Beleaguered Cliffs posts Q2 loss, beats expectations – by Henry Lazenby ( – July 24, 2014)

TORONTO ( – US iron-ore and coal producer Cliffs Natural Resources, which is locked in a proxy fight with an activist shareholder for control of the board, on Wednesday reported a net loss for the three months ended June 30, as lower iron-ore and metallurgical steelmaking coal prices and reduced sales pressured the balance sheet.

The Cleveland, Ohio-based miner reported a loss of $2-million, or $0.01 a share, compared with a net income of $133-million, or $0.82 a share, in the second quarter of 2013.

The year-over-year consolidated revenues were 26% lower at $1.1-billion, mainly impacted by a 24% drop in sales volume from the company’s US iron-ore operations.

Seventeen Wall Street analysts had on average expected a loss of $0.06 a share, based on revenue of $1.17-billion.

The cost of goods sold decreased by 17% to $1-billion, mainly driven by reduced volumes, lower idle costs and favourable foreign exchange rates when compared with the second quarter of 2013.

Lower revenues significantly contributed to a 66% decrease in the consolidated sales margin to $92-million, down from $268-million in last year’s comparable quarter. The consolidated sales margin also included $18-million in lower-cost-or-market adjustments in the North American coal and Eastern Canadian iron-ore business segments.


In the US, iron-ore pellet sales totalled 4.3-million tons compared with 5.7-million tons in the second quarter of 2013. The decrease was mainly driven by reduced vessel shipment availability owing to the freeze on the Great Lakes, resulting in a delayed start of the 2014 shipping season, as well as lower export and other spot sales. This decrease was partially offset by increased demand from two customers, the company said.

Cliffs highlighted that it now expected to only hit the lower end of its full-year US iron-ore output guidance of 22-million tons, owing to weather-related impacts.

In Eastern Canada, iron-ore sales volumes were up 3% to two-million tons, an increase of 3% over the prior year’s quarter and reflected Bloom Lake mine concentrate sales only. Cliffs added that Bloom Lake’s second-quarter sales volume increased 33% over last year’s comparable quarter and was a record quarter for tons shipped.

This was mainly driven by improved production rates and a Chinamax-sized vessel shipment that was delayed in the first quarter owing to the adverse weather-related impact on logistics. The segment’s sales volume increase was partially offset by an absence of sales from the Wabush mine, which shipped 500 000 t in the prior year’s second quarter, reflecting the mine’s recent idling.

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