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CLEVELAND-CLIFFS INC. (CLF)·Q2 2025 Earnings Summary

Executive Summary

  • CLF delivered sequential improvement: revenue rose to $4.93B, adjusted EBITDA turned positive to $97M from a $(174)M loss in Q1, and adjusted EPS improved to $(0.50) vs $(0.92) prior quarter .
  • Versus S&P Global consensus*, revenue was roughly in line/slight beat ($4.93B vs $4.91B*), adjusted EPS beat (−$0.50 vs −$0.675*), and adjusted EBITDA materially beat (+$97M vs −$23M*), driven by record shipments, better realizations, and $15/ton sequential unit cost reductions .
  • Management cut FY25 capex ($600M from $625M) and SG&A ($575M from ~$600M), maintained $50/ton 2025 cost reduction target, and raised FY25 D&A to ~$1.2B (from ~$1.1B) on accelerated depreciation from idles—tightening opex and capex while acknowledging non-cash charges .
  • Strategic catalysts: end-of-year expiration of the slab supply contract expected to boost EBITDA run-rate (mgmt: ~$125M per quarter at today’s market) and potential asset sales to accelerate deleveraging; inventory draw and working capital release support a return to free cash flow in 2H25 .
  • Tariff environment and auto reshoring underpin volume and pricing narrative; CLF guided to further $20/ton cost reductions in Q3 and similar 4.3Mt shipments, implying continued EBITDA improvement near term .

What Went Well and What Went Wrong

What Went Well

  • Record shipments and ASP uptick: 4.29Mt steel shipments (record), with average selling price up to $1,015/ton from $980 in Q1; realized pricing benefited from index-linked contracts and mix .
  • Cost execution ahead of plan: unit costs fell $15/ton q/q (vs prior expectation of +$5/ton), and management now expects another ~$20/ton sequential reduction in Q3, reinforcing confidence in the $50/ton FY25 reduction target .
  • EBITDA inflected positive: Adjusted EBITDA of $97M vs $(174)M in Q1, aided by cost actions and higher volumes; CFO highlighted internal coke sourcing synergy from Stelco and expiry of external coke contracts as structural tailwinds .

What Went Wrong

  • GAAP loss from non-recurring charges: GAAP net loss of $470M was driven by $323M in non-recurring charges related to idled facilities (asset impairments, accelerated depreciation, and restructuring) .
  • Steelmaking gross margin remained negative: segment gross margin was $(225)M (vs $(400)M in Q1 and $145M in Q2’24), reflecting elevated COGS and non-recurring items during footprint optimization .
  • Canada demand/pricing pressure: management flagged Canadian market weakness and import penetration, constraining Stelco’s pricing, though coke synergies are mitigating cost pressures .

Financial Results

Headline metrics vs prior year and prior quarter

MetricQ2 2024Q1 2025Q2 2025
Revenue ($B)5.092 4.629 4.934
GAAP Diluted EPS ($)0.00 -1.00 -0.97
Adjusted EPS ($)0.11 -0.92 -0.50
Adjusted EBITDA ($M)323 -174 97
Steel Shipments (Mt)3.989 4.140 4.290
Avg Selling Price ($/ton)1,125 980 1,015
Steelmaking Gross Margin ($M)145 -400 -225

Actuals vs S&P Global Wall Street consensus*

MetricConsensus*ActualCommentary
Revenue ($B)4.907*4.934 Slight beat driven by volumes and index-linked pricing*.
Primary EPS (diluted, $)-0.675*-0.50 Beat on stronger cost execution and shipments*.
Adjusted EBITDA ($M)-22.9*97 Material beat; swung to positive on cost/mix*.

Values marked with * are retrieved from S&P Global.

Segment / End-market mix (Steelmaking revenues)

End MarketQ1 2025 ($B, %)Q2 2025 ($B, %)
Infrastructure & Manufacturing1.4 (30%) 1.5 (31%)
Distributors & Converters1.2 (28%) 1.4 (30%)
Automotive (Direct)1.3 (29%) 1.2 (26%)
Steel Producers0.588 (13%) 0.6 (13%)

Product mix and other KPIs (Q2 2025)

  • Product mix: 40% hot-rolled, 27% coated, 15% cold-rolled, 5% plate, 3% stainless & electrical, 10% other (incl. slabs, rail) .
  • Liquidity: $2.7B at June 30, 2025 .
  • Working capital: inventories reduced q/q, aiding operating cash flow ($45M net cash from ops in Q2) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Capital ExpendituresFY 2025~$625M ~ $600M Lowered
SG&AFY 2025~ $600M ~ $575M Lowered
Steel Unit Cost ReductionFY 2025 vs 2024~$50/ton ~$50/ton Maintained
Depreciation, Depletion & AmortizationFY 2025~ $1.1B ~ $1.2B (accelerated depreciation from idles) Raised
Cash Pension & OPEB PaymentsFY 2025~ $150M ~ $150M Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
Tariffs & Trade PolicyEmphasized Section 232 across-the-board tariffs and downstream protections; anticipated demand/pricing benefits; focused on limiting exclusions .Reinforced that 25%→50% tariffs are supporting domestic steel and auto; called out Brazil pig iron tariff starting Aug 1; urged strict enforcement; noted Canada import issues .Strengthening policy tailwinds; stricter enforcement narrative.
Automotive Reshoring & VolumeQ4: auto demand was trough but improving into 2025; Q1: order book/market share recovery, more domestic production, fixed-price exposure reduced to ~30–35% .OEMs shifting models to U.S., increasing domestic sourcing; CLF ready to ramp; expected volumes ~4.3Mt in Q3; ASP calculus provided .Positive; visibility improving into 2H25.
Footprint Optimization & CostsQ1: idled loss-making assets, targeted >$300M annual savings; guided $50/ton FY25 cost reduction; flagged ~$300M non-cash charges in Q2 .Achieved $15/ton q/q cost decline in Q2; guided further ~$20/ton decline in Q3; SG&A and capex trimmed; inventory draw supporting FCF .Executing ahead of schedule; cost-down trend intact.
Coke/Raw Materials Synergies (Stelco)Q1: Stelco acquisition to lower avg costs; leverage Hamilton coke; capex discipline .Replaced external coke contracts with internal supply; >$100/ton benefit vs external; another coke contract rolls off at YE .Structural cost tailwind increasing.
Slab Contract HeadwindQ1: Contract linked to Brazilian price caused negative margin; expiring Dec 9, 2025; ~$500M annualized EBITDA uplift at today’s market .Management reiterated not extending; CFO quantified ~$125M per quarter EBITDA benefit assumption post-expiry .Near-term headwind turning into 2026 tailwind.
Strategic/Regulatory ProjectsQ1: Middletown project to pivot away from hydrogen; DOE discussions; Butler induction furnace intact; Weirton transformer plant shelved .Middletown to “operate fully under AI” and rely on domestic feedstocks; reinforced Butler & stainless bright-anneal investments .Strategy refocused on pragmatic capex with faster paybacks.

Management Commentary

  • “Our second quarter results demonstrate that the footprint optimization initiatives…are already generating a positive impact on both costs and revenues…further expected improvements in adjusted EBITDA [in] Q3 and Q4.” — CEO .
  • “After the Arcelor slab agreement expires in December…we should get another $125 million per quarter in EBITDA boost.” — CFO .
  • “We ended the quarter with $2.7 billion of liquidity and no near-term maturities…use excess free cash flow to pay down debt.” — CFO .
  • “Cliffs is ready…we can ramp up quickly and our capabilities, quality and customer service are well known by all OEMs.” — CEO on auto ramp .
  • “Our smaller, but consistently profitable stainless business…$150 million [Coshocton] investment…with an expected quick return.” — CEO .

Q&A Highlights

  • Cost cadence: Q2 unit costs down $15/ton vs plan to be up $5; guide another ~$20/ton reduction in Q3, with more reductions in Q4; FY25 −$50/ton vs 2024 maintained .
  • ASP/Volume framework: Q3 shipments expected ~4.3Mt (similar to Q2); ASP composition explained (1/3 fixed, ~20% CRU month lag, ~8% slab two‑month lag, 5% CRU quarter lag, ~1/3 spot incl. Stelco) .
  • Free cash flow: Q2 WC release; more expected in 2H; priority is deleveraging; potential asset sales (advisor engaged) to accelerate debt reduction .
  • Coke synergy: Internal coke vs external saves >$100/ton; one external contract expired June 30, another at YE—structural cost benefit .
  • Auto demand: Growing volumes with OEM reshoring to U.S.; CLF highlighted readiness and qualified product approvals with OEMs .

Estimates Context

  • S&P Global consensus* vs actuals: revenue $4.91B* vs $4.93B, Primary EPS −$0.675* vs −$0.50, Adjusted EBITDA −$22.9M* vs +$97M—broad beats on profitability as cost reductions and improved realizations outpaced expectations .
  • Directional revisions: Management’s guidance cuts to capex/SG&A and clearer cost-down trajectory suggest upward estimate revisions for EBITDA/FCF in 2H25, while higher D&A lifts non‑cash expense run‑rate .
    Values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

  • Sequential turnaround is underway: shipments at record 4.3Mt, ASP higher, costs falling—Adjusted EBITDA swung to +$97M; management guides further EBITDA improvement in Q3 on another ~$20/ton cost reduction and stable volumes .
  • Profitability beat matters more than the GAAP loss: non-recurring charges ($323M) drove GAAP loss; core earnings improved materially, beating consensus* on EPS and EBITDA .
  • 2H25 FCF setup is constructive: inventory reductions and lower capex/SG&A support FCF inflection; proceeds from potential non-core asset sales would go straight to debt reduction .
  • Structural cost tailwinds are building: Stelco coke integration, external coke contract roll-offs, and footprint optimization provide ongoing cost leverage into 2026 .
  • 2026 step-up catalyst: expiration of slab contract implies ~$125M per quarter EBITDA uplift at today’s environment, improving base earnings power .
  • Macro/trade policy is a net positive: stricter tariff regime and auto reshoring underpin volume and pricing, with CLF positioned as an auto-focused, vertically integrated supplier .
  • Trading lens: near-term narrative centers on cost-down execution and Q3 EBITDA progression; medium-term focuses on FCF, deleveraging pace, and realization of the slab-contract uplift and potential asset monetizations .

Supporting Detail

Additional Operating & Cash Flow Data (Q2 2025)

  • Operating cash flow: $45M; capex $112M; net financing inflow $68M; cash and equivalents $61M at period end .
  • Balance sheet: Total liquidity $2.7B; long-term debt $7.73B; total equity $6.04B .

Notable Press Release Within the Quarter

  • Coshocton Works $150M Bright Anneal Line commissioned; hydrogen-atmosphere process with recovery unit, targeting premium stainless for auto/appliances; management expects quick payback and quality/productivity benefits .

Cross-Checks and Disclosures

  • Revenue, EPS, EBITDA, shipments, ASP, segment mix, guidance figures, and qualitative commentary sourced from Q2’25 8‑K/press release and earnings call; prior quarter/year figures from Q1’25 and Q4’24 filings/calls for trend analysis .
  • Consensus estimates (EPS, revenue, EBITDA) sourced from S&P Global; see asterisks and disclaimer above. Values marked with * are retrieved from S&P Global.