Cliffs to Record Charges in 4Q - Analyst Blog
January 25 2013 - 6:10AM
Zacks
Cliffs Natural Resources Inc. (CLF) announced
that it will incur a $1 billion charge in the fourth quarter of
2012 related to the acquisition of Consolidated Thompson Iron Mines
Ltd. It will be recorded as a goodwill impairment charge and as a
non-cash expense for the year ended December 31, 2012.
Cliffs expects to incur the charge due to the project’s lower
long-term volumes and higher capital and operating costs. Delay in
the Phase II expansion of the Bloom Lake mine also led to the
impairment. Cliffs also expects to incur $100 million to $150
million in other charges related to its Eastern Canadian iron ore
business.
Cliffs also stated that it will record $542 million in valuation
allowances in the fourth quarter related to two deferred tax
assets. The allowances are based on lower long-term pricing
assumptions and the related effects on profitability and expected
future tax payments.
Few days ago, it was announced that Cliffs along with
Anglo American Plc. (AAUKY) are set to divest
their Amapa iron ore operation in Brazil to a single entity.
Ohio-based Cliffs stated that the value of Amapa will be adjusted
to reflect the fair value of its investment. Cliffs holds a 30%
stake in the Amapa mine while the rest is owned by Anglo American.
Cliffs expects to incur a non-cash pre-tax impairment charge of
around $365 million related to the divestiture in the fourth
quarter.
Similar to Cliffs, another steel maker
ArcelorMittal (MT) is set to record a goodwill
write down of $4.3 billion for its European businesses in the
fourth quarter of 2012. The charge is in accordance with the
results of its goodwill impairment test as per the IFRS accounting
standards. The write down will be in the form of a non-cash
impairment charge.
Cliffs released its third-quarter 2012 results in October 2012.
The company posted earnings of 59 cents per share in the quarter,
down 85.8% from $4.15 reported in the year-ago quarter. Declining
iron ore prices and higher costs led to the slump in earnings.
Earnings from continuing operation came in at 61 cents a share in
the quarter. By that measure, it largely missed the Zacks Consensus
Estimate of $1.05.
Sales for the quarter came in at $1,544.9 million, down 26% from
$2,089.1 million in the prior-year quarter, missing the Zacks
Consensus Estimate of $1,742 million. The decline in revenues
resulted from a 36% year-over-year drop in seaborne iron ore
pricing and higher labor, mining and maintenance costs.
Cliffs is slated to release its fourth quarter 2012 results on
Feb 13. Currently, it retains a Zacks Rank #3 (Hold). Another
company in the iron mining industry, Kumba Iron Ore
Ltd. (KIROY), carries a Zacks Rank #1 (Strong Buy).
ANGLO AMER -PLC (AAUKY): Free Stock Analysis Report
CLIFFS NATURAL (CLF): Free Stock Analysis Report
(KIROY): ETF Research Reports
ARCELOR MITTAL (MT): Free Stock Analysis Report
To read this article on Zacks.com click here.
Kumba Iron Ore (PK) (USOTC:KIROY)
Historical Stock Chart
From Sep 2024 to Oct 2024
Kumba Iron Ore (PK) (USOTC:KIROY)
Historical Stock Chart
From Oct 2023 to Oct 2024