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SunCoke Energy, Inc. (NYSE:SXC) Q1 2024 Earnings Call Transcript

SunCoke Energy, Inc. (NYSE:SXC) Q1 2024 Earnings Call Transcript May 1, 2024

SunCoke Energy, Inc. beats earnings expectations. Reported EPS is $0.23, expectations were $0.22. SXC isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, everyone, and welcome to the SunCoke Energy First Quarter 2024 Earnings Call. My name is Angela, and I will be coordinating your call today. [Operator Instructions] I will now hand you over to your host, Shantanu Agrawal, Vice President, Finance and Treasurer. Please go ahead.

Shantanu Agrawal: Thanks, Angela. Good morning and thank you for joining us this morning to discuss SunCoke Energy's first quarter 2024 results. With me today are Mike Rippey, Chief Executive Officer; Katherine Gates, President; and Mark Marinko, Senior Vice President and Chief Financial Officer. Following management's prepared remarks, we'll open the call for Q&A. This conference call is being webcast live on the Investor Relations section of our website, and a replay will be available later today. If we do not get to your questions on the call today, please feel free to reach out to our Investor Relations team. Before I turn things over to Katherine, let me remind you that the various remarks we make on today's call regarding future expectations constitute forward-looking statements.

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The cautionary language regarding forward-looking statements in our SEC filings apply to the remarks we make today. These documents are available on our website as are reconciliations to non-GAAP financial measures discussed on today's call. With that, I'll now turn things over to Katherine.

Katherine Gates: Thanks, Shantanu. Good morning and thank you for joining us on today's call. Before we get started, I'd like to congratulate Mike Rippey on his previously announced retirement in two weeks. Mike's leadership and contributions have been crucial to the success of SunCoke during his tenure. I've had the privilege of working closely with Mike over the past several years and look forward to having him as an adviser for the company. The entire SunCoke team wishes him the best in his retirement. Moving to first quarter results, I wanted to share a few highlights before turning it over to Mark to discuss the results in detail. First, I'd like to thank all of our SunCoke employees for their contributions to our very good first quarter results.

Our domestic coke plants continue to run at full capacity with strong operational performance. Our logistics terminals delivered excellent results, handling 5.5 million tons during the quarter. We saw higher volumes at our domestic terminals due in part to East Coast port congestion caused by the unfortunate incident in Baltimore, which favorably impacted results. Through our collective efforts, we delivered consolidated adjusted EBITDA of $67.9 million. From a balance sheet perspective, we ended the first quarter with a strong liquidity position of $470.1 million. Our gross leverage was approximately 1.86x on a trailing 12-month adjusted EBITDA basis at the end of the quarter. Looking ahead, we're pleased to have all of our spot blast and foundry coke sales finalized for the full year.

With this strong start, we are well positioned to achieve our full year adjusted EBITDA guidance range of $240 million to $255 million. With that, I'll turn it over to Mark to review our first quarter earnings in detail. Mark?

A coal miner emerging from a vast underground mining operation, his clothes blackened from the day's work.
A coal miner emerging from a vast underground mining operation, his clothes blackened from the day's work.

Mark Marinko: Thanks, Katherine. Turning to Slide 4. Net income attributable to SunCoke was $0.23 per share in the first quarter of 2024, up $0.04 versus the prior year period. Adjusted EBITDA for the first quarter 2024 was $67.9 million compared to $67.1 million in the first quarter 2023. The increase in adjusted EBITDA was primarily driven by higher blast coke sales volumes and higher volumes at our domestic logistics terminals, partially offset by lower volumes at CMT. Moving to Slide 5 to discuss our domestic coke business performance in detail. First quarter domestic coke adjusted EBITDA was $61.4 million and coke sales volumes were 996,000 tons. The domestic coke fleet continues to run at full capacity and the increase in adjusted EBITDA as compared to the prior year period was primarily driven by higher blast coke sales volumes.

Our full year domestic coke sales tons guidance remains approximately 4.1 million tons. As Katherine mentioned earlier, all spot blast and foundry coke sales are finalized for the full year. Given the strong performance this quarter from our domestic coke segment, we are well positioned to achieve full year domestic coke adjusted EBITDA within our guidance range of $238 million to $245 million. Now moving on to Slide 6 to discuss our logistics business. Our logistics business generated $13 million of adjusted EBITDA in the first quarter of 2024 compared to $13.5 million in the first quarter of 2023. The decrease in adjusted EBITDA was primarily due to lower throughput volumes at CMT, partially offset by higher volumes at our domestic terminals.

CMT also recognized limited API2 price adjustment benefit during the quarter. Our terminals handled combined throughput volumes of approximately 5.5 million tons during the first quarter of 2024 as compared to 5.3 million tons during the same prior year period. Our domestic terminals handled 3.6 million tons in Q1 2024, making it the best quarter in terms of volume for the domestic terminals in the past five years. The increase in volume was driven in part by the unfortunate bridge incident in Baltimore, which caused East Coast port congestion. We are pleased with the excellent results from our logistics segment in the first quarter and are well positioned to achieve our logistics full year 2024 adjusted EBITDA and volume guidance, which remain unchanged.

Now turning to Slide 7 to discuss our liquidity position for Q1. SunCoke ended the first quarter with a cash balance of $120.1 million. Cash flow from operating activities generated $10 million and was negatively impacted by the timing of working capital changes of approximately $50 million in the quarter. We expect this impact to reverse over the course of the year, and we are reaffirming full year operating cash flow guidance of $185 million to $200 million. We paid $9 million in dividends at the rate of $0.10 per share this quarter and spent $15.5 million on CapEx. In total, we ended the quarter with a strong liquidity position of $470.1 million. With that, I will turn it back over to Katherine.

Katherine Gates: Thanks, Mark. Wrapping up on Slide 8, as always, safety is our first priority, and we will continue to focus on strong safety and environmental performance, robust safety and environmental standards set SunCoke apart and are central to our reliable delivery of high-quality coke and logistics services. We remain focused on safely executing against our operating and capital plan for full utilization of our cokemaking assets. We also continue to concentrate our efforts on adding new business at our logistics terminals. And while we were able to finalize all of our spot, blast and foundry coke sales for the full year, we are still focused on future opportunities to broaden our customer base. As we have demonstrated in the past, we will pursue a balanced yet opportunistic approach to capital allocation.

From a growth perspective, we continue to work on developing the Granite City GPI project. We continuously evaluate the capital needs of the business, our capital structure and the need to reward our shareholders and will make capital allocation decisions accordingly. Finally, we are very pleased with the strong results in the first quarter and we expect to achieve our full year consolidated adjusted EBITDA guidance of $240 million to $255 million. With that, let’s go ahead and open up the call for Q&A.

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To continue reading the Q&A session, please click here.