Cleveland-Cliffs Inc. (NYSE:CLF) Q2 2024 Earnings Conference Call July 23, 2024 8:30 AM ET
Company Participants
Celso Goncalves - Executive Vice President & Chief Financial Officer
Lourenco Goncalves - Chairman, President & Chief Executive Officer
Conference Call Participants
Lucas Pipes - B. Riley Securities
Lawson Winder - Bank of America
Carlos De Alba - Morgan Stanley
Philip Gibbs - KeyBanc Capital Markets
Operator
Good morning, ladies and gentlemen. My name is Daryl, and I am your conference facilitator today. I would like to welcome everyone to Cleveland-Cliff's Second Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers 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 could cause actual results to differ materially. Important factors that could cause results to differ materially are set forth in reports on Forms 10-K and 10-Q and news releases filed with the SEC, which are available on the Company's website.
Today's conference call is also being -- is also available and being broadcast on 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 Celso Goncalves, Executive Vice President and Chief Financial Officer.
Celso Goncalves
Hey, good morning, everyone. In Q2 we generated a strong cash flow of $362 million, driven by higher shipments, lower costs, and continued success in managing working capital and finished inventory levels. We allocated 65% of that free cash flow in Q2 toward reducing net debt by $237 million, bringing our net debt balance down to $3.4 billion. We used the remaining 35% of that free cash flow from the quarter or $125 million toward buybacks, reducing our share count by another 7.5 million shares. Our diluted share count is now at 474 million shares, down by nearly 20% from as high as 585 million shares three years ago.
Notwithstanding the lower than expected realized pricing in Q2, we generated an adjusted EBITDA of $323 million, supported by the cost improvements we foreshadowed on last quarter's conference call. Importantly, our shipments were up sequentially back to the 4 million ton level, despite the weaker demand environment that we and other North American steel companies experienced throughout the quarter. The continued resilient demand for steel from our clients in the automotive sector, coupled with weak demand from service centers and other buyers of commercial grades resulted in a richer sales mix than expected. As a result, the impact of lower index pricing led to a $50 decline in average selling price quarter-over-quarter.