Cliffs Natural Resources Inc.’s CLF net loss (attributable to common shareholders) for third-quarter 2015 was at 10 cents per share, narrower than net loss of $38.49 per share recorded in the year-ago quarter.
Adjusted loss came in at 15 cents per share, lower than Zacks Consensus Estimate of a loss of 23 cents.
Sales for the quarter came in at $593.2 million, down 39% from $979.7 million in the prior-year quarter. Sales also missed the Zacks Consensus Estimate of $622 million.
Cliffs Natural Resources Inc. (CLF) - Earnings Surprise | FindTheCompany
Segment Performance
U.S. Iron Ore: U.S. Iron Ore pellet sales volume was 5.6 million tons in the third quarter, compared with 6.8 million tons in the year-ago quarter. The decrease was mainly due to lower demand from U.S. steel mills.
Revenues per ton were down 24% year over year to $76.52. Cash production cost per ton decreased 16% year over year to $48.99 in the reported quarter due to reduction in workforce headcount and overall reductions in employment costs, lower maintenance and repair costs along with year-over-year reduction in energy rates.
Asia Pacific Iron Ore: Sales volumes in the segment decreased 5% to 2.9 million tons owing to the timing of shipments related to port maintenance activities.
Revenues per ton were $39, down around 44% from $69.04 in the prior-year quarter. Cash production cost per ton was $26.87, down 49% from the year-ago quarter. The decrease was due to lower mining and administrative costs, as well as favorable exchange rate variances of roughly $12 per ton.
Financial Position
Cliffs had $270.2 million in cash and cash equivalents as of Sep 30, 2015, compared with $244 million as of Sep 30, 2014. Long-term debt was at $2,721.6 million as of Sep 30, 2015, compared with $3,012.5 million as of Sep 30, 2014.
At the end of the reported quarter, Cliffs had net debt of $2.5 billion versus net debt of $2.9 billion a year ago. There was nothing drawn on the company's new asset-based lending facility at the end of the quarter. Reduction in net debt was due to a number of actions including asset sales, exchange offers and open-market bond repurchases.
Capital expenditure including the discontinued coal operations was $24 million in the third quarter, representing a reduction of 66% year over year. Cliffs also reported depreciation, depletion and amortization of $36 million in the quarter.
Outlook
Cliffs reduced its 2015 selling, general and administrative (SG&A) expenses expectation to $110 million, from its earlier expectation of $120 million. The reduction is mainly due to lower headcount and external services spending.
Cliffs expects 2015 interest expense to be roughly $235 million, of which about $205 million is cash interest. Consolidated 2015 depreciation, depletion and amortization is anticipated to be about $135 million.
Cliffs reduced its 2015 capital expenditures budget to the range of $85–$95 million, from its prior expectation of $100–$125 million. The spending includes outflows associated with North American Coal and assumes no additional asset sales. The reduction is due to spending discipline exhibited across the business.
U.S. Iron Ore Outlook
For 2015, Cliffs reduced its sales volume expectation by 1.5 million to 17.5 million tons of iron ore pellets, due to the termination of the Essar Algoma Pellet Sale and Purchase Agreement in October. The company, however, retained its earlier cash production cost outlook of $55–$60 per ton and the prior expectation for cash cost of goods sold per ton of $60–$65.
Cliffs is currently negotiating with the United Steelworkers and is committed to reaching a fair and equitable deal.
Asia Pacific Iron Ore Outlook
For 2015, Cliffs increased its Asia Pacific Iron Ore expected sales and production volumes to about 11.5 million tons from its prior expectation of 11 million tons. The company 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 #3 (Hold).
Some better-ranked mining stocks include Atlas Iron Ltd. AGODY, Fortescue Metals Group Ltd. FSUGY and Primero Mining Corp. PPP. All of these carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report CLIFFS NATURAL (CLF): Free Stock Analysis Report PRIMERO MINING (PPP): Free Stock Analysis Report FORTESCUE METAL (FSUGY): Free Stock Analysis Report ATLAS IRON LTD (AGODY): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research