Bloomberg News

Cliffs Misses Profit Estimate After Iron-Ore Prices Decline

October 24, 2012

Cliffs Natural Resources Inc. (CLF:US), the largest U.S. iron-ore producer, reported third-quarter results that missed analysts’ estimates as the price of the steelmaking raw-material dropped.

Net income (CLF:US) fell 86 percent to $85.1 million, or 59 cents a share, from $601.2 million, or $4.15, a year earlier, the Cleveland-based company said today in a statement. Profit from continuing operations was 61 cents a share, missing the $1.02 average of 21 estimates (CLF:US) compiled by Bloomberg. Sales dropped 30 percent to $1.45 billion.

The price of seaborne iron ore fell 36 percent to an average $112 a metric ton in the quarter, compared with $176 a year earlier, according to Steel Business Briefing data compiled by Bloomberg. Cliffs decreased its outlook (CLF:US) for the spot price of iron ore this year by 12 percent to $128 a ton from a July forecast of $145 a ton.

Cash costs in Cliffs’ Canadian division rose 21 percent to $106.06 a ton. Costs at the Bloom Lake Mine, which Cliffs acquired with its 2011 purchase of Consolidated Thompson Iron Ore Mines Ltd., rose 18 percent from a year earlier driven by higher fuel, labor, maintenance and supply costs, the company said in the statement.

“That was a shocker on Canada,” Laurence Balter, who oversees $100 million at Oracle Investment Research in Fox Island, Washington, said today in a phone interview. “The increase in cash cost was a little concerning for me.”

Cliffs fell 6.9 percent to $39.76 at 6:29 p.m. after the close of regular trading in New York. The shares (CLF:US) declined 32 this year through the close.

U.S. steelmakers used 75 percent of their capacity on average in the third quarter, compared with 76 percent a year earlier, according to data compiled by Bloomberg from the American Iron and Steel Institute. Capacity utilization has tumbled from 81 percent in April to 70 percent on Oct. 22.

To contact the reporter on this story: Sonja Elmquist in New York at selmquist1@bloomberg.net

To contact the editor responsible for this story: Steven Frank at sfrank9@bloomberg.net


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Companies Mentioned

  • CLF
    (Cliffs Natural Resources Inc)
    • $15.03 USD
    • -0.45
    • -2.99%
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