CLF - Earnings call transcript Q4 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gentlemen. My name is Christina and I'm your conference facilitator today. I would like to welcome everyone to Cleveland-Cliffs 2019 Fourth Quarter and Full Year Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session.

Harbor that statements made be of that forward-looking the you will today's made XXXX. reminds Private within predictive the include are Safe company certain Reform on comments call as Securities The Litigation of Act protections intended to

such materially that Important Although, assumptions website. differ could the results set results differ that on materially. cause available that reports XX-K on believes to could on to the subject company which SEC, the and forward-looking statements actual are the based forth in XX-Q risks company factors are cause with are news is its reasonable statements and uncertainties forms filed release to and

the and also on and in clevelandcliffs.com. call for call, the earnings certain for broadcast available can morning. is will which conference G Today's published Reconciliation items. found be excluding The regular discuss the results, available Regulation this also archived purposes was company conclusion special will website being at it replay. of At release, the be

I Officer. would Executive Goncalves, President Lorenzo Chairman, like introduce to Chief time, and this At

Lourenco Goncalves

Thank should you, closing call of our and iron Steel, good Christina, a appreciate After as be company. iron Cleveland-Cliffs standalone ore last be of joining on our everyone. a steel you the I all and acquisition will what AK morning, ore company.

and manufactured carbon their fields automotive forward stainless of the products of and for all ore to benefits steel two flat feedstock very are looking as rolled come unique with quiros highly excited with will and We engineered industry. the including as and these controlling transaction this that parts well HBI

The very by assets first ahead we potential of is we have the for clearly bigger by the the quality untapped actually us Over the of and the a ground. what on that case people several come than away envisioned. opportunity exists weeks, captivated new impressed past

closing we Before to stand start I where of an with our with time will lay line. I regards update out why,

As on we up with call well Jones great AK Thanks to this well from and moved you gather of a outside Cleveland-Cliffs both being one necessary all transaction. by checkpoints counsel transaction our as could as remarkably Day. teams to the effort combined week, progressing our probably are Steel's close

approval regulatory on February receive XXth approval received from the We XXnd, XXth. Mexican Canadian States expect January by United and February on approval to

XXth, statement addition, went Xth, effective thereafter following February shareholder us our transaction soon closed special allowing March our registration on March S-X to with on In meeting date set the of XXth.

a conviction last the dealings and Cleveland-Cliffs of several Our and that the the from the AK out companies are majority vast us weeks very Steel common AK Steel and companies with gave other over both have lot different there. in

companies Steel make products AK that lot case Also AK not not and both Steel. AK have the Cliffs, with necessary Cliffs, worse, to over equipment saved Cliffs by Similarly skipping maintenance, time rely the on would money of China. not strong the a majority continue the with and case market days, have Differently with here not North in thrive will businesses currently and depend we and our do States. the these from a economy to on United American we should have vast

mills EBITDA the their and integrated of steelmakers. we steel that forma synergies The the of supplier the EAF the as relevant pro line new companies includes in Cliffs finished ore car in becomes the to most automotive margin cost-cutting a all America. to before commands all With that numbers highest the and of from actions, North all steel among for parts States, the industry And even manufacturers. Steel, show account assembly integrated Tier auto acquisition parts AK of United supplier used the in on fully Cleveland-Cliffs ground iron X

sheet that steel relatively concentration balance are business from we not AK stable automotive biggest price structure, mills due the high-end with share of financial industry. markets within no a Steel does but we its managing among be variations serves company This and which ore. on all a with our AK stability their lot the in revenue a mirror will iron the day prices one of of four-year not that varies to Last maturities a of least, more for prefer window particularly issue. position resolving With the in cost stream the running strength. good Steel

that's businesses, intra-year of combination two the level common metals volatility predictability mining while our a the margin this marrying not with costs with we world. prices, By mitigate and a of stable in and company can providing new

There are two the steel supply. or other in they But And more same level ore prices. exposure a market. spot iron automotive penetration their partially U.S. of have have totally integrated steelmakers to the who both lot control neither

use The be as will performance the rationale Upon less a of inflation, Cliffs AK XXXX. for for explained as more our will on in investors completion that proxy our the be a Steel, in indices our acquisition deal announcement X, December the commodity was control. revenues lot our of far

mills furnace said, share integrated all steel treating simplification. understand This high from producers, as producers. is not a continue good to all so-called grab same they being that market EAF the if the We cost were blast

different there among a In fact, is integrated massive mills. disparity

each mill EAFs exist to steel produce. willing that is are something as EAF are steel just in vast can steel any far of serious AK capable concerned limitations making. of that or some the supplies products technological sophisticated not the Steel types mill is The of as Also majority

and furnaces are among and of Japan, power That's well-run properly and blast one of automotive in such this furnaces. others. Germany, by Nippon operated These as countries companies, such important a to dominated capitalized industry as is blast ArcelorMittal the few by – manufacturing completely France Korea a handful Steel, South meaningful with POSCO

this group There's the integrated technological steels the three One, the to part steel capability; furnace that producers have of R&D the group. staying high-end and power two, grow the operated large strong small by balance in and three all for world prevail blast highly-sophisticated of be world resources; a Automotive select industry, of automotive a sheet. necessary the of strengths a mean furnaces, margin. In well good blast I mills together.

While the only three the steelmakers. select AK the and belongs the all strengths this Cleveland-Cliffs three, group legacy therefore of of has very two have will in Steel new

of trucks. We and passenger a very AK in The well-established as cars Steel is the American the vehicles interesting when trucks. early use change importance supplier we very inflection a to electric-powered for and market combustion transformational engines cars moments of of at of ourselves the time a relevant from North this automotive that of more find the point in industry in approach even

up show electric make percentage of EVs. the Right cars for start presence is the a market Tesla very undeniable company still to a with an small the on first in a as vehicles and reality, road now being

few However, vehicles as models next other over and new a Steel the rates introduce our markets of full car AK particularly downstream-oriented several the interest favorable catch ready get Cliffs from will and up manufacturers electric low integrated supported American vertically to in the with market years, employment, trend. and by benefit

in supplier highly-automated a automotive Tier sophisticated the produced operated in Canada as to Steel's of best products X by combustion unique to for traditional including facilities positioned company fleet this supply Mexico. parts engineering the technical needed industry U.S., AK in to located With partners several what's precision engines the expertise, the from Steel are EVs. change we the and plants most strategic AK

with we Moving Cleveland-Cliffs to proved we partners AK our very leverage renegotiations our downstream have are pellet to We will core our cases our and contract forward, and precision and in Tube business and profit-driven will businesses the at to increase and clients, commercial outsiders be ability through some with strategy. succeed. our surprising good execution our commercial successful

vehicles focused the will of a provide steel new Cliffs more our the resources the for market. car mass advance solutions commercially manufacturers the needed improving the way, and AK R&D By produce utilization to by in in unique can electric

established clients manufacturers car AK of well Steel. These long-term are

some And to will contacted the to and entity willingness their be. to them our during combined last with us a of Cliffs transaction weeks their business as support do Steel at AK express several the Cleveland-Cliffs have stronger

sheet will balance scratched would explored entity, while our combined will With of Cleveland-Cliffs stayed separate two These benefit. this window Steel as happen the never Cliffs AK course, a cars what we of That, financial companies. a market and to for of Steel. Steel provide just surface we as maintaining put the examples AK achieving strong AK be and the opportunity to and a and do to prepared in well-capitalized for are and can the relief, standalone rare trucks profile

have already flexibility Steel uniformity AK bonds the exchange in executed of us great We offer relevant strips a and structure. covenants that deal providing from with capital a our successful

a also loan new entity. and asset-based arranged combined have place We for $X in the billion put

low with pay and us debt way provide penalty. prepayment down substantial and will quickly new Our an easy ABL with with to liquidity

will but XXXX Last, to we on other market and bonds. least, nice company as be new AK near-term, closing subjected maturity should not the window standalone currently combined than comfortable refinancing that, March we stronger a the that a have the and conditions. at years profile all including forward AK much Cleveland-Cliffs. and the Steel With XX, low financial going current four customary XXXX In enjoy

for will planning initiatives. will the able combined synergy close on plans, deals into Until the optimization progress, day our be our details and takeover then, continue our once setting I one. including go footprint to operational stage more achievement much teams and

a remains reliable business steady as always. and Pelletizing and Mining our now, For

One of up and a the of Steel supplier our have AK our of products. destiny the functionality pellet benefits control own with transaction is a lot supply now we other of ore that iron as picked

secured our XX% book pellets We through have of roughly XXXX. order

merchant footprint production, pellets, blast the either For We several iron. contracts, extend grade or the sell pig furnace pellet sell options. remaining Steel third-party to AK XX% leverage of have can we via

only producing our made and our because position pellets us months, HBI we'll unique primarily do This we hot maximize have the iron. briquetted possible way We allow to in of profitability decision we of markets. selling HBI it construction ore pellets enjoy in flexibility be Within was and will a that the make plant. few will a we the and iron with from that the later

in right EBITDA in start-up generate is confirm healthy Toledo our HBI and flow plant we our from operation expect of still June XXXX XXXX. I free healthy to As now and will cash

of the achieve of Toledo our in In calendar expect year of of well million underway X.X our activities commercial XXXX, We plant. our operation advance nameplate arc also and electric tons startup, metric be new our clients. full to furnace which are will first technical with HBI

is high a HBI Cliffs differentiated low commonly carbon HBI DRI carbon produced. X% steps premium With product. Several content, a the and above

fact, pig iron. a direct is HBI our for In replacement imported

pellet factor defining a to which a Also single allow very our source, homogeneous supplied is product. a very plant exclusively mine operation from feedstock a uniform for our and is Toledo with important, stable Northshore

on actual HBI also will natural commercial in based market that and that, states, our Illinois, Kentucky, arc With inform ongoing activity, partners as the in I'm not furnace only Ohio, electric to Great pleased within among be Arkansas. but states plants sold located Cliffs Indiana, Lakes, Mississippi to such other

HBI Toledo more investment in brought than both Toledo and more construction jobs jobs DR-grade taconite and Northshore including from plant approximately mine has years. generated This to benefit $X Minnesota to the economic ore last very use states couple a billion than upgrade pellets, spent both Ohio, high-paying iron in during Between a relevant the meaningful full-time X,XXX iron XXX new of new of and for produce has range. the develop the Cleveland-Cliffs Minnesota the to

from of Ukrainian EAF in our and away excited just months and iron our made are clients, Russian Ohio. economy to shareholders our few replacing Northwest of the employees, HBI We very our and we new the benefit stocking Toledo that pig U.S.A. are with a

CFO, Koci, On that would Keith fourth our XXXX year results. quarter discuss our and note, I to to full invite like

Keith Koci

XXXX represented quarter This morning $XXX EBITDA good and full steel and an best after of Lorenzo, year Cliffs of pricing concluded listening Thanks, adjusted precipitous the in with $XXX XX% industry today. year. drops premiums adjusted EBITDA during margin, to even EBITDA pellet everyone million both fourth with dealing million. and

$XXX in highest XXXX. million operations continues operating our on positive since trend. notably, compared from from Net last to six-year our cash and year million activities flow was cash upward XXXX, generated $XXX a Most

intercompany and by guidance. EBITDA for million X.X full long long of quarterly us mining previous sales This our Our tons roughly line tons was year, pelletizing in of $XXX put tons the at segments with of XX.X million of shipments, driven XXX,XXX sales. including million

adjustment in realization hot-rolled price long in affected and in half ton $XX pellet saw pellet true-up caused during year. volatility by negatively unfavorable the fourth the of was quarter prices quarter. fourth back Our the we that us the of to per an revenue the steel record That premiums

a the and year our which full pellet price that, midpoint of range IODEX, function negatively $XXX came the premium we've all for primarily revenue was rate. QX at our of having averages in sales provided at The to was spot true-up year After impacting entire guiding per ton, revalue HRC, our last rate year of the quarter. that long full

$XX for were range ton. costs us right put midpoint full the quarter year per per long of which fourth long Cash of $XX.XX in ton, guidance our the also

As and roughly $XXX the Toledo. half for million construction spend peak year wrap to we as of CapEx, we are the see in our now that expect in of amount XXXX, up HBI plant through

no On million With cash to have spending end reduced such reduction construction lighter. we position, including of capital contracted healthy were the grateful an liquidity $XX Along much to year, revolver. our the costs, pay maintaining that finance side, will longer cash untapped $XXX last years. payment interest we we be heavy the are XXXX in in a in with needs three a each will minority spend, in million and HBI

And including have next HBI of still of sell years. in of to XX finally, continuing the tons plant. $XX of another with tons pellets of two long our expected we two our and delivered in pellets million middle and $XX million million be long to the steady year refunds XX.X between expect tax we this million X.X refunds XXXX, each to DR-grade million of In approximately flow

in have XXXX inventory, last to warrant. that the is beyond amount produced additional that we demand tonnage to sales also currently Due should pellet increase year, in flexibility

full guidance, have to a million. EBITDA XXXX range year provided of expected adjusted $XXX stand-alone $XXX For Cliffs we basis, an million on

been In of down, become in publicly other developed same I November. documents, flag pricing used prices forth prices come movements have order less would our to roughly have forecast sensitive assumptions have pellet to maintain consistency, nature iron analysis our have in we that the filed slightly put that and that, using ore last pricing premiums, formulas. also due and rates HRC revenue to as the was

this already not a we by of out and revenue are we to AK sits forward. Atlantic we And stand-alone be will relevant market. Nevertheless, complete pellet sensitivities now players supply point we our a begin as premium Both our should be where will are and note such range that, at Steel business conversion deemphasized of of us the still while guidance EBITDA the going acquisition below have the after cost pellet seen for market. most come in the I

that, occurrence signal On actually rare top than of currently is pretty low the higher a premium the often a rise. likely to that Atlantic Chinese pellet too and and premium the Atlantic, is

the quarter the shipping in we're only. to For Great restricted us limit XXXX, Lakes, most middle first to deliveries the as always, on of rail forcing

X% revenues to stand-alone QX year should our X% full Cliffs represent only on basis. of a

would of reflect date Assuming XX we month. close quarter's results last only for those expected days our XX on next AK's of the our March results

influence our AK's not until but benefit full would results Pro-rated in of the see second their a see earnings from quarter. may small earnings we QX the So during

that, for With Lourenco his will turn to final remarks. I

Lourenco Goncalves

both of the Toledo HBI With the upcoming will plant the XXXX year coming most acquisition Steel Keith. in our year transformational Thanks, online. the XXX AK completion history. be in

of HBI clients We a several Northstar, acquired J. as are for Joseph, OmniSource tonnage new burden and Big car others our Steel school a very list of David their excited Nucor Steel, massive Blue to River to welcome Dynamics, they furnaces. electric of customers, the

materials vote shareholder by on received call, reality. AK the need record Cliffs Steel to XX shareholders the transaction. of the you to In necessary January Cleveland-Cliffs of acquisition a will we To make for have the should today's support already meantime, listening our as those of

appreciate and Your necessary vote your is support. I

has know shareholder never single million myself, become you a the and taxes Cleveland-Cliffs in CLF big offsetting As one of the stock worth of I'm that bought sold market except for shares several share dollars' before mine. a open

team the the our with the guidance our Speaking under maximize management team acquisition the the key I of as shareholders, of all shareholder to of Steel shares. leadership our optimal to CLF from believe AK the Steel management of and is addition of value AK with path players a and my

to about any using March you to information provided free One important. the feel If please rationale receive how reach materials your before I our forward to XX. the contact for time vote have website. affirmative questions look us on out more the deal or to or or in your is vote on And vote your

to direct it will back With Christina to turn that Q&A. I

Operator

first Lucas Your comes Instructions] [Operator question Pipes Riley B. from from FBR.

Your open. is line

Lucas Pipes

acquisition. continued completing moving to level with and start on higher morning good quickly team Lourenco, the I Lourenco HBI some and on questions. progress AKS Congratulations on the wanted out so Hey everybody.

long-term candidates So, appreciated. less Any first be But and could on mentioned relevant pieces for the on portfolio the that be are opportunities there. strategy monetization? you AKS that might there that AKS, the of commercial be thoughts would

marriage reading mentioned appears then Could the prepared remarks. the with a asset? And you you on Ashland think your And on date us maybe about in through don't Ashland. I it that S-X started this update thoughts

And in remarks. those of EV. of regarding typically are into feed there? be the kind will And comments you your to context steel the your prepared about questions. EV all AKS market of three then in what transition do thoughts your think So products appreciate revolution longer-term that the there? impact lastly Folks specifically? Kind what the appreciate and I think color don't What on

Lourenco Goncalves

But Okay get Lucas. try let's it to That's show. a to done. lot

in charge law careful of I few I touching cannot the jumping thoughts because I'm a But M&A in about and of on be some of regulations what the kind assets. I'll not all provisions there terms and in yet. talk company the of that things are in the very can First terms of

plan. a on we of So plan. And a course we have are working preparing

being We way general on anything the that and specific be a some core with part are will are are going that a without more terms That core lot of be not buyers. to did of more in a specific assets more was monetized. the lot complicated, of the going difficult, to not there be a part in Cliffs. But the that lot potential

without have they in proposal few They're of this here terms reverse doing calling we inquiries AK in that we're anything. things on doing -- and and and making coming actually are With a receiving that. soliciting

plan day own on to taking We And And execute. we paper. everybody. are to will listening our are we to start X,

So be ability. of assets first. of monetized and the best should will taken to expect noncore you the care that our That's

As Ashland extremely far doing developing we were look market HBI. well. We're as a for

We are now. done

We we came believe are fruition. and -- commercial that efforts our to our efforts technical

names We clients are buying gave going of that HBI be tonnage to us. of very pleased. are I from massive

way did on And I HBI are did AK -- by mention clients because the to concentrating Steel outside we this I not point. effort at the not

Steel So the to at our we planning are HBI beginning. even not AK very within use

So an HBI marketplace just idea to the give products how right is the now. in you hot

But I level I seeing back to Ashland, was Ashland to I be high for started the of because interested HBI. our started Ashland interest -- in

an So opinion to the it Metallics this an market producer iron Ashland for of my marketplace. in expansion opportunity as be pig create in would a develop and

I that, have when analysis. do However market we to start doing

can't they iron exposed exposed the might with be if available. the supply of these Metallics cannot to economically them And because they EAFs. need there market they in other pig get parts you other products might pass. if then they they not is continue have that because they with types because more will If into before be the EAFs fairness you get a viable iron words then to produce they just not much that realize buying do they will analysis pig if to not producing restriction be iron automotive it so they all certain you have that's ceiling not alternatives And produce available, that pig for for -- meaning be EAFs In can that will only parts. intelligent can't to

HBI We EAFs. our really getting we're market point realized that with a optimizing the much we are to pretty that for

that are I don't maximize going happen? to Because And I would this AK so, to when and there don't able realized the that Ashland I EAFs untapped Steel that know. so believe also could get At with first potential point there, I because will I not an develop. AKS foremost realized was we be capabilities.

integrated market producing walking history some of more other the the that transition going Even automotive products our important, backwards. producers away a for they're have are in

from going a are a car they So to bicycle.

let do them with good that. that. So I'm

technical Steel has has the capability, AK patents, the products, the the R&D the clients. has has capability, has

we to there it on improve commercially we March besides only land that before sheet it be done So balance XXth. will the need

what in months So That's do for this living that's our years forte. XX six we a business. and

HBI. I'm this at So of believe back market AK I'm Ashland, to I But going needs in don't need Ashland. if sure point the burner. not can And need leads everything do Ashland. Steel. for Ashland market they is to to not going the the The the definitely I market grow business our I'm because

it electric revolution. S the is all your agree on more mentioned Tesla Even steel. revolution. evolution a all is the Tesla It's you that revolution. also terminology. of see X, The aluminum. Tesla the important the was street the You Tesla the vehicle and Remember I with steel a

towards as So there steel potential is well. a

that is real. car for traditional for are a Tesla at now is they point real. And the manufacturers that finally, realize And EV the

they jumping clients guess all into AK of are what, this they're So all Steel. And thing.

to So it and EVs going right R&D EVs, for we Middletown, we be our going are start actually inside developing away. are materials to Ohio center in

Tesla So Volkswagen's companies a And his executives it's real. when Tesla CEO see will big coming. saying Volkswagen, -- is AK is be you Steel beneficiary. like to

bunch a believe, General EVs. don't don't is means coming belong If point. to you at Volkswagen something. That of Motors this with you

company AK support going Steel. producing of towards a huge called to They trucks Ford continue trucks is development. to Illinois. Rivian in their a that. We're are There's producing going client

lot a there's in this So thing. coming

combined; want States, lot But going have to they're of also the I United Cleveland-Cliffs And business say a I AK the to have think participate ArcelorMittal in marketplace. that USA much for alone to big we here are us ArcelorMittal don't in we USA. client and going our pretty because be

good in and the auto sides So pellets side in we're side. both in the

long but gave very my if me you and answer is provocative points to talk very three Sorry interesting about. too

Lucas Pipes

all I'll mentioned really expenditures in it. my really enough. but appreciate second appreciate breakdown could never if A I short you reiterate Thank keep it XXXX, Lourenco. it. it the I have in that your in for missed may capital prepared you. It's it question. case if color just of remarks, I would you

Keith Koci

And -- No million problem virtually range going to -- million all of $XX $XX CapEx that million Toledo's the XXXX we're of down. during plant. or Lucas, six $XXX million for Sustaining breaks to will $XX there. -- in the Toledo first we're we the complete, provided to HBI's capitalized be year Cliffs, $XXX $XXX interest million somewhere complete the million million happen to to in be to to months. $XXX going roughly

breakdown. So that's the

Lucas Pipes

Okay. and luck. best I you. appreciate it of Thank continued very much

Lorenzo Goncalves

Lucas. Thanks,

Operator

comes question from Citi. next Alex Hacking from Your

open. is line Your

Alex Hacking

wanted thanks just a with time. and to the I HBI. morning follow-up on good the for question Hi,

prices a commercial success of or the a will what you've will HBI, give pricing. on headway possible color would to that Can lot in curious terms of sounds out. in Will you all often and be you. then said I'm the the into? like already in -- pricing linked entering offtake the us it way? on the You lot be on mechanism you'll that for terms the And how terms Thank offtake contracts reset? there of have So And very also the made of be But duration? any any in of you it sorted and the be helpful. if of of structure congratulations kind there color any indexes pricing type

Lourenco Goncalves

being that forever. is Good way we a doing saying built morning, have business. HBI saying Alex. have that product HBI been of been the before I that clients have to plant. The sold I

way to a respect way impose business new to doing clients before entering We can't try We do of business. the market. the a have

adjusted for iron So Ponta for we in Madeira price Brazil loosely buy tonnage price or a be us for on in Europe. HBI set client, or pig not agreed It's upon order. some folks biggest delivered These pig of more monthly to used iron, orders per buy short-term. will da pig our and are of that Tubarao iron the I the F.O.B. the reference value quarter, mean, The for price the F.O.B. basis. terms of -- these is port F.O.B. in course. They

States, the delivered the delivered to carbon. for to it's It's Now iron there. Remember, We're site and pig have has X.X% close, values. adjust the but carbon. to United X% going not

a So we're going generate less heat. to little

We gain zero silica. silica, because not are we but low are more have a little we

very On the other high hand, we have metallization. a

a and will the are product. there client So be really lot The will developed gives but by using of the values their values, takes that be is defined after.

to we we develop are But and six June have large, way. are by payback, the be profitable be I will to built. XXXX happy, we going promised, or months parameters. these continue that It are The we easily when seven set, very for months So business will between and to first we going of December adjusting us. and to started, this that are IRR be

Alex Hacking

time good luck. and helpful. the for very That’s thanks. Thanks Okay,

Keith Koci

Thank you.

Operator

Your from Rosenfeld B&P. is Seth Exane from next question

open. line Your is

Seth Rosenfeld

the Ashland, the I CapEx Good being the in elements, the HX. on understanding end talked at that? but closer What was two that we're $XXX the or first, for to in budget Keith, on increase HBI of morning. think, for an there before If that was points, budget, that. those XXXX is above tracked parts of earlier CapEx track there? budget CapEx taking moving color QX, please. thank fast Thank then one questions. tracked CapEx, ramp-up my I looking on $XX CapEx your implying million, in you to comes touch fast secondly being, about and actually comes and expected it can to When the the obviously, HBI the million on release it When for you are million, is $XXX HBI development

secondly, it to please, when at Ashland. pig then iron And comes

to at market HBI. growth your what incremental we you deal based story. key run back well December market Your the about in seemed to on one research counter when for the a to the be just own time of It drivers metallics supplied announcement Ashland the comments from growth pointing of heard seems

what's always going clarify, to was research changed was after time? you. that Is announced, Just or new from your back to December? in with acquisition Thank expectations you this completed the a it line market

Lourenco Goncalves

of let's record set the first all, here. Well, straight

HBI particularly United that widow a throughout in the here States, You said the is maker. world,

still my So married. wife is

So I'm alive. still

generates a on budget you Seth? was So Remember remember, when that, time? that said maker HBI complete because construction and can't widow HBI that, overruns people

Seth Rosenfeld

wife a do I'm widow. I not and is glad your

Lourenco Goncalves

I'm So right here.

our on is So HBI time.

Our actually our on of HBI schedule and ahead HBI's budget. is

with So that. good we are

the the from CapEx numbers for just if Second, last pay year carry we you pay later don't did over year for last we'll another one things or because not that can later, fluctuation earlier. we pay reason and

thumb a Earlier time do capital. goes on the everything So rule much that's the it. pretty later to of and not you If you're you to deploy when are deploy not why being building forced something. capital can

it's one another. to year move So from just a

we AK Steel. that's as for. what is diligence diving diligence, doing due Where are really deep are far Ashland As due into deep

have a refinanced. that, We of a conference not immense. as a that into AK as phenomenal. to business the capabilities is business. calls their as HBI are support start And too hear heard their far about about bonds hear not about going lot We is so to automotive support lot business. would and from much were I'm like lot are heard importance I'm a digging in of the produce denying EAFs. pig sheet. iron patient. public did But We we when lot our And that the business Their We EAF things technical as their didn't not public a we we to concerned, vessel. information balance I heard lot

So is with ongoing statements there in business, due AK showed a automotive. for impressive. the extremely existing to what potential previous that the for related conflict real It's no that particularly diligence just

going be development Steel Our AK will for first be and Middletown, sure of Day and you're at Ohio done in Investors center AK I'm Steel to there Seth. research the

will going as You're other be surprised analysts to well. as research

what That's really into. diligence do what companies they're getting diligence. they conflict. no is due companies – due there learn when why So acquiring to It's other are just

something we Ashland. more to the relevant more in and that's return of pig a just out scale the important that terms saying we're come to I'm that was in I'll lot lot bigger to going not lot priorities. marketplace not shareholders behind way producing So into a say the realized of getting iron and a now than just of this

Seth Rosenfeld

you Thank very helpful. much. Okay. That’s

Lorenzo Goncalves

you. Thank

Operator

question comes from Nick Your from Stifel. next Jarmoszuk

is line open Your

Nick Jarmoszuk

morning. Good Lorenzo. Hi,

Lorenzo Goncalves

Good morning, Nick

Nick Jarmoszuk

of the on in you any it A contribution second guidance, from plant question the for EBITDA year? half does assume HBI the the

Lorenzo Goncalves

X Keep thing. as mind that we're comes tons the of here's forget as sales. going to far million Look, have Don't that. XXXX in intercompany

details in EBITDA go the related So in to into things change But or see guide. guidance. everything Koci I that terms you that of this let the will that will numbers share Keith to

Keith Koci

our mainly it's HBI the XXXX. in EBITDA Right. half only grows just due the getting number at in in And pretty we've to as with we additional full as of capacity. from running always far costs of and started. a ramp-up nameplate modest to as expect in some XXXX start-up have And coming The year million HBI, and we're immensely back put $XX there's

And in we're $XXX what – we've got our guidance. XXXX. that's roughly of million in looking we've generation EBITDA So at

Nick Jarmoszuk

Okay.

Regarding...

Lorenzo Goncalves

thing Let me complement about that. one

for number easy date as the $XX was far very a XXXX, and As is Well in the IODEX. IODEX should number be a States this modest to that $XX.XX, assuming morning. posted $XXX to United for achieve. hot-band still

So the new normal is unabated.

pellet the destroy They biggest the accept is destroy of absurdity reopen with IODEX. Vale. clients down. to this the that. biggest you are unable problem in the stone premium, that set The and then go was that victim wolf is crying you When about clients those Vale premiums did doubt contracts Even no

they So losing tonnage. are by the away They pellet are away revenue premium. giving giving

So very soon reality. to will to come they need

Keith premium in majority will pellet vast the the up. the pellet The cover of go the explained world current doesn't producers for premium Like pellet costs.

Brazilian the So X.XX. Vale okay manipulation of at trading be might that's of $X real they now are trouble. because the for BRL in

So absurd. pretty it's

control but So they gives they all the costs that impression have that under don't.

we to put very soon. will number expectation be why pellet because the our a play have with catch-up for they So high. believe premium XX that That's we

Keith Koci

my The I quick. follow-up more Nick million intercompany quoted that $XX And to margin. comment include real not the does one

that margin then that recognize the charging the So, we -- we're also price ourselves. to

the would in be the there Mining in product an Pelletizing that HBI additional So, and is division. margin

So, it's--

Lourenco Goncalves

It profitability serves Metallics Good point. division. the the of

Keith Koci

right. That's

Lourenco Goncalves

to market profits do from based market among to the to it pellets Northshore because at Not way on royalties selling we'd Yes. price pay Mesabi Trust we that from Northshore that price. we to make units other so our own Toledo. things have Because

that. don't we mess So with

Nick Jarmoszuk

of Okay. customers does nameplate fully the contract you mentioned And the with that Toledo? capacity that

Lourenco Goncalves

X.X tons for has No. metric for awarded company steel. Of more I not. No What Nobody have steel have product, world the why that. million for I pellets don't mean? I HBI? has course either. do has XXXX? If in Nobody for ore I any should have that

you're are you HBI? for have you why that question? don't Are trying I implying? So, this say asking that Is to what orders

Nick Jarmoszuk

No, curious as of much the I just how contracted? to capacity was is

Lourenco Goncalves

believe the to going and are are is at to good clients product as are the If we a that going States we is not trouble. that the in have the is, we United believe and beginning is us. But Everything have the like we up and produce producers the it product are great we the product product is will one even us. to them, probably Texas, business. here other we in If

source with know a of have deal from how ore. We Northshore. to single pellets We iron coming

how years feedstock to learned so clients. or been to be fine we business for we also thing to XXX with have two. ore Nick. And deal supply going we dealing contract with are understand We iron one to But

there. to need we start we go and and will from orders the have then We

Nick Jarmoszuk

then looking -- returning sort way that that's do have a premium. to aggressive be blast customers Europe they'll Okay. a pellet could once think -- think pellet little to get with the give reasonable to the margins it? then Do in they'll you about thoughts Is to And And improve more the that throughput. you to furnace any discount their discussion. of then some maintain European Vale

Lourenco Goncalves

reasonable the think I people on way -- job to the job many getting think on about the at too that trained Vale. training that

it resolve. they point, of business out to they Vale the But as has to soon there. They Vale they'll members resolve. thing. for -- going to other It's few clients charge. people learn And that Board to resolve to Vale a a is start charge have the what As to to need this Vale, things the at a jail. mess It's

So, I don't got them. you know, ask to

Nick Jarmoszuk

I all That's you. had. right. All Thank

Lourenco Goncalves

you. Thank

Operator

James Your last from question comes Citigroup. from Finnerty

Your go open, please ahead. is line

James Finnerty

for question. the thanks Hi, taking

be guaranteed that XXXXs. and the AKS XXXXs and like the the intend the and to XXXXs? XXXXs Will refinance on XXXXs you unsecured Just

Lourenco Goncalves

Look can't as now. right you know about I being a that bond analyst, talk

So, we the will time. announce at this right deal

We transaction have doing of the record track transactions a right. doing types and of these

my last I Looking are five here show and just we have back we the half point. of plenty but We're disclose will this right not within I good, And now. set. years, stay a can't comparables But Cleveland-Cliffs, check that hand tuned. at

James Finnerty

Okay. And determined. is the still be timing to

the afterwards. could it happen it of or So, conjunction true? closing still Is in the transaction with could happen that

Lourenco Goncalves

the I all I one. be hit to to mean running. done going said day going ground by that's we're

stripped the so we check be to the check the the We arranged box. ABL, covenants already AK the bonds, We are already done. going Remember, of box.

bonds. the missing So, is last piece the

when proper type to we're the to of steel on is we produce. charging technology work we in that take opportunity than care a and have going get developing going clients and four-year the price that steel And important refocused that. the of land on refocus anything, there, we more for that to a will commercial, be So, embedded of AK window Steel are

James Finnerty

Great. That helpful. was Thank much. you very very

Lourenco Goncalves

James. Thanks,

Operator

final your Tyler Cowen. from from question comes Kenyon And

Your line is open.

Tyler Kenyon

morning. in. Good for Hey. Thanks squeezing me

and EBITDA $XXX within SG&A to price Cliffs. you range? given us if million guidance embedded volumes, assumptions could a some some perhaps Wondering more pellet commodity $XXX million that the on provide you've little stand-alone for based inputs So on bit detail costs cash

Lourenco Goncalves

you want take to Keith, that? do

Keith Koci

mean, -- cost more DR-grade you of the Yes. of, it, a the mean, maintenance pellet production kind SG&A, of the standalone also DR-grade product of more we'll But up a year. to roughly because cost similar mix lot Cash some producing Mainly additional in produce. the is see X%. I I part year-over-year. pellet, cost big be

we labor You'll cost soon because see you'll the our as XX-K. as we've higher the then year. in life stripping, mine, the increase costs see in some at Tilden each disclosed extended And of natural

a bit What you'll other of factor? the So see increase little was there.

Lourenco Goncalves

today's we $X. increase, like need Less something At probably $X.XX than that. prices

Tyler Kenyon

Okay, sales? on great. And volume for anything just third-party pellet assumptions then

Lourenco Goncalves

be in will the XX range. million tons million Volume to XX.X

Tyler Kenyon

build? just us provide how in going could you to sense inventory on will any HBI of much And be terms

Lourenco Goncalves

inventory. we the No built already inventory build;

X.X will we HBI. build pellets, X.X to XXXX, go steady going be that be any considering year. we moving ramp-up in million And to So have we're metric million a produce it's -- to it X.X don't XXXX tons more a of Actually, million inventory going because tons are state to do. to starting we're of in only

But We X.X tons to Toledo. of need are will and million pellets going beyond. XXXX moving be into that

Tyler Kenyon

you. Thank Okay.

Lourenco Goncalves

Tyler. you, Thank Christina?

Operator

There are you no Do comments today? have further questions time. any at this closing

Lourenco Goncalves

Keep a everybody Thursday. attention. Just to wish paying great

fast. moving We are

everything have We are do. we to doing

that will to next We're be about for We change excited we this that XX will excited company HBI. excited years. here are transformational transaction. the about XXX and will We're event a have guarantee Cleveland-Cliffs that the going we forward

have with We what we of our done. support We appreciate are the pleased shareholders.

each coming So of in appreciate every the to retail votes We day massively to support demonstrate institutional in and investors one transaction. the are our far that their favor investors continue the of strategic the moves.

am I'm company We company. for shareholder or this involved My one a three going of big are will of this down. be generations I you. two together. family with

we So and day. this see great no working have that's here. a short-term There this shareholders much thing you is how of for Thank company. business. We're us, very

Operator

call. participating. for gentlemen, concludes Thank conference and today's this you Ladies

may disconnect. You now

Cleveland-Cliffs (CLF) 20 Feb 202019 Q4 Earnings call transcript