Cleveland-Cliffs Inc (CLF), a leading iron ore and steel producer, reported a challenging third quarter, with a loss attributed to weaker demand and lower pricing in the steel market.
The company’s revenue for the quarter came in at $4.57 billion, falling short of analysts’ expectations of $4.77 billion. Earnings per share (EPS) registered a loss of 33 cents, exceeding estimates for a loss of 27 cents.
Steel shipments totaled 3.8 million net tons during the quarter, with a breakdown of 36% hot-rolled, 28% coated, 17% cold-rolled, 4% plate, 4% stainless and electrical, and 11% other categories.
Lourenco Goncalves, chairman, president, and CEO of Cleveland-Cliffs, attributed the company’s performance to the challenging market environment. He stated that weaker demand and pricing resulted in tighter margins, leading to the temporary idling of the company’s Cleveland #6 blast furnace.
Despite achieving the lowest unit cost since 2021, exceeding their cost reduction targets, Cleveland-Cliffs was significantly impacted by the underperformance of two of its top four automotive clients. The company’s high exposure to the automotive sector put them at a disadvantage compared to competitors.
To mitigate the challenges, Cleveland-Cliffs highlighted the recent acquisition of Stelco, a steel producer with a strong business model and cost advantages. The company emphasized Stelco’s minimal exposure to the automotive sector, positioning it as a strategic asset to offset the current market headwinds.
Looking ahead, Cleveland-Cliffs has adjusted its capital expenditure outlook for the full year 2024 from a range of $650 million to $700 million to a new range of $600 million to $650 million. However, the company remains optimistic about the future of the steel industry, anticipating a rebound in demand in early 2025.
Goncalves expressed confidence in the company’s ability to capitalize on this projected upswing, citing Stelco’s assets and cost reductions. He also highlighted the potential to quickly reduce acquisition debt through healthy free cash flow.
Management will host a conference call on Tuesday morning at 8:30 a.m. ET to provide further details and insights into the company’s third-quarter results.
Cleveland-Cliffs shares fell by 4.04% after hours, trading at $12.58 at the time of publication.
