current liabilities:
Long-term debt
3,458
4,249
Pension liability, non-current
456
473
OPEB liability, non-current
563
585
Deferred income taxes
662
590
Other non-current liabilities
1,362
1,267
TOTAL LIABILITIES
9,795
10,713
TOTAL EQUITY
8,264
8,042
TOTAL LIABILITIES AND EQUITY
$
18,059
$
18,755
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED CASH FLOWS
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In millions)
2023
2022
2023
2022
OPERATING ACTIVITIES
Net income
$
275
$
165
$
589
$
1,580
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and
amortization
249
237
738
788
Deferred income taxes
116
59
132
210
Pension and OPEB credits
(40
)
(27
)
(119
)
(81
)
Loss (gain) on extinguishment of debt
—
(4
)
—
76
Impairment of long-lived assets
—
—
—
29
Other
47
20
121
75
Changes in operating assets and
liabilities:
Accounts receivable, net
169
271
(164
)
(145
)
Inventories
135
246
538
(348
)
Income taxes
(153
)
(54
)
16
(109
)
Pension and OPEB payments and
contributions
(26
)
(60
)
(84
)
(174
)
Payables, accrued employment and accrued
expenses
(17
)
(304
)
(95
)
66
Other, net
12
(13
)
(57
)
(33
)
Net cash provided by operating
activities
767
536
1,615
1,934
INVESTING ACTIVITIES
Purchase of property, plant and
equipment
(162
)
(248
)
(481
)
(716
)
Acquisition of FPT, net of cash
acquired
—
(22
)
—
(31
)
Other investing activities
2
10
11
20
Net cash used by investing activities
(160
)
(260
)
(470
)
(727
)
FINANCING ACTIVITIES
Repurchase of common shares
(58
)
(34
)
(152
)
(210
)
Proceeds from issuance of senior notes
—
—
750
—
Repayments of senior notes
—
(36
)
—
(1,355
)
Borrowings under credit facilities
325
1,390
3,004
4,650
Repayments under credit facilities
(833
)
(1,545
)
(4,543
)
(4,169
)
Debt issuance costs
—
—
(34
)
—
Other financing activities
(44
)
(42
)
(165
)
(115
)
Net cash used by financing activities
(610
)
(267
)
(1,140
)
(1,199
)
Net increase (decrease) in cash and cash
equivalents
(3
)
9
5
8
Cash and cash equivalents at beginning of
period
34
47
26
48
Cash and cash equivalents at end of
period
$
31
$
56
$
31
$
56
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.
Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
(In millions)
2023
2022
2023
2022
June 30, 2023
Net income
$
275
$
165
$
589
$
1,580
$
356
Less:
Interest expense, net
(70
)
(64
)
(226
)
(205
)
(79
)
Income tax expense
(29
)
(10
)
(118
)
(404
)
(102
)
Depreciation, depletion and
amortization
(249
)
(237
)
(738
)
(788
)
(247
)
Total EBITDA
$
623
$
476
$
1,671
$
2,977
$
784
Less:
EBITDA of noncontrolling interests
$
20
$
22
$
60
$
57
$
17
Gain (loss) on extinguishment of debt
—
4
—
(76
)
—
Asset impairment
—
—
—
(29
)
—
Other, net
(11
)
(13
)
(21
)
(21
)
(8
)
Total Adjusted EBITDA
$
614
$
463
$
1,632
$
3,046
$
775
EBITDA of noncontrolling interests
includes the following:
Net income attributable to noncontrolling
interests
$
11
$
13
$
35
$
31
$
9
Depreciation, depletion and
amortization
9
9
25
26
8
EBITDA of noncontrolling interests
$
20
$
22
$
60
$
57
$
17
2 CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
NON-GAAP RECONCILIATION - FREE
CASH FLOW
Free cash flow is a non-GAAP financial
measure defined as net cash provided by operating activities less
purchase of property, plant and equipment. Management believes it
is an important measure to assess the cash generation available to
service debt, strategic initiatives or other financial activities.
The following table provides a reconciliation of net cash provided
by operating activities to free cash flow.
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In millions)
2023
2022
2023
2022
Net cash provided by operating
activities
$
767
$
536
$
1,615
$
1,934
Purchase of property, plant and
equipment
(162
)
(248
)
(481
)
(716
)
Free cash flow
$
605
$
288
$
1,134
$
1,218
3 CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
NON-GAAP RECONCILIATION - NET
DEBT
Net debt is a non-GAAP financial measure
that management uses in evaluating financial position. Net debt is
defined as long-term debt less cash and cash equivalents.
Management believes net debt is an important measure of the
Company’s financial position due to the amount of cash and cash
equivalents on hand. The presentation of this measure 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 this measure may
be different from non-GAAP financial measures used by other
companies. A reconciliation of this measure to its most directly
comparable GAAP measure is provided in the table below:
(In millions)
September 30,
2023
June 30, 2023
December 31, 2022
Long-term debt
$
3,458
$
3,963
$
4,249
Less: Cash and cash equivalents
31
34
26
Net debt
$
3,427
$
3,929
$
4,223
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231023087004/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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