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Cleveland-Cliffs' net income drops 79.2% YOY to US$90.9M in Q3'19

As Cleveland-Cliffs Inc. cut capital expenditure guidance, the iron ore miner's net income fell 79.2% year over year in the third quarter to US$90.9 million, or 33 U.S. cents per share, from US$437.8 million, or US$1.41 per share.

The company booked net income of US$160.8 million, or 57 cents per share, in the second quarter.

Commenting on the results, Cleveland-Cliffs' Chairman, President and CEO Lourenco Goncalves pointed to an unnamed iron ore miner for depressing the premium for iron ore pellets.

"While irrational behavior by one major supplier in the pellet marketplace has dampened the Atlantic Basin pellet premium, our business remains on solid footing," Goncalves said in an Oct. 23 news release.

Consolidated revenues for the quarter totaled US$555.6 million, falling 25.1% from US$741.8 million a year prior. Quarterly costs dropped 19.7% to US$400.7 million, from US$480.2 million in the prior-year period. Sales of iron ore pellets fell 11.3% year over year to 5.8 million long tons during the quarter.

The company posted US$143.3 million in unadjusted EBITDA, down from US$487.2 million a year earlier.

For the full year, Cleveland-Cliffs dropped capital expenditure guidance to between US$625 million and US$675 million, from between US$650 million and US$700 million.

B. Riley FBR analyst Lucas Pipes maintained a "buy" rating on Cleveland-Cliffs' stock with a US$13 price target, noting that the company beat consensus in the third quarter but was hit by lower pellet pricing.

"The company was negatively affected by a steep decline in IODEX, Atlantic Basin pellet premium and U.S. Midwest HRC pricing during the third quarter," Pipes said in an Oct. 23 note.