Cliffs Sales Beat Estimates on Realized Iron Ore Prices

Cliffs Natural Resources Inc., the largest U.S. iron ore producer, posted better-than-expected first-quarter earnings and sales after the company rationalized is operations in the face of weaker commodity prices.

Excluding one-time items, Cliffs had a profit of 94 cents, the Cleveland-based company said Tuesday in a statement. That beat the 18-cent average loss of 17 analysts’ estimates compiled by Bloomberg.

Sales -- including revenue from North American coal assets that Cliffs is in the process of selling -- were $573.9 million, ahead of the $557 million average estimate.

While sales volumes from Cliff’s North American iron-ore operations disappointed, prices exceeded predictions. The shares rose 4.8 percent to $6.15 at 9:37 a.m. in New York.

“It was a pretty solid quarter,” said Jeremy Sussman, an analyst at Clarkson Capital Markets LLC in New York. “The big thing that stood out to me was that U.S. iron ore prices were much stronger than expected.”

Lourenco Goncalves took over as Cliff chairman and chief executive officer in August after an activist investor staged a boardroom coup. He’s trying to sell the coal assets and the company’s Australian mines, banking on steady demand from U.S. customers while shunning the international seaborne market for iron ore.

Iron ore demand in China, the biggest user, has dropped about 3.4 percent this year, according to data compiled by Bloomberg Intelligence. The price of steelmaking raw material had plunged to a decade-low this year, although the benchmark Chinese grade has posted gains in the past three weeks. Still, the overall decline has left Cliffs grappling with debt accumulated from an acquisition back when the price was much higher.

2015 Forecast

In January Goncalves scrapped Cliffs’ dividend payments and sought creditor protection in Canadian courts for its halted Bloom Lake mine.

Cliffs said last month that its $540 million junk-bond offering, along with a debt exchange to lower interest costs, will give it at least another two years to weather a slump in the commodity’s price.

Losses from the Canadian operations contributed to Cliffs’ first-quarter net loss widening to $4.26 a share from 54 cents a year earlier.

Sales of U.S. iron ore, Cliffs’ largest unit, were 2.95 million long tons, missing the 3.5 million-ton average of three estimates. The average sales price was $92.70 a ton, compared with $109.02 last year and the $83-a-ton average estimate.

Cliffs cut its 2015 U.S. iron ore sales forecast by 6.8 percent to 20.5 million tons.

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