Cleveland-Cliffs Inc. (NYSE: CLF)

Cleveland-Cliffs Inc. (NYSE: CLF), founded in 1847, is the oldest and among the largest vertically integrated iron ore and steel producers in North America. Headquartered in Cleveland, Ohio, Cleveland-Cliffs employs approximately 11,000 people across mining and steel manufacturing operations in the United States and Canada. The company specializes in supplying both iron ore pellets and steel solutions to a quality-focused customer base.

In December 2019, Cleveland-Cliffs agreed to buy AK Steel in a stock deal valued at $1.1 billion. The tie-up, which was finalized in March 2020, has resulted in a vertically integrated company pairing Cleveland-Cliff’s iron ore pellet production with AK Steel’s rolled and stainless steel operations.

Merger with AK Steel

Cleveland-Cliff’s bid for AK Steel in December 2019 valued the company at a premium to its then market price; however, it represented less than half of the company’s market capitalization from early 2018, when the U.S. first announced that it would place tariffs on steel and aluminum imports in an effort to help those industries.

Cleveland-Cliff’s purchase decision centered on turning around AK Steel’s profitability through a three-pronged approach – refinancing the company’s high debt load, cutting costs and providing the company with a captive supply of iron ore pellets (http://nnw.fm/tvxJu).

The Future looks Bright

During Cleveland-Cliffs’ second quarter 2020 results announcement, CEO Lourenco Goncalves revealed that the combined entity had already resulted in a combined $151 million of cost and revenue synergies, outpacing the original $120 million target (http://nnw.fm/3uuls). Going forward, the company is poised to finish the construction of its new hot briquetted iron plant in the second half of the year, which is expected to result in revenue contribution from 2021 onward.

The company expects a significant pick-up in revenues and earnings during the latter half of 2020, with the majority of the company’s facilities resuming normal operations after being idled earlier in the second quarter. More importantly, it forecasts the resumption of operations for the North American automotive industry, which represents the largest end-market for Cleveland-Cliff’s steel business.

Management Team

Lourenco Goncalves was appointed Chairman, President and Chief Executive Officer of Cleveland-Cliffs in August 2014. Goncalves boasts more than 30 years of experience in the metals and mining industries. Prior to Cleveland-Cliffs, he served as Chairman of the Board, President and Chief Executive Officer of Metals USA Holdings Corp., a leading American manufacturer and processor of steel and other metals, for over 10 years. Prior to Metals USA, Goncalves served as President and Chief Executive Officer of California Steel Industries Inc. for five years. Prior to that, he was employed by Companhia Siderúrgica Nacional (CSN), a leading steel and mining company in Brazil, where he held several positions in operations and sales. Goncalves earned a Master of Science in metallurgical engineering from the Federal University of Minas Gerais in Belo Horizonte, Brazil, and a bachelor’s degree in metallurgical engineering from the Military Institute of Engineering in Rio de Janeiro, Brazil.

Clifford T. Smith, Chief Operating Officer, has oversight of the company’s operations, commercial sales and business development. Previously, Smith was Executive Vice President, Business Development, and had leadership for developing emerging business opportunities to grow Cleveland-Cliffs’ U.S. domestic market. Smith joined Cleveland-Cliffs in 2003 and has held several senior level positions, most recently serving as Executive Vice President, Seaborne Iron Ore, where he had oversight of the company’s international operations in Australia and Canada.

Keith A. Koci, Chief Financial Officer, has executive responsibility for finance, accounting, tax, treasury and investor relations. Koci joined Cleveland-Cliffs in February 2019 from Metals USA Inc., where he served most recently as its Senior Vice President and Chief Financial Officer. Prior to that role, he served as Metals USA’s Senior Vice President, Business Development, from 2006 to 2013, where he was responsible for mergers and acquisitions, capital investments, forecasting and budgeting. Koci graduated from the University of Illinois, Chicago, with a Bachelor of Science in business administration. He has been a certified public accountant since 1986.

Investor Highlights
  • Cleveland-Cliffs Inc. is the oldest and among the largest iron ore and steel producers in North America.
  • Cleveland-Cliffs agreed to purchase AK Steel for $1.1 billion in December 2019.
  • The merger has resulted in a vertically integrated company, combining AK Steel’s rolled and stainless steel operations with CLF’s iron ore production capabilities.
  • Management has guided for improved revenues and earnings from the company’s steel business in the second half of 2020, with the North American automotive industry (Cleveland-Cliffs’ largest end-market for steel products) set to resume normal operations.
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