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Cliffs Natural Resources’ Q2 Results: Key Financial Highlights

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Aug. 2 2016, Updated 10:08 a.m. ET

Revenue summary

Cliffs Natural Resources (CLF) reported revenues of $496 million for 2Q16, essentially flat year-over-year (or YoY). However, revenues were higher than Wall Street expectations of $465 million, mainly due to the higher volumes in the US (DIA) iron ore (or USIO) division.

U.S. Steel (X) reported revenues of $2.5 billion in 2Q16. Its revenues have risen on a sequential quarterly basis, and its earnings were better than consensus estimates. Nucor (NUE) and Steel Dynamics (STLD) have taken advantage of higher spot steel prices and increased their spot sales. Nucor’s 2Q16 revenues rose by 16% sequentially. In comparison, AK Steel (AKS) has been an outlier, and its revenues fell on a sequential basis in 2Q16.

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EBITDA surprise

Cliffs reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $102 million. This is the first quarter since 4Q14 that the company has achieved EBIDTA greater than $100 million. This is also an impressive improvement of 57% YoY. The important thing to note here is that this improvement wasn’t helped by prices. The company mentioned that the $53 per ton iron ore price in 2Q16 was lower than in 2Q15.

Higher domestic steel prices as well as strong operating performance and cost discipline led to this impressive growth in EBITDA.

Divisional EBITDA

The adjusted EBITDA for the US iron ore (or USIO) division came in at $97 million, almost double that of 1Q16. Volumes picked up after a seasonally weaker first quarter. This change also led to an EBITDA margin of 30% for 2Q16.

The adjusted EBITDA for Cliffs’ Asia-Pacific iron ore (or APIO) division also came in at $27 million compared to $23 million in 1Q16.

In the next part of this series, we’ll have a look at the progression of Cliffs’ US sales volumes.

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