Cliffs Natural Resources Inc.
) posted adjusted earnings of 62 cents per share for the fourth
quarter of 2012, down 58% from $1.49 earned in the year-ago
quarter. Adjusted earnings from continuing operations were 41
cents a share. By that measure, it missed the Zacks Consensus
Estimate of 55 cents.
On a reported basis, the company turned to a loss of $11.36
per share compared with earnings of $1.30 per share in the
year-ago quarter. Non-cash impairment charges of $1 billion
related to Cliffs' acquisition of Consolidated Thompson
Iron Mines Limited, $365 million of charges related to sale of
Amapa stake, $541 million related to a couple of deferred tax
assets and lower iron ore pricing led to the year over year slump
in the bottom line.
For the full year, adjusted earnings came in at $3.45 per
share, down 70% year over year, missing the Zacks Consensus
Estimate of $3.59. After including one-time charges, the company
recorded a loss of $6.32 per share compared with earnings of
$11.48 per share a year ago.
Sales for the quarter came in at $1,535.9 million, down
roughly 4% from $1,603.7 million in the prior-year quarter.
However, it exceeded the Zacks Consensus Estimate of $1,529
million. The decline in revenues resulted from a year-over-year
drop in seaborne iron ore pricing.
For full-year 2012, sales decreased 11% year over year to
$5.87 billion, missing the Zacks Consensus Estimate of $6.37
U.S. Iron Ore:
U.S. Iron Ore pellet sales volume decreased to 6.2 million tons
in the quarter from 7.8 million tons in the fourth quarter of
2011. Lower volumes to a customer and lower demand for iron ore
led to the decline.
Revenues per ton fell 7% year over year to $120.06. The decline
was due to lower pricing of sea borne iron ore and changes in
customer mix. Cash costs per ton fell 3% to $64.55.
Eastern Canadian Iron Ore:
Sales volumes increased 20% to 2.3 million tons in the quarter,
mainly due to increased customer demand and improved production
volume at Bloom Lake Mine. Revenues per ton for the segment
declined 19% year over year to $100.70, hurt by lower pricing of
iron ore, timing of certain cargoes, and product mix.
Cash costs per ton jumped 14% to $116.56, attributable to
higher cash costs at Wabush mine due to higher labor costs and
increased spending related to maintenance, and repair costs.
Higher fuel, contract labor and maintenance and supply costs at
the Bloom Lake Mine also led to higher cash costs.
Asia Pacific Iron Ore:
Sales volumes in the segment increased 56% to 2.8 million tons as
Koolyanobbing Complex expansion project was completed in the
quarter. Revenues per ton were $99.96, down 23% from $130.18 in
the prior-year quarter, due to weaker year over year pricing for
seaborne iron and low grade iron ore in the company's product
Cash cost per ton in the Asia-Pacific Iron Ore segment
declined 5% to $65.86 on the back of improved volumes and the
related favorable impact on fixed-cost leverage.
North American Coal:
Sales volumes shot up 94% to 1.9 million tons, led by
significantly higher sales volumes from Cliffs' low-volatile
metallurgical coal mines. Revenues per ton decreased 12% to
$110.14, due to lower market pricing for all coal products. Cash
cost per ton decreased 15% to $114.56. Also, increased shipments
to Asia lowered revenues due to higher freight.
Cliffs entered into a definitive share and asset sale agreement
to sell its 45% economic interest in Sonoma Coal. The transaction
closed in the fourth quarter of 2012 and Cliffs collected net
cash proceeds of AUD $141 million.
Cliffs had $195.2 million in cash and cash equivalents as of
Dec 31, 2012, compared with $519.3 million as of Dec 31, 2011.
Long-term debt stood at $3,960.7 million as of Dec 31, 2012,
compared with $3,608.7 million as of Dec 31, 2011.
Cliffs' Board of Directors approved the reduction of the
company's quarterly cash dividend by 76% to 15 cents per share
from 62.5 cents. The cash dividend is payable on Mar 1, 2013, to
shareholders of record as of Feb. 22, 2013.
According to Cliffs, prices are likely to stay volatile in
2013, but demand should remain healthy because of high demand in
China for raw materials used in making steel. Cliffs expects its
global iron ore sales to be relatively flat year over year at
about 40 million tons.
In order to reduce overhead costs, Cliffs expects selling,
general and administrative expenses for 2013 to be $230 million,
a decrease of about $60 million from 2012.
The company increased its 2013 capital expenditures budget to
$800-$850 million from its previous expectation of $700-$800
million due to additional investments in its Eastern Canadian
Iron Ore business segment.
U.S. Iron Ore Outlook
The company expects sales and production volumes in U.S. Iron Ore
to be 20 million tons in 2013. Cash cost is expected to be in the
range of $65-$70 per ton.
Eastern Canadian Iron Ore Outlook
The company maintained its sales volume target in the range of
approximately 9-10 million tons and production is also expected
to be in the range of 9-10 million tons. Cash cost per ton in
Eastern Canadian Iron Ore is expected to be in the range of
$100-$105 in 2013.
Asia Pacific Iron Ore Outlook
For 2013, sales and production volumes are forecast to be 11
million tons. Cash cost per ton is expected to be approximately
North American Coal Outlook
For 2013, expected sales and production volumes for North
American Coal are approximately 7 million tons. Cash cost per ton
has been projected in the range of $95-$100, lower than full-year
2012 cash costs due to the improved operating performance.
Cliffs currently retains a Zacks Rank #2 (Buy).
Other companies in the mining industry having a favourable
Zacks Rank are
Kumba Iron Ore Ltd.
BHP Billiton Plc.
BHP Billiton Ltd.
). While Kumba Iron Ore retains a Zacks Rank #1 (Strong Buy), BHP
Billiton Ltd. and BHP Billiton Plc. hold a Zacks Rank #2 (Buy).
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