SunCoke Energy Reports Second Quarter 2013 Results
07/25/2013 - As it reported its quarterly earnings results, SunCoke Energy, Inc. said its coal business continues to be a challenge while its domestic coke business continues to deliver solid results.
SunCoke Energy, Inc. reported second quarter 2013 net income attributable to shareholders of US$5.7 million, down from net income attributable to shareholders of US$22.7 million in second quarter 2012.
"Our coal business continues to be a challenge, weighing down Adjusted EBITDA by nearly US$12 million in the second quarter," said Fritz Henderson, chairman and chief executive officer of SunCoke Energy, Inc. "In response to industry conditions, we have made substantial progress on our coal action plan, reducing coal production costs by about US$19 per ton, and we are confident in our ability to further drive down these costs. Our domestic coke business continues to deliver solid results, generating US$61.3 million of Adjusted EBITDA in the quarter. We believe we can sustain and build on this performance as we focus on achieving operations excellence and continue to make progress refurbishing our Indiana Harbor cokemaking facility."
Henderson continued, "Looking ahead to the second half of the year, we stand behind our full year 2013 guidance for consolidated Adjusted EBITDA and earnings per share of US$205–230 million and US$0.30–0.55 per share, respectively.”
CONSOLIDATED RESULTS
|
Three Months Ended |
|||
|
(In millions, except per share amounts) |
2013 |
2012 |
Decrease |
| Revenues |
$403.7 |
$460.9 |
(57.2) |
| Operating Income |
$26.1 |
$42.8 |
(16.7) |
| Adjusted EBITDA |
$52.4 |
$66.8 |
(14.4) |
| Net Income Attributable to Shareholders |
$5.7 |
$22.7 |
(17.0) |
| Earnings per Diluted Share |
$0.08 |
$0.32 |
(0.24) |
In second quarter 2013, total revenues were down 12.4% to US$403.7 million versus the same prior year period reflecting the pass-through of lower coal prices in our cokemaking business and a US$52.55 per ton decline in average coal sales price in our coal mining segment, partly offset by higher coal sales volume.
Operating income and Adjusted EBITDA declined by US$16.7 million and US$14.4 million in second quarter 2013, respectively. The decline in operating income was primarily driven by lower results in our Coal Mining Segment and US$3.1 million in accelerated depreciation at our Indiana Harbor plant where a major refurbishment is underway. Adjusted EBITDA was primarily impacted by weakness in the Coal Mining Segment driven by a significant decline in coal sales price partly offset by lower per ton coal production costs. Higher corporate costs also contributed to the decline.
Net income attributable to shareholders fell by US$17.0 million to US$5.7 million in second quarter 2013. Factors impacting net income included weak coal segment results, accelerated depreciation at our Indiana Harbor facility 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 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.
|
Three Months Ended |
|||
|
(In millions, except per share amounts) |
2013 |
2012 |
Decrease |
| Segment Revenues |
$375.8 |
$441.5 |
(65.7) |
| Adjusted EBITDA |
$61.3 |
$62.4 |
(1.1) |
| Sales Volumes (in thousands of tons) |
1,074 |
1,074 |
|
| Adjusted EBITDA per Ton |
$57.08 |
$58.10 |
(1.02) |
Brazil Coke
Formerly named International Coke, our Brazil Coke segment consists of a cokemaking facility in Vitória, Brazil, which we operate for a Brazilian affiliate of ArcelorMittal. Brazil 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 rose US$0.9 million to US$1.6 million, due to favorable comparison to prior year which contained a higher allocation of corporate costs.
India Coke
India Coke consists of our 49% interest in VISA SunCoke, a joint venture with VISA Steel which was launched on March 18, 2013. VISA SunCoke produces coke for the Indian merchant market and owns a 440 thousand ton cokemaking facility and associated steam power generation unit located in Odisha, India. Financial results for VISA SunCoke are recorded on a one-month lag and represent our 49% share of the joint venture’s results. Second quarter 2013 results are for the period from closing through May 31, 2013.
- Segment Adjusted EBITDA was US$0.8 million on coke sales of nearly 26 thousand tons. Performance in the period was affected by several local factors including: iron ore mining restrictions in India which limited steel production, a weak coke pricing environment due to increased Chinese coke imports, and shipping delays and trade finance challenges related to securing our coal supply.
- India Coke recognized US$0.2 million of losses from equity method investment reflecting our share of depreciation, interest expense and taxes attributable to the venture.
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.
|
Three Months Ended |
|||
|
(In millions, except per share amounts) |
2013 |
2012 |
Increase/(Decrease) |
| Total Coal Mining Revenues |
$52.7 |
$60.8 |
$(8.1) |
| Segment Revenues |
$19.8 |
$10.2 |
$9.6 |
| Adjusted EBITDA |
$(2.6) |
$9.3 |
$(11.9) |
| Coal Production (in thousands of tons) |
367 |
401 |
(34) |
| Sales Volumes (in thousands of tons) |
457 |
365 |
92 |
| Sales Price per ton |
$114.18 |
$166.73 |
$(52.55) |
| Adjusted EBITDA per Ton |
$(5.69) |
$25.48 |
$(31.17) |
- Total coal mining revenues (including sales to affiliates) was down due to the decline in average sales price, partly offset by increased third-party coal sales volumes. Segment revenues (excluding sales to affiliates) rose due to higher sales volumes. The difference between coal sales volumes and coal production in second quarter 2013 was comprised primarily of increased purchases of raw coal.
- Adjusted EBITDA was unfavorably impacted by the decline in average coal sales price previously discussed. This was partly offset by lower cash production costs of approximately US$19 per ton, reflecting the success of our coal action plan initiatives, which include idling mines, reducing staff, upgrading equipment and installing a new cyclone system in our coal prep plant.
2013 OUTLOOK
We cooperated with AK Steel on projected second half 2013 coke needs after a recent blast furnace outage at their Middletown plant and expect no material impact to our coke production, Adjusted EBITDA and earnings per share guidance as a result. Specifically, due to this outage, we have agreed to manage coke production at our Haverhill facility to be consistent with annual contract maximums and temporarily trim production at our Middletown facility to name plate capacity level in the second half 2013. Due to the temporarily reduced production at Middletown and pursuant to our omnibus agreement, we anticipate remitting to SunCoke Energy Partners, L.P. during second half 2013 a total of approximately US$2 million in make-whole payments, which are expected to be paid in quarterly installments based on actual production. In addition, we plan to provide AK Steel a temporary extension of payment terms on December 2013 coke production, resulting in a shift of approximately US$20 million in expected operating cash flow from 2013 to early 2014.
Our 2013 guidance is as follows:
§ 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 SunCoke Energy, Inc. is expected to be between US$165 million and US$190 million, reflecting the impact of public ownership in SunCoke Energy Partners, L.P.
§ Earnings per diluted share attributable to SunCoke Energy, Inc. is expected to be between US$0.30 and US$0.55 per diluted share, reflecting the impact of public ownership in SunCoke Energy Partners, L.P.
§ Cash generated by operations is expected to be approximately US$120 million
§ Capital expenditures and investments are projected to be US$242 million on a consolidated basis. Approximately US$25 million of the projected 2013 capital expenditures has been pre-funded from the proceeds of the initial public offering SunCoke Energy Partners, L.P.
§ 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 U.S. cokemaking facilities are located in Virginia, Indiana, Ohio and Illinois. Outside the U.S., we have cokemaking operations in Vitoria, Brazil and Odisha, India. Our coal mining operations, which have more than 110 million tons of proven and probable reserves, are located in Virginia and West Virginia.
SunCoke Energy, Inc., through certain of its subsidiaries, is the general partner holding a 2.0% general partner interest in SunCoke Energy Partners, L.P. SunCoke Energy Partners, L.P. is a master limited partnership that owns a 65% interest in each of SunCoke Energy, Inc.’s Haverhill and Middletown cokemaking facilities. In addition to its general partnership interest, SunCoke Energy, Inc. owns a 55.9% limited partner interest and all the incentive distribution rights in the partnership. Prior year results in this release reflect periods prior to the initial public offering of SunCoke Energy Partners, L.P.
