Cleveland-Cliffs reports Q4 EPS (41c), consensus (30c)

Reports Q4 revenue $5.0B, consensus $5.19B. Q4 adjusted EBITDA was $123M vs. $1.5B y/y. CEO Lourenco Goncalves said: "In what was just our second year with our current configuration, 2022 is the year in which we consolidated Cleveland-Cliffs’ position as the leader in flat-rolled steel in the United States. Through the synergies we envisioned back in 2020 when we executed the acquisitions of two steel companies, in 2022 we achieved record revenues of $23 billion and reduced combined debt and post-retirement liabilities by more than $3 billion. Also, even in the face of falling steel prices in the broad market, we achieved substantially higher selling prices. Our Adjusted EBITDA and free cash flow in 2022 were each the second highest ever in our 175-year history, only surpassed by 2021. We also signed long-term labor agreements with more than half of our workforce, and completed our major maintenance initiatives, setting us up for continued success going forward. In the fourth quarter of 2022 we generated healthy free cash flow of $262 million. We also achieved our targeted unit cost reduction of $80 per net ton, which helped us to partially offset the impact of lagged index pricing. Entering 2023, as our fixed price contracts reset higher, our unit costs continue to decline, and sales volumes improve, we believe our quarterly Adjusted EBITDA should progressively improve, confirming our belief that the fourth quarter of 2022 was the inflection point for our profitability. The most important achievement of this newly configured Cleveland-Cliffs has been the successful renewals of our fixed price contracts for 2023, particularly for those with our automotive customers, breaking a historical paradigm that was so detrimental to the steel companies of the past. Even with flat-rolled prices falling over 60% from the peak in April, we were able to achieve price increases that average $115 per ton for 2023 compared to 2022 for our direct automotive business, our largest end market. This validates what we have been saying all along, that any model tying our automotive fixed prices to steel index prices no longer applies."