Cliffs Natural Resources posts third-quarter results

Cliffs Natural Resources posts third-quarter results

CLEVELAND, OH — Cliffs Natural Resources Inc. (NYSE: CLF) today reported third-quarter results for the period ended September 30, 2015. Third-quarter 2015 consolidated revenues of $593 million decreased 39 percent from the prior year’s third-quarter revenues of $980 million. Cost of goods sold decreased by 26 percent to $538 million compared to $724 million reported in the third quarter of 2014.

For the third quarter of 2015, the Company recorded net income of $6 million compared to a net loss of $6.9 billion recorded in the prior-year quarter. The Company recorded a net loss attributable to Cliffs’ common shareholders of $15 million, or $0.10 per diluted share, compared to a net loss attributable to Cliffs’ common shareholders of $5.9 billion, or $38.49 per diluted share recorded in the third quarter of 2014.

Lourenco Goncalves, Cliffs’ Chairman, President and Chief Executive Officer, said, “Our performance this past quarter illustrates how far we have come in our turnaround story. We have been able to deliver significant cost reductions in all areas of the business through disciplined execution of the strategy instituted last year.” Mr. Goncalves added, “We expect the domestic steel market to improve in 2016 as trade actions reduce the pressure of imports and firm up steel pricing. Our solid cost position coupled with stronger demand from the mills should drive better profitability for Cliffs.”

For the third quarter of 2015, adjusted EBITDA1 was $60 million. Cliffs noted that this figure includes idle expenses of $33 million related to previously announced production curtailments. Excluding these idle expenses primarily associated with the Empire and United Taconite mines, Cliffs’ adjusted EBITDA1 would have been $93 million.

(Information/Statistics Courtesy of Cliffs Natural Resources)

Adjusted EBITDA1 by Segment (in millions)

U.S.
Iron Ore

Asia Pacific
Iron Ore

Corporate/
Other

Total

Q3 2015 Adjusted EBITDA1 (in millions)

$

72.3

$

9.7

$

(21.9)

$

60.1

YTD 2015 Adjusted EBITDA1 (in millions)

$

254.6

$

32.8

$

(70.4)

$

217.0

Cliffs’ third-quarter 2015 SG&A expenses were $22 million, a 55 percent decrease when compared to the third-quarter 2014 expense of $50 million. Although the decrease is primarily attributable to the previous year’s proxy contest as well as change in control and severance-related expenses that were not repeated this year, overall SG&A expenses were further decreased by lower staff costs and reduced external services spending.

Cliffs’ third-quarter 2015 interest expense was $62 million, a 35 percent increase when compared to a third-quarter 2014 expense of $46 million. The increase was primarily driven by the issuance of secured notes during the first quarter of 2015. The Company noted that of the $62 million recorded, $53 million is a cash expense and the remaining $9 million is a non-cash expense.

U.S. Iron Ore

Three Months Ended
September 30,

Nine Months Ended
September 30,

2015

2014

2015

2014

Volumes – In Thousands of Long Tons

Total sales volume

5,600

6,848

12,791

14,022

Total production volume

4,099

5,814

14,978

16,256

Sales Margin – In Millions

Revenues from product sales and services

$

471.0

$

767.4

$

1,152.5

$

1,643.3

Cost of goods sold and operating expenses

422.3

547.9

974.8

1,181.6

Sales margin

$

48.7

$

219.5

$

177.7

$

461.7

Sales Margin – Per Long Ton

Revenues from product sales and services*

$

76.52

$

100.70

$

80.85

$

104.27

Cash production cost3

48.99

58.38

57.25

65.63

Non-production cash cost3

13.85

6.49

4.11

(0.08)

Cash cost3

62.84

64.87

61.36

65.55

Depreciation, depletion and amortization

4.98

3.78

5.60

5.79

Cost of goods sold and operating expenses*

67.82

68.65

66.96

71.34

Sales margin

$

8.70

$

32.05

$

13.89

$

32.93

* Excludes revenues and expenses related to domestic freight, which are offsetting and have no impact on sales margin. Revenues per ton also exclude venture partner cost reimbursements.

U.S. Iron Ore pellet sales volume in the third quarter of 2015 was 5.6 million tons, an 18 percent decrease when compared to the third quarter of 2014. The decrease was driven by lower U.S. steel mill demand.

Cash production cost per ton3 in U.S. Iron Ore was $48.99, down 16 percent from $58.38 in the prior year’s third quarter. The decrease was driven by salaried workforce reductions and overall lower employment costs; reduced maintenance and repair costs based on cost reduction and predictive maintenance initiatives; and year-over-year lower energy rates.

Non-production cash cost per ton3 of $13.85 included $33 million of idle costs.

Asia Pacific Iron Ore

Three Months Ended
September 30,

Nine Months Ended
September 30,

2015

2014

2015

2014

Volumes – In Thousands of Metric Tons

Total sales volume

2,926

3,075

8,710

8,616

Total production volume

2,928

2,789

8,655

8,310

Sales Margin – In Millions

Revenues from product sales and services

$

122.2

$

212.3

$

384.8

$

699.6

Cost of goods sold and operating expenses

115.8

203.2

369.3

588.2

Sales margin

$

6.4

$

9.1

$

15.5

$

111.4

Sales Margin – Per Metric Ton

Revenues from product sales and services*

$

39.00

$

69.04

$

42.01

$

81.20

Cash production cost3