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Despite Continuing Talks Over Shedding Some Mines, CEO Says ‘There Is No Ticking Clock’
Under fire as his company’s stock plummets, the chief executive of Cliffs Natural Resources, Inc. said that despite continuing talks to sell some mines at home and abroad, he isn’t under any deadline to sell noncore assets and urges patience.
“There’s no ticking clock,” said Lourenco Goncalves, whose company’s share price has fallen by more than half since he took over in August.
S&P has lowered the Cleveland-based miner’s credit rating to BB- from BBB- with a negative outlook, mostly because of falling iron ore prices. “They’re predicting the past,” referring to Cliffs’ poor performance in the recent few years, Mr. Goncalves said of the rating firm. Of the stock-price decline, he said, “I haven’t sold a share,” adding, “I can’t control stupidity” in the market.
Cliffs, one of the worst performers on the S&P 500 index in the past two years, has been hurt by declining iron-ore prices, which have fallen over 40% this year, due to oversupply and slumping Chinese demand. Cliffs suffered a net loss of $1.9 million in the second quarter of 2014, versus a $133.1 million profit over the same period a year ago. Its revenue dropped 26%.
Cliffs isn’t alone in being hit by falling iron ore prices. The iron-ore industry is on the verge of a potentially massive shake-up. Rio Tinto Group, one of the world’s top three producers, disclosed this week that it had received a takeover offer this past summer from Glencore GLNCY -2.06% PLC. Such an offer is expected to become attractive to Rio Tinto shareholders if iron ore prices fall further and the company’s financial performance slackens.
Mr. Goncalves, who took over as CEO of Cliffs in August after a board coup forced by activist shareholder fund Casablanca Capital LP, said he was “doing a lot of blocking and tackling” and predicted “the results will come.”
In his two months on the job, he said, he and his team have “accomplished peace inside the company, with everyone rowing in the same direction,” and they have cut costs and overhead. He declined to offer specifics on cost-cutting. “It’s sad to see people being so impatient with a company that was doing so bad for so long,” he said. “Now that we have a real plan, people are impatient.”
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