SunCoke Reports Strong Q3 Operational Results
10/29/2014 - As it reported its third quarter earnings results, SunCoke Energy said it believes it can continue to sustain solid performance in its coke and coal logistics segments.
SunCoke Energy Inc. (SXC) reported a third quarter 2014 net loss attributable to SXC of US$3.6 million compared to net income of US$6.2 million in third quarter 2013. Third quarter 2014 results reflect a loss related to discontinued operations of US$18.5 million, or US$0.26 per share. Discontinued operations consists of our Coal Mining operations, which is currently held for sale. Income from continuing operations attributable to SXC was US$14.9 million, or US$0.21 per diluted share, up from US$9.8 million, or US$0.14 per diluted share in third quarter 2013.
"We delivered strong operating results in the third quarter, with Adjusted EBITDA from continuing operations rising nearly 33% to US$68.0 million," said Fritz Henderson, chairman and chief executive officer of SunCoke Energy, Inc. "Domestic Coke Adjusted EBITDA per ton at US$67 reached its highest level since our July 2011 initial public offering, due to improvement at our Indiana Harbor facility and solid operations across the rest of our coke fleet. I believe we can continue to sustain solid performance in our coke and coal logistics segments and benefit from the consistent levels of Adjusted EBITDA and cash flow these businesses generate."
Henderson added, "As I look ahead, I believe our strategic plan to move toward becoming a pure-play general partner will unlock substantial shareholder value over time. Initiating a cash dividend, which today represents approximately one-third of the general and limited partner cash flows we receive from SunCoke Energy Partners (SXCP), marks another milestone in this transformation."
CONSOLIDATED RESULTS
Total revenues from continuing operations dipped US$5.8 million to US$367.6 million in third quarter 2014 versus same prior year period due to the pass-through of lower coal prices and reduced Domestic Coke sales volumes, partly offset by revenues contributed by our new Coal Logistics business.
Operating income from continuing operations and Adjusted EBITDA from continuing operations rose 44.0% and 33.0%, respectively, primarily due to better results at our Indiana Harbor cokemaking facility and the contribution of our new Coal Logistics business. Income from continuing operations attributable to SXC was US$14.9 million, up from US$9.8 millionin third quarter 2013.
Net loss attributable to SXC of US$3.6 million in third quarter 2014 reflects the impact of US$18.5 million of loss related to discontinued operations and US$3.9 million of higher noncontrolling interest. Discontinued operations consists of our Coal Mining operations, which is currently held for sale.
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% 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 onemonth lag and represent our 49% 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.
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 third quarter 2014, discontinued operations recorded a net, after-tax loss of US$18.5 million, or US$0.26 per diluted share, compared with a loss of US$3.6 million, or US$0.05 per diluted share, in third quarter 2013. The third quarter 2014 loss primarily reflects the after-tax impact of US$10.0 million in impairment charges recognized in the quarter and a US$18 decline in average coal sales price on relatively flat coal sales volumes of 432 thousand tons.
2014 OUTLOOK
Our 2014 guidance is as follows:
"We delivered strong operating results in the third quarter, with Adjusted EBITDA from continuing operations rising nearly 33% to US$68.0 million," said Fritz Henderson, chairman and chief executive officer of SunCoke Energy, Inc. "Domestic Coke Adjusted EBITDA per ton at US$67 reached its highest level since our July 2011 initial public offering, due to improvement at our Indiana Harbor facility and solid operations across the rest of our coke fleet. I believe we can continue to sustain solid performance in our coke and coal logistics segments and benefit from the consistent levels of Adjusted EBITDA and cash flow these businesses generate."
Henderson added, "As I look ahead, I believe our strategic plan to move toward becoming a pure-play general partner will unlock substantial shareholder value over time. Initiating a cash dividend, which today represents approximately one-third of the general and limited partner cash flows we receive from SunCoke Energy Partners (SXCP), marks another milestone in this transformation."
CONSOLIDATED RESULTS
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Three Months Ended September 30, |
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| (In millions, except per share amounts) | 2014 | 2013 |
Increase/ (Decrease) |
|||||||||
| Total revenues | US$ | 367.6 | US$ | 373.4 | US$ | (5.8 | ) | |||||
| Operating income | 45.8 | 31.8 | 14.0 | |||||||||
| Adjusted EBITDA from continuing operations(1) | 68.0 | 51.1 | 16.9 | |||||||||
| Income from continuing operations attributable to SXC | 14.9 | 9.8 | 5.1 | |||||||||
| Loss from discontinued operations, net of tax | (18.5 | ) | (3.6 | ) | (14.9 | ) | ||||||
| Net (loss) income attributable to SXC | (3.6 | ) | 6.2 | (9.8 | ) | |||||||
| Earnings per diluted share from continuing operations | 0.21 | 0.14 | 0.07 | |||||||||
| Loss per diluted share from discontinued operations | (0.26 | ) | (0.05 | ) | (0.21 | ) | ||||||
| (1) See definition of Adjusted EBITDA and reconciliation elsewhere in this release. | ||||||||||||
Operating income from continuing operations and Adjusted EBITDA from continuing operations rose 44.0% and 33.0%, respectively, primarily due to better results at our Indiana Harbor cokemaking facility and the contribution of our new Coal Logistics business. Income from continuing operations attributable to SXC was US$14.9 million, up from US$9.8 millionin third quarter 2013.
Net loss attributable to SXC of US$3.6 million in third quarter 2014 reflects the impact of US$18.5 million of loss related to discontinued operations and US$3.9 million of higher noncontrolling interest. Discontinued operations consists of our Coal Mining operations, which is currently held for sale.
SEGMENT RESULTS
Domestic Coke
Domestic Coke consists of cokemaking facilities and heat recovery operations at our Jewell, Indiana Harbor, Haverhill,Granite City and Middletown plants.
| Three Months Ended September 30, | ||||||||||
| (In millions, except per ton amounts) | 2014 | 2013 | Increase/(Decrease) | |||||||
| Segment revenues | US$ | 349.9 | US$ | 364.8 | US$ | (14.9 | ) | |||
| Adjusted EBITDA(1) | 72.4 | 64.3 | 8.1 | |||||||
| Sales volume (in thousands of tons) | 1,074 | 1,084 | (10 | ) | ||||||
| Adjusted EBITDA per ton(1) | US$ | 67.41 | US$ | 59.32 | 8.09 | |||||
| (1) See definitions of Adjusted EBITDA and Adjusted EBITDA per Ton and reconciliation elsewhere in this release. | ||||||||||
- Segment revenues declined as a result of the pass-through of lower coal costs and lower sales volume.
- Adjusted EBITDA rose US$8.1 million to US$72.4 million due to new contract economics at Indiana Harbor and improvedGranite City performance, partly offset by lower sales volumes and lower coal-to-coke yields at our Haverhill facility.
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.
- Segment Adjusted EBITDA increased US$1.0 million to US$2.5 million due to higher production and foreign currency impacts.
India Coke consists of our 49% 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 onemonth lag and represent our 49% share of the joint venture's results.
- Adjusted EBITDA increased US$0.8 million to a loss of US$1.3 million in third quarter 2014. The Adjusted EBITDA loss per ton was US$17. Import competition from China continues to depress coke pricing in India, resulting in weak margins. The prior year period was also impacted by US$2.4 million of foreign exchange losses.
- India Coke's net loss in third quarter 2014 was US$1.5 million versus a loss of US$2.3 million in the same prior year period.
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.
- Coal Logistics handled 4,772 thousand tons of coal, contributing US$3.8 million to Adjusted EBITDA in third quarter 2014. Tons handled and Adjusted EBITDA in third quarter 2013 was 136 thousand and US$0.7 million, respectively.
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 third quarter 2014, discontinued operations recorded a net, after-tax loss of US$18.5 million, or US$0.26 per diluted share, compared with a loss of US$3.6 million, or US$0.05 per diluted share, in third quarter 2013. The third quarter 2014 loss primarily reflects the after-tax impact of US$10.0 million in impairment charges recognized in the quarter and a US$18 decline in average coal sales price on relatively flat coal sales volumes of 432 thousand tons.
2014 OUTLOOK
Our 2014 guidance is as follows:
- Domestic Coke production is expected to be approximately 4.2 million tons
- Adjusted EBITDA from continuing operations is expected to be between US$235 million and US$255 million. Adjusted EBITDA attributable to SXC from continuing operations is expected to be between US$175 million and US$192 million
- Consolidated Adjusted EBITDA including discontinued operations is expected to be between US$220 million and US$240 million. The portion attributable to SXC is expected to be between US$160 million and US$177 million. Potential black lung charges of approximately US$8 million in the fourth quarter could result in consolidated Adjusted EBITDA at or below the low end of this guidance range
- Expect to incur US$10 million to US$15 million of exit costs associated with the sale and/or disposition of our coal mining business
- Capital expenditures are projected to be US$128 million
