Cliffs Natural Resources Inc. CLF reported second-quarter 2015 net income from continuing operations of $60 million or 39 cents per share as against net loss of $2 million or 2 cents per share in the year-ago quarter.
Excluding one-time items, adjusted loss from continuing operations came in at 21 cents per share, wider than the Zacks Consensus Estimate of a loss of 11 cents.
Sales for the quarter came in at $498.1 million, down 33.4% from $747.7 million in the prior-year quarter. Sales, however, missed the Zacks Consensus Estimate of $610 million.
Cliffs Natural Resources Inc. - Earnings Surprise | FindTheBest
Segment Performance
U.S. Iron Ore: U.S. Iron Ore pellet sales volume was 4.2 million tons in the second quarter, compared with 4.3 million tons in the year-ago quarter. The decrease was mainly due to reduced year-over-year export sales and lower demand from U.S. mills. This was partially offset by improved shipping conditions on the Great Lakes.
Revenues per ton were down 26.7% year over year to $78.32 due to a significant adjustment to the hot-band steel price estimate for one major contract. Cash production cost per ton decreased 9% year over year to $56.06 in the reported quarter due to reduction in workforce headcount and overall reductions in employment costs along with a year-over-year reduction in energy rates.
Asia Pacific Iron Ore: Sales volumes in the segment decreased 5% to 2.8 million tons owing to the impact of previously scheduled port maintenance activities.
Revenues per ton were $44.29, down 44.9% from $80.38 in the prior-year quarter. Cash production cost per ton was $34.32, down 33% from the year-ago quarter. The decrease was because of reduced mining and administrative costs, as well as favorable exchange rate variances of roughly $7 per ton.
Financial Position
Cliffs had $276.2 million in cash and cash equivalents as of Jun 30, 2015, compared with $359.9 million as of Jun 30, 2014. Long-term debt stood at $2,887.4 million as of Jun 30, 2015, compared with $3,293 million as of Jun 30, 2014.
At the end of second-quarter 2015, Cliffs had net debt of $2.6 billion, compared with net debt of $3.1 billion at the end of second-quarter 2014. There was nothing drawn on the company's new asset-based lending facility at the end of the reported quarter. Reduction in net debt was a result of several actions including asset sales, exchange offers and open-market bond repurchases during the prior twelve months.
Capital expenditure reduced 70% year over year to $19 million in the second quarter. This includes capital spending related to North American Coal. Depreciation, depletion and amortization amounted to $31 million.
Outlook
Starting in 2015, Cliffs is providing full-year expected revenues-per-ton ranges based on different assumptions of seaborne iron ore prices to offer more financial transparency to its shareholders. The company expects improved industry operating conditions and profitability in the second half of 2015 as actions have been taken to combat the influence of unfairly-traded steel in the U.S.
The company reiterated its selling, general and administrative (SG&A) expenses guidance of $120 million.
Consolidated 2015 depreciation, depletion and amortization is expected to be roughly $145 million.
Cliffs maintained its 2015 capital expenditures budget in the range of $100—$125 million. The expected expenditure includes outflows related to North American Coal and assumes no additional asset divestitures.
U.S. Iron Ore Outlook
For 2015, Cliffs reduced its full-year sales and production volume expectation by 1.5 million to 19 million tons of iron ore pellets, reflecting currently low capacity utilization rates among U.S. steel makers, mainly due to heavy imported steel penetration. The company, however, is maintaining its previous cash production cost outlook of $55—$60 per ton and the previous expectation for cash cost of goods sold per ton of $60—$65.
Asia Pacific Iron Ore Outlook
For 2015, Cliffs reiterated its 2015 Asia Pacific Iron Ore expected sales and production volumes of roughly 11 million tons. The company also maintained its cash production cost per ton expectation of $30—$35. Further, Cliffs reaffirmed its cash cost of goods sold per ton outlook of $35—$40.
Cliffs currently carries a Zacks Rank #2 (Buy).
Better-ranked mining stocks include Energy Fuels Inc. UUUU, Primero Mining Corp. PPP and Vista Gold Corp. VGZ. While Energy Fuels sports a Zacks Rank #1 (Strong Buy), Primero Mining and Vista Gold carry a Zacks Rank #2 (Buy).
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