President Obama to raise minimum wage for Federal contractors to $10.10 an hour from $7.25
Hedge Fund Casablanca Pushes for Breakup of Iron-Ore Miner
Investor Wants Cliffs Natural Resources to Split International and Domestic Operations
A hedge fund is pressing for a breakup at Cliffs Natural Resources Inc., CLF +0.36% the company with the worst-performing stock in the S&P 500 index over the past year.
New York hedge fund Casablanca Capital LP wants to see the iron-ore miner divide its international and domestic operations, according to a letter sent Monday to the Cleveland-based company's management that is expected to be disclosed in a securities filing Tuesday morning.
The letter, reviewed by The Wall Street Journal, says Casablanca has been building a position in Cliffs and now owns about 5.2% of the shares outstanding. The two sides have engaged in discussions for more than a month, the letter said.
In a statement, Cliffs called the conversations with Casablanca productive and said it is open to more talks. It added that it has made "significant changes to strengthen its board" and taken steps to improve its financial and operating performance.
"Cliffs will continue to evaluate the strategic fit and value creation potential of all the Company's assets as part of that process," the company said.
Cliffs shares are down about 46% over the past 12 months, versus a 19% rise in the S&P 500. They closed up 0.4% at $19.40 Monday.
With a market capitalization of about $3 billion, Cliffs is also the index's most shorted stock, according to data provider Markit.
Casablanca was started in 2010 by former mergers-and-acquisitions banker Donald Drapkin, along with Douglas Taylor, also a former M&A adviser.
Activists regularly push for corporate breakups. Casablanca executives contend that splitting up Cliffs' international and U.S. operations could help it reverse its fortunes, the letter said.
Concerns about falling demand for iron-ore in China and elsewhere have hurt many international miners. Many analysts have proclaimed the end of the so-called commodity supercycle, in which mining companies aggressively expanded in recent decades in response to rising prices but lately have retrenched amid slowing demand.
Benchmark iron ore prices are currently around $135 a ton, down 10% since a year ago, just as more production is coming online. That has pressured many mining stocks, and the biggest miners, including Rio Tinto PLC and BHP Billiton Ltd. BHP.AU -1.97% , have changed executives and written down billions in acquisitions.
"When most major mining companies have announced sharp revisions to their capital allocation and cost management policies, Cliffs' Board and management have, from our perspective, been slow to respond to the end of the commodities supercycle," said the letter to Cliffs' executive chairman, James Kirsch.
A Canadian mine Cliffs acquired in 2011 has cost billions and produced little so far, adding to concerns around Cliffs.
Cliffs has already undertaken some changes. Former Chairman and Chief Executive Joseph Carrabba retired in November, handing the reins to Mr. Kirsch. The company in October hired Gary Halverson, a former executive at gold miner Barrick Gold Corp. ABX.T -2.09% , as chief operating officer and said he would eventually take over as CEO. Several other executives have departed. The company has made cost-cuts a priority and slowed spending on projects, it has said.
The company is looking at options for the struggling Canadian mine, Bloom Lake, including joint-venture partners, the company has said. The company has reduced spending plans for the project.
The Casablanca letter said Cliffs' domestic operations are well placed to benefit from a resurgent U.S. auto and manufacturing industry. The U.S. business—in iron ore and coal—has long-term contracts with customers that provide investors with visibility, and steel demand in the U.S. has been rising.
To be sure, the U.S. business could also be vulnerable. "There's a lot of new iron ore production coming on in the next few years, in Minnesota for example, and no new [steel mills] being built" that use iron ore, says Charles Bradford, an analyst with Bradford Research Inc.
By spinning off the international operations, Cliffs could create a company that would be more volatile but have the growth potential that can lure some investors, the letter said. Casablanca feels the stock drop is an overreaction to the macroeconomic concerns, the people said.
Meanwhile, the U.S. operations, the letter said, could double the current dividend, slash costs, sell noncore assets, and form a master-limited partnership backed by Cliffs' assets.
All of those moves, the letter said, could boost Cliffs shares to a combined $53 a share.
In the first nine months of 2013, Cliffs' U.S. operations made up 61% of revenue and 76% of the company's gross margin.
S&P comments on 2014 Euro Zone sovereign rating risks
- Region has made little progress in weakening the links between sovereigns and vulnerable bank
- Region to continue with its slow recovery
- Risk of adjustment fatigue
- Region to continue with its slow recovery
- Risk of adjustment fatigue
- * Casablanca Capital has built up a 5.2% stake in Cliffs Natural Resources (CLF), the Wall Street Journal reports, adding that the hedge fund wants the iron-ore miner to split itself up into its domestic and international operations.
- * Casablanca's activism comes after Cliffs was the worst-performing stock in the S&P 500 in the past year and is the index's most shorted stock.
- * The sides have been in talks for a month, discussions that Cliffs said have been productive. The company noted that it has has strengthened its board and taken measures to improve its financial and operating performance. It has also been replacing senior management.
Crane beats by $0.01, beats on revs; guides FY14 EPS in-line, revs below consensus
Reports Q4 (Dec) earnings of $1.04 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus Estimate of $1.03; revenues rose 8.2% year/year to $681.5 mln vs the $642.16 mln dual est.
Segments:
Aerospace & Electronics - Fourth quarter 2013 sales increased $10.7 million, or 6.1%, reflecting sales increases of $5.5 million (4.9%) in the Aerospace Group and $5.2 million (8.0%) in the Electronics Group. The Aerospace Group sales increase reflected stronger commercial OEM and aftermarket sales activity.
Engineered Materials - Segment sales of $52.4 million were 11.7% higher than the fourth quarter of 2012, driven by higher sales to recreational vehicle equipment manufacturers. Excluding Special Items, operating profit increased 24% to $5.8 million, and margins increased from 10.0% to 11.1%, reflecting the impact of the higher sales.
Guidance:
Co issues mixed guidance for FY14, sees EPS of $4.55-4.75, excluding non-recurring items, vs. $4.70 Capital IQ Consensus Estimate; sees FY14 revs of $3.0 bln vs. $3.19 bln single estimate, driven by a core sales increase of 1% - 3% and the impact of the MEI acquisition.
Commentary: - In addition, as part of ongoing efforts to continue to drive margin expansion, the Company expects modest facility repositioning actions relating to consolidation of certain smaller manufacturing sites. Associated costs are expected to be in the range of $10 to $13 million and are expected to be partially offset by gains from sales of certain real estate. Savings associated with these actions will approximate $5 million in 2015 and $10 million on an annual basis beginning in 2016.
U.S. Steel beats by $0.52, misses on revs
Reports Q4 (Dec) earnings of $0.27 per share, excluding non-recurring items, $0.52 better than the Capital IQ Consensus Estimate of ($0.25); revenues fell 4.9% year/year to $4.27 bln vs the $4.36 bln consensus. Q4 results exclude after-tax non-cash restructuring and other charges primarily related to the shut down of the iron and steelmaking facilities at Hamilton Works of $302 million, or $2.09 per diluted share, and a favorable tax-related item of $142 million, or $0.98 per diluted share.
Reportable Segments and Other Businesses
Reportable Segments and Other Businesses
- Fourth quarter results for co's Flat-rolled segment were comparable to the third quarter. Average spot and market-based contract prices were higher in the fourth quarter; however, a higher percentage of hot rolled shipments resulted in average realized prices that were comparable to the third quarter. A decrease in raw materials and other costs were offset by an increase of approximately $45 million for facility repairs and maintenance costs due primarily to a blast furnace reline at Gary Works and a planned blast furnace maintenance project at Fairfield Works.
- Results for co's European segment improved in the fourth quarter and returned to profitability due to higher shipments and lower facility repairs and maintenance costs as a blast furnace outage was completed in the third quarter. Average realized euro-based prices for the majority of co's products remained relatively unchanged in the fourth quarter; however, overall average realized prices in the fourth quarter declined compared to the third quarter due to a higher level of hot-rolled shipments.
- Fourth quarter results for co's Tubular segment decreased compared to the third quarter due primarily to lower shipments and average realized prices as end users decreased drilling activity in order to operate within their 2013 capital budgets and imports persisted at high levels for which a trade case is pending. Inventory management by co's customers was also a factor as we approached year-end.
- Co expects first quarter results for co's Flat-rolled segment to increase primarily due to higher average realized prices and shipments as well as reduced repairs and maintenance costs.
- Average realized prices and shipments are expected to increase as a result of higher contract and spot market prices and improving end user demand after the fourth quarter holiday down time.
- Repairs and maintenance costs are projected to decrease as compared to the fourth quarter due to the completion of the projects at Gary Works and Fairfield Works.
- Co will also have reduced idled facility costs after the shut down of the iron and steelmaking facilities at Hamilton Works.
- Raw materials costs, primarily for purchased scrap, and energy costs are expected to increase.
- Co expects first quarter results for co's European segment to be comparable to the fourth quarter as the benefits of increased average realized prices are offset by an increase in raw materials costs, primarily for iron ore, and other operating costs.
- Average realized prices are expected to increase compared to the fourth quarter due to a more favorable product mix and an anticipated gradual recovery in the spot market while shipments are expected to remain comparable.
- First quarter results for co's Tubular segment are expected to decrease as the benefits of reduced operating costs and increased shipments are more than offset by a decrease in average realized prices and an increase in substrate costs.
- Average realized prices are projected to decrease primarily due to pricing pressures from continuing high import levels and increased domestic supply.
- Shipments are expected to increase as drilling activity begins to improve.
Hearing market rumours that Macquarie could counter bid for F&C - unconfirmed
FCAM +4% trading above the 120 offer from BMO
RWE AG Need to recognize an additional impairment of €3.3B
Apple's 1QFY2014 revs of $57.59bn were below GS est of $58.54bn and above cons of $57.46bn, while EPS of $14.50 topped our forecast of $14.29; cons of $14.09. iPhone shipments of 51.03mn missed our est of 56.67mn and cons of 54.60mn, but revs of $32.5bn were in line with our ests on much higher ASPs. Apple guided to 2QFY2014 revs of $42-$44bn, below GS forecast of $45.92bn and cons of $46.05bn.The disappointing guidance is likely to pressure the stock in the near-term, but we are maintaining our Buy rating for the following reasons:
1) Cash Flow remains solid and leaves room for substantial increases in capital allocation in coming months
2) The ramp of China Mobile is weighted toward the back half of the year, providing room for incremental iPhone growth
3) Apple's enterprise momentum should accelerate in 2014
4) Platform enhancements (mobile payments) are increasingly likely in 2014
5) We believe Apple could be more open to competing more aggressively in the midrange smartphone market.
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Europe Food, HPC 2014 Ests. Cut at JPMorgan, Sector May De-Rate 2014-01-28 08:35:19.451 GMT
By Heather Burke Jan. 28 (Bloomberg) -- European food, household & personal care sector may de-rate as earnings growth slows, JPMorgan says. * Sector valuations at historical highs, earnings growth near a decade low * 2014 ests. cut by ~3%-4% on slowing sales, more cautious outlook on margins, FX; sees flat EPS growth in food, 5% in HPC * Sales have decelerated since last yr; may continue on developed mkt price pressure, low global inflation, emerging mkts slowing; sees LFL growth ~4%-5% for most cos. * 2014 margins may rise 10bps in food, 20bps in HPC * Weak sales probably continued into 4Q, margins may help earnings on savings, lower raw material costs * Top picks Nestle in food, SCA, L’Oreal in HPC * Beiersdorf raised to neutral, sales improvement faster than anticipated * Earlier: L’Oreal Cut on Margin Concern, Henkel Top HPC Pick: Commerzbank
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--Editor: James Cone
To contact the reporter on this story: Heather Burke in London at +44-20-7673-2044 or hburke2@bloomberg.net
To contact the editor responsible for this story: James Ludden at +44-20-7673-2645 or jludden@bloomberg.net