Cleveland-Cliffs 2Q Profit Plunges as Margin Weakens

By Victor Swezey

Cleveland-Cliffs reported a steep drop in second-quarter profit as weakening prices reduced margins for steel.

The Cleveland-based steelmaker on Monday posted a profit of $2 million, or 0 cents a share, for the quarter ending June 30, compared with $347 million, or 68 cents a share, a year earlier.

Stripping out one-time items, earnings per share were 11 cents. Analysts polled by FactSet expected an adjusted loss of 1 cent per share.

Revenue fell to $5.09 billion from $5.98 billion, falling short of analyst expectations of $5.18 billion.

Chief Executive Lourenco Goncalves said that the company's free flow cash generation of $362 million during the quarter indicates its ability to continue performing amid adverse business conditions including weaker demand and falling steel prices.

Goncalves added the company was able to pay down over $200 million in debt and return about $125 million to shareholders through stock buybacks.

The company's gross margin fell to $145 million from $629 million last quarter.

Cleveland-Cliffs said on July 15 that it planned to acquire Canadian steelmaker Stelco, a subsidiary of competitor U.S. Steel, at a price of 3.4 billion Canadian dollars ($2.48 billion).

The company was beaten last year by Japanese steelmaker Nippon Steel in a bidding war over U.S. Steel.

The company also said Monday it plans to open a new electrical distribution transformer plant in Weirton, W.Va., which it expects to come online in the first half of 2026. The new factory will be located on the site of a former tinplate factory that the company closed in February, citing an inability to compete with foreign imports.

Cleveland-Cliffs cut its guidance for full-year capital expenditures to between $650 million and $700 million, from a range of $675 million to $725 million.

Write to Victor Swezey at victor.swezey@wsj.com

(END) Dow Jones Newswires

July 22, 2024 17:09 ET (21:09 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.