Cliffs' Earnings Tops, Sales Miss - Analyst Blog
April 25 2013 - 12:15PM
Zacks
Cliffs Natural Resources Inc. (CLF) posted
adjusted earnings of 60 cents per share in the first quarter of
2013, down 29.4% from 85 cents earned in the year-ago quarter but
ahead of the Zacks Consensus Estimate of 32 cents. The
adjusted earnings exclude a tax benefit of 6 cents per share.
On a reported basis, Cliffs’ earnings were 66 cents per share
compared with $2.63 reported in the year-ago quarter. Weak iron ore
pricing coupled with lower volume hurt Cliffs’ earnings in the
quarter.
Sales for the quarter came in at $1,140.5 million, down roughly
5.9% from $1,212.4 million in the prior-year quarter and also
missed the Zacks Consensus Estimate of $1,226 million. Decline in
global iron ore sales volumes led to reduced sales in the
quarter.
Segment Performance
U.S. Iron Ore: U.S. Iron Ore pellet sales
volume decreased to 3.1 million tons in the quarter from 3.4
million tons in the first quarter of 2012. Lower volumes to a
customer due to bankruptcy in May 2012 and seasonal shipping
constraints on the Great Lakes led to the decline.
Revenues per ton were up 2% year over year to $119.82 due to
customer mix and favorable provisional pricing settlement. Cash
cost per ton fell 2% to $60.17 due to lower maintenance
expenses.
Eastern Canadian Iron Ore: Sales volumes in the
reported quarter were flat year over year at 1.9 million tons.
Cliffs announced that it will idle the Wabush Pointe Noire Pellet
Plant by the end of second-quarter 2013.
Revenues per ton for the segment jumped 13% year over year to
$131.95, led by favorable provisional pricing settlements, lower
freight rates and a 3% year-over-year increase in seaborne iron ore
pricing.
Cash cost per ton fell 4% to $99.41, attributable to lower cash
cost at Bloom Lake Mine primarily due to lower transshipping costs,
reduced demurrage and lower contractor spending.
Asia Pacific Iron Ore: Sales volumes in the
segment slipped 17% to 2.3 million tons due to vessel timing and
the absence of sales volume from Cliffs' Cockatoo Island operation.
Revenues per ton were $117.48, down 9% from $129.75 in the
prior-year quarter, due to lesser revenue realizations due to lower
iron ore grades as well as customer mix.
Cash cost per ton in the Asia-Pacific Iron Ore segment climbed 2%
to $75.10 on the back of higher mining and logistic costs.
North American Coal: Sales volumes spiked 27%
to 1.8 million tons, led by significantly higher sales volume from
Cliffs' Oak Grove Mine. Revenues per ton decreased 9% to $110.35,
due to lower spot pricing for metallurgical coal products. Cash
cost per ton decreased 6% to $91.16, due to lower maintenance and
employment-related expenses.
Financial Position
Cliffs had $287.2 million in cash and cash equivalents as of Mar
31, 2013, compared with $122.3 million as of Mar 31, 2012.
Long-term debt stood at $3,433 million as of Mar 31, 2013, compared
with $3,583.8 million as of Mar 31, 2012.
Outlook
The company reaffirmed its 2013 capital expenditures budget of
$800–$850 million. Cliffs also maintains its 2013 selling, general
and administrative expenses outlook of roughly $230 million. Cliffs
expects depreciation, depletion and amortization to be around $565
million in 2013.
U.S. Iron Ore Outlook
Cliffs reiterated its production volume guidance in U.S. Iron
Ore to be 20 million tons in 2013 while it increased its sales
expectations to 21 million tons from its earlier guidance of 20
million tons. Cash cost guidance was maintained in the range of
$65–$70 per ton.
Eastern Canadian Iron Ore Outlook
The company maintained its sales volume target in the range of
roughly 9–10 million tons and production is also expected to be in
the range of 9-10 million tons. Cash cost per ton in Eastern
Canadian Iron Ore is expected to be in the range of $95–$100 in
2013.
Asia Pacific Iron Ore Outlook
For 2013, sales and production volumes are forecast to be 11
million tons. Cash cost per ton is expected to be roughly
$70–$75.
North American Coal Outlook
For 2013, the company expects sales and production volumes for
North American Coal to be around 7 million tons. Cash cost per ton
has been projected in the range of $95–$100.
Cliffs remains optimistic regarding its financial flexibility
including its prospects for cash generation and opportunities to
fund organic growth projects and return cash to shareholders. It
also has a significant presence in the Asia-Pacific region, where
demand is still robust, lending support to shipments. However,
Cliffs remains hamstrung by lower iron ore pricing, partly due to
oversupply in the industry.
Cliffs currently retains a Zacks Rank #3 (Hold).
Another mining company Freeport-McMoRan Copper &
Gold Inc. (FCX) also recently released its first quarter
2013 results. The company’s adjusted earnings (excluding one-time
charges) of 73 cents per share for the quarter beat the Zacks
Consensus Estimate by a penny but exceeded the year-ago earnings of
96 cents.
Among other mining companies, Newmont Mining
Corporation (NEM) and Goldcorp Inc. (GG)
are slated to release their first-quarter 2013 results on Apr 29
and May 2, respectively.
CLIFFS NATURAL (CLF): Free Stock Analysis Report
FREEPT MC COP-B (FCX): Free Stock Analysis Report
GOLDCORP INC (GG): Free Stock Analysis Report
NEWMONT MINING (NEM): Free Stock Analysis Report
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