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Cleveland-Cliffs Reports Stable Earnings Amid Market Challenges

AInvestMonday, Jan 29, 2024 10:30 pm ET
2min read

$CLF(CLF)

Finance analysts received an in-depth earnings report from Cleveland-Cliffs, a prominent flat-rolled steel producer in North America, revealing its financial results for the full year and fourth quarter ended on December 31, 2023. Although the company experienced a slight decline in annual revenue from $23.0 billion to $22.0 billion, it managed to achieve a significant feat by setting a record in steel shipments, totaling 16.4 million net tons. This included record automotive shipments, further highlighting the company's strong position in the automotive sector.

The company's full-year GAAP net income amounted to $450 million or $0.78 per diluted share, representing a substantial decrease from the previous year's $1.4 billion or $2.55 per diluted share. Adjusted net income, however, stood at $545 million, with adjusted EPS of $1.07 per diluted share. The reduction in net income and Adjusted EBITDA, which was $1.9 billion compared to $3.2 billion in 2022, was primarily driven by lower steel index pricing in 2023.

Operationally, Cleveland-Cliffs demonstrated strong cash flow management, generating $2.3 billion in cash flow from operations. This led to a free cash flow of $1.6 billion, with the majority of the free cash flow being used strategically to reduce the net debt by $1.3 billion, surpassing the publicly stated target and ending the year with a net debt of $2.9 billion.

During the fourth quarter, Cleveland-Cliffs reported consolidated revenues of $5.1 billion, a slight increase from $5.0 billion in the same quarter in the previous year. However, the company recorded a GAAP net loss of $139 million, or $0.31 per diluted share, with an adjusted net loss of $25 million, or $0.05 per diluted share. This comparatively showed improvement from the prior-year fourth-quarter net loss of $204 million, or $0.41 per diluted share. The fourth-quarter Adjusted EBITDA was $279 million, more than double the $123 million from the same period in 2022.

Chairman, President, and CEO Lourenco Goncalves commended the company's achievements, including significant reductions in unit costs and the expectation of further decreases in 2024. He emphasized Cleveland-Cliffs' strong liquidity position with a record $4.5 billion at year-end and the strategic focus on aggressive share buybacks due to the company's undervalued shares.

In terms of the company's balance sheet, Cleveland-Cliffs showed a healthy liquidity position, with $198 million in cash and cash equivalents and a total equity of $8.122 billion. The reduction in net debt signifies the company's commitment to financial discipline and its capability to generate free cash flow even in a challenging market environment.

Looking forward, Cleveland-Cliffs expects steel shipment volumes to slightly increase to 16.5 million net tons in 2024, accompanied by steel unit cost reductions of approximately $30 per net ton. The company plans for capital expenditures between $675 to $725 million. It anticipates that its Adjusted EBITDA performance in the first quarter of 2024 will significantly exceed the performance recorded in the fourth quarter of 2023.

Despite the fluctuations in the steel market, Cleveland-Cliffs has showcased its resilience, financial discipline, and capacity for growth in the face of challenges. With a robust liquidity position and continued focus on reducing costs, the company's future remains promising as it maintains its position as an American leader in the steel industry.


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