Cleveland-Cliffs Inc.

Good morning, ladies and gentlemen. My name is Daryl and I am your conference facilitator today. I would like to welcome everyone to Cleveland Cliffs' third quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. 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 protections 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 can cause actual results to differ materially. Important factors that can cause results to differ materially are set forth in reports on Forms 10-K and 10-Q and the 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 yesterday. At this time, I would like to introduce Lorenzo Gonçalves, Chairman, President, and Chief Executive Officer.

Thank you, Dara. Good morning, and happy Election Day to the Americans listening in on the call today. Throughout my 10 years with Eclipse, We have worked very consistently to position the company to benefit no matter what candidate or political party is in power. This year is no different. At this point, it's clear to us that with either Donald Trump or Kamala Harris as President of the United States, our executive branch will work to improve conditions and support a domestic steel industry owned and operated by American producers. American steel companies are way ahead of all others in the entire world, both in steelmaking technology and access to capital markets. We have a domestic market for steel that's the envy of other nations, and we have the American people willing to work for us and benefit from these favorable conditions. It still touched several important areas, national security, infrastructure, manufacturing, supply chains, middle class, union, and non-union jobs, just to name a few. It's exciting that both presidential candidates are concerned about all these areas and also that both have similar pro-steel views. We have had a thorough dialogue with surrogates from each campaign, and we definitely believe that critical points we have made about our American steel industry have been heard, accepted, and understood. Our number one topic of conversation with these officials is trade. While steel imports are a fact of life in the United States, not all imports are created equal. A country like Canada, for example, follows the rules and does things the right way. And this is a large part of the rationale behind Cleveland Cliffs acquiring Stelco, the steel company of Canada. We received all approvals within the timeframe we expected we would and closed the deal in three months. That's how M&A is done. When we have two honest counterparties working collaboratively, the deal closes, bankers and lawyers get paid, and shareholders are rewarded. In our release yesterday evening, we provided Stelco's financial results. While operating on a smaller scale, Stelco provides amazing resilience in a not so good steel market, as well as substantial upside in a strong market, all driven by the best-in-class cost structure an emphasis on spot sales versus the primarily contractual book of business that standalone cliffs relies upon. Based on these current market conditions, the acquisition of Stelco will allow us to average up the overall EBITDA margin of Cleveland Cliffs. The standalone cliffs is primarily a company-centered towards serving the automotive industry. Our specialized equipment capabilities, our material flows, and our robust customer and technical service efforts are distinct from any other steelmaker. When automotive is humming, our footprint hums nicely along with it. Conversely, in an environment like we had in Q3, where the automotive industry is slowed down well below expectations. The fixed costs associated to our configuration become more difficult to overcome. With Stelco as part of our company, our overall cost structure is significantly improved, making us better suited to serve the non-automotive market. As a supplier to primarily non-automotive end users and service centers, Stelco runs a much lower fixed cost and nimble operation. They are geared to thrive selling to these end markets at mid-cycle, peak, and trough spot pricing levels because of their cost advantages. These advantages are well documented. Currency, iron ore cost, plant layout, health care, and power costs. With these advantages, Lake Erie Works became the benchmark in low costs of our new operating footprint from day one. Our Lake Erie cost structure for hot rolls is lower than anyone else's in North America, EAF Mini Meals included, and the numbers are unquestionable. Unlike the acquisitions of AK Steel and ArcelorMittal USA, which were either underperforming or underinvested when we acquired them, Stelco is both well-invested and a standout performer in the industry. Based on our experience from the previous acquisitions mentioned above, we are convinced that we have the opportunity to generate $120 million of cost synergies within the first year. Stelco will keep its name, structure, and most of its leadership, and the Canadian flag will continue to fly proudly at each operational facility. I will now kick it to Celso for his remarks.

Thank you, and good morning, everyone. Our Q3 results were impacted by weaker steel demand and pricing throughout the quarter, which were partially offset by a great cost performance by our team. These factors drove an adjusted EBITDA of $124 million on 3.8 million tons of shipments during the third quarter. North American automotive build rates in Q3 were the lowest since the deaths of the semiconductor shortage a few years ago, with only 3.75 million units built during the quarter. The latest expectation for automotive builds this year is around 15.5 million units, which is about 1 million units less than what was expected at this time last year. With our position as a large automotive supplier, this drove our shipments, average selling prices, and unit margins down quarter over quarter. And compounding this, our non-automotive business also saw continued weakness in demand and pricing, both in flat rolled and plate. Overall average selling price fell $80 per ton and shipments fell 150,000 tons compared to the prior quarter. Given the ongoing demand weakness, we temporarily idled one of our blast furnaces in Cleveland to better align production with our order book, as both automotive and service center customers reduced their order activity during the third quarter. The idle temporarily takes offline about 1.5 million net tons of annual capacity, and we don't plan to resume operations until market conditions improve. From a cost standpoint, We reduced unit costs by over $40 per ton during the quarter, exceeding our previous guide on both an absolute and mix adjusted basis. This came ahead of expectations, despite running our mills at reduced operating rates. The belt tightening at the operational level was reflected in both capital spending and SG&A costs as well. Our quarterly SG&A of $112 million and capital spending of $151 million remain substantially below our averages for the past four years. Along these same lines, we are taking a similarly lean approach to our capital expenditures budget for next year. We have guided to a capital spend of $600 million for 2025 on an ex-Delco basis, which would be our lowest standalone CapEx since our transformation in 2020. This is a function of reduced needs across the footprint and updated spend estimates on our three strategic growth projects at Middletown, Butler, and Weirton. In 2025, we also see the favorable impact of improved coal supply contracts to the tune of a $70 million cost improvement year over year. That said, our most critical recent accomplishments on the finance front were completing the necessary steps to close the Stelco acquisition. As you may recall, we originally intended to fund the acquisition with a combination of financing instruments, including a term loan, secured and unsecured high yield notes, and our ABL. But as we began to market the deal to investors, we noticed strong receptivity to the story and grew conviction we could raise what we needed without tapping either the secured bonds or the term loan markets. The resulting financing structure leaves us in an ideal and flexible position to weather any economic downturn and to de-lever quickly when cash flow starts to heat up. Now that we have Stelco closed, we'll be reprioritizing debt repayment over share with purchases with future cash flow generation. Looking ahead, the Stelco acquisitions assets to the footprint is exactly what we need at this time, a nimble operation that thrives even in down markets. The North American flat role market has long been in need of consolidation, and we continue to do our part to make that a reality. The deal is EPS accretive, credit positive, and we maintain ample liquidity to navigate the current cycle. Based on what we're seeing in the marketplace, we expect the tide to turn soon. And regardless of who wins the election today, it's easy to get bullish on the expectations for 2025. And our upside for that is further amplified with Estelco assets. With that, I'll pass it back to Lorenzo.