EPS of $-0.92 decreased by 196.8% from previous year
Gross margin of -6.3%
Net income of -447.00M
""The current state of the market is challenging, with steel prices softening and production costs on the rise, impacting margins significantly."" - ClevelandCliffs Management
ClevelandCliffs Inc (0I0H.L), a significant player in the industrial materials sector, reported a troubling Q4 2024, marked by noteworthy declines in revenue and profitability. The company's revenue of $4.33 billion reflected a 15.40% year-over-year decrease and a 5.34% decline from the previous quarter, highlighting ongoing operational and market challenges. Moreover, the reported net income was a loss of $447 million, encompassing a significant depreciation in performance compared to both the prior quarter and the same period last year, where the company had previously shown profitability.
Management indicated that challenges stemmed primarily from increased production costs and a competitive market landscape, leading to substantial operational losses. The cash flow statement revealed a negative net cash from operating activities of $472 million, further emphasizing the company's struggles to generate sustainable cash flow. Overall, ClevelandCliffs' financial health remains under scrutiny as it navigates a volatile marketplace, raising concerns about its long-term viability unless structural changes are implemented to enhance operational efficiency and demand generation.
Key Performance Indicators
Revenue
4.33B
QoQ: -5.34% | YoY:-15.40%
Gross Profit
-273.00M
-6.31% margin
QoQ: -162.50% | YoY:-262.50%
Operating Income
-465.00M
QoQ: -79.54% | YoY:-365.00%
Net Income
-447.00M
QoQ: -84.71% | YoY:-188.39%
EPS
-0.92
QoQ: -76.92% | YoY:-196.77%
Revenue Trend
Margin Analysis
Key Insights
**Revenue:** Q4 2024 revenue totaled $4.33 billion, marking a **15.40% decrease YoY** and a **5.34% decrease QoQ**.
**Gross Profit:** The company reported a gross profit loss of **-$273 million**, reflecting **-262.50% YoY** and **-162.50% QoQ**.
**Operating Income:** The operating loss stood at **-$465 million**, down **365.00% YoY** and **79.54% QoQ**.
**Net Income:** A net loss of **-$447 million** was recorded, representing a **188.39% decline YoY** and an **84.71% decline QoQ**.
**EPS:** Diluted earnings per share (EPS) came in at **-$0.92**, a staggering **196.77% decline YoY**.
Financial Highlights
### Key Financial Metrics
- Revenue: Q4 2024 revenue totaled $4.33 billion, marking a 15.40% decrease YoY and a 5.34% decrease QoQ.
- Gross Profit: The company reported a gross profit loss of -$273 million, reflecting -262.50% YoY and -162.50% QoQ.
- Operating Income: The operating loss stood at -$465 million, down 365.00% YoY and 79.54% QoQ.
- Net Income: A net loss of -$447 million was recorded, representing a 188.39% decline YoY and an 84.71% decline QoQ.
- EPS: Diluted earnings per share (EPS) came in at -$0.92, a staggering 196.77% decline YoY.
- Current Ratio: 2.08, indicating adequate short-term liquidity.
- Debt to Equity Ratio: 1.166, suggesting a highly leveraged position.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
4.33B
-15.40%
-5.34%
Gross Profit
-273.00M
-262.50%
-162.50%
Operating Income
-465.00M
-365.00%
-79.54%
Net Income
-447.00M
-188.39%
-84.71%
EPS
-0.92
-196.77%
-76.92%
Key Financial Ratios
currentRatio
2.08
grossProfitMargin
-5.46%
operatingProfitMargin
-9.25%
netProfitMargin
-10.3%
returnOnAssets
-2.13%
returnOnEquity
-6.71%
debtEquityRatio
1.17
operatingCashFlowPerShare
$-0.97
freeCashFlowPerShare
$-1.39
priceToBookRatio
0.69
priceEarningsRatio
-2.56
Net Income vs. Revenue
Expense Breakdown
Management Commentary
### Management Insights
- Market Conditions: "The current state of the market is challenging, with steel prices softening and production costs on the rise, impacting margins significantly. We continue to reassess our operational strategies moving forward." - ClevelandCliffs Management
- Future Strategy: "Our focus is shifting towards operational efficiency and adjusting our sales strategies to better align with current market realities. We believe that by optimizing our processes, we can navigate through this downturn more effectively." - ClevelandCliffs Management
"The current state of the market is challenging, with steel prices softening and production costs on the rise, impacting margins significantly."
— ClevelandCliffs Management
"Our focus is shifting towards operational efficiency and adjusting our sales strategies to better align with current market realities."
— ClevelandCliffs Management
Forward Guidance
### Forward Guidance
Management has acknowledged that Q1 2025 is expected to remain under pressure, projecting further operational challenges due to ongoing high costs amid fluctuating steel prices. However, they emphasized a strategic pivot towards enhancing operational efficiency and market diversification. Key targets for improvement include:
1. Reducing operational costs to improve margins.
2. Expanding customer segments to mitigate demand risk.
Investors should closely monitor the company's execution on these strategies, as successful implementation could be critical for recovery.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0I0H.L Focus
-6.31%
-9.25%
-6.71%
-2.56%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
ClevelandCliffs Inc's current performance raises substantial concerns for investors, primarily due to its increasing losses and declining revenue metrics. Given the weak market conditions expected to persist in Q1 2025, a cautious investment approach is advisable. It is essential for investors to closely observe operational adjustments and market recovery indicators that could eventually enhance profitability. The focus on cost management and diversification strategies will be key determining factors in assessing future investment potential.
Key Investment Factors
Growth Potential
ClevelandCliffs operates in a market that can rebound with increased demand for steel, particularly in infrastructure projects if federal funding is realized. The company’s strategic focus on operational efficiency could improve margins in the medium to long term.
Profitability Risk
The primary risks revolve around volatile commodity prices, high operational costs, and significant debt levels, which could further strain cash flow and financial health if market conditions do not improve.
Financial Position
ClevelandCliffs exhibits a relatively high liquidity position with a current ratio of 2.08; however, its substantial debt levels and prolonged operating losses raise concerns regarding its ability to sustain operations during downturns.
SWOT Analysis
Strengths
Strong market presence in North America.
Diverse product portfolio in high-demand sectors like automotive and construction.
Weaknesses
Current operational inefficiencies leading to significant losses.
High levels of debt relative to equity.
Opportunities
Potential for long-term demand growth in infrastructure projects.
Diversification into renewable energy steel applications.