Cliffs Natural Resources (CLF) will release its 2Q15 results before the US market opens on July 29, 2015. A conference call with securities analysts and institutional investors will occur at 10:00 AM ET on July 29 to discuss the results. The link to the live broadcast of the conference call will be available at http://www.cliffsnaturalresources.com.
In this series, we’ll provide a preview of what to expect from the earnings. The preview will allow you to compare the company’s actual performance with the expectations.
Why are the results important?
Cliffs’ results on July 29 are important for two reasons. One is to look at the operating performance of the company since the price of iron ore touched fresh lows in April before rebounding in the quarter. Prices touched a decade low of $47.08 in April. The second reason is that there are many decisions of strategic importance that might be addressed either in the results release or during the earnings conference call.
Also important will be the details surrounding management’s strategy regarding further deleveraging of the balance sheet, including possible sales of further coal assets. Analysts are also anticipating a further update on the company’s venturing into a direct reduced iron business.
About Cliffs Natural Resources
Cliffs Natural Resources is mainly an iron ore producer. A small percentage of its revenue comes from metallurgical coal sales. Cliffs accounts for close to 46% of North America’s iron ore pellet supply.
Cliffs has operations in the United States, Eastern Canada, and Australia. Recently, it put its Eastern Canadian Iron Ore assets into bankruptcy. Cliffs has a small direct exposure to the volatile seaborne iron ore market where mining giants like BHP Billiton (BHP), Rio Tinto (RIO), and Vale S.A. (VALE) operate.
The rest of the company’s earnings are tied to legacy contracts in the United States with integrated US steel players, including U.S. Steel (X), AK Steel (AKS), and ArcelorMittal (MT). The SPDR S&P Metals and Mining ETF (XME) is another way for investors to play the metals and mining space. Cliffs, U.S. Steel, and AK Steel account for 2.8%, 3.6%, and 2.9%, respectively, of XME’s holdings.