SunCoke Energy Inc. Announces Fourth Quarter 2014 Results
01/30/2015 - SunCoke Energy Inc. announced its results for the fourth quarter and full year 2014.
Fourth quarter 2014 net loss from continuing operations attributable to shareholders was US$25.3 million, down from US$15.4 million in the same prior year period, due primarily to impairment charges related to our India joint venture and black lung charges. Full year 2014 net loss from continuing operations attributable to shareholders was US$20.1 million, compared to income of US$40.5 million for full year 2013. “2014 was a year of transformation for SunCoke Energy, as we achieved solid operating performance across most of our domestic cokemaking fleet, began our transition to a pure-play GP with our first cokemaking asset dropdown, launched aUS$150 million share repurchase program and paid our first cash dividend,” said Fritz Henderson, Chairman and Chief Executive Officer of SunCoke Energy, Inc. “We faced our share of challenges as well. We weren’t able to sell the coal business. While we continue to explore coal sale options in 2015, we have aggressively rationalized these operations to reduce ongoing cash losses. Our Indiana Harbor turnaround is taking longer than we anticipated and we did not achieve our growth objectives in 2014. Each of these areas remain top priorities in 2015." We expect 2015 Adjusted EBITDA from continuing operations to be between US$225 million and US$245 million. This outlook reflects our view for sustained solid operations in our Domestic Coke and Coal Logistics businesses and continued improvement at our Indiana Harbor facility, offset by the standalone cost impact to our Jewel Coke facility from the downsizing of our coal mining operations. Separately, pursuant to the previously announced phased plan to downsize our Coal Mining business, effective immediately, we are idling one mine and further reducing our Coal Mining business workforce. In addition, beginning in February, we expect to retain contractors to operate our remaining two mines.
Operating income from continuing operations declined US$10.7 million to US$30.8 million in fourth quarter 2014 primarily due to a US$12.3 million black lung valuation charge as a result of adverse claims awards rates and lower discount rates in 2014. Accelerated depreciation at the Indiana Harbor cokemaking facility also contributed to the decline. These factors and a US$16.8 million non-cash impairment charge on our coal preparation plant contributed to full year 2014 operating income from continuing operations falling US$26.7 million to US$109.8 million. Adjusted EBITDA from continuing operations rose US$7.2 million and US$16.0 million to US$70.0 million and US$237.8 million in fourth quarter and full year 2014, respectively. Improved performance at Indiana Harbor benefited the quarter and the full year. The full year also benefited from the contribution of our new Coal Logistics segment. Fourth quarter 2014 net loss from continuing operations attributable to shareholders was US$25.3 million, down from US$15.4 million in the same prior year period. Full year 2014 net loss from continuing operations attributable to shareholders wasUS$20.1 million versus income of US$40.5 million for full year 2013. Both current year periods were impacted by a US$30.5 million non-cash impairment charge on our investment in VISA SunCoke, our Indian cokemaking joint venture, in addition to the items discussed above. Total net loss attributable to SXC of US$65.4 million in fourth quarter and US$126.1 million in the full year 2014, include loss from discontinued operations, net of tax, of US$40.1 million and US$106.0 million, respectively. Discontinued operations consists of our Coal Mining business. While we are actively pursuing a strategic exit from our Coal Mining business, in fourth quarter 2014 we implemented a plan to rationalize coal mining operations, which included reducing coal production by 50 percent, eliminating positions and reducing operations at our coal preparation plant. FOURTH QUARTER 2014 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.
Brazil Coke consists of a cokemaking facility in Vitória, Brazil, which we operate for an affiliate of ArcelorMittal. Brazil Coke earns operating and technology licensing fees based on production and recognizes a dividend on a preferred stock investment assuming certain minimum production levels are achieved.
India Coke consists of our 49 percent interest in VISA SunCoke, a joint venture with VISA Steel formed on March 18, 2013. VISA SunCoke owns a 440 thousand ton cokemaking facility and associated steam generation unit in Odisha, India. Financial results for VISA SunCoke are recorded on a one month lag and represent our 49 percent share of the joint venture's results.
The Coal Logistics segment consists of the coal handling and blending services operated by SXCP as a result of its acquisitions of Lake Terminal in third quarter 2013 and Kanawha River Terminals, LLC (KRT) in fourth quarter 2013. SXCP's coal handling and blending terminals are located in East Chicago, Indiana, and along the Ohio, Big Sandy and Kanawha rivers in West Virginia and Kentucky.
Corporate and other expenses in fourth quarter 2014 were US$8.6 million, down US$2.6 million versus fourth quarter 2013 primarily due to the reduction in workforce at our Corporate headquarters in first quarter 2014. The year-over-year comparison was impacted by the settlement of certain litigation in 2013. Interest Expense, Net Net financing expense was relatively flat in fourth quarter 2014 at US$12.0 million. Cash Flow Net cash provided by continuing operations was US$130.0 million for the full year 2014, down US$26.7 million from 2013, reflecting working capital changes largely due to the timing of accounts payable. Cash used in continuing investing activities was US$118.3 million for the full year 2014 as compared with US$313.3 million in 2013. The decrease in spending was driven by the US$113.3 million acquisitions of Lake Terminal and KRT, a US$67.7 million investment in our VISA SunCoke joint venture as well as higher refurbishment spending at Indiana Harbor in 2013. Discontinued Operations On 17 July 2014, SXC's Board of Directors authorized the sale and/or disposition of our coal mining business. As a result, our coal mining operations are reflected as discontinued operations. Prior periods have been reclassified to reflect discontinued operations and held-for-sale presentation. In fourth quarter 2014, discontinued operations recorded a net, after-tax loss of US$40.1 million, or US$0.60 per diluted share, compared with a loss of US$4.4 million, or US$0.06 per diluted share, in fourth quarter 2013. The fourth quarter 2014 loss reflects severance and contract termination costs of US$17.6 million, the after-tax impact of US$17.8 million in impairment charges recognized in the quarter and a US$17 decline in average coal sales price per ton on coal sales volumes of 346 thousand tons. 2015 OUTLOOK Our 2015 guidance is as follows:
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