Core Viewpoint - U.S. trade tariffs, while seen as a hurdle by many investors, are benefiting domestic firms in the basic materials sector, particularly in steel, due to increased local production and a trend towards onshoring [1] Group 1: Cleveland-Cliffs Inc. (CLF) Investment Potential - Cleveland-Cliffs Inc. has recently reached a new 52-week high, indicating significant upside potential that is not fully priced in [2] - The inclusion of electrical steel and stainless steel derivative products in Section 232 has made imports of these metals more expensive, allowing Cleveland-Cliffs to capture market share [2] - The current steel prices are near a five-year low, and with the Federal Reserve cutting interest rates, a new bull market cycle for commodities may be on the horizon [3] Group 2: Demand and Financial Outlook - As business and consumer spending recover due to lower interest rates, steel demand is expected to rise, benefiting Cleveland-Cliffs and leading to improved margins and earnings per share [4] - Analysts forecast a significant improvement in Cleveland-Cliffs' EPS, projecting a swing from a net loss of 50 cents to a 17-cent EPS by the second quarter of 2026 [5] Group 3: Market Performance and Institutional Support - Cleveland-Cliffs' stock has surged by 19.1% in the past month, outperforming the S&P 500 by over 15%, indicating strong investor support [6] - The company reported a record 4.3 million tons of steel shipments, showcasing the positive impact of tariffs on domestic demand [7] - State Street increased its holdings in Cleveland-Cliffs by 20.2% in August 2025, reflecting strong institutional confidence in the company's prospects [8] Group 4: Market Sentiment and Short Interest - The short interest in Cleveland-Cliffs has declined by 3.3% over the past month, suggesting potential bearish capitulation amid tariff uncertainties [9] - The company's role in the onshoring of various industries and the increased market share from Section 232 inclusion make it an attractive option for investors seeking a favorable risk-to-reward ratio [9]

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q4 2025 was $87 million, slightly up from $86.5 million in the prior year quarter [4] - Earnings per share increased to $1.1 from $1.06 year-over-year [5][17] - Net sales decreased by $78 million or 9% year-over-year to $833 million, primarily due to lower direct selling prices [23] - Estimated pretax inventory holding gains were $20.8 million compared to losses of $3.4 million in the prior year quarter, a favorable swing of $24.2 million [20] Business Line Data and Key Metrics Changes - Automotive shipments increased by 5% year-over-year, contributing positively to overall performance [24] - Construction market volumes were down 5% year-over-year, consistent with historical fourth-quarter levels [26] - Agricultural market volumes decreased by 40% compared to the prior year quarter due to softness in agricultural equipment and increased competition [26] - Toll processing tons were down 11% year-over-year, impacted by various factors including customer decisions and the idling of a facility [27] Market Data and Key Metrics Changes - Market pricing for hot rolled coil started the year at just under $700 per ton, spiked to $950 per ton due to tariffs, and then fell to approximately $850 per ton [22] - The U.S. transformer market is expected to double over the next ten years, driven by electrification demand [9] Company Strategy and Development Direction - The company is focused on three strategic pillars: investments in electrical steel, margin-accretive growth through strategic CapEx and acquisitions, and base business improvements [7] - The acquisition of a 52% stake in CEDIM enhances the company's position in the European electric motor lamination market [10][30] - The company is embracing artificial intelligence to improve productivity and quality [13] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the macroeconomic environment and ongoing uncertainty around tariffs [15] - The company is focused on improving processes and gaining market share despite headwinds [15] - Management believes the right strategy and strong customer relationships will drive future growth [15] Other Important Information - The company announced a quarterly dividend of $0.16 per share payable on September 26, 2025 [29] - Cash flow from operations was $54 million, with free cash flow of $8 million [28] Q&A Session Summary Question: How did the company achieve a richer mix of direct tons and stronger metal spreads? - Management noted that Q4 is typically the strongest quarter, and while volume was flat year-over-year, there was a significant quarter-over-quarter increase [36][37] Question: What is the outlook for galvanized spreads moving into fiscal year 2026? - Management expressed cautious optimism, citing tariff impacts and increased anti-dumping measures that may improve market conditions [40][42] Question: How can the company continue to succeed in the automotive market despite OEM destocking? - Management highlighted significant market share gains and strong relationships with automotive customers as key factors for success [44][47] Question: What are the competitive dynamics in the Taylor welded blanks business? - Management explained that the market is highly technical with few players in North America, and they are focused on lightweighting and part consolidation [52][56]

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q3 2025 was $41.9 million, down from $82.8 million in the prior year quarter, reflecting a significant decline [8] - Earnings per share decreased to $0.27 from $0.98 year-over-year [8] - Net sales were $687 million, a decrease of $118 million or 15% from the prior year quarter, primarily due to lower direct volumes and pricing [36] - Adjusted EBIT fell to $25.3 million, down from $66.9 million in the prior year quarter [31] Business Line Data and Key Metrics Changes - Shipments to the automotive market decreased by 3% year-over-year, impacted by production cuts at a major OEM [10][37] - Construction market shipments decreased by 20% year-over-year, attributed to economic uncertainty and a prior year pivot to a construction-heavy mix [40] - Agriculture market demand remains soft due to interest rates and commodity prices, while the heavy truck market is expected to show GDP-type growth for the remainder of 2025 [14] Market Data and Key Metrics Changes - Automotive production in North America for 2024 was 15.4 million units, with a forecast of approximately 15.3 million units for 2025, indicating flat growth [11] - The hot-rolled coil pricing increased to approximately $950 per ton in March, up from a range of $650 to $700 per ton [35] - Estimated pretax inventory holding gains for Q4 2025 are projected to be between $20 million to $25 million, compared to losses in Q3 2025 [35] Company Strategy and Development Direction - The company is focused on investments in the electrical steel market, anticipating a 6% annual growth in power demand over the next 15 years [16] - Progress is being made towards acquiring a 52% stake in Sitem, a European electrical steel lamination manufacturer, which is expected to enhance the company's capabilities [17][18] - Capital investments in electrical steel capabilities in Canada and Mexico are ongoing, with production expected to begin in late 2025 and early 2026 respectively [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the North American automotive market for 2025, despite current uncertainties [10] - There is an expectation for the construction market to gain momentum in the second half of 2025, aided by interest rate cuts [13] - Overall, management believes that clarity will improve as the year progresses, leading to a more optimistic outlook for the second half of 2025 [27] Other Important Information - The company reported cash flow from operations of $54 million and free cash flow of $25 million for the quarter [44] - A quarterly dividend of $0.16 per share was announced, payable on June 27, 2025 [44] - The company ended the quarter with $63 million in cash and $112 million in outstanding debt, resulting in net debt of $49 million [44] Q&A Session Summary Question: Impact of tariff policy - Management anticipates minimal impact from tariff policies, emphasizing a localized strategy for steel procurement [48][49] Question: TWB charges and performance - Special charges related to TWB included a write-off of R&D and costs from a voluntary retirement program, impacting quarterly results [54][55] Question: Normalization of underlying EBITDA - Management indicated uncertainty in demand and market conditions, suggesting a cautious optimism for normalization by the end of the calendar year [60][61] Question: Serviacero performance - Serviacero faced similar demand compression as the U.S. market, with challenges from exchange rate movements and inventory holding losses [70][72] Question: Construction market share efforts - Management acknowledged a tough comparison with the previous year but indicated efforts to pursue more opportunities in the construction market [78][79] Question: New automotive customer awards - The company has gained share in the automotive market, with expectations for increased shipments and potential margin improvements in the coming months [82][84]

Financial Data and Key Metrics Changes - Adjusted EBITDA for the third quarter was $41.9 million, down from $82.8 million in the prior year quarter [5] - Earnings per share decreased to $0.27 from $0.98 in the same period last year, impacted by lower volumes and average selling prices [6][21] - Net sales were $687 million, a decrease of $118 million or 15% from the prior year quarter, primarily due to lower direct volumes and market pricing [24] Business Line Data and Key Metrics Changes - Shipments to the automotive market were down 3% year over year, with production cuts at a major OEM affecting results [7][25] - Construction market shipments decreased by 20% year over year, attributed to economic uncertainty and a prior year pivot towards construction due to an automotive strike [29] - Heavy truck market demand remains slow, but signs of improvement are noted, with expectations for GDP-type growth for the remainder of 2025 [9] Market Data and Key Metrics Changes - The North American automotive market is forecasted to produce approximately 15.3 million units in 2025, showing flat builds year over year [7] - The construction market is expected to gain momentum in the second half of 2025, benefiting from anticipated interest rate cuts [8] - The agriculture market is expected to remain soft due to interest rates, commodity prices, and tariffs affecting purchasing decisions [9] Company Strategy and Development Direction - The company remains focused on investments in the electrical steel market, anticipating a 6% annual growth in power demand over the next 15 years [10][11] - Strategic capital expenditures and acquisitions are ongoing, with expansions in electrical steel capabilities in Canada and Mexico [13] - The company is pursuing a transformation strategy aimed at improving operational efficiency and reducing costs [14][15] Management's Comments on Operating Environment and Future Outlook - Management expresses cautious optimism about the near term, with expectations for improved clarity in the second half of 2025 [18] - The company is closely monitoring macroeconomic conditions, including inflation and interest rates, which could impact demand [47] - Management believes they are well-positioned for growth, with a strong focus on safety, quality, and customer service [19] Other Important Information - The company reported cash flow from operations of $54 million and free cash flow of $25 million for the quarter [31] - A quarterly dividend of $0.16 per share was announced, payable on June 27, 2025 [32] - The company is exploring AI integration into its operating model and expanding its advanced analytics portfolio [18] Q&A Session Summary Question: Impact of tariff policy - Management anticipates minimal impact on business from tariff policies, with localized strategies in place to mitigate risks [37][40] Question: TWB performance and charges - Special charges related to TWB included a write-off of R&D and early retirement program costs, impacting quarterly results [42][44] Question: Normalization of underlying EBITDA - Management indicates uncertainty in demand makes it difficult to predict when underlying EBITDA will normalize, but they are cautiously optimistic for the end of the calendar year [46][48] Question: Construction market share efforts - Management acknowledges a tough comparison in construction volumes but is actively pursuing opportunities to regain market share [61] Question: New automotive customer awards - The company has gained share in the automotive market, with expectations for increased volume and margin impact from new programs over the coming months [63][65]