- Third-quarter revenue of $5.7 billion
- Third-quarter net income of $165 million
- Third-quarter Adjusted EBITDA1 of $452 million
- $1.8 billion reduction in pro forma pension/OPEB net
liabilities from previous remeasurement
Cleveland-Cliffs Inc. (NYSE: CLF) today reported
third-quarter results for the period ended September 30, 2022.
Third-quarter 2022 consolidated revenues were $5.7 billion,
compared to the prior-year third-quarter revenues of $6.0 billion.
For the third quarter of 2022, the Company recorded net income of
$165 million, or $0.29 per diluted share attributable to Cliffs
shareholders. In the prior-year third quarter, the Company recorded
net income of $1.3 billion, or $2.33 per diluted share.
For the nine months ended September 30, 2022, the Company
recorded revenues of $17.9 billion and net income of $1.6 billion,
or $2.95 per diluted share. In the first nine months of 2021, the
Company recorded revenues of $15.1 billion and net income of $2.1
billion, or $3.69 per diluted share.
Pension/OPEB Liability Reduction
In conjunction with its newly ratified labor agreements with the
United Steelworkers, the Company has remeasured its associated
pension/OPEB plan assets and obligations. Pro forma pension/OPEB
liabilities, net of assets, were reduced by $1.8 billion, or 63%,
since the last remeasurement on December 31, 2021. The reduction is
due primarily to lower healthcare premiums negotiated separately
from the labor agreements. Due to ratification timing, the full
impact was not reflected on this quarter's balance sheet. The
Company has provided the table below with pro forma
information.
(In Millions)
Pension/OPEB2
Actual
Actual
Pro forma
December 31,
2021
September 30,
2022
September 30,
2022
Non-current assets
$
224
$
390
$
390
Current liabilities
(135
)
(134
)
(98
)
Non-current liabilities
(2,961
)
(2,751
)
(1,359
)
Funded Status
$
(2,872
)
$
(2,495
)
$
(1,067
)
The remeasurement reflects updates for plan amendments, discount
rates, asset values, and other actuarial assumptions as of
September 30, 2022, for the affected plans. The impact of higher
interest rates was mostly offset by lower market returns during
2022.
As an additional benefit, Cliffs expects cash flow requirements
related to OPEB plans to be reduced by more than $100 million
annually, or approximately 50%, going forward.
Third-quarter 2022 Adjusted EBITDA1 was $452 million, compared
to Adjusted EBITDA1 of $1.9 billion in the third quarter of 2021.
For the first nine months of 2022, the Company reported Adjusted
EBITDA1 of $3.0 billion, compared to $3.8 billion for the same
period in 2021.
(In Millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Adjusted EBITDA1
Steelmaking
$
436
$
1,934
$
2,967
$
3,796
Other Businesses
9
6
58
25
Eliminations (A)
7
(7
)
8
(15
)
Total Adjusted EBITDA1
$
452
$
1,933
$
3,033
$
3,806
(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 third quarter results were affected by the delayed inventory
impact of higher input costs and maintenance activities from prior
periods. Now, that all major projects have been concluded and
production levels are back to normal, we expect costs to decline
meaningfully, into Q4 and further into 2023.”
Mr. Goncalves added: “Shipments to our automotive clients
significantly improved in Q3, achieving a level among the highest
in six quarters. That allowed us to hold sales volumes steady in
Q3, despite much weaker service center activity. We expect this
positive trend in automotive shipments to continue into Q4, with
the added benefit of improved pricing from our successful renewal
of contracts pertaining to the October cycle. As the automotive
industry increases production, supply on the spot trade should
tighten. That supports pricing going forward.”
Mr. Goncalves continued: “The most important event of our third
quarter was the agreement and subsequent ratification of the new
4-year labor contracts with our USW-represented employees,
corresponding to over half of our workforce. In parallel, we used
our scale to successfully negotiate better healthcare rates for our
retirees, achieving a massive reduction in our post-retirement
liabilities.”
Mr. Goncalves concluded: “It is well known that the assumption
of Pension & OPEB liabilities at the time of the acquisition
was the main source of enterprise value we leveraged to in order
acquire the U.S. assets from ArcelorMittal in December 2020. Fast
forward, our combined total balance of $4.2 billion in liabilities
following the acquisition has been made irrelevant, as we now have
only $1.1 billion remaining on the books. We also concurrently
renegotiated lower healthcare premiums for our non-USW retiree
plans, which have not been remeasured yet. The remeasurement of
these non-USW plans will happen at year-end, when we expect the
total Pension & OPEB liabilities to be even lower than what is
shown in the pro-forma's at this time.”
Steelmaking
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
External Sales
Volumes
Steel Products (net tons)
3,635
4,153
10,913
12,502
Selling Price -
Per Net Ton
Average net selling price per net ton of
steel products
$
1,360
$
1,334
$
1,431
$
1,122
Operating Results
- In Millions
Revenues
$
5,511
$
5,869
$
17,481
$
14,710
Cost of goods sold
(5,167
)
(4,098
)
(14,948
)
(11,472
)
Gross margin
$
344
$
1,771
$
2,533
$
3,238
Third-quarter 2022 steel product sales volumes of 3.6 million
net tons consisted of 33% coated, 29% hot-rolled, 15% cold-rolled,
6% plate, 5% stainless and electrical, and 12% other, including
slabs and rail.
Steelmaking revenues of $5.5 billion included $1.7 billion, or
31%, of direct sales to the automotive market; $1.5 billion, or
27%, of sales to the distributors and converters market; $1.5
billion, or 27%, of sales to the infrastructure and manufacturing
market; and $847 million, or 15%, of sales to steel producers.
Third-quarter 2022 Steelmaking unit costs increased compared to
the second quarter of 2022 due to the lagged effects of higher cost
inventory produced in prior periods, impacted by elevated repair
and maintenance expenses and lower production volume, as well as
higher costs in natural gas, electricity, scrap, and alloys.
Liquidity and Cash Flow
As of October 21, 2022, the Company had total liquidity of
approximately $2.4 billion.
During the third quarter of 2022, the Company paid down
borrowings on its ABL Facility by $155 million. Cliffs also
completed open market repurchases of $41 million aggregate
principal amount of assorted series of its outstanding senior notes
at an average price of 88% of par.
In addition, Cliffs repurchased 2.0 million shares at an average
price of $16.97 per share during the third quarter of 2022.
Outlook
Based on the current 2022 futures curve, which implies an
average hot-rolled coil steel index price of $730 per net ton for
the remainder of the year, the Company would expect its full-year
2022 average selling price to be approximately $1,370 per net ton.
This incorporates improvements in fixed contract prices resetting
on October 1, 2022, and updates to expected mix, including higher
expected slab shipments during the fourth quarter of 2022.
Reduced repair and maintenance costs, higher production volume,
and lower energy and raw material costs are expected to drive
Steelmaking unit operating costs at least $80 per net ton lower in
the fourth quarter of 2022.
Conference Call Information
Cleveland-Cliffs Inc. will host a conference call this morning,
October 25, 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
inflationary pressures, 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
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 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, 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, 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;
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 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
or otherwise, 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
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Revenues
$
5,653
$
6,004
$
17,945
$
15,098
Operating costs:
Cost of goods sold
(5,305
)
(4,229
)
(15,367
)
(11,838
)
Selling, general and administrative
expenses
(124
)
(116
)
(353
)
(329
)
Miscellaneous – net
(37
)
(10
)
(104
)
(38
)
Total operating costs
(5,466
)
(4,355
)
(15,824
)
(12,205
)
Operating income
187
1,649
2,121
2,893
Other income (expense):
Interest expense, net
(64
)
(81
)
(205
)
(258
)
Gain (loss) on extinguishment of debt
4
—
(76
)
(88
)
Net periodic benefit credits other than
service cost component
49
46
148
139
Other non-operating income (expense)
(1
)
1
(6
)
5
Total other expense
(12
)
(34
)
(139
)
(202
)
Income from continuing operations
before income taxes
175
1,615
1,982
2,691
Income tax expense
(10
)
(334
)
(404
)
(559
)
Income from continuing
operations
165
1,281
1,578
2,132
Income from discontinued operations, net
of tax
—
1
2
2
Net income
165
1,282
1,580
2,134
Income attributable to noncontrolling
interest
(13
)
(8
)
(31
)
(39
)
Net income attributable to Cliffs
shareholders
$
152
$
1,274
$
1,549
$
2,095
Earnings per common share attributable
to Cliffs shareholders - basic
Continuing operations
$
0.30
$
2.46
$
2.98
$
3.87
Discontinued operations
—
—
—
—
$
0.30
$
2.46
$
2.98
$
3.87
Earnings per common share attributable
to Cliffs shareholders - diluted
Continuing operations
$
0.29
$
2.33
$
2.95
$
3.69
Discontinued operations
—
—
—
—
$
0.29
$
2.33
$
2.95
$
3.69
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL POSITION
(In Millions)
September 30,
2022
December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents
$
56
$
48
Accounts receivable, net
2,301
2,154
Inventories
5,542
5,188
Other current assets
426
263
Total current assets
8,325
7,653
Non-current assets:
Property, plant and equipment, net
9,030
9,186
Goodwill
1,141
1,116
Pension and OPEB, asset
390
224
Other non-current assets
802
796
TOTAL ASSETS
$
19,688
$
18,975
LIABILITIES
Current liabilities:
Accounts payable
$
2,361
$
2,073
Accrued employment costs
479
585
Other current liabilities
740
903
Total current liabilities
3,580
3,561
Non-current liabilities:
Long-term debt
4,475
5,238
Pension liability, non-current
464
578
OPEB liability, non-current
2,287
2,383
Other non-current liabilities
1,614
1,441
TOTAL LIABILITIES
12,420
13,201
TOTAL EQUITY
7,268
5,774
TOTAL LIABILITIES AND EQUITY
$
19,688
$
18,975
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED CASH FLOWS
(In Millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
OPERATING ACTIVITIES
Net income
$
165
$
1,282
$
1,580
$
2,134
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and
amortization
237
239
788
664
Impairment of long-lived assets
—
1
29
1
Deferred income taxes
59
332
210
557
Pension and OPEB credits
(27
)
(18
)
(81
)
(59
)
(Gain) loss on extinguishment of debt
(4
)
—
76
88
Amortization of inventory step-up
—
11
—
129
Other
20
14
75
79
Changes in operating assets and
liabilities, net of business combination:
Receivables and other assets
337
(252
)
(108
)
(1,166
)
Inventories
246
(236
)
(348
)
(793
)
Income taxes
(54
)
(10
)
(109
)
(1
)
Pension and OPEB payments and
contributions
(60
)
(56
)
(174
)
(279
)
Payables, accrued expenses and other
liabilities
(383
)
209
(4
)
294
Net cash provided by operating
activities
536
1,516
1,934
1,648
INVESTING ACTIVITIES
Purchase of property, plant and
equipment
(248
)
(175
)
(716
)
(473
)
Acquisition of FPT, net of cash
acquired
(22
)
—
(31
)
—
Acquisition of ArcelorMittal USA, net of
cash acquired
—
—
—
54
Other investing activities
10
3
20
5
Net cash used by investing activities
(260
)
(172
)
(727
)
(414
)
FINANCING ACTIVITIES
Series B Redeemable Preferred Stock
redemption
—
(1,343
)
—
(1,343
)
Proceeds from issuance of common
shares
—
—
—
322
Repurchase of common shares
(34
)
—
(210
)
—
Proceeds from issuance of debt
—
—
—
1,000
Repayments of debt
(36
)
(7
)
(1,355
)
(1,346
)
Borrowings under credit facilities
1,390
1,673
4,650
4,353
Repayments under credit facilities
(1,545
)
(1,670
)
(4,169
)
(4,160
)
Other financing activities
(42
)
(28
)
(115
)
(130
)
Net cash used by financing activities
(267
)
(1,375
)
(1,199
)
(1,304
)
Net increase (decrease) in cash and cash
equivalents
9
(31
)
8
(70
)
Cash and cash equivalents at beginning of
period
47
73
48
112
Cash and cash equivalents at end of
period
$
56
$
42
$
56
$
42
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
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Net income
$
165
$
1,282
$
1,580
$
2,134
Less:
Interest expense, net
(64
)
(81
)
(205
)
(258
)
Income tax expense
(10
)
(334
)
(404
)
(559
)
Depreciation, depletion and
amortization
(237
)
(239
)
(788
)
(664
)
Total EBITDA
$
476
$
1,936
$
2,977
$
3,615
Less:
EBITDA of noncontrolling interests
$
22
$
17
$
57
$
60
Asset impairment
—
—
(29
)
—
Gain (loss) on extinguishment of debt
4
—
(76
)
(88
)
Severance costs
(2
)
(3
)
(9
)
(15
)
Acquisition-related costs excluding
severance costs
—
(1
)
(1
)
(3
)
Acquisition-related loss on equity method
investment
—
—
—
(18
)
Amortization of inventory step-up
—
(11
)
—
(129
)
Impact of discontinued operations
—
1
2
2
Total Adjusted EBITDA
$
452
$
1,933
$
3,033
$
3,806
EBITDA of noncontrolling interests
includes the following:
Net income attributable to noncontrolling
interests
$
13
$
8
$
31
$
39
Depreciation, depletion and
amortization
9
9
26
21
EBITDA of noncontrolling interests
$
22
$
17
$
57
$
60
2CLEVELAND-CLIFFS INC. PENSION AND
OPEB
On October 12, 2022, the Company announced the ratification of
the new 4-year labor agreement with the USW, covering 12,000
USW-represented employees at 13 operating locations. As a result of
significant pension and OPEB plan amendments in the agreement, the
Company will be required to remeasure the plan assets and benefit
obligations for the affected defined benefit pension and OPEB plans
as of the October 12, 2022 ratification date. The following table
sets forth amounts recognized in the Statements of Financial
Position related to pension and OPEB:
- on an actual basis as of September 30, 2022 reflecting
consolidated pension and OPEB; and
- on a pro forma basis as of September 30, 2022 to give effect to
the remeasurement of pension and OPEB plans affected by the October
12, 2022 ratification. The pro forma basis column is presented with
pro-forma data pursuant to ASC 855-10-50-3.
(In Millions)
Pension Benefits
OPEB
Actual
Pro forma
Actual
Pro forma
September 30,
2022
September 30,
2022
September 30,
2022
September 30,
2022
Non-current assets
$
227
$
227
$
163
$
163
Current liabilities
(4
)
(4
)
(130
)
(94
)
Non-current liabilities
(464
)
(558
)
(2,287
)
(801
)
Funded Status
$
(241
)
$
(335
)
$
(2,254
)
$
(732
)
The remeasurement reflects updates for plan amendments, discount
rates, assets values, and other actuarial assumptions as of
September 30, 2022 for the affected plans.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221025005411/en/
MEDIA CONTACT: Patricia Persico Senior Director,
Corporate Communications (216) 694-5316 INVESTOR CONTACT:
James Kerr Manager, Investor Relations (216) 694-7719
Cleveland Cliffs (NYSE:CLF)
Historical Stock Chart
From Mar 2024 to Apr 2024
Cleveland Cliffs (NYSE:CLF)
Historical Stock Chart
From Apr 2023 to Apr 2024