Cliffs Natural Resources Inc. (CLF) posted earnings of $2.63 per share in the first quarter of 2012, down from $3.11 a year ago. The results outshone the Zacks Consensus Estimate of $1.12 per share.
Sales for the quarter came in at $1,264.7 million, up 7% from $1,183.2 million posted in the prior year quarter. The increase was driven by higher sales volumes across all the segments. However, revenues missed the Zacks Consensus Estimate of $1,333 million.
Segment Performance
U.S. Iron Ore: U.S. Iron Ore pellet sales volume increased to 3.4 million tons in the quarter from 2.8 million tons in the first quarter of 2011. The increase was led by stronger demand for iron ore pellets driven by slightly higher North American steel industry capacity utilization. Revenues per ton plunged 29% to $117.40. Cash costs per ton rose considerably by 91% from the prior year quarter to $61.14 driven by mine-development and labor-related expenses.
Eastern Canadian Iron Ore: Sales volumes more than doubled year over year to 1.9 million tons in the quarter, mainly due to increased iron ore concentrate sales volume from the Bloom Lake Mine. However, this was offset by decreased sales volumes at Wabush Mine.
Revenues per ton for the segment declined 33% year over year to $116.40 due to unfavorable product mix and lower pricing of iron ore. Cash costs per ton were down 9% to $103.96 due to lower cash costs and the impact of fire leading to production disruption at the Bloom Lake Mine.
Asia Pacific Iron Ore: Sales volumes in the segment increased 25% to 2.8 million tons as two shipments were carried over from the last quarter. In the quarter, revenues per ton were $129.75, a decrease from $155.52 in the prior-year quarter due to weaker year-over-year pricing for seaborne iron.
Cash cost per ton in the Asia Pacific Iron Ore segment increased 31% to $73.86, driven by unfavorable foreign exchange rates and accelerated mining costs.
North American Coal: Sales Volumes increased 12% to 1.4 million tons, led by significantly higher sales and production volumes from Cliffs' low-volatile metallurgical coal mines.Revenues per ton inched down 1.8% to $121.61, driven by lower pricing for the company’s coal products. Cash cost per ton decreased 11% to $97.01 due to higher fixed costs.
SonomaCoal and Amapa: Cliffs has a 45% economic interest in Sonoma Coal. Sales volumes in the segment were 393,000 tons in the quarter. Revenues per ton at Sonoma were $133.28, with cash costs of $90.92 per ton.
Cliffs has a 30% ownership interest in Amapa, an iron ore operation in Brazil. During the quarter, Amapa produced approximately 1.4 million tons and posted an equity loss of $6.1 million for Cliffs' share of operation.
Financial Position
As of March 31, 2012, Cliffs had $122.3 million of cash and cash equivalents compared with $521.6 million as of December 31, 2011. Long term debt stood at $3,583.8 million as of March 31, 2012, compared with $3,608.7 million as of December 31, 2011.
Outlook
Looking ahead, Cliffs reaffirmed its SG&A expense guidance of about $325 million in 2012. The company expects to incur cash outflows of approximately $165 million to support future growth. For 2012, Cliffs anticipates a full-year effective tax rate of approximately 5% versus its previous expectation of 25%. The company sees the U.S. economy slightly improving, which is expected to result in steady end markets for its customers.
The company expects to generate cash flow from operations of approximately $1.7 billion down from the previous expectation of $1.9 billion. Cliffs reiterated its earlier forecast for capital expenditures of approximately $1 billion for 2012.
U.S. Iron Ore Outlook
For 2012, U.S. Iron Ore revenues are expected to be in the range of $115-$120 per ton. Cash cost is expected to be in the range of $60-$65 per ton. The company expects sales and production volume to be approximately 23 million tons and 22 million tons respectively.
Eastern Canadian Iron Ore Outlook
The company expects revenues per ton to be in the range of $140-$145 for 2012. It expects cash cost per ton in the range of $80-$85. Cliffs expects sales volumes to be about 12 million tons for 2012 and production volume is forecast to be approximately 11.2 million tons.
Asia Pacific Iron Ore Outlook
For 2012, the company expects revenues per ton in the range of $140-$145. Cash cost is expected to be in the range of $70-$75 per ton. Cliffs expects sales volumes to be about 11.4 million tons for 2012 and production volume is forecast to be approximately 11.1 million tons.
North American Coal Outlook
For 2012, the company expects revenues in the range of $130-$135 per ton. Cash cost is expected to be in the range of $105-$110 per ton. The company expects sales volumes to be about 7.2 million tons for 2012 and production volume is forecast to be approximately 6.6 million tons.
Sonoma Coal and Amapa Outlook
For 2012, the company forecast sales and production volume of approximately 1.6 million tons. Cash cost per ton is expected to be approximately $110-$115. Cliffs expects Amapa to breakeven in 2012.
Cliffs, which competes with CONSOL Energy Inc. (CNX) and Alpha Natural Resources, Inc. (ANR), currently retains a Zacks #3 Rank, reflecting a short-term (1 to 3 months) Hold rating. Currently, we have a long-term (more than 6 months) Neutral recommendation on the stock.
ALPHA NATRL RES (ANR): Free Stock Analysis Report
CLIFFS NATURAL (CLF): Free Stock Analysis Report
CONSOL ENERGY (CNX): Free Stock Analysis Report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment