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SunCoke Energy Achieves Key Milestones in First Quarter; Outlook Optimistic

04/30/2013 - SunCoke Energy achieves key milestones in first quarter, including an IPO of SunCoke Energy Partners and closing on the VISA SunCoke joint venture in India, and says it expects to sustain a high level of performance in its cokemaking business going forward.

  • Net income totaled US$2.1 million in first quarter 2013, down from prior year reflecting the impact of accelerated depreciation, non-recurring debt transaction costs, unfavorable tax items and income attributable to the public unit holders of SunCoke Energy Partners, L.P.
  • Adjusted EBITDA declined 5.8% to US$52.3 million in the first quarter 2013 in line with our expectations, due to weak performance in our Coal Mining Segment and Indiana Harbor cokemaking facility, offset by strong performance at Middletown
  • Improved Domestic Coke results with Adjusted EBITDA of US$61.1 million, an increase of 11.5%, resulting in Adjusted EBITDA per ton of US$58
  • Coal Mining Segment Adjusted EBITDA was down US$12.0 million as expected on flat sales volumes, reflecting the impact of a US$50 per ton decline in the average coal sales price, offset by improved total cash production costs ofUS$23 per ton
  • Re-affirm 2013 consolidated Adjusted EBITDA of US$205 million - US$230 million 
SunCoke Energy, Inc. reported first quarter 2013 net income of US$2.1 million down from net income of US$16.9 million in first quarter 2012.
“We achieved several key strategic milestones in the first quarter with the completion of the initial public offering of SunCoke Energy Partners and closing on the VISA SunCoke joint venture in India. These key milestones lay a foundation for growth domestically and overseas.” said Fritz Henderson, chairman and chief executive officer of SunCoke Energy, Inc. "As expected, our Adjusted EBITDA was down in the quarter due to the significant decline in metallurgical coal prices and operating challenges at Indiana Harbor, where a major plant refurbishment is underway. These challenges were partly offset by strong performance at Middletown and coal mining cost reductions.
Henderson continued, “Looking ahead, I expect to sustain a high level of performance in our cokemaking business, make further progress in the refurbishment of Indiana Harbor and continue taking aggressive action in our coal mining business to enhance productivity and reduce costs.”
Consolidated Results
In first quarter 2013, total revenues dipped 5.7% to US$453.9 million versus first quarter 2012, due to the pass-through of lower coal prices in our cokemaking business and the decline in average coal sales price.
Operating income and Adjusted EBITDA were down 20.4% and 5.8% in first quarter 2013, respectively. The decline in operating income was primarily driven by weakness in our Coal Mining Segment and US$4.3 million in accelerated depreciation at our Indiana Harbor plant where a major refurbishment is underway. Adjusted EBIDTA was primarily impacted by weakness in the Coal Mining Segment which was partly offset by continued strong performance at our Middletown facility and slightly lower corporate costs.
Net income attributable to shareholders fell by US$14.8 million to US$2.1 million in first quarter 2013. Factors negatively impacting net income included the write-down of unamortized debt issuance costs and other financing costs, unfavorable tax items and accelerated depreciation at our Indiana Harbor facility due to refurbishment and the attribution of income to public unit holders of SunCoke Energy Partners, L.P.
SEGMENT RESULTS
Domestic Coke
Domestic Coke consists of cokemaking facilities and heat recovery operations at our Jewell, Indiana Harbor, Haverhill,Granite City and Middletown plants. Beginning in the first quarter 2013, the company combined its Jewell Coke and Other Domestic Coke segments into one segment called Domestic Coke due to the similarities of operations and contracts between the two segments. Prior year periods have been adjusted to reflect this change.
  • Segment revenues were affected by the pass-through of lower coal costs and lower sales volumes, which was primarily due to operating challenges at Indiana Harbor and one less day of production and sales due to leap year in 2012.
  • Adjusted EBITDA increased US$6.3 million driven by Middletown, reflecting better operating cost recovery, and favorable comparison to prior year, which included US$4.0 million in startup costs and lower yields at this facility.
International Coke
International Coke consists of a cokemaking facility in Vitória, Brazil, which we operate for a Brazilian affiliate ofArcelorMittal. International Coke earns operating and technology licensing fees based on production and recognizes a dividend on its preferred stock investment assuming certain minimum production levels are achieved at the facility.
  • Segment Adjusted EBITDA increased US$1.5 million to US$1.6 million in first quarter 2013. Prior year results were affected by higher legal costs.
Coal Mining
Coal Mining consists of our metallurgical coal mining activities conducted in Virginia and West Virginia. A substantial portion of the metallurgical coal produced by our coal mining operations is sold to our Jewell Coke segment for conversion into coke.
  • Total coal mining revenues (including sales to affiliates) declined due to a reduction in average sales price of approximately US$50 per ton. Segment revenues (excluding sales to affiliates) were down due to lower average sale price and lower sales volumes.
  • Adjusted EBITDA was unfavorably impacted by the decline in coal sales price, but was partly offset by approximately US$23 per ton in lower cash production costs as a result of our coal action plan initiatives, including idling mines, reducing staff, upgrading equipment and installing a new cyclone system in our coal prep plant.
2013 OUTLOOK
The following summarizes the company’s 2013 guidance:
§ Domestic coke production is expected to be in excess of 4.3 million tons
§ Coal production is projected to be approximately 1.4 million tons
§ Adjusted EBITDA is expected to be between US$205 million and US$230 million on a consolidated basis. Adjusted EBITDA attributable to SXC is expected to be between US$165 million and US$190 million, reflecting the impact of public ownership in SXCP
§ Earnings per diluted share attributable to SXC is expected to be between US$0.30 and US$0.55 per diluted share, reflecting the impact of public ownership in SXCP
§ Cash generated by operations is expected to be approximately US$140 million
§ Capital expenditures and investments are projected to be US$200 million on a consolidated basis, including theUS$67.7 million investment in the VISA SunCoke JV. Approximately US$15 million of the projected 2013 capital expenditures has been pre-funded from the proceeds of the initial public offering SXCP
§ The effective tax rate for the full year 2013 is expected to be between 14% and 20%, and the cash tax rate is expected to be between 12% and 20%
 
SunCoke Energy, Inc. is the largest independent producer of coke in the Americas, with 50 years of experience supplying coke to the integrated steel industry. Our advanced, heat recovery cokemaking process produces high-quality coke for use in steelmaking, captures waste heat for derivative energy resale and meets or exceeds environmental standards. Our cokemaking facilities are located in Virginia, Indiana, Ohio, Illinois and Vitoria, Brazil, and our coal mining operations, which have more than 114 million tons of proven and probable reserves, are located in Virginia and West Virginia.