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Key Highlights from Cleveland-Cliffs’ 3Q17 Results

Anuradha Garg - Author

Aug. 18 2020, Updated 6:36 a.m. ET

Revenue summary

Cleveland-Cliffs (CLF) achieved revenues of $698.0 million for 3Q17, an increase of 26% year-over-year (or YoY). The company achieved a revenue beat on the back of higher volumes in the United States Iron Ore (or USIO) division (SPY) (SPX) due to higher customer demand and export sales.

Cleveland-Cliffs’ US peers (SLX) have been releasing their results in the last two weeks. Steel Dynamics (STLD) released its 3Q17 results on October 18, followed by Nucor’s (NUE) results on October 19.

Among the other steel companies, U.S. Steel (X) and AK Steel (AKS) are scheduled to release their 3Q17 earnings on October 31.

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EBITDA rose year-over-year

Cleveland-Cliffs’ adjusted EBITDA[1. earnings before interest, tax, depreciation, and amortization] came in at $154.0 million, an increase of 149.0% compared to 3Q16.

While USIO’s EBITDA was $174.0 million, the Asia-Pacific Iron Ore (or APIO) division contributed just $4.9 million. The balance of the adjustment is due to the other corporate items.

The company has already generated more EBITDA in the first nine months of 2017 than it had achieved in all of 2015 and 2016. USIO’s EBITDA represented another multiyear high, mostly due to the higher-than-expected sales volumes and strong cash margins.

Although APIO’s EBITDA of $5.0 million was an improvement over 2Q17, it was weaker compared to 3Q16. Cleveland-Cliffs’ CFO, Tim Flanagan, noted during the 3Q17 earnings call that despite higher iron ore benchmark prices, the decline was due to increased operational costs, heavily discounted realizations, and flat-to-reduced volumes.

Net earnings

Cleveland-Cliffs (CLF) reported net income of $53.0 million in 3Q17, a 290% increase compared to its net income reported in 3Q16.

While Cleveland-Cliffs downgraded its EBITDA guidance from $700.0 million to $650.0 million in its 3Q17 results, the company no longer provides EBITDA guidance due to too many moving variable assumptions.

In the next part of this series, we’ll take a look at the volumes in the US segment in 3Q17.


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