Cleveland-Cliffs reports Q4 EPS (31c), consensus (4c)

Reports Q4 revenue $5.11B, consensus $5.15B. Lourenco Goncalves, CEO said: “2023 was another great year for Cleveland-Cliffs, in which we accomplished several goals in commercial, operations, finance and human resources. Steel demand remained healthy throughout the entire year, with our most important market – the automotive sector – performing well. Even with the UAW labor strike late in Q3 and into Q4, automotive steel demand remained consistently strong, as we anticipated. After it was clear that the strike was not creating any real issues in the marketplace, non-automotive clients de-stocking their inventories betting on lower steel prices were compelled to buy steel at higher prices. Our 2023 total steel shipments of 16.4 million tons set a record since we became a steel company in 2020. We now have four consecutive quarters with steel shipments above 4 million tons. We generated robust free cash flow of more than $1.6 billion and primarily used it to continue to pay down debt, while also repurchasing more than 10 million shares at an average price of $14.68 per share. Our net debt of $2.9 billion at the end of 2023 is below our publicly stated target of $3.0 billion, and our liquidity is now at an all-time high of $4.5 billion. We ended 2023 with a zero balance on our ABL, as planned. Going forward, and assuming a fair scrap marketplace — free from artificial, provoked and hard-to-explain moves — with scrap demand growing and scrap supply shrinking, there is no good reason for scrap prices to go down. If true supply and demand for scrap in the U.S. prevails, there is no good reason for HRC prices to go below $1,000 per net ton. Another very important highlight of 2023 at Cleveland-Cliffs was our success in significantly reducing our unit costs. We expect steel unit costs to further decrease $30 per ton in 2024. Together with expected strong shipments in 2024, we should continue to generate healthy free cash flow throughout the year. With our net debt target achieved and our shares still undervalued, we can now put a stronger focus on aggressive share buybacks.”