Cleveland-Cliffs Inc. (CLF) Cash Flow Statement

The $230M operating cash flow in 2026Q2 contrasts sharply with the $145M net loss, a gap largely attributable to a $99M working capital inflow and $262M in depreciation. This suggests that cash conversion is being propped up by non-operating items, and the quality of earnings remains weak as losses persist. Investors should monitor whether working capital tailwinds can continue, as they appear to be masking the underlying cash burn from operations.

The only positive FCF quarter in the recent period was 2026Q2 at $73M, but this is insufficient to offset the cumulative outflows. The negative FCF trajectory, combined with a 3% revenue decline, suggests that the company is not generating enough cash to cover its capital expenditures, let alone service debt. This divergence from peers like Nucor, which report positive FCF margins, highlights a structural cash flow disadvantage that may require external financing or asset sales.

The consistency of capex suggests management is prioritizing maintenance and strategic investments, but the lack of positive operating cash flow means these investments are not self-funding. The capital intensity relative to revenue is moderate, yet the inability to generate positive cash from operations implies that the company may be deferring necessary maintenance or relying on external capital, which could impair long-term asset reliability.

The erratic working capital adjustments, including a $286M inflow in 2024Q2 and a -$229M outflow in 2024Q4, suggest that the company is struggling to stabilize its cash conversion cycle. This volatility may reflect inventory build-ups during periods of weak demand or aggressive payables management, but it also indicates that operating cash flow is not a reliable indicator of underlying profitability. Investors should monitor whether the company can achieve more consistent working capital discipline to reduce cash flow unpredictability.

The absence of dividends and buybacks, combined with the large acquisition outflow in 2024Q4, suggests that management is prioritizing balance sheet stability over returning cash to shareholders. This is a prudent response to the negative cash flow environment, but it also signals that the company may not have the financial flexibility to pursue growth opportunities or reward investors until cash generation improves. The $2.5B acquisition in 2024Q4 likely contributed to the current liquidity strain, as cash reserves have dwindled to $57M.

The persistent gap between net income and operating cash flow, with OCF/NI ratios often negative or below 1, suggests that accruals are not the primary driver of the divergence. Instead, the company appears to be consuming cash at a rate that exceeds its reported losses, likely due to working capital demands and heavy capex. This cumulative cash burn, combined with a debt-to-equity ratio of 1.29, raises concerns about the company's ability to meet its obligations without additional financing or a significant improvement in steel market conditions.