NEWS RELEASE
Cliffs Natural Resources Inc. Reports Second-Quarter 2016 Results
7/28/2016
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Reports Net Income of $30 million
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Achieves Adjusted EBITDA(1) of $102 million
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Reports Earnings of $0.07 per diluted share
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Cost of goods sold decrease by 8 percent to $405 million
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U.S. Iron Ore cash production costs(2) decrease 17 percent to $46 per long ton
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Asia Pacific Iron Ore cash production costs(2) decrease 17 percent to $28 per metric ton
CLEVELAND, July 28, 2016 /PRNewswire/ -- Cliffs Natural Resources Inc. (NYSE: CLF) today reported second- quarter results for the period ended June 30, 2016. Second-quarter 2016 consolidated revenues of $496 million were relatively flat compared to the prior year's second-quarter revenues of $498 million. Cost of goods sold decreased by 8 percent to $405 million compared to $441 million reported in the second quarter of 2015.
For the second quarter of 2016, the Company recorded net income from continuing operations of $30 million compared to a net loss from continuing operations of $38 million recorded in the prior-year quarter. The Company recorded earnings attributable to Cliffs shareholders from continuing operations of $0.07 per diluted common share, compared to a net loss attributable to Cliffs shareholders from continuing operations of $0.28 per diluted common share recorded in the second quarter of 2015.
Lourenco Goncalves, Cliffs' Chairman, President and Chief Executive Officer, said, "During the second quarter we finalized a range of deals that are essential to Cliffs' future prosperity and growth. Among them, the most significant was the renewal of our multi-year supply agreement with ArcelorMittal. This deal is a win-win for both Cliffs and ArcelorMittal, and demonstrates the strength of the Cliffs franchise. We also negotiated a low-cost power agreement in Minnesota that put cash on the balance sheet, and ensures cost-effective power for years to come. Then, we negotiated additional sales with a new customer, U.S. Steel Canada, previously supplied by its parent
company, U.S. Steel." Mr. Goncalves continued, "On top of this, we reported very strong quarterly results, earning
$102 million in adjusted EBITDA, with all of the credit going to our superior operating performance and cost discipline." Mr. Goncalves added: "With our clear focus on debt reduction and balance sheet strength, I am very optimistic about where Cliffs can go from here."
For the second quarter of 2016, adjusted EBITDA1 was $102 million, compared to $65 million reported in the second quarter of 2015. Cliffs noted that second-quarter 2016 adjusted EBITDA1 includes idle expenses of $20 million related to the previously announced production curtailments at the Northshore and United Taconite mines. Excluding these idle expenses, Cliffs' adjusted EBITDA1 would have been $122 million.
Adjusted EBITDA1 by Segment (in millions)
U.S.
Iron Ore
Asia Pacific Iron Ore
Corporate/
Other Total
Q2 2016 Adjusted EBITDA1 $ 97.2 $ 26.5 $ (22.1) $ 101.6
YTD 2016 Adjusted EBITDA1 $ 143.3 $ 49.5 $ (55.0) $ 137.8
Cliffs' second-quarter 2016 SG&A expenses were $23 million, a 27 percent decrease when compared to the second- quarter 2015 expenses of $31 million. The decrease was driven primarily by reduced staff and external services costs.
Cliffs' second-quarter 2016 interest expense was $51 million, a 20 percent decrease when compared to a second- quarter 2015 expense of $64 million. The Company noted that of the $51 million recorded, $42 million was a cash expense and the remainder was non-cash.
U.S. Iron Ore
Three Months Ended June 30,
Six Months Ended June 30,
2016 2015 2016 2015
Volumes - In Thousands of Long Tons
Total sales volume
|
4,146
|
4,244
|
6,056
|
7,190
|
Total production volume
|
4,155
|
5,503
|
7,202
|
10,879
|
Sales Margin - In Millions
Revenues from product sales and services
|
$ 361.7
|
$ 369.7
|
$ 547.2
|
$ 681.5
|
Cost of goods sold and operating expenses
|
291.7
|
320.7
|
464.0
|
552.5
|
Sales margin
|
$ 70.0
|
$ 49.0
|
$ 83.2
|
$ 129.0
|
Sales Margin - Per Long Ton
Revenues from product sales and services*
|
$ 77.81
|
$ 78.32
|
$ 79.72
|
$ 84.23
|
Cash production cost2
|
46.32
|
56.06
|
46.97
|
60.36
|
Non-production cash cost2
|
9.93
|
5.53
|
11.37
|
(0.15)
|
Cash cost2
|
56.25
|
61.59
|
58.34
|
60.21
|
Depreciation, depletion and amortization
|
4.68
|
5.18
|
7.65
|
6.08
|
Cost of goods sold and operating expenses*
|
60.93
|
66.77
|
65.99
|
66.29
|
Sales margin
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$ 16.88
|
$ 11.55
|
$ 13.73
|
$ 17.94
|
* 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 second quarter of 2016 was 4.1 million long tons, a 2 percent decrease when compared to the second quarter of 2015. The decrease was driven principally by the termination of a customer contract, largely offset by a new customer arrangement.
Cash production cost per long ton2 in U.S. Iron Ore was $46.32, down 17 percent from $56.06 in the prior year's second quarter. The decrease was driven by improved maintenance practices involving condition based monitoring, lower diesel fuel and natural gas rates, and lower employee-related costs.
Non-production cash cost per long ton2 of $9.93 included $20 million of idle costs related to the Northshore and United Taconite mines.
Asia Pacific Iron Ore
Three Months Ended June 30,
Six Months Ended June 30,
2016
|
2015
|
2016
|
2015
|
Volumes - In Thousands of Metric Tons
|
Total sales volume
|
3,103
|
2,750
|
5,906
|
5,784
|
Total production volume
Sales Margin - In Millions
|
2,800
|
2,847
|
5,607
|
5,727
|
Revenues from product sales and services
|
$ 134.5
|
$ 128.4
|
$ 254.5
|
$ 262.6
|
Cost of goods sold and operating expenses
|
113.0
|
120.1
|
215.3
|
253.5
|
Sales margin
|
$ 21.5
|
$ 8.3
|
$ 39.2
|
$ 9.1
|
Sales Margin - Per Metric Ton
|
Revenues from product sales and services*
|
$ 41.96
|
$ 44.29
|
$ 41.58
|
$ 43.53
|
Cash production cost2
|
28.46
|
34.32
|
27.70
|
35.56
|
Non-production cash cost2
|
4.60
|
4.52
|
5.06
|
4.15
|
Cash cost2
|
33.06
|
38.84
|
32.76
|
39.71
|
Depreciation, depletion and amortization
|
1.97
|
2.44
|
2.18
|
2.25
|
Cost of goods sold and operating expenses*
|
35.03
|
41.28
|
34.94
|
41.96
|
Sales margin
|
$ 6.93
|
$ 3.01
|
$ 6.64
|
$ 1.57
|
*Excludes revenues and expenses related to freight, which are offsetting and have no impact on sales margin.
Second-quarter 2016 Asia Pacific Iron Ore sales volume increased 13 percent to 3.1 million metric tons, from 2.8 million metric tons in 2015's second quarter. The volume increase was driven by the timing of shipments related to prior year port maintenance activities.