Cliffs Natural Resources Inc.
) reported first-quarter 2014 net loss of $83 million, or 54
cents per share compared with a net income of $97 million or 66
cents per share in the year-ago quarter.
Barring income tax benefit of $22 million, loss was 68 cents per
share, wider than the Zacks Consensus Estimate of a loss of 21
cents per share.
Sales for the quarter came in at $940 million, down 18% from
$1,140.5 million in the prior-year quarter. It also missed the
Zacks Consensus Estimate of $1,039 million. The decline was due
to significantly lower market pricing for iron ore and
metallurgical coal, and a 2% reduction in global iron ore sales
volumes, most of which was weather related.
U.S. Iron Ore:
U.S. Iron Ore pellet sales volume was 2.8 million tons in the
first quarter, compared with 3.1 million tons in the year-ago
quarter. The decline was due to the extremely cold weather seen
across the Midwestern U.S., which impacted production and
shipment of product on the Great Lakes.
Revenues per ton were down 9% year over year to $109.02 due to
lower realized pricing from certain customer contracts, reduced
year-over-year market pricing for iron ore and customer mix.
Cash cost per ton increased 9% year over year to $65.42 due to
higher maintenance activity and energy costs, which rose due to
Eastern Canadian Iron Ore:
Sales volumes in the reported quarter decreased 14% year over
year to 1.6 million tons. A Chinamax-sized vessel shipment was
delayed due to the adverse weather-related impact on logistics,
leading to the decline in sales.
Revenues per ton for the segment decreased 25% year over year
to $98.45 due to a 19% decline in ore market pricing and
unfavorable provisional pricing settlements that benefitted the
prior-year quarter. A year-over-year rise of 23% in freight rates
and product mix also adversely impacted the revenues.
Cash cost per ton rose 4% to $103.73 due to lower cost or
market inventory adjustments of roughly $13 million or $8 per ton
that are reported through cash cost of goods sold.
Asia Pacific Iron Ore:
Sales volumes in the segment rose 15% to 2.6 million tons due to
the timing of vessel shipments. Revenues per ton were $96.25,
down 18% from $117.48 in the prior-year quarter, due to a 19%
year-over-year decrease in iron ore market pricing, an
unfavorable foreign exchange hedging loss of $4 per ton and
increased freight rates.
Cash cost per ton in the segment fell 25% to $56.34 due to
favorable foreign exchange rate variances. Increased sales
volumes also led to improved fixed-cost leverage.
North American Coal:
Sales volumes decreased 12% to 1.6 million tons, led by lower
sales to certain customers due to extended pricing negotiations
and unfavorable weather-related impacts. Revenues per ton
decreased 20% to $88.61, due to lower market pricing for
metallurgical coal products, coupled with positive impact in the
prior year's first quarter related to tons that were priced at a
Cash cost per ton was $100.38 compared with $91.16 per ton in
the year-ago quarter.
Cliffs had $364 million in cash and cash equivalents as of Mar
31, 2014, compared with $287.2 million as of Mar 31, 2013.
Long-term debt stood at $3,194.8 million as of Mar 31, 2014,
compared with $3,433 million as of Mar 31, 2013.
Capital expenditures were reduced by 55% to $103 million in
the first quarter and depreciation, depletion and amortization
amounted to $141 million.
Cash used in operations was $ $82 million in the reported
quarter compared with $25 million in the comparable quarter in
Cliffs maintained its full-year sales and production volumes
for all business segments. Demand from its North American
customers remains strong, reflecting lower-than-normal iron ore
inventory stockpiles at customers' facilities.
Cliffs expects the Chinese economy to expand at a pace near
the official government target rate, mainly driven by fixed asset
investment, especially infrastructure spending. As such, higher
steel production in China will need both domestic and imported
steelmaking raw materials to satisfy the demand. Cliffs expects a
healthy pace of economic growth in the U.S. to support the
company's U.S. Iron Ore products in 2014.
For full-year 2014, selling, general and administrative
(SG&A) expenses are expected to be roughly $185 million,
which excludes severance-related costs. Cliffs is also
maintaining its full-year cash outflows expectation of $15
million for exploration.
Cliffs expects its full-year 2014 depreciation, depletion and
amortization to be roughly $600 million. Cliffs reaffirmed its
2014 capital expenditures budget of approximately $375-$425
U.S. Iron Ore Outlook
For full-year 2014, Cliffs expects sales and production volume
to be between 22 million tons and 23 million tons. Cash-cost
expectation is in the range of $65-$70 per ton. Depreciation,
depletion and amortization for full-year 2014 are expected to be
roughly $7 per ton.
Eastern Canadian Iron Ore Outlook
For full-year 2014, sales and production volume is reiterated
to be between 6-7 million tons. Cliffs maintains its full-year
2014 cash cost per ton outlook to be $85-$90. Depreciation,
depletion and amortization for full-year 2014 are expected to be
roughly $25 per ton.
Asia Pacific Iron Ore Outlook
For 2014, Cliffs maintains its sales and production volume
outlook to be between 10 and 11 million tons. The product mix is
expected to be around half lump and half fines iron ore. Cash
cost per ton is expected to be roughly $60-$65. Depreciation,
depletion and amortization is anticipated to be about $14 per ton
for the year.
North American Coal Outlook
For 2014, the company maintains its outlook of sales and
production volume of about 7-8 million tons from its North
American Coal business. Cliffs lowered its expectations for
revenues-per-ton outlook to $80-$85 from its previous outlook of
$85-$90. The decrease is primarily driven by lower market pricing
for metallurgical coal products.
Cliffs reaffirmed its full-year cash-cost-per-ton expectation
of $85-$90. Full-year 2014 depreciation, depletion and
amortization is expected to be about $15 per ton.
Cliffs, a prominent mining company along with
BHP Billiton Limited
Rio Tinto plc
), currently carries a Zacks Rank #3 (Hold).
Another company in the mining industry with a favorable Zacks
Kumba iron Ore Ltd.
), carrying a Zacks Rank #1 (Strong Buy).
BHP BILLITN LTD (BHP): Free Stock Analysis
CLIFFS NATURAL (CLF): Free Stock Analysis
KUMBA IRON ORE (KIROY): Get Free Report
RIO TINTO-ADR (RIO): Free Stock Analysis
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