Yahoo Finance Cleveland-Cliffs Inc (CLF) Q1 2024 Earnings Call Transcript Highlights: Strategic Moves and ...
Share Buybacks: Over 30 million CLF shares repurchased in Q1, utilizing $608 million from the previous $1 billion program. A new $1.5 billion share repurchase program announced.
Net Debt to EBITDA Ratio: Target set at 2.5x, allowing flexibility for aggressive shareholder returns.
Q1 Adjusted EBITDA: $414 million, indicating a rebound in profitability.
Automotive Sales: Higher sales contributed to better than expected average sales pricing.
Production Volume: 3.9 million net tons in Q1, with an expectation to exceed 4 million tons in Q2.
Unit Costs: Approximately $30 per net ton reduction expected in 2024, starting with a $20 drop in Q2.
Decarbonization Projects: Selected for negotiations for $575 million in DOE grants for two projects, with no significant impact on this year's capital spend.
GAAP Loss: Driven by approximately $170 million in one-time charges, primarily related to employee support costs and asset impairments.
Release Date: April 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Lourenco, you mentioned that the option for Nippon to acquire the nonunion assets and Cleveland-Cliffs to acquire the union assets is dead. Is there anything that could revive that option? A: C. Lourenco Goncalves - Cleveland-Cliffs Inc. - Chairman, President & CEO: The proposal is completely off the table following the President of the United States' declaration, making it clear that the government will not support it. This decision is final and respects the President's stance.
Q: Can you discuss the expected cost reductions in Q2 and their impact on margins and free cash flow? A: Celso L. Goncalves - Cleveland-Cliffs Inc. - Executive VP & CFO: We anticipate a $30 per ton decrease in costs year-over-year, mainly due to lower coal and natural gas prices. For Q2 specifically, costs are expected to drop by $20 per ton. Share buybacks remain a priority, although opportunities to buy back bonds will also be considered if they arise.
Q: How should we think about the product mix and its impact on pricing into the second quarter? A: C. Lourenco Goncalves: The mix is returning to normal levels with increased sales to service centers and distribution, balancing the heavy automotive mix from Q1. This normalization should help stabilize pricing and volumes.
Q: What are the details regarding the DOE grants for the decarbonization projects, and how do they impact the financials? A: Celso L. Goncalves: The grants are paid out proportionally with the capital spend on the projects, which begin significantly impacting CapEx in 2025. The total contribution from Cliffs for the Middletown project in 2025 is about $250 million, with total CapEx around $985 million.
Q: Could the Middletown project's approach be a model for other facilities in Cleveland-Cliffs' portfolio? A: C. Lourenco Goncalves: While the Middletown project is tailored to its specific circumstances, particularly its costly coke contract, other facilities might not transition as quickly. Each plant will be evaluated individually for similar conversions based on their unique cost structures and contracts.
Q: What is the status of the NOES expansion at Zanesville, and how is it impacting the market? A: C. Lourenco Goncalves: The NOES expansion at Zanesville is operational and meeting its goals, particularly in serving the electric vehicle market. There are no current plans for further expansion beyond the existing capacity.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
