Cleveland-Cliffs (CLF) 23 Jul 242024 Q2 Earnings call transcript

Good morning, ladies and gentlemen. My name is Darryl, and I am your conference facilitator today. I would like to welcome everyone to Cleveland-Cliffs' Second Quarter 2024 Earnings Conference Call. [Operator Instructions] The company reminds you that certain comments made on today's call will include predictive statements that are intended to be made as forward-looking within the safe harbor protections of the Private Securities Litigation Reform Act of 1995.

Although the company believes that its forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause actual results to differ materially. which cause on differ and is Forms filed the could forth are news also that the on with reports on clevelandcliffs.com. also in XX-K SEC, being being factors -- results conference available materially to set releases company's is Important website. Today's available and call broadcast are and XX-Q At available for and on the the conclusion website of the call, it will be archived replay. results excluding certain items. The will also discuss company special which release, published be found Reconciliation in yesterday. for Regulation purposes earnings G can the was At to Vice this introduce Celso President and I would time, like Goncalves, Chief Executive Financial Officer.

of toward QX, by generated from capital free debt driven working We billion. and free the QX net in debt In net everyone. million, quarter morning, cash million count $XXX our lower shares. the to success or reducing cash $XXX of continued cash balance and million, of finished Good flow higher $X.X down costs million that by shipments, reducing we another remaining XX% toward buybacks, strong that inventory managing flow flow levels. in by our allocated X.X XX% share used bringing $XXX We

count share by XX% million at cost we adjusted generated call. as million, by XXX is million $XXX supported nearly lower-than-expected XXX ago. foreshadowed shares, the conference shares improvements in high down as Notwithstanding years quarter's we QX, now from X on the diluted pricing Our realized EBITDA last of

up weaker companies other were steel to shipments North ton the and quarter. demand throughout our Importantly, we despite X the experienced sequentially that back the million environment level American

buyers commercial richer coupled with clients our centers grades, from resulted than the weak and sales steel expected. mix sector, service a for automotive demand resilient Continued in demand from of other in

index a quarter-over-quarter. As in the selling average impact $XX price decline lower pricing led a of to result,

overhead in per Our remains our costs of cost down, and year-over-year come track. continue ton guidance and to reduction operating $XX on

QX. lower with through of as working flow lower see of iron inventory higher and quarter our lower costs drove the primarily This the from reduction in majority way mines. replacing our a making cost cost is already this benefit inventory their inventory cash cost can the in statement costs, during You ore coal capital function

$XX cost partially expect the low benefit. to prices impact largely flow we QX. QX help We spot by free was working a ton from will driven reduction per This the cash QX offset for another sales in captured generated to by indexes. The of capital

was to past to by systematically of and years, steel start our have the this. opportunity at operations in as from there's achieve over to come the XXXX cash million inventory forward. from We more X.X also down commercial effort consistently finished tons budget. X the million under were currently. million tons year unlock $XX reduced from X.X inventory able It our And and even great have budget going CapEx for teams to more projects certain a our reduce We

We year. will our spend even flagship next project CapEx, starting up with lean Middletown remain on

shareholders factors, even As proven down pricing deliver flow our in we cash can of we a have great result cycle to these environments. that all

to the what Our We're will environment year. going pricing of the a committed over get on keep pricing comes target second half X and to priorities have continue $XXX far, there, and million. In to our regardless operational improving efforts are ourselves key through-the-cycle weak our environment, overhead the The sharpen annual now by achieve our steel we of the order accomplished EBITDA with all forward. the during fronts we our pleased has remain cash meet to ago. We forced to from These so These two, lot and track reduction further to SG&A at maximizing level. costs, our that same was priorities Number right reductions pencils ultimately and nearly target it further we are X year doing with the a both QX, when XXXX -- million things down from XXXX. to on steel as flow momentum in expense us us in of period one, costs. automotive. follows: $XX reduce carrying all number

for flow cycle, both projects, automotive. Number for spot automotive automotive be the footprint. a cash us once in which online have and value-enhancing prices consistent and generate any steel three, free in continue we on down We in particularly largest environmental progress the Hemisphere. achieve allow and most game-changers margins The to profitable Western our market market franchise to strong will reliable structure fixed in cost from

quickly in time, continue We with combined Cliffs The to Ohio, options opportunistic deal of repayment. And projects Stelco growing in along the plant the yesterday. Number Energy on deleverage and our structure four, the Virginia, transformer allocation. Butler, as on accumulation enterprise. state-of-the-art U.S. as Department of and us the with value At Middletown, M&A. this possible West prepayable as PA, laser-focused to several is partnership getting Stelco cash work provide and capital five, number advance our soon Weirton, announced deal the major will at we to closing reprioritize debt of

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Celso, of are of pursuit quarter transcript Thank of who last This in and everyone. last past our missed opportunities have today. how I since ourselves. focus and recording I and repeat I Monday. actions is will illustration the available to great detail our morning, better last the acquisition may that in those call will call and matter you, The our of no not merits for myself always logic week, have are week's was we announcement a On doing, Stelco, great taken spoke on website it. Today, our the market good about we on

the represented steel in can't with that to workers including engaged soon. stakeholders, have To Stelco, start we local of key discussions all We all with wait you union working leadership. U.S.

place efficient flat-rolled will Canada reline the very States. Alan success. Ontario significant connection Ontario Stelco set convinced made future have blast natural efficient We years Stelco we fight in up quick production away. megawatts and the by Canada. It's EAFs conversations more of going the have COX closing, Erie know with and political and in and The plant The level we provide us built are a Works federal level also to everyone an XXX a and business, the further great steel ago partnership and advance benchmark Canada. and couple made stakeholders are to a do encountered emissions. By captured at to to operating greater brand-new net are and smart as improve more just been power upgrades, that leadership benefit by Lake furnace team that we even to Kestenbaum at are coke is now, between from recognize and a furnaces will including relevant and grateful advantage able coke superior scrap. quick furnace have investors the will the plant, a in a all of blast healthy and have the reutilized of to investments resolution and key of technology warm shrinking clear United for we prime is now, in Cleveland-Cliffs generation a blast constant welcome gain pile provincial fueled and for the a over province that and a we gas plant steel acquisition not

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midst transformers in the of in an of country. shortage are this extreme We

in current customer have labor. produce these the our by is meet constrained needs, ability other chain lack GOES supply base and to areas additional of the to We more but of

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proud. Furthermore, emissions X schedule. the announced West repeat, We our of reduction ahead X schedule. This target XX% came of after new during carbon we will will years Virginia previous quarter, I make ahead years achieving targets.

with by at Butler, now aligned the reduce will This in our Paris targets of be projects and our Energy. Pennsylvania Middletown, reduction agreement, and scenario. committed greenhouse the with Ohio, degrees support XXXX to X a XX% are XXXX. From financial gas with with by cooperation from developed Celsius emissions baseline, U.S. We Scope driven X primarily by each Department another long-term one X.X and

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Darryl it For over for is to Q&A. yet come. turn I Cleveland-Cliffs, the that, will With best to

Pipes questions [Operator Riley line from B. come with first Securities. the Lucas Instructions] Our of

on make the the could maybe to And and payback transformer technical wondered the wanted opportunity. I requirements you and investment successful. ask if capital human about this to speak to the I Lourenco,

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that a high. EBITDA is is extremely don't you one business margins even second this control your that are The feedstock, when

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lead this quality great cost term if mean more QX, Also, outlook XXXX. reductions. you And for continued might this the to volume some reductions hear super wondered a is items remarks, realizations? your you cost mentioned and what QX, little Lourenco, the to your could elaborate you into pricing and speak near that And I in maybe bit mix for and helpful. to could on of could maybe continued

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benefits then for cost from QX. guidance what's that's QX year obviously, cost to the here to the our we're going So full maintaining drive well. And as

see we continued cost throughout So the improvements year.

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Lourenco Lucas, here.

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next Securities. of with Our Bank America the Lawson come questions line of from Winder

the that ask, from cash After auto that take measures improve to might, intend to in flow on your color to And auto. some us to on you you the what perhaps give flow could are I comments today, if cash I some improve your of additional business? goal wanted

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what, know kept saying with electrical you we So that it would go vehicles. away

they're egg Now getting all on face. their

All having combustion their promises walk more on back of electric only vehicles selling no -- vehicles. electrical them to are and vehicles engine

by the non-oriented we one produce transformers. another non-oriented of and all GOES putting will luck, tons guys, back my company now coming time big we the you XXX,XXX about-face we car steel and But steel XXX,XXX investment of and capacity. by announcement, the electrical to capacity both. In the time manufacturers, more pivot is tons all Good for electrical that saw made the big our announcing happily NOES, in case, our one

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we So to that's and we'll why resilient, that's are progress. why continue

side the financial from treat how I'll we bit automotive. let more Celso on say little a

Yes, Lawson.

automotive the from So maximize cash flow the is business. to idea

don't continent, that's in continue, to steel the have going and everything the everyone. are largest automotive be but We to franchise to we

we a can produce in care but them. We being we're auto we being more in sophisticated investment. supply and of The that that customers that terms make more about the a the price, grades, on a we're So to that lot serve. lot return with need only careful most selective business do the ones we

our willing because part pay we So cash-flowing the price going we're and go elsewhere a find be to can franchise, to but command this company. to it the continue automotive to that supply have of has aren't customers that

we Lawson, already that. have And started

automotive not you in only this several If lowest last business, quarters. XX% if of lowest of noticed, our quarter one probably the was the the

So being selective. we are

can heading the spot very What and perhaps the a for your just should mix, estimated realized your be into pricing third QX? pricing range was I price. noted. get That Yes. contracts lagged quarter? So on we also well realized for And current based thoughts thinking index about on

Yes.

right a here like Lawson, the change of now, and quickly bottom things cycle that So in this we're we place feel very quarter. a we're could in

So it to doesn't at point. sense for make specific guide us to this ASP

an But can factors all the kind look lags at feel the terms a of you look and in You at lags can bounce we're for quarterly back. and of you can monthly the that get sharp idea. we like overdue

this we're So why not at that's guiding to ASPs point.

come with line Our De next from Alba the of Morgan Carlos questions Stanley.

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was Carlos, QX. the into inventory QX. QX obligations, and things related in a We pulled impairment $XX that these charges costs, to charges asset of about like employee-related And sure. year-to-date, it's majority so the $XXX that, SUB-pay, are and idle severance, QX million like forward million, retirement PP&E of Yes, stuff impairment, healthcare, that.

the pretty charges only and minimal. QX remaining same. is million, are $X So is the about about QX

That's clear. another the on just question is then M&A. opportunistic And

further presence U.S. appetite acquisition planned to leave now acquisition your issue you more taking America. does would where expanding of of bit Stelco, quarters, that given Stelco, in North an greater or flat-rolled a share your With in market coming that that place hopefully, in and a with the the for give something the the you of acquire little else potentially if integration try

Yes.

are problem acquisition as Stelco spot that on more a customers the currently. number galvanized bit any Just for is to Stelco the to well, market customers a our that of supplying market gives I basically anything not the acquire a the little else because believe don't in of record, me player the hot-rolled of

into not like are that a occupying. buying it's we're space So we

are into completely into and expanding for automotive applications. application specified our we hot-rolled markets for are generic commercial because hot-rolled our in and from galvanized galvanized market the different the products a So or for

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So a don't really people works these they lot things, how about understand with the DOJ. process but the talk

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province States between fast. -- have real and much Mexico. going a about Ford X to a I already a So a partners picture, talking My this guys. and resilient of with from partnership of much result real let's will Canada more and the much the the stronger Stelco partners. the appreciate Premier the of big to Ontario, And are United I started pay as acquisition, X to Canada. deal more close support the have, Doug attention we're

for be XXXX, it will X, July a is coming, So and bad day Mexico.

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because particularly for Steel loud States to leverage. election, about clear That will the President after the include the the from that of said be American-owned likes election wait Japan, and doesn't Look, United States USW that that. the he no the said anybody American-operated. Think when executive have head the and will United

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come questions KeyBanc the Gibbs line Phil next Our Capital with from Markets. of

this to be long the down year. transformers. ready to take the commissioning to given you CapEx just equipment? put on that you range on get Lourenco, will budget it took the done does How what I'm get would the 'XX assume plant needs curious then the the for for guys side, in And I

West capital deployment Look, Yes. of of other year, the going are from state have we any come not Virginia. that than money than other deployment will the this to

need to all be things West are in actually, got don't plan the lots expand Keep $XX million from done build that to So already we a when mind, this of over we that done there. plant we year Virginia.

has do. The going there. to And are are utilities, industrial house repair. -- had that in We adapting a big a building, building to empty just gas, It's need the floor, that we building, the it's warehouse building, everything that's building equipment. is a supply, of walls, good actually what a all a big needs shape, matter strong warehouse we a because water that's using building no a roof,

be results. I'm acquisition long-term and that with the now a orders these be for a going get announcement Virginia has will equipment, that first haven't Stelco, we'll install the will and the them not acquisition, of will the like placing of I are which And equipment I the start-up this of just make quarter I will this to my the announcement on day suppliers, the the be and first bringing to focused the spoken we XXXX, they to aiming of equipment keep orders the I'm be I doing, done customer I understand but equipment that going. XX So the a because be the it's doing all. it expediting of with of matter only else. hours everybody because West sure on forefront half plant, last. will

believe that So XXXX. I start this that there is we can a shot plant the of before end

will also will of to I'm of a run home another going Department So the be it capital. And to deployment Energy. way, the by that talk of in be one the terms

than even negotiate Secretary government if If of to federal be Granholm the DOE, type help. my have Jennifer I'm see with can down grant that friend dear to more sure we you from the time but will noticed, and sit me didn't some happy

in we're good So shape.

have just I and were very then strongly quarter the follow-up. second Operating year. strongly the first a versus versus expenses down last quarter And very

seen from we where expenses expect that pricing some So levels production. just quarters your once these should given operating recover? and to return in curious strong savings to of we've came And profit the the prior

covered bit, this we're I both on mean, overhead. and much we I a think pencils everything, Phil, our operating Yes. little sharpening pretty but

saw made environment managing operating like ore also have the and driven coal, lower we're scrap very you given So been iron on we But and from we pricing the carefully lower things that facing. that. here progress SG&A lower costs

that the momentum half We the into this second expect of continues all on fronts. year

to back the the like for floor reached question-and-answer over Goncalves our I end closing now session. remarks. to have We would turn of Lourenco

a believed My exciting I everything worse next. horrible pricing very gut up about chit-chatting me conference because that prices will once a good are pushing turn. these keep that And and for are soon buyers are they are in everybody, you, lot in like for we they a when would setting feel of that back surprise. It's a call. time. down. They that tells this after with again, the to us in Thank quarter smart in terms prices be being themselves how big the be a are things year, everybody COVID very about low in how

workers be go we can't our continue minimal we will talk us, to United of here of no Weirton, country employees, see without be will the a to we starting price And ourselves that shareholders and this Ohio; prices So they Zanesville, allow the the that is Butler without Virginia. soon on lot to to and deploy TV AI. allow as return our investments we up need go capital, day, people sector AI because on in this on treated like behalf sector States. We as everything do There our because very every to business like -- up. we particularly to support, would and West need people capital and Butler, flock that's like in to the our that Pennsylvania spark

ones making be a about this on they talkative TV, talk are that to clue. don't the able We have stuff people

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GOES GOES. we the were All produce NOES, not We are We and is NOES, in sole but ones. announced these GOES. supplier of investments are is only both, NOES the is are NOES that GOES.

ours. GOES is Cleveland-Cliffs. So GOES is

a so now. Bye you and have great Thank week. much,

conclude does teleconference. today's your We This participation. appreciate

this of at lines Enjoy rest time. day. your the your disconnect may You