Cleveland-Cliffs Inc. (NYSE:CLF) reported robust third-quarter 2023 earnings, with revenues reaching $5.6 billion and adjusted EBITDA of $614 million. The company highlighted its commitment to reducing debt and using hydrogen as a decarbonization path during its earnings call.
Key takeaways from the call include:
- Cleveland-Cliffs reported GAAP earnings per share of $0.52 and total shipments of 4.1 million net tons.
- The company set a new quarterly record for steel shipments to the automotive sector.
- Free cash flow of $605 million was used to pay down debt, reducing net debt to $3.4 billion.
- Since acquiring ArcelorMittal (NYSE:MT) USA in December 2020, the company has reduced net debt by nearly $2 billion and eliminated $3.5 billion in pension OPEB liabilities, showcasing its high shareholder yield as noted by InvestingPro Tips.
- Cleveland-Cliffs expects Q4 shipments to remain around 4 million net tons, regardless of the UAW strike.
- The company is committed to using hydrogen as a decarbonization path and has committed to buying a large portion of the output from the Midwest hydrogen hub.
According to InvestingPro's real-time metrics, Cleveland-Cliffs' market cap stands at $7890M USD, with a P/E ratio of 23.23, suggesting it is trading at a high earnings multiple, as also pointed out by InvestingPro Tips.
Cleveland-Cliffs' CEO, Lorenzo Goncalves, emphasized the company's commitment to hydrogen as a future energy source during the earnings call. Goncalves believes that hydrogen can replace fossil fuels and significantly reduce carbon emissions. The company's commitment to purchasing a large portion of the output from the Midwest hub has made the hub viable, attracting other sectors.
The company is installing a new pipeline at their Indiana Harbor plant to support hydrogen usage. Goncalves also expressed appreciation for the Biden administration's support of projects that sustain and grow union jobs.
The CEO also discussed the company's sales mix, emphasizing the strong demand for wind and solar energy sources. He expressed skepticism about the need for service centers in the supply chain and a desire for more free trade between the US and Europe, particularly in the steel industry.
CFO Celso Goncalves discussed capital allocation priorities, including debt reduction, share buybacks, dividends, and potential mergers and acquisitions. He also discussed cost reductions for 2024, including benefits from a new coal contract and lower natural gas prices, and mentioned productivity improvements and cost savings through strategic purchasing. The company expects costs to return to around $1,000 per ton in 2024.
CEO Goncalves highlighted the company's efficient labor deployment and ability to produce a significant amount of steel despite reduced throughput. He mentioned that the company has been delivering more than 4 million net tons of steel for three consecutive quarters, primarily to the automotive industry. The company has implemented cost initiatives, such as negotiating favorable deals with suppliers. The call concluded with Goncalves expressing appreciation for the interest in Cleveland-Cliffs and announcing the next conference call for February 2023.
InvestingPro Tips indicate that Cleveland-Cliffs has been aggressively buying back shares, a move that demonstrates management's confidence in the company's future. For more insights like these and other tips, you can visit InvestingPro.
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