Q4 2021 SunCoke Energy Inc Earnings Call
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[music]. Good morning, My name is Chris and I'll be your conference operator today at this time I'd like to welcome everyone to the Sun Coke Energy fourth quarter 2021 earnings call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question answer session.
If you'd like to ask a question. During this time simply press Star then the number one on your telephone keypad and to withdraw your question. Please press star one again.
Sure, it's a new agro wall, Vice President Investor Relations and Treasurer, you may begin.
Thanks, Chris.
Good morning, and thank you for joining us this morning to discuss <unk> fourth quarter and full year 2021 results as well as 2022 guidance with me today is Mike Rippey, President and Chief Executive 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.
Our website and a replay will be available later today, if we don't get to your questions on the call today, Please feel free to reach out to our Investor Relations team.
<unk> done things over to Mike, Let me remind you that the various remarks, we make on todays call regarding future expectations constitute forward looking statements. 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 a reconciliations to non-GAAP .
Ashwin measures discussed on today's call with that I will now turn things over to Mike. Thanks, Jonathan Good morning, and thank you all for joining us on today's call today, we announced some coke Energy's fourth quarter and full year results and before I turn it over to Sean who will review the results in detail I wanted.
To discuss a few highlights let.
Let me start by first thanking all of our Sun Coke employees for their commitment and contributions and what has been an historic year for Sun Coke not.
Not only from a financial results perspective, but also because of the steps we have taken towards transforming the company.
The dedication of our team is clearly visible through our safety record operational excellence and financial results.
On slide three you can see the key initiatives that we set out and how we performed against these objectives.
We delivered $275 4 million of adjusted EBIT da in 2021, the highest in Suncoast history exceeding our revised guidance range of $255 million to $265 million. Additionally, we generated $101 million in free cash flow, which.
Was also above our revised guidance range of $80 million to $100 million.
We operated our domestic Coke fleet at full capacity and the main driver behind that was our successful entry into the foundry and export coal markets. This was our first year of entering these new markets on a commercial scale. We are extremely pleased with the success we achieved.
We developed strong customer relationships and our high quality products are well received in both markets are operational and technical expertise combined with our strong commodity market environment.
An excellent opportunity to enter these markets, we expect to further increase our participation in both the foundry and export coal markets in 2022.
Additionally, we signed a five year take or pay agreement to supply blast furnace Coke to Algoma steel beginning this year with an average sales volume of 150000 tons per year.
This new contract addresses a portion of the on contracted Coke tons for the next five years, along with providing further customer diversification. We are excited to begin working with this new customer.
Looking at our progress on capital structure, we successfully refinanced the company's debt in 2021 significantly reducing the cost of debt and extending debt maturities.
The interest rate savings, resulting from the refinancing and are in excess of $17 million on an annual basis. The debt refinancing is a significant step toward matching suncoast capital structure with our operating plants.
From a capital allocation perspective, we deployed our free cash flow to reduce our gross debt by approximately $64 million. Additionally, we returned $20 million to our shareholders paying a 24 cent per share annual dividend and anticipate this dividend to continue in 2022 with that I'll turn it over to.
<unk> to review, our fourth quarter and full year earnings in detail Shantallow.
Thanks, Mike turning to slide four now.
Fourth quarter net income actually weren't able to ethic feet was 15 cents per share up 21 cents versus the fourth quarter of 2020.
Our full year 2021, net income attributable to ASIC fee was 52 cents per share up 48 cents versus the full year 2020, driven by strong operating results and lower interest expense, partially offset by a loss on extinguishment of debt recorded in connection with the refinancing.
Consolidated adjusted EBITDA for the fourth quarter of 2021 was $62 9 million up $25 $9 million versus fourth quarter of 2020. The increase was mainly driven by higher volumes across both coke and logistics businesses or is there anything from the strength in steel and coal markets as well as the absence of supply really pro.
And with 13 customers in exchange for extending it.
Existing contracts in 2020 on a full year basis, we delivered adjusted EBITDA of $275 4 million up $69 $5 million versus full year 2020, turning to slide five to discuss the ear to ear adjusted EBITDA variance in detail.
Our core business delivered strong financial results, mainly driven by successful entry in participation in the foundry and export coal markets. We also saw a significant increase in volume year over year due to that sensor supply relief provided to certain customers last year in exchange for contract extensions that domestic Coke segment.
<unk> delivered full year, adjusted EBITDA of $243 4 million, which was well above our full year revised domestic coke guidance, including Brazil, Our Coke operations delivered adjusted EBITDA of $260 6 million.
Logistics segment, adjusted EBITDA increased approximately $26 million year over year, driven by higher throughput volumes higher price realizations and the addition of a new product at CMT with the backdrop of a strong commodity market. The logistics segment delivered full year adjusted EBITDA of $43 5 million finally, our cooperating.
Other expenses were lower by $13 2 million year over year, mainly due to lower noncash legacy liability expense and absence of foundry related R&D expense, which were partially offset by higher employee related expenses.
But all we're very pleased with our performance across all segments, resulting in a historic year for the company.
Turning to slide six to discuss capital deployment in 2021.
We generated very strong operating cash flow in 2021 up approximately $233 million, which was above our full year revised guidance range of 209 million to $224 million that.
<unk> robust cash flow generation allowed us to make good progress on our capital deployment initiatives Capex of approximately $98 million. During the year was aboard revised guidance as we pulled forward some capital work to manage labor availability and supply chain issues as you will see in later slides our twin.
22 capital expenditure is expected to be significantly lower as compared to 2021 at approximately $80 million and takes into account both pulling forward of the projects as well as the impact on inflation on material and labor costs.
As discussed in our second quarter call, we significantly strengthened our balance sheet with execution of the debt refinancing transactions. This value refinancings, both extended our maturity profile and lowered our cost of debt the interest rate savings, resulting from the debt financing or in excess of $17 million on an annual basis.
We incurred approximately $20 million as transaction fees, what it was <unk> of the new senior secured notes and extension of the revolver. We also paid $22 million that's premium to call. It 2025 senior notes as part of the refinancing transaction.
Along with the refinancing we also reduced our debt outstanding by approximately $64 million in 2021 year.
Year over year, we brought down our leverage ratio by more than a darn and we expect that deleveraging to continue in 2022 as we further work towards lowering our outstanding revolver balance.
We also returned capital to our shareholders in 2021 in the form of 24 cents per share annual dividend.
Which was a use of cash of approximately $20 million.
In total we ended 2021 with a cash balance of approximately $64 million and strong liquidity of approximately $292 million setting the stage for continued progress against our capital allocation priorities in 2020 to switch.
Switching gears, our nine I would now like to talk about our guidance expectation for 2022, let's turn to slide eight.
We expect 2022, adjusted EBITDA to be between 240 and $255 million domestic.
Domestic coke adjusted EBITDA is expected to be lower by 8% to 48 million to $14 million in 2020, due mainly driven by a lower price realization assumption on export sales. Our coke facilities are expected to continue to run at full capacity, but we as we increase our participation in the export and foundry markets.
We're exposed to greater commodity risk, which is reflected in our guidance, Brazil Coke adjusted EBITDA will be down $2 million to $3 million, mainly due to lower volumes due to a required capital rate, but rebuilt project as a reminder, the Brazil Coke is under an operating contract where the Coke plant is owned by <unk>.
Arcelormittal, Brazil, and Suncorp provides the operating and technological services all Coke plant related capital expenditures are paid by Ann Brazil turn.
Turning to the logistics segment, we expect logistics to be lowered by 4 million to $10 million in 2022, we anticipate similar volumes year over year, but lower price realizations as well as more normalized higher high water costs, our CMT are expected to impact the profitability year over year.
Lastly, we expect our corporate and other segment expense to be higher by approximately 6 million to $8 million. The year over year change is driven by normalized noncash legacy liability expense as well as higher insurance cost moving on to slide nine.
In 2022, we expect our domestic coke adjusted EBITDA to be between 229 and $235 million with sales of approximately $4 1 million tons, which includes contract export and foundry Coke.
We expect to run their domestic fleet at full capacity approximately $3 five 5 million tons are contracted under long term take or pay agreements in 2022, we ended up as anticipated selling the remaining 700000, but net equivalent tonnes in the foundry and export markets. This.
Represents a significant increase in both foundry and export market participation from the previous year.
As a reminder, boundary and export tons do not replace blast furnace tons on a ton per ton basis. For example, due to differences in the production process a singleton our foundry Corp. They places approximately two tons of blast furnace school.
The order book for both export and foundry Coke is solid and the sales for first quarter of 2022 have been finalized the drop in adjusted EBITDA year over year is mainly driven by lower price realization assumptions and higher commodity price risk as we increase our participation in spot markets.
Moving to slide 10.
2022 logistics adjusted EBITDA is expected to be between $34 and $40 million.
This outlook is based on current expectations for the thermal coal export volumes from the Gulf Coast and price realizations based on API. Two forward curve, we are projecting between five five and 7 million tons of coal to be exported from CMT in 2022. Additionally.
Additionally, our volume estimates also include approximately three to three 5 million tons up non called throughput such as iron ore pet Coke and aggregates.
We expect to handle approximately the same volumes at our domestic coal terminals as we did last year with our Coke production facility is running at full capacity and third party volumes remaining unchanged.
The year over year decrease in logistics EBITDA is mainly driven by two factors.
Firstly, we expect the CMT price kicker benefit which is based on API two coal price index to be lower in 2022 as compared to previous year. This call index futures contract has been very volatile recently and it's expected to remain so in the near term.
Secondly, 2021 was an exceptional year at CMT from a high water cost perspective, we incurred no high high water caused during the previous year, but but anticipate a more normalized weather pattern, resulting in an increase in high water cost at CMT in 2022.
Overall, we anticipate another solid year for logistics segment as we maintain the level of volumes reached last year and pave the way for continued success.
Moving to the 'twenty to 'twenty two guidance summary on slide 11.
This slide provides an historical view of actual performance across many metrics as well as a summary of our 2022 guidance. Once again, we expect adjusted EBITDA to be between 240 and $255 million, our Coke and logistics business are expected to run at similar volumes year over year, but at lower.
Price realizations.
As mentioned earlier in the call, we anticipate our capex requirement in 2022 to be around $80 million. We brought forward some of the capital spend from 2022 to 2021, which favorably impacts that 2022, capex guidance, but we continue to see inflationary pressure on wages and materials.
Our free cash flow is expected to be between 110 and $125 million after taking into account cash interest cash taxes capital expenditures and working capital changes with that I will turn it back to Mike. Thanks, Jonathan.
Wrapping up on slide 12, 2022 will be a year of continued building on the progress we made in 2021 as always safety and operational performance is top of mind for our organization.
Our efforts will continue to focus on safely executing against our operating and capital plan in 2022.
Additionally, we anticipate inflation to become a larger part of manufacturing market dynamics and.
And we have recently started developing continuous improvement plans with the goal of minimizing any inflationary pressures that our operations face in the future.
We will continue to pursue opportunities to optimize our asset base, specifically as it relates to the convent Marine terminal.
Made good progress on revitalizing CMT in 2021 with the backdrop of positive market dynamics and will continue to build on this foundation for CMT is long term success.
As I mentioned in the beginning of this call. We are extremely pleased with our entry and success in the foundry and export coal markets. This diversification is a meaningful step for the long term success of Sun Cope with a strong base established in 2021, we look to further strengthen our relationships increase our brand recognition and grow our <unk>.
<unk> share in these new markets.
As we have demonstrated in the past we will continue to pursue a balanced yet opportunistic approach to capital allocation. We expect our deleveraging initiative to continue in 2022 as we look to further bring down our revolver balance we.
We are looking at growth opportunities, both organically and through M&A.
And as we have said before we will remain disciplined understanding.
Then it is not in shareholders' interest for the company to sacrifice long term value creation for short term marginal gains.
We continue to evaluate the capital needs of our business, our capital structure and the need to reward shareholders on a continuous basis, and we will make capital allocation decisions accordingly.
Looking beyond 2022, we believe that Suncorp is well positioned for long term success, we believe coke supply, which has been underinvested in nearing the end of life cycles will continue to exit the market.
<unk> is the youngest domestic coke, making facilities in the NAFTA region, and we continue to invest in our facilities to ensure they operate safely and efficiently we have leading technology with outstanding environmental performance and are recognized.
By the EPA <unk> standard.
Our coal production process is the cleanest and least carbon intensive in the world. We have taken significant steps towards diversifying both our customer and product base and we'll continue to look for further opportunities to do so in total we're excited for the new year after making significant progress in diversifying and growing.
Our business in what was an historic 2021, we see good potential to further build on the strengths of our core coke, making in logistics franchises to meet our financial targets and create value for our shareholders.
With that let's go ahead and open the call for Q&A.
Thank you and as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.
Our first question is from Lucas pipes with B Riley Securities. Your line is open.
Yes. Thank you so much for taking my questions.
And good job in 2021, I wanted to ask a little bit more on the decline.
In EBITDA expectations in the domestic coke business and specifically.
Specifically is it is it a degree of conservatism when I look at commodity prices globally.
I think you know.
The margins on export sales could be could be pretty attractive, but would appreciate your perspective on that thank you.
Well Lucas Great question and it's obviously.
Asking about the unknowable at this point, we hope you're right.
We just.
We're making an estimate you may characterize it as conservative.
We see it is our best estimate as we sit here today, we have obviously good visibility in the first quarter, where we're sold out for the first quarter. So we know the the.
The pricing and the margins on those tons were well into the second quarter in terms of selling that.
Capability, but we don't have visibility into the back half of the year. So it is an estimate with all estimates theres risk both on the up and the downside. So we've made an estimate and though I hope youre right.
Yeah.
Got it got it but in terms of what is embedded in the guidance. It assumes a normalization in.
In the back half of the year.
That's correct.
Got it.
Assume the same can be said for the lower priced kicker expectations at CMT.
Youre, 100% right.
Very helpful. <unk> always see here holding up well in the first half and we just don't have visibility into the second at least not as clear visibility as we do for the first.
And.
Do you have your own subjective estimate or do you look at a forward curve for the back half for the API too.
Well, we look at the.
Forward curve Didnt runs out through 'twenty three so we're.
Familiar with it on a daily basis.
Got it got it okay, no I appreciate that and maybe to turn to two.
Kind of bigger picture strategy.
You are generating.
A nice amount of free cash flow here at the midpoint of your guidance.
Hi.
Could you list your priorities for the use of that cash.
Our priority remains as it has been which is to further delever the.
The company, we've made nice progress, but others, there's still work to do and we're going to drive that revolver balance down.
That's our number one priority.
Beyond that of course, we look to maintain our.
Our facilities and the excellent condition. They are as I've said before we see organic growth opportunities often times.
Presenting certainly the lowest level of risk and oftentimes the highest returns that's most evident.
And the investment we made to enter the foundry market as well as some very modest investments we made at CMT to allow ourselves into.
Both the pet Coke and iron ore.
<unk>, so inorganically, we will look to grow our business.
As we have successfully done in the past beyond that we look to external growth through M&A as we've said many many times, we will do so in a very prudent way.
Not growth at any price it's.
It's profitable growth.
Industries, where we have expertise and knowledge, both with regard to our technologies, our management know how as an industry perspective and of course, then we look to allocation to our shareholders. So the capital allocation strategy is the same that it's been in place now for several years.
And so is it is it.
Would it be reasonable for an investor to expect an increased emphasis on capital returns after the revolvers fully paid down.
Yes, it does.
Becomes a matter of what opportunities to grow the company are present to us and then.
To return.
Two to shareholders excess cash flows.
Okay, Okay, well I really appreciate your perspective.
Best of luck.
Great. Thanks.
Our next question is from Matthew fields with Bank of America. Your line is open.
Hey, everyone.
Exciting news on the on the new Oklahoma contracts, just maybe a little more detail on that is that similar.
Type of contract to your others work fixed price fixed volume.
Yes, very similar Matthew.
Okay.
You say, it's accretive to margins and domestic coke or is it.
Dilutive or no.
No effect.
That's very consistent with the existing margins, we earn from our other customers okay.
Okay.
And then in your table of.
Contract summary from your slide deck, I think it's page 17.
It seems to imply that Oklahoma co.
<unk> will be.
May be supplied from either Haverhill, one or juul.
Early on which facility is going to be actually supplying.
Omar.
Haverhill is a lot closer to associated Murray and it's on the river that one would make more sense.
We have the option. We are currently anticipating supplying all of that call from hover huh.
So juul will continue to be kind of not used for your contracted domestic coke customers more of the foundry and export.
Outlets from Joel.
That's.
Mostly correct. There there are some contract tons coming through they're still yet mathematically as Shannon I mean as you see on the table.
That 400000 from cliffs cliffs could come out of parallel Jules So it's like in July .
Julian Harris Hell, one kind of access our flex capacity there.
Feel we fill up that fortinet than the $1 50 export and foundry from those two facilities.
All of our foundries.
Foundry is coming from Joshua.
Okay, great. Thank you.
And then on the logistics guide.
It seems a little light.
There may be some people who are watching what the coal producers are saying about their kind of opportunities in the export market I know there's more than coal.
Going through that.
But you.
You mentioned, a little bit of things on the cost side.
High water costs expected to normalize.
Maybe you're not baking in any kind of price kicker that you got in 2021.
Maybe like Luca said is that conservatism, but maybe maybe you can explain kind of.
How youre getting to that guide when it seems like coal exports through the Gulf should be stronger in 2022 than they were in 2021.
You see that's a great question, we see volumes is relatively same which is a continuation of the strong market dynamics, where you experienced in 2021 on the high water well historically during the spring season win.
The snowpack melts in Minnesota.
The rains come the Mississippi River.
Depth increases and we incur a call.
Cost associated with that higher water in the spring last year was quite abnormal in that we incurred no high water costs. So we.
We don't plan on something that it's only happened once in my history and so on Coke. So we've budgeted for return to the normal costs associated with the spring high water season.
So that's one point the other point is the question around API two pricing, we have assumed price kicker for a portion of the year, we have not done so for the full year.
Certainly if you look at the forward curve today, you would call that conservative, but that there is a lot of volatility in that API too.
Curve. So we haven't forecast that we'll receive the full benefit of <unk>.
That API to kick or for the year. So the two things that are going on than our.
The price realization the assumption around the extent of the API two price kicker and the resumption of normalized higher water cost other than that it's very much the same as last year.
That's helpful and maybe to just sort of drill down and quantify a little bit of this what's the what was the kind of high water costs that you incurred maybe in 2019 and 20 that you didn't incur in 2021.
It's in the order of $2 million to $3 million is kind of the normalized cost it can be higher than that it's it's been higher than that we had a very wet year a couple of years back.
Where the water remained high it seem like until September but.
I'd call it $2 million to $3 million a year.
Okay, and then maybe.
You think about if things were to stay the same with API too and you were to get that price kicker in the back half of the year kind of what what what upside with that impose on your on your logistics guidance.
Well, we look a lot like 2021, yes, I mean, you take away the high water costs, and we look very similar to 2021.
Okay Alright.
That's helpful.
And then lastly, going back to the capital structure I. Appreciate the comments you made earlier about number one priority is lower revolver balance.
Based on the guidance after your distributions of $20 million or so youre going to have about $90 million to $105 million of cash to reduce our revolver balance.
That's going to take you to kind of under two times net.
Which is.
Well below what your historical kind of leverage target has been.
<unk> been under that target for a while now.
It's time to kind of revise that leverage target you know fundamentally lower and that's just kind of what youre trying to get at.
Our capital allocation priorities.
Well, we've always said three times or less and I again, I probably didn't stress less.
Strongly enough, but it remains three times or less and I think as you are.
If you look at our company, we're entering these new markets, where we're doing quite well.
But these markets unlike the.
The contracted take or pay when all of our volumes are contracted under long term take or pay contracts. It does change somewhat the risk profile of the company, so I'm quite comfortable being well below three times as we enter these new markets. We've enjoyed great success, we plan on that but.
At the same time, we will remain prudent and recognize there's a cyclical element to these earnings.
Okay great.
Thank you very much and good luck in 'twenty two.
I appreciate it thanks Matthew.
Our.
Question is from Nathan Martin with the Benchmark Company. Your line is open.
Hey, good morning, everybody congrats on the full year results and thanks for taking my questions.
Thanks.
Like I guess I was wondering if could could we possibly get some more color on the labor availability costs mentioned in your prepared remarks as it specifically difficulties hiring already COVID-19 absenteeism higher wages or combination of those obviously seeing that kind of up and down the supply chain and then what are your thoughts on those issues going forward.
Thanks.
No we don't.
Struggled to attract labor to our company, we do quite well there is.
Well no.
Channels into our company. So when we do have openings that are relatively.
Straightforward to Phil.
We've knock on wood had exceptional performance as it relates to Covid, where.
Like all companies all communities, we've experienced absences related to the.
COVID-19, but we have had no spread in any of our plants and that's really.
A true Testament to the dedication of our people to keep people safe in the workplace. So we have had no inability to produce.
And deliver our products because of Covid. So now what we refer to really is kind of the general type of wage inflation that we're starting to see in our economy, we saw it most notably with.
With regard to the capital work, where we're employing outside resources to perform that work and we've seen the inflationary impacts on the capital side. During Covid, we we werent able to get all of the capital work done that we'd set out to do.
Some of that was because of contractor labor availability and some of it was we just didn't want that level of activity during a period, where we were very much looking to safeguard our employees from the virus. So.
We are as we did in the fourth quarter, we were able to do some catching up and getting ahead and we.
We feel.
And a very good position now with regard to the capital work, we've achieved in that which we have planned for next year from an availability standpoint, we are seeing no inflationary pressures as it relates to both labor and materials.
Got it appreciate all that info there.
And then maybe just another question related to CMT specifically.
<unk> com's handle it looks like it came in about 1 million cartons lower than guidance I was wondering if any of that had to do with labor supply chain issue or just any thoughts there.
Yes, it was.
Some supply chain issues, one of our customers had some issues.
One of their producing coal mines and was unable to to get as much product to us as they had in the previous quarter.
Okay, and where are those still ongoing or are you seeing those progressing getting better sequentially here.
They are in the process of bringing that mine back online as we speak.
Got it exactly when you are talking about I appreciate that.
And then maybe just finally.
More of a modeling question how much Coke did you guys end up selling in the fire foundry in export markets in 'twenty. One just wondering as you pointed out you expect accretion amount here 22. Thanks.
Yes, we are.
We don't go into specifics with regard to.
Particularly the.
The foundry market and it's a smaller market as you know and we've.
Achieve meaningful market share participation and we look to grow that market share, but for commercial reasons, we don't discuss the specifics, yes, I mean, what we can say need on that is like kind of on it.
Fairness equal linked capacity, we thought approximately 450000 foreign I think will end in 2021. So we are going to 700000 equaling in 2022. So that's kind of gives you the magnitude of increase the increase in participation in both those markets, but we don't give <unk>.
Further.
Detail beyond that and I think you can appreciate why Jonathan was properly pointed out in the past and again today.
A furnace.
Last furnace equivalent basis, the substitution rates two to one.
Foundry.
Shopping and Thats exactly those I'd appreciate that guys I'll leave it there. Thanks again for your time and best of luck in 'twenty two.
Thanks Nathan.
Our next question is from Karl Blunden with Goldman Sachs. Your line is open.
Good morning, Thanks for the time today.
Mike You mentioned in your opening comments and interest in M&A and organic growth, where it makes sense.
When investors think about sizing that is all of that all of those opportunities doable with your cash flow and then potentially.
Our revolver draw could that involve additional financing just based on what you see in the landscape.
What we're seeing right now would not require any additional borrowings on the part of the company.
Got you.
On the cost inflation point, you mentioned that a couple of times.
Do you have a specific number baked in kind of year over year and how much that could vary.
Guess, what im getting at is.
How much visibility do you have into costs or have you locked in at this point in time.
A source of significant uncertainty.
Not for 2022 it's quite locked in.
Concern that the we have I think is the concern that many are voicing now is is there a structural change in the inflation rate in the U S and how does that affect us in 'twenty three and beyond.
Inflation order too.
To continue at rates like we have experienced more recently the compounding impact of that can become.
A real drag if you don't find ways to to otherwise improve and become more efficient so as to offset those impacts but for 'twenty two there's no risk.
Got you.
On the Capex side, maybe I guess that that line item can be impacted by inflation to longer term, but what should we think of as your normalized capex.
Some of it was pulled forward into 'twenty, one or you've got 80 for 2022.
As we model. This out further is there is it slightly higher than that number 23 and beyond.
I think it's.
80 ish for a number that's assuming kind of inflationary increases on the 2% to 3% range. If inflation were to settle in at rates higher than we would have to adjust that number yes. I mean, our 2020 number was 73 right. So and this year I mean, obviously, you're pulling forward. Some work side was <unk> 98, So I think Mike $75.
88%, that's a pretty good estimate and the longer term.
No very helpful. Thanks, very much for the time.
Hello.
Our next question is from Peter <unk> with foundry Freak Advisors. Your line is open.
Hi, good morning, when I look at the credit rating agency commentary at the time of the bond issue and the successful refinancing I was just wondering if you could update us.
Great everybody on <unk>.
Our actions with the credit rating agencies and sort of whether theyre seeing seeing.
Seeing the progress there is obviously happening at the company it seems like you're hitting some of the markers that they laid out so any color on conversations with rating agencies would be helpful.
Thanks, Peter Thanks for the question, Yes, no I mean, we have regular conversations with them right and I mean as you mentioned there are certain markets that they have laid out so a one off the fact is all taking our leverage down to a certain level and.
Obviously kind of getting a better rating from the credit agency now the other factor all of that is to maintain our credit rating at that level as well so.
I think I think as Mike previously pointed out in one of the questions.
Our kind of the point of taking our leverage down in Florida that is to make sure we are.
Kind of at that level and.
And we would add that level and able to maintain as our business becomes more and more.
<unk> driven or if we have more volumes into the spot market, so pretty pretty pretty good conversation when we refinance they affirmed the ratings and they continue to have we continue to have good dialogue with them.
Great. Thank you.
Again, Please press star one if you'd like to ask a question.
And it appears that we have no further questions I'll turn the call over to Mr. <unk> for any closing remarks.
Alright, well, thank you and again, thank you all for joining US this morning, and as always for your continued interest in Sun Coke look forward to continuing these discussions as 2022.
Now comes into focus as we move through it. So thanks again and have a good day.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Yes.
Please wait the conference will begin shortly.
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Okay.
Yes.
Okay.
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