Here’s What to Expect from Cleveland Cliffs Inc. Q3 2017 Results

by Trefis Team
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Cleveland-Cliffs Inc.
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Cleveland Cliffs Inc. (NYSE: CLF) will release its Q3 2017 earnings results and conduct a conference call with analysts on Oct 20. [1]

The consensus estimate for the company is much higher compared to the same period last year owing to the company’s successful implementation of its strategy to focus on its US operations. Below is a summary of revenue and EPS consensus estimates for Cliffs Q3 2017:

The company’s recent 100% equity acquisition of the Tilden mines in Michigan from US Steel is a leap forward towards this goal to become a pure-play US iron ore producer. The mine would increase the company’s annual pellet production capacity by 1.2 million and cater to the demand in the Great Lakes region. [2]

The recent volatility seen in global iron ore prices wouldn’t have a significant impact on the revenue of  Cliffs as the company’s US operations are characterized by longer term iron ore pricing contracts as opposed to its APAC operations whose prices are more closely linked to the spot prices and the demand-supply dynamics of the international seaborne iron ore market. The contribution of the APAC operations to the total revenue are expected to remain low as the economic lives of the mines comes closer to extinction and there are no additional plans made by the management to keep these mines operational. [3]

The company’s SG&A and Capex are expected to remain high due to the ongoing development of the company’s hot briquetted iron (HBI) production plant which is expected to start production by 2020. The HBI facility is expected to cater to the electric arc furnace (EAF) steel making process as a high cost alternative to scrap and cater to an import market of over 3 million metric ton EAF customers in the Great Lakes region. The company has increased its SG&A and Capex forecast by $10 million each, for the remainder of the year during its last quarter earnings call. ((Cliffs Natural Resources (CLF) Q2 2017 Results – Earnings Call Transcript, Seeking Alpha))

In addition, it is most likely that the management would discuss the ongoing Section 232 investigation initiated by the Trump administration on the impact of steel imports on US Security.  Although no material action has yet been taken with respect to this probe, a suitable action would have significant impact on US steel and iron ore producers. We would be closely watching these developments, which are likely to materially impact Cliffs’ future business prospects.

Have more questions about Cleveland Cliffs? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Cliffs Natural Resources

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Notes:
  1. Cleveland-Cliffs 2017 Third Quarter Earnings Conference Call, Cleveland Cliffs website []
  2. Cleveland-Cliffs Inc. Announces Acquisition of Remaining Equity Interest in the Tilden Mine, Cleveland Cliffs News Release []
  3. Cliffs Natural Resources (CLF) Q2 2017 Results – Earnings Call Transcript, Seeking Alpha []
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