Cliffs(US:CLF)2025-02-25 17:07Financial Data and Key Metrics Changes - In Q4 2024, the company reported an adjusted EBITDA loss of $81 million, primarily due to weaker automotive demand and lagged pricing [33] - Total shipments in Q4 were 3.8 million tons, lower than Q3 due to idling of the C6 furnace and seasonally weaker demand [37] - Q4 price realization was $976 per net ton, a decrease of $70 per net ton from the previous quarter, influenced by the inclusion of Stelco and its lower price mix [37] Business Line Data and Key Metrics Changes - Direct shipments to the automotive sector in Q4 were the lowest since the pandemic, reflecting a significant impact from weak demand [33] - The company expects to improve shipment levels above 4 million tons in Q1 2025 due to better demand and full utilization of Stelco [37] - The inclusion of Stelco helped reduce weighted average unit costs by approximately $15 per net ton compared to the prior quarter [38] Market Data and Key Metrics Changes - The demand for steel in 2024 was the weakest since 2010, with significant declines in automotive demand and construction activity [8] - The company noted a significant uptick in demand for automotive steel as 2025 begins, with improved volumes from both existing and new programs [23] - The company is experiencing a tightening scrap market, with prime scrap prices increasing by $70 per gross ton in just two months [21] Company Strategy and Development Direction - The company is focused on leveraging tariffs to strengthen domestic production and protect American manufacturing [11][12] - The acquisition of Stelco is expected to yield $120 million in synergies, with many already in motion [18][145] - The company aims to maintain a target net debt-to-EBITDA ratio of 2.5 times and will use free cash flow for debt reduction [41][72] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2025, citing a recovering order book and rising steel prices [6][34] - The company anticipates that the fourth quarter of 2024 was the trough in profitability, with expectations for improved performance in 2025 [35] - Management highlighted the importance of domestic manufacturing and the positive impact of tariffs on the steel industry [10][14] Other Important Information - The company reported a total reportable incident rate of 0.9% for 2024, indicating a strong safety record [26] - The company has $3 billion in liquidity and plans to focus on debt reduction following the acquisition of Stelco [40][132] - Capital expenditures for 2025 are expected to be $700 million, down from $800 million in 2024 [46] Q&A Session Summary Question: Discussion on evolving tariff environment and implications for Stelco - Management stated that tariffs are necessary and will benefit the overall business, with minimal negative impact on Stelco [54][55] Question: Mechanics of reporting tariffs in adjusted EBITDA - Management confirmed that results will be reported as they are, without excluding tariffs from adjusted EBITDA [58][59] Question: Volume cadence and cost guidance for 2025 - Management indicated that only 30% to 35% of volumes will be under fixed pricing, with a $40 per ton reduction in costs expected for the full year [76][78] Question: Capital expenditures and project timelines - Management outlined a clear CapEx plan for 2025, with $500 million for legacy operations and $100 million for Stelco [88][89] Question: Working capital expectations for Q1 - Management expects working capital to be relatively neutral in Q1, with benefits seen in subsequent quarters [124][115] Question: Pricing expectations for automotive steel in 2025 - Management indicated that automotive prices may slightly decrease but are not expected to drop significantly compared to competitors [126] Question: Possibility of equity issuance - Management confirmed there are no plans for equity issuance, focusing instead on debt reduction [128][132] Question: Conditions for restarting the C6 furnace - Management stated that the C6 furnace remains indefinitely idle with no current plans for a restart [141] Question: Synergies from Stelco acquisition - Management expressed confidence in exceeding the $120 million synergy target, with many initiatives already underway [144][145] Question: Status of the Zanesville electrical steel line - Management confirmed that the electrical steel line is ramping up and they are well-positioned in the market [150][153]