CLEVELAND–(BUSINESS WIRE)–Cleveland-Cliffs Inc. (NYSE: CLF) today reported results for the full year and fourth quarter ended December 31, 2021.
Consolidated revenue for the full year 2021 was $20.4 billion, compared to $5.3 billion in the prior year.
For the full year 2021, the company generated net income of $3.0 billion, or $5.36 per diluted share.That compares with a net loss of $81 million, or $0.32 per diluted share, in 2020.
Consolidated revenue for the fourth quarter of 2021 was $5.3 billion, compared to $2.3 billion in the fourth quarter of last year.
In the fourth quarter of 2021, the company generated net income of $899 million, or $1.69 per diluted share.This included charges of $47 million, or $0.09 per diluted share, from inventory upgrades and amortization of acquisition-related charges.By comparison, net income for the fourth quarter of 2020 was $74 million, or $0.14 per diluted share, including acquisition-related costs and amortization of inventory buildup of $44 million, or $0.14 per diluted share $0.10.
Adjusted EBITDA1 in the fourth quarter of 2021 was $1.5 billion compared to $286 million in the fourth quarter of 2020.
From cash generated in the fourth quarter of 2021, the company will use $761 million for the acquisition of Ferrous Processing and Trading (“FPT”).The company used the remaining cash generated during the quarter to repay approximately $150 million of principal debt.
Also in the fourth quarter of 2021, pensions and OPEB liabilities net of assets decreased by approximately $1.0 billion, from $3.9 billion to $2.9 billion, primarily due to actuarial gains and strong returns on assets.Debt reduction (net of assets) for full-year 2021 is approximately $1.3 billion, which also includes corporate capital contributions.
The Cliffs Board of Directors has approved a new share repurchase program for the company to repurchase its outstanding common stock.Under the stock repurchase program, companies will have sufficient flexibility to purchase up to $1 billion worth of stock through open market acquisitions or privately negotiated transactions.Company is not obligated to make any purchases and the program may be suspended or terminated at any time.The program goes into effect today with no specific expiration date.
Lourenco Goncalves, chairman, president and CEO of Cliffs, said: “Over the past two years, we have completed construction and started operating our flagship state-of-the-art direct reduction plant, and have also acquired and paid for the acquisition of two major steel companies and a major Scrap Co. Our results in 2021 clearly demonstrate how strong Cleveland-Cliffs has become, with our revenue growing more than tenfold from $2 billion in 2019 to over $20 billion in 2021. All These increases were profitable, generating $5.3 billion in adjusted EBITDA last year and $3.0 billion in net income. Our strong cash flow generation allowed us to not only reduce our diluted share count by 10%, but also Our leverage is down to a very healthy level of 1x Adjusted EBITDA.”
Mr. Goncalves continued: “Our results for the fourth quarter of 2021 show that a disciplined supply approach is critical to us. During the third quarter of last year, we realized that our automotive customers would not be able to address their supply chains in the fourth quarter. Demand pull in this industry will be weak. This will exceed the broadly expected demand for service centers in the fourth quarter. As a result, we have chosen not to chase weak demand and have instead accelerated the maintenance of several of our steel production and finishing facilities Work until the fourth quarter. These actions had a short-term impact on our unit costs in the fourth quarter, but should benefit our 2022 results.”
Mr. Goncalves added: “Cleveland-Cliffs is by and large the largest steel supplier to the U.S. automotive industry. Through our extensive use of HBI in our blast furnaces and high-quality scrap in our BOFs, we are now able to reduce hot metal, lower coke rates, and and CO2 emissions down to new international benchmark levels for steel companies similar to our product portfolio. When our automotive industry customers compare our emissions performance to their other counterparts in Japan, Korea, France, Austria, Germany, Belgium and more This is especially important when comparing major steel suppliers. In other words, through operational changes that we have implemented and do not rely on breakthrough technologies or large-scale investments, Cleveland-Cliffs is providing a premium steel supplier to the automotive industry Set new CO2 emission standards.”
Mr. Goncalves concluded: “2022 will be another extraordinary year for Cleveland-Cliffs profitability as demand rebounds, particularly from the automotive industry. We are now selling at a fixed price under our recently renewed contract. The vast majority of contract volumes are at significantly higher selling prices. Even on the steel futures curve as of today, we expect the average selling price of our steel in 2022 to be higher than in 2021. As we look forward to another great year in 2022, Our capital expenditure needs are limited and we can now confidently implement shareholder-focused actions ahead of our original expectations.”
On November 18, 2021, Cleveland-Cliffs completed the acquisition of FPT.FPT’s business falls within the company’s steelmaking division.Steelmaking results listed include FPT’s operating results for the period from November 18, 2021 to December 31, 2021 only.
Full-year 2021 net steel production of 15.9 million tonnes, comprising 32% coated, 31% hot rolled, 18% cold rolled, 6% plate, 4% stainless and electrical products, and 9% of other products, including slabs and rails.Net steel production in the fourth quarter of 2021 was 3.4 million tonnes, comprising 34% coated, 29% hot rolled, 17% cold rolled, 7% plate, 5% stainless and electrical products, and 8% % of other products, including slabs and rails.
Full-year 2021 steelmaking revenue of $19.9 billion, of which approximately $7.7 billion, or 38% of sales in the distributors and processors market; $5.4 billion, or 27% of sales, in the infrastructure and manufacturing markets; $4.7 billion, or 24% of sales, went to the automotive market; and $2.1 billion, or 11% of sales, went to steelmakers.Steelmaking revenue in the fourth quarter of 2021 was $5.2 billion, of which approximately $2.0 billion, or 38% of sales in the distributors and processors market; $1.5 billion, or 29% of sales, in the infrastructure and manufacturing markets ; $1.1 billion, or 22% of sales, for the automotive market; $552 million, or 11% of the steelmaker’s sales.
Full-year 2021 steelmaking cost of sales was $15.4 billion, including $855 million in depreciation, wear and tear and amortization and $161 million in amortization of inventory buildup charges.Steelmaking segment adjusted EBITDA for the full year was $5.4 billion, including $232 million in SG&A charges.Steelmaking cost of sales for the fourth quarter of 2021 was $3.9 billion, including $222 million in depreciation, wear and tear and amortization and $32 million in amortization of inventory buildup charges.Steelmaking segment adjusted EBITDA for the fourth quarter of 2021 was $1.5 billion, including $52 million in SG&A charges.
Fourth quarter 2021 results for other businesses, particularly tooling and stamping, were negatively impacted by inventory valuation adjustments and the December 2021 tornado affecting the Bowling Green, Kentucky plant.
As of February 8, 2022, the company’s total liquidity was approximately $2.6 billion, including approximately $100 million in cash and approximately $2.5 billion in ABL’s line of credit.
Due to the successful renewal of the relevant fixed price sales contract, and based on the current 2022 futures curve, which implies an average HRC index price of $925 per net tonne for the rest of the year, the company expects its 2022 average price to sell About $1,225 per net ton.
This compares to an average company selling price of $1,187 per net ton in 2021 when the HRC Index averages around $1,600 per net ton.
Cleveland-Cliffs Inc. will host a conference call on February 11, 2022 at 10:00 AM ET.The call will be broadcast live and archived on the Cliffs website: www.clevelandcliffs.com
Cleveland-Cliffs is the largest flat steel producer in North America.Founded in 1847, Cliffs is a mine operator and the largest manufacturer of iron ore pellets in North America.The company is vertically integrated from mined raw materials, DRI and scrap to primary steelmaking and downstream finishing, stamping, tooling and tubing.We are the largest steel supplier to the North American automotive industry and serve a variety of other markets due to our comprehensive line of flat steel products.Headquartered in Cleveland, Ohio, Cleveland-Cliffs employs approximately 26,000 people in operations in the United States and Canada.
This press release contains statements that constitute “forward-looking statements” within the meaning of the federal securities laws.All statements other than historical facts, including, without limitation, statements regarding our current expectations, estimates and projections about our industry or business, are forward-looking statements.We caution investors that any forward-looking statements are subject to risks and uncertainties that could cause actual results and future trends to differ materially from those expressed or implied by such forward-looking statements.Investors are cautioned not to place undue reliance on forward-looking statements.Risks and uncertainties that could cause actual results to differ from those described in the forward-looking statements are as follows: Operational disruption related to the ongoing COVID-19 pandemic, including the possibility of a significant portion of our employees or- on-site contractors becoming ill or unable to perform its day-to-day job functions; continued volatility in market prices for steel, iron ore and scrap metal, which directly and indirectly affects the prices of products we sell to customers; uncertainties associated with the highly competitive and cyclical steel industry and our perception of the automotive industry’s impact on steel Demand-dependent, the automotive industry has been experiencing a trend of lightweighting and supply chain disruptions, such as semiconductor shortages, which could lead to lower steel production being consumed; potential weaknesses and uncertainties in global economic conditions, global steelmaking overcapacity, iron ore Oversupply of stone, general steel imports and reduced market demand, including due to the prolonged COVID-19 pandemic; due to the ongoing COVID-19 pandemic or otherwise, one or more of our major customers (including customers in the automotive market, major Severe financial difficulties, bankruptcy, temporary or permanent closures, or operational challenges adversely impacted by suppliers or contractors), which may result in reduced demand for our products, increased difficulty in collecting receivables, and customer and/or supplier assertions of force majeure or otherwise fail to perform its contractual obligations to us; with the U.S. government in connection with Section 232 of the Trade Expansion Act of 1962 (as amended by the Trade Act of 1974), the U.S.-Mexico-Canada Agreement and/or other trade agreements, tariffs, treaties or policies risks associated with actions to be taken, and uncertainty about obtaining and maintaining effective anti-dumping and countervailing duty orders to offset the harmful effects of unfair trade imports; the impact of existing and growing government regulations, including those related to climate change and carbon Potential environmental regulations related to emissions, and associated costs and liabilities, including failure to obtain or maintain required operational and environmental permits, approvals, modifications, or other authorizations, or from any implementation of improvements to ensure compliance with regulatory changes (including potential financial assurance requirements) related government or regulatory agencies and costs; the potential impact of our operations on the environment or exposure to hazardous substances; our ability to maintain adequate liquidity, our level of debt and availability of capital may limit our ability to provide working capital, plans the financial flexibility and cash flow necessary to fund capital expenditures, acquisitions and other general corporate purposes or the continuing needs of our business; our ability to reduce our debt or return capital to shareholders either entirely within the currently anticipated time frame; Adverse changes in credit ratings, interest rates, foreign currency exchange rates, and tax laws; litigation, claims, arbitrations related to commercial and commercial disputes, environmental matters, government investigations, occupational or personal injury claims, property damage, labor and employment matters, or litigation involving estates or results of government procedures and expenses incurred in operations and other matters; supply chain disruptions or changes in the cost or quality of energy, including electricity, natural gas and diesel fuel, or critical raw materials and supplies, including iron ore, industrial gases, graphite electrodes , scrap metal, chromium, zinc, coke and metallurgical coal;Problems or disruptions related to customers shipping products, transferring manufacturing inputs or products within our facilities, or suppliers shipping raw materials to us; related to natural or man-made disasters, severe weather conditions, unexpected geological conditions, critical equipment failures, infectious diseases Uncertainties related to outbreaks, tailings dam failures and other unforeseen events; disruptions or failures of our information technology systems, including those related to cybersecurity; related to any business decision to temporarily idle or permanently close operating facilities or mines Liabilities and costs, which may adversely affect the carrying value of the underlying assets and create impairment charges or closure and recovery obligations, and uncertainty associated with restarting any previously idle operating facilities or mines; we realize recent acquisitions the expected synergies and benefits and the ability to successfully integrate the acquired business into our existing business, including uncertainties related to maintaining relationships with customers, suppliers and employees and our commitment to the known and unknown related to the acquisition Liability; our level of self-insurance and our ability to obtain adequate third-party insurance to adequately cover potential adverse events and business risks; the challenges of maintaining our social license to operate with our stakeholders, including the impact of our operations on local communities impact, reputational impact of operating in carbon-intensive industries that generate greenhouse gas emissions, and our ability to develop a consistent operating and safety record; we successfully identify and refine any strategic capital investment or development project, cost-effectively achieving planned productivity or levels, the ability to diversify our product portfolio and add new customers; reductions in our Actual Economic Mineral Reserves or current Mineral Reserve estimates, and any title defects or any leases, licenses, easements or Loss of other possession rights; availability of workers to fill critical operational positions and potential labor shortages from the ongoing COVID-19 pandemic, and our ability to attract, hire, develop and retain key personnel; we maintain order with unions and employees the ability to have satisfactory industrial relations; unexpected or higher costs associated with pension and OPEB obligations due to changes in the value of plan assets or increased contributions required for unfunded obligations; the amount and timing of the repurchase of our common stock ; Our internal control over financial reporting may have material deficiencies or material deficiencies.
See Part I – Item 1A for additional factors affecting Cliffs’ business.Our Annual Report on Form 10-K for the year ended December 31, 2020, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021, and others Risk Factors filings with the U.S. Securities and Exchange Commission.
In addition to the consolidated financial statements presented in accordance with US GAAP, the company also presents EBITDA and Adjusted EBITDA on a consolidated basis.EBITDA and Adjusted EBITDA are non-GAAP financial measures used by management in evaluating operating performance.These measures should not be presented in isolation from, in lieu of, or in preference to financial information prepared and presented in accordance with U.S. GAAP.The presentation of these measures may differ from non-GAAP financial measures used by other companies.The table below provides a reconciliation of these consolidated measures to their most directly comparable GAAP measures.
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