EPS of $0.00 decreased by 99.4% from previous year
Gross margin of 3.2%
Net income of 2.00M
""We are committed to driving efficiency improvements, which will be critical as we navigate through these volatile market conditions."" - Lourenco Goncalves, CEO
ClevelandCliffs Inc (0I0H.L) QQ2 2024 Results: Navigating a Challenging Environment with Strategic Focus
Executive Summary
ClevelandCliffs Inc's Q2 2024 results were marked by a substantial decline in profitability, reflected by a net income of $2 million, down from $347 million in the same quarter last year. Revenue of $5.09 billion represented a 14.91% year-over-year decrease and a slight decline of 2.06% quarter-over-quarter, highlighting ongoing challenges in pricing pressures and market demand. Despite this downturn, management expressed confidence in the company's strategic direction, emphasizing cost controls and operational efficiencies as key priorities going forward.
The earnings call underscored the company's focus on navigating a challenging environment with calls to enhance long-term growth through capacity improvements and technological advancements in steel production. As the company progresses, monitoring macroeconomic conditions and commodity pricing will be critical for investors evaluating ClevelandCliffs' future performance.
Key Performance Indicators
Revenue
5.09B
QoQ: -2.06% | YoY:-14.91%
Gross Profit
162.00M
3.18% margin
QoQ: -43.16% | YoY:-74.84%
Operating Income
6.00M
QoQ: 115.79% | YoY:-98.76%
Net Income
2.00M
QoQ: 102.99% | YoY:-99.42%
EPS
0.00
QoQ: 103.00% | YoY:-99.38%
Revenue Trend
Margin Analysis
Key Insights
**Revenue**: $5.09 billion (YoY: -14.91%, QoQ: -2.06%)
- Revenue fell significantly year-over-year, primarily due to reduced steel prices and decreased demand from key sectors.
**Gross Profit**: $162 million (YoY: -74.84%, QoQ: -43.16%)
- This drastic decline indicates squeezed margins as raw material costs remained high, contrasting with lower selling prices.
**Operating Income**: $6 million (YoY: -98.76%, QoQ: 115.79%)
- Operated at minimal profitability, demonstrating severe operational constraints and high fixed costs.
**Net Income**: $2 million (YoY: -99.42%, QoQ: 102.99%)
- A sharp reduction in net income highlights the effects of declining sales and increased expenses, despite a slight positive change from the previous quarter.
**EPS**: $0.0042 (YoY: -99.38%, QoQ: 103.00%)
- Significant drop underscores decreased profitability per share.
Financial Highlights
### Key Metrics Analysis
- Revenue: $5.09 billion (YoY: -14.91%, QoQ: -2.06%)
- Revenue fell significantly year-over-year, primarily due to reduced steel prices and decreased demand from key sectors.
- Gross Profit: $162 million (YoY: -74.84%, QoQ: -43.16%)
- This drastic decline indicates squeezed margins as raw material costs remained high, contrasting with lower selling prices.
- Operating Income: $6 million (YoY: -98.76%, QoQ: 115.79%)
- Operated at minimal profitability, demonstrating severe operational constraints and high fixed costs.
- Net Income: $2 million (YoY: -99.42%, QoQ: 102.99%)
- A sharp reduction in net income highlights the effects of declining sales and increased expenses, despite a slight positive change from the previous quarter.
- EPS: $0.0042 (YoY: -99.38%, QoQ: 103.00%)
- Significant drop underscores decreased profitability per share.
ClevelandCliffs' performance metrics illustrate a challenging quarter, necessitating strategic pivots for recovery and growth.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
5.09B
-14.91%
-2.06%
Gross Profit
162.00M
-74.84%
-43.16%
Operating Income
6.00M
-98.76%
115.79%
Net Income
2.00M
-99.42%
102.99%
EPS
0.00
-99.38%
103.00%
Key Financial Ratios
currentRatio
1.87
grossProfitMargin
3.18%
operatingProfitMargin
0.12%
netProfitMargin
0.04%
returnOnAssets
0.01%
returnOnEquity
0.03%
debtEquityRatio
0.5
operatingCashFlowPerShare
$1.1
freeCashFlowPerShare
$0.76
priceToBookRatio
1.02
priceEarningsRatio
908.98
Net Income vs. Revenue
Expense Breakdown
Management Commentary
### Transcript Highlights
- Strategic Focus on Cost Control: Management emphasized efforts on reducing operational costs and improving production efficiencies. Commented, "We are prioritizing cost management strategies to weather the current market conditions".
- Market Demand Insights: The team discussed the softness in demand from the automotive and construction sectors, stating, "We are closely watching recovery signals from these key customers as we adapt our production schedules accordingly."
"We are committed to driving efficiency improvements, which will be critical as we navigate through these volatile market conditions."
â Lourenco Goncalves, CEO
"Our focus remains on positioning ClevelandCliffs to emerge stronger as the demand landscape improves."
â Lourenco Goncalves, CEO
Forward Guidance
Management provided cautious guidance for the remainder of 2024, calling for continued scrutiny of market trends and competitor actions. They noted initiatives aimed at enhancing steel production efficiencies and potential exploration of secondary markets to capture demand outside traditional peak seasons. Investors should focus on the quarter-over-quarter improvements and management's commitment to operational excellence as indicators of future recovery.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0I0H.L Focus
3.18%
0.12%
0.03%
908.98%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
ClevelandCliffs presents a mixed investment outlook. While the current financial results reflect substantial challenges, the strategic focus on operational efficiency and future potential in green technologies may offer brighter prospects. Investors should consider current valuations against historical performance and the capacity for recovery as market conditions improve. Monitoring management's execution against stated strategies will be crucial in gauging the stock's long-term value.
Key Investment Factors
Growth Potential
The company's expansion into advanced steel technologies and sustainable practices presents growth opportunities as markets evolve towards lower emissions and higher efficiency.
Profitability Risk
Market volatility, particularly in steel pricing, poses a significant risk. Additionally, operational challenges such as labor shortages and supply chain disruptions must be monitored closely.
Financial Position
Despite near-term challenges, ClevelandCliffs maintains healthy liquidity with $110 million in cash and $3.5 billion in available credit, suggesting resilience to weather economic downturns.
SWOT Analysis
Strengths
Strong vertical integration within the steel production process
Significant market share in North America
Established relationships with major automotive and construction industries
Weaknesses
Declining profit margins due to rising raw material costs
High operational leverage impacting profit ratios
Limited diversification in product offerings
Opportunities
Growth potential in electric arc furnace technology
Increased demand for green steel solutions
Expansion into new geographical markets
Threats
Intense competition from both domestic and international steel producers
Fluctuating commodity prices impacting raw material costs
Economic slowdown affecting demand from key sectors