Cliffs Natural Resources Inc. (CLF) has announced a 25% (or $100 million) reduction in its capital expenditure for 2014 to $275 million – $325 million due to volatility in seaborne iron ore and metallurgical coal pricing. Roughly 75% of the reduction will be in Cliffs' Eastern Canadian iron ore and North American coal operations.
This step by the company comes after it decreased its capital expenditure by 55% from its full-year 2013 capital expenditures. Cliffs is focused on reducing its capital expenditures while maintaining its expected full-year volume and operating cost targets. The company is looking for delivering objectives that can be controlled, including safety, costs, production volume and customer relationships.
Cliffs expects seaborne iron ore and metallurgical coal prices to remain volatile in the near term, which will impact revenue in most of the company's business segments.
The company anticipates delivery of about $650 million in cost and capital reductions in 2014 versus 2013. This is driven by a year-over-year reduction of roughly $560 million in capital spending and $90 million in selling, general and administrative and exploration expenses, excluding severance and proxy contest-related costs.
In Apr 2014, Cliffs released its first-quarter 2014 results. The company reported net loss of $83 million, or 54 cents per share for the quarter compared with a net income of $97 million or 66 cents per share in the year-ago quarter.
Barring income tax benefit of $22 million, loss was 68 cents per share, wider than the Zacks Consensus Estimate of a loss of 21 cents per share.
Sales for the quarter came in at $940 million, down 18% from $1,140.5 million in the prior-year quarter. It also missed the Zacks Consensus Estimate of $1,039 million. The decline was due to significantly lower market pricing for iron ore and metallurgical coal and a 2% reduction in global iron ore sales volumes, most of which was weather related.
Cliffs currently carries a Zacks Rank #3 (Hold).
Other companies in the mining industry with favorable Zacks Rank are Kumba Iron Ore Ltd. (KIROY), Anglo American plc (AAUKY) and Alderon Iron Ore Corp. (AXX). While Kumba and Anglo American carry a Zacks Rank #1 (Strong Buy), Alderon Iron Ore has a Zacks Rank #2 (Buy).
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