Cliffs’ US Iron Ore Pricing Helped It Deliver an Earnings Beat
Highlights of Cliffs’ 1Q15 Earnings: Beat on US Pricing (Part 2 of 5)
Cliffs Natural Resources’ revenue
Cliffs Natural Resources’ (CLF) revenue for 1Q15 was $446 million—28% lower YoY (year-over-year). Cliffs excluded NAC (North American Coal) from the revenue contribution and classified it as a “discontinued operation.” This was done because NAC is treated as non-core and non-strategic. It’s up for sale.
Cliffs also reduced its SG&A (selling, general, and administrative) expenses by 22% from 1Q14. Expenses came in at $29 million for 1Q15.
US iron ore
USIO (US iron ore) pricing came in at $93 per ton. It was the main reason why Cliffs’ results beat the estimates. This is well above the company’s full-year guidance of $80–$85 per ton. This is what analysts expected for 1Q15 as well.
The realized pricing mainly benefited from higher priced carryover tons in 1Q15 from the previous quarter. The cost side was also a positive surprise. The cash costs for USIO decreased by 20% to $64.98 per ton. The decrease was mainly due to reduced energy and repair and maintenance expenditures. USIO’s volumes were 2.9 million tons—up 4% from 1Q14. This was due to more favorable shipping conditions in the Great Lakes in 1Q15—compared to 1Q14.
Asia Pacific iron ore
APIO’s (Asia Pacific iron ore) volume increased by 15% to 3 million tons in 1Q15. The increase was mainly due to a favorable shipping schedule during 1Q15. The favorable exchange rate also helped APIO’s cash costs. They declined by 28% YoY. The rest of the decline was due to reduced mining and administrative costs.
Other companies in the iron ore segment, BHP Billiton (BHP) and Vale SA (VALE), announced their 1Q15 production results on April 22. Rio Tinto (RIO) announced its production results on April 21. BHP slowed down its expansion to 290 million tons per annum. Vale also hinted at curtailing 30 million tons of iron ore capacity to improve its margins.
The SPDR S&P Metals and Mining ETF (XME) is another way for investors to get exposure to the metals and mining space without picking individual companies. Cliffs forms 4% of XME’s holdings.
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