Reports record-high second-quarter sales volume of 6.2 million long tons
Cleveland-Cliffs Inc. (NYSE: CLF)on Friday reported consolidated revenues of $743 million, a 4 percent increase compared with the prior year's $714 million. Sales volume was 6.2 million long tons, a record high, at an average pellet price of $113 per long ton. Cost of goods sold was $480 million compared with $430 million reported in the second quarter of 2018.
The company recorded net income of $161 million, or 57 cents per diluted share, which included a one-time $18 million loss on extinguishment of debt related to proactive refinancing measures. Excluding the non-recurring charge, earnings were 63 cents per diluted share. That compared to net income of $165 million, or 55 cents per diluted share recorded in the prior-year quarter.
For the six months ended June 30, net income was $139 million versus $81 million during the same period in 2018. For the second quarter of 2019, adjusted EBITDA was of $249 million.
Due to the earlier than expected completion of the Northshore plant upgrade, production of DR-grade pellets began ahead of schedule and 40,000 tons of intercompany sales to the Toledo HBI plant were recognized in the second quarter.
“The new normal in the global iron ore market has started to influence our results, offsetting weak steel prices in the United States during the second quarter. While the new normal in iron ore is here to stay, the absurdly low prices for steel in the United States are just a temporary thing, and we should see higher steel prices going forward. On top of that, our Toledo plant construction is ahead of schedule, and we now expect to be producing HBI in less than one year," Chairman, President and CEO Lourenco Goncalves said in the report. "It has become abundantly clear that the market advantage has shifted favorably towards responsible producers of environmentally friendly high-grade iron units, and only environmentally responsible players such as Cleveland-Cliffs will be rewarded by investors in the near future. Knowing that, we will continue to center and expand our proven strategy around this premise.”
Cliffs now expects to reach commercial production at its Toledo HBI plant ahead of schedule, in the first half of 2020. Due to the advanced construction timeline and more certain visibility of the start-up date, a portion of the budgeted contingency has been allocated. As a result, Cliffs' 2019 total capital expenditures expectation was revised to $650-$700 million. There is no change to the base budget of the HBI project.
For full year 2019, Cliffs maintained its full-year sales and production volume expectation of 20 million long tons. Cliffs' full-year 2019 mining and pelletizing cash cost of goods sold rate expectation was maintained at $62 to $67 per long ton.