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CLEVELAND-CLIFFS INC. (CLF)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 was the trough: revenue fell to $4.33B and diluted EPS to -$0.92; Adjusted EBITDA was -$81M, driven by weak automotive pull and low index pricing, with management expecting a 2025 rebound as order books and lead times improved and pricing began rising .
  • Mix shifted toward spot/non-automotive after the Stelco acquisition; average selling price per ton dropped to $976 and shipments were 3.83M net tons, while unit costs fell sequentially by ~$15/ton with Stelco’s inclusion .
  • 2025 guidance introduced: ~$700M capex, ~$625M SG&A, ~$1.1B DD&A, ~$150M cash pension/OPEB; management targets steel unit cost reductions of ~$40/ton vs 2024 and prioritizes deleveraging with ~$3B liquidity .
  • Policy/trade tailwinds are a core narrative catalyst: management highlighted newly announced 25% tariffs on steel imports and downstream products, expecting demand/pricing support and synergy capture from Stelco (~$120M year-one targeted) .

What Went Well and What Went Wrong

What Went Well

  • Order book strength and lead times: hot-rolled lead times extended from ~3 to ~7 weeks; early-2025 demand signs across automotive and non-automotive bolster confidence in a rebound .
  • Cost actions and Stelco impact: sequential unit cost reduction (~$15/ton) from Stelco’s cost structure; SG&A down ~16% in 2024 vs 2023; management guides a further ~$40/ton decline in 2025 .
  • Strategic footprint: Stelco adds spot-heavy, low-cost capacity and resilience; synergy plan of ~$120M in year one already “set in motion” with upside potential .

What Went Wrong

  • Q4 profitability: Adjusted EBITDA of -$81M and diluted EPS of -$0.92, with automotive shipments the lowest since the pandemic and lagged pricing headwinds; C6 blast furnace idled .
  • Pricing/mix pressure: average selling price fell to $976/ton in Q4 (from $1,045 in Q3); mix dilution from Stelco’s lower-priced portfolio .
  • Cash use and leverage: Q4 cash from operations was -$472M (inventory build ahead of anticipated demand), long-term debt rose to $7.07B with acquisition financing, pushing leverage above the 2.5x net debt/EBITDA target (management committed 100% FCF to debt paydown) .

Financial Results

Consolidated P&L and EPS vs Prior Periods and Prior Year

MetricQ4 2023Q3 2024Q4 2024
Revenues ($USD Billions)$5.11 $4.57 $4.33
Diluted EPS ($)-$0.31 -$0.52 -$0.92
Adjusted EPS ($)-$0.05 -$0.33 -$0.68
Adjusted EBITDA ($USD Millions)$279 $124 -$81

Steelmaking KPIs

KPIQ4 2023Q3 2024Q4 2024
Steel Product Shipments (000 net tons)4,039 3,840 3,827
Avg Selling Price per Net Ton ($)$1,093 $1,045 $976
Steelmaking Revenues ($USD Billions)$4.95 $4.42 $4.17
Gross Margin ($USD Millions)$156 -$114 -$281

Cash Flow and Balance Sheet Snapshots

MetricQ4 2023Q4 2024
Cash from Operations ($USD Millions)$652 -$472
Capital Expenditures ($USD Millions)$165 $205
Long-Term Debt ($USD Millions)$3,137 $7,065
Cash & Equivalents ($USD Millions)$198 $54

Segment / End-Market Mix

End Market (Steelmaking Revenues)Q3 2024 ($USD Billions)Q3 2024 (%)Q4 2024 ($USD Billions)Q4 2024 (%)
Direct Automotive$1.3 30% ~$1.2 28%
Distributors & Converters$1.3 30% ~$1.2 27%
Infrastructure & Manufacturing$1.2 26% ~$1.2 30%
Steel Producers$0.61 14% $0.62 15%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Steel Unit Cost ReductionFY 2025Not explicitly quantified (FY24 targeted ~$30/ton YoY; Q3 guided further cost progress) ~$40/ton vs 2024 New/Expanded
Capital ExpendituresFY 2025~$600M standalone (ex-Stelco) + ~US$100M Stelco sustaining ~$700M total (incl. Stelco) Maintained (aggregate)
SG&AFY 2025No prior numeric guide; FY24 SG&A $486M ~$625M New
Depreciation, Depletion & AmortizationFY 2025No prior numeric guide~$1.1B New
Cash Pension & OPEBFY 2025No prior numeric guide~$150M New

Earnings Call Themes & Trends

TopicQ2 2024 (Prior-2)Q3 2024 (Prior-1)Q4 2024 (Current)Trend
Automotive demand/mixResilient auto; rich mix; focus on cash flow from auto Auto build rates lowest since chip shortage; ASP pressure; C6 idled Early-2025 “market share recovery”; auto shipments to rise; pricing resets slightly lower but tonnage preserved Improving pull into 2025
Tariffs/trade policyCritique of Mexico transshipment; calling for enforcement Policy support expected post-election; consolidation narrative Applauds new 25% tariffs incl. downstream; expects broad benefit incl. Stelco Positive policy tailwind
Cost actions$30/ton sequential reduction guide; inventory efficiency >$40/ton reduction achieved; SG&A and capex lean 2025 target ~$40/ton reduction; Stelco lowers average costs Continued cuts
Stelco acquisitionAnnounced; accretive, spot-heavy resilience Closed; $120M synergies yr-1 targeted Integration underway; synergies “likely higher” Integration synergies building
Working capitalInventory draw focus; FCF generation Seasonal changes; Q4 working cap build expected Q4 inventory build to support 2025 demand; expected reversal in later quarters Build then unwind
Capacity (C6 furnace)Operating footprint optimization Idled ~1.5MT capacity; restart when demand/prices recover Indefinite idle; management reiterates no near-term restart Awaiting recovery
Projects (Middletown/Butler/Weirton)DOE-supported; transformer plant JV plan; 2026 start Funding approvals; equipment ordered; late-2025/early-2026 transformer start 2025 capex cadence clarified; Weirton transformer progress On track
Scrap/prime & EAF dynamicsPrime scrap tightness; pricing pressures on EAFs Commentary on import economics and onshoring Prime scrap tightening continues; Cliffs advantaged by iron ore feedstock Structural advantage

Management Commentary

  • “Order book has picked up substantially... lead times for hot-rolled steel were 3 weeks... now 7 weeks” .
  • “We view the fourth quarter of 2024 as the trough... with inclusion of Stelco, for every $100 increase in HRC... yearly revenue would increase roughly $1 billion... largely flow directly down to EBITDA” .
  • “Steel unit cost reductions of approximately $40 per net ton compared to 2024; capex ~$700M; SG&A ~$625M; DD&A ~$1.1B; cash pension/OPEB ~$150M” .
  • “Best year for Stelco... 2018 when 25% tariffs... were in place... We expect to have the $120M in synergies set in motion before the end of this year” .
  • “Q4 was a heavy period of cash use... inventory build... pellets... sets us up well to rapidly respond to improved demand” .

Q&A Highlights

  • Tariffs scope/impact: management expects broad benefit from 25% import tariffs, including downstream products; Stelco’s Canadian mix mitigates tariff risk while broader footprint benefits from pricing uplift .
  • ASP and contracting: Q1 ASPs expected up at least $10/ton vs Q4; fixed-price automotive resets “slightly down” but tonnage preserved; Stelco’s spot exposure tempers consolidated ASP but lowers costs .
  • Working capital and cash: Q4 inventory build will be worked down over 2025; Q1 relatively neutral; strong liquidity and plan to apply 100% FCF to debt reduction; no equity issuance, no buybacks near term .
  • C6 furnace: remains indefinitely idled; restart contingent on demand/price recovery; management anticipates 2025 improvement .
  • Synergies and capex: Stelco synergies at least $120M in year one with likely upside; 2025 capex cadence ~$700M total including Stelco; strategic projects’ timing outlined (Weirton late-2025/early-2026, Middletown 2026/27) .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 EPS, revenue, and EBITDA were unavailable due to SPGI request limits at time of analysis; as a result, explicit beat/miss vs consensus cannot be determined at this time [Values retrieved from S&P Global unavailable].
  • Based on reported actuals, CLF’s Q4 2024 revenue ($4.33B) and adjusted EPS (-$0.68) declined vs Q3 2024 and vs Q4 2023, reflecting mix/pricing and auto demand pressures; revisions to Street models likely to reflect 2025 guidance on costs and capex, tariff tailwinds, and Stelco integration .

Key Takeaways for Investors

  • Q4 marked the trough; early-2025 indicators (order book, lead times, pricing) are encouraging, with management calling for sequential ASP and shipment improvement in Q1 .
  • Cost-down remains the core lever: ~$40/ton unit cost reduction targeted for 2025; Stelco lowers average costs and adds nimble spot exposure; SG&A and sustaining capex are lean vs historical .
  • Tariff policy is a major catalyst: broad 25% tariffs on imports and downstream products expected to tighten supply, support domestic pricing, and benefit CLF’s integrated footprint and automotive recovery .
  • Capital allocation pivots to deleveraging: ~$3B liquidity, 100% FCF to debt reduction; no buybacks/equity issuance near term; bond tranches become callable starting 2025, creating optionality .
  • Working capital reversal should aid cash generation: Q4 inventory build (pellets, coke) positions CLF to capture demand; management expects neutral Q1 and beneficial unwind through 2025 .
  • Project pipeline adds medium-term EBITDA: Weirton transformer JV progress (late-2025/early-2026 start), Middletown/Butler DOE-supported efficiency projects underpin structural margin expansion .
  • Near-term trading lens: watch tariff implementation breadth, auto pull rates, HRC curve, and ASP progression; Stelco synergy updates and cost cadence are key to narrative momentum into 1H25 .