Cleveland-Cliffs Inc (NYSE:CLF) Q2 2019 Earnings Conference Call - Final Transcript

Jul 19, 2019 • 09:00 am ET

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Cleveland-Cliffs Inc (NYSE:CLF) Q2 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning, ladies and gentlemen. My name is Mariama, and I am your conference facilitator today. I would like to welcome everyone to Cleveland-Cliffs 2019 Second Quarter Conference Call. [Operator Instructions]

The company reminds you that certain comments made on today's call will include predictive statements that are intended to be made as forward-looking within the Safe Harbor protection of the Private Securities Litigation Reform Act of 1995.

Although the company believes that its forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause actual results to differ materially. Important factors that could cause results to differ materially are set forth in the reports on Forms 10-K and 10-Q and news releases filed with the SEC, which are available on the company's website.

Today's conference call is also available and being broadcast at clevelandcliffs.com. At the conclusion of the call, it will be archived on the website and available for replay.

The company will also discuss results excluding certain special items. Reconciliation for Regulation G purposes can be found in the earnings release, which was published this morning.

At this time, I would like to introduce Keith Koci, Executive Vice President and Chief Financial Officer.

Executive
Keith A. Koci

Thank you, Mariama, and thanks to everyone joining us this morning. Before getting into the discussion of our second quarter results and outlook. I wanted to briefly highlight the financial transaction we completed earlier in the quarter to improve our balance sheet. Shortly after we reported our last quarter results, we issued $750 million in unsecured notes due in 2027 at a five handle coupon. This new issue allowed us to both retire legacy notes coming due in two years and reduce the size of our largest debt maturity tower in 2025 by $600 billion. With the transaction closed, we have no debt coming due until the year 2024. Also, our previous $1.4 billion maturity tower Tower in 2025 was nearly cut in half and pushed out another two years to 2027.

We accomplished all of this without a material change to our annual debt service expense, even though our balance sheet was already in excellent shape, we are and will always be on the lookout for opportunities like these to make it stronger.

Now to our financial results. For Q2, we reported total company adjusted EBITDA of $249 million, a dramatic increase from $21 million in the first quarter, which is typical for the seasonality of our business as it is today, pre HBI. Our Mining and Pelletizing segment generated $281 million in adjusted EBITDA, an impressive result driven by stronger than expected shipping volumes of 6.2 million long tons as our customers maintained a healthy appetite for pellets throughout the quarter.

For the full year, we were able to maintain our pellet sales forecast of 20 million long tons. Despite some reduction and nominations from one major client, our newly accomplished ability to produce and export meaningful tonnage of DR-grade pellets coupled with better overall pricing