Cliffs Natural Resources (CLF) Posts Narrower-than-Expected Q3 Loss; Boosts Iron Ore Pricing Outlook

Cliffs Natural Resources (NYSE: CLF) reported Q3 EPS of ($0.10), $0.15 better than the analyst estimate of ($0.25). Revenue for the quarter came in at $593 million versus the consensus estimate of $595.78 million.

Lourenco Goncalves, Cliffs' Chairman, President and Chief Executive Officer, said, "Our performance this past quarter illustrates how far we have come in our turnaround story. We have been able to deliver significant cost reductions in all areas of the business through disciplined execution of the strategy instituted last year." Mr. Goncalves added, "We expect the domestic steel market to improve in 2016 as trade actions reduce the pressure of imports and firm up steel pricing. Our solid cost position coupled with stronger demand from the mills should drive better profitability for Cliffs."

For the third quarter of 2015, adjusted EBITDA was $60 million. Cliffs noted that this figure includes idle expenses of $33 million related to previously announced production curtailments. Excluding these idle expenses primarily associated with the Empire and United Taconite mines, Cliffs' adjusted EBITDA1 would have been $93 million.

Outlook

Cliffs provides full-year expected revenues-per-ton ranges based on different assumptions of seaborne iron ore prices. Cliffs indicated that each different pricing assumption holds all other assumptions constant, including customer mix, as well as industrial commodity prices, freight rates, energy prices, production input costs and/or hot-band steel prices (all factors contained in certain of Cliffs' supply agreements).

The table below provides certain Platts IODEX averages for the remaining three months of 2015 and the corresponding full-year realization for the U.S. Iron Ore and Asia Pacific Iron Ore segments. The estimates consider actual Platts IODEX rates and Cliffs' revenue realizations for the first nine months of 2015. Cliffs previously furnished 2015 pricing expectations on July 29, 2015. Due primarily to improved customer mix partially offset by decreased hot-band steel price assumptions, Cliffs has increased its revenues-per-ton expectations for U.S. Iron Ore. At a fourth-quarter Platts IODEX assumption of $55 - $60 per ton, the full-year expected range of realizations has increased to $80 - $85 per ton from the previous expectation of $75 - $80 per ton.

Expectations of revenue realizations for Asia Pacific Iron Ore have not changed significantly since the end of the second quarter. Cliffs noted that over the past year, Asia Pacific Iron Ore price realizations have ranged between a $15 and $20 per ton discount to the average Platts IODEX price on a quarterly basis.

For earnings history and earnings-related data on Cliffs Natural Resources (CLF) click here.

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