Q4 2023 SunCoke Energy Inc Earnings Call

Hello, and welcome to today's some Coke energy fourth quarter 2023 earnings call. My name is Jordan and I'll be coordinating your call today, if you'd like to register any audio questions. You may do so by pressing star followed by one on your telephone keypad.

I'm now going to hand over to Sean how do I grow all VP finance and treasurer to begin shutdown and please go ahead.

Thanks, Jordan good morning, and thank you for joining us this morning to discuss <unk> Energy's fourth quarter and full year results as well as 2024 guidance with me today are Mike Rippey, Chief Executive Officer, Katherine Gates, President and Mark <unk>, Senior Vice President and Chief.

Financial.

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 of 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.

Before I turn things over to Kathryn Let me remind you that the various remarks, we make on todays call regarding future expectations constitute forward looking statements are 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 are reconciliations to non-GAAP financial measures discussed on today's call with that I'll now turn things over to Scott.

Good morning, Thank you all for joining us today.

Earlier today, we announced some coke energy fourth quite a result.

Before I turn it over to Mark to review the results in detail I wanted to share a few highlights from 2023.

I wanted to start by thanking all of our Sun Coke employees for their contributions in achieving our 2023 objectives.

The dedication of our team as evidenced by our strong operational performance and our financial results.

Slide three lays out our key objectives for 2023, and how we performed against those objectives.

We delivered consolidated adjusted EBITDA of $268 8 million modestly exceeding the high end of our guidance range of $265 million.

Strong domestic coke operational performance drove our results, while our logistics business faced headwinds due to challenging market conditions.

We generated $138 9 million of free cash flow exceeding the high end of our guidance range of $120 million.

We continued to build on the success of our foundry Coke business to the completion of the foundry Screener project in 2023.

This investment improves our handling efficiency and allows us to continue growing our foundry market participation.

Our plants ran full in 2023, and we were able to successfully sell all non contracted tons into the foundry and spot blast Coke markets.

We also extended our Indiana Harbor contract with Cleveland Cliffs through September 2035, with key provision similar to the prior agreement.

The renewal affirms our mutually beneficial relationship with Cleveland cliffs and positions, Indiana Harbor, well for the future.

We also made great progress on our capital allocation priorities in 2023, we.

We deployed free cash flow to reduce our gross debt by approximately $44 million ending the year with a gross leverage ratio of 1.86 times on a last 12 months adjusted EBITDA basis.

Jordan: Hello and welcome to today's Sunco Energy fourth quarter 2023 earnings call. My name is Jordan, and I'll be coordinating your call today. If you'd like to register any audio questions, you may do so by pressing star followed by one on your telephone keypad. I'm now going to hand over to Shantanu Agrawal, VP Finance and Treasurer, to begin. Shantanu, please go ahead.

We returned approximately $31 million to our shareholders, having increased our quarterly dividend from eight cents per share to <unk> 10 per share during 2023.

We expect the continuation of our quarterly dividend throughout 2024, and lastly, we continue to work on the development of the GPI project at granite City.

Shantanu Agrawal: Thanks, Jordan. Good morning, and thank you for joining us this morning to discuss Suncook Energy's fourth quarter and full year 2023 results, as well as its 2024 guidance. With me today are Mike Rippey, Chief Executive Officer, Katherine Gates, President, and Mark Marinko, Senior Vice President and Chief Financial 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 of our website, and a replay will be available later today.

With that I'll turn it over to Mark to review, our fourth quarter and full year earnings in detail Mark.

Thanks, Catherine turning to slide four.

The fourth quarter net income attributable Sun Coke was <unk> 16 per share up <unk> <unk> versus the fourth quarter of 2022.

Our full year 2023, net income attributable Suncorp was <unk> 68 per share down 51 versus the full year 2022.

Shantanu Agrawal: If we don't get to your questions on the call today, please feel free to reach out to our Investor Relations team. Before I turn things over to Catherine, let me remind you that the various remarks we make on today's call regarding future expectations constitute forward-looking statements. Cautionary language regarding forward-looking statements in our SEC filing applies to the remarks we make today. These documents are available on our website as our reconciliations to non-GAAP financial measures discussed on today's call. With that, I'll now turn things over to Catherine. Thanks, Shantanu. Good morning.

Tax adjustments of 29 per share recorded in the third quarter of 2022 in the third quarter of 2023 impacted EPS, primarily due to tax law changes in the USA and Brazil in both 2022 and 2023.

Excluding the impact of these adjustments EPS was lower by 22 per share year over year, primarily driven by lower contribution margins on non contracted flash co sales.

Solid data to adjusted EBITDA for the fourth quarter 2023 was $62 3 million up $3 4 million versus the fourth quarter of 2020 to the.

Catherine Gates: Thank you all for joining us today. Earlier today, we announced Suncook Energy's fourth quarter results. Before I turn it over to Mark to review the results in detail, I want to share a few highlights from 2023. I want to start by thanking all of our Suncoak employees for their contributions in achieving our 2023 objectives. The dedication of our team is evident through our strong operational performance and our financial results. Slide 3 lays out our key objectives for 2023 and how we will perform against those objectives. We delivered consolidated adjusted EBITDA of $268.8 million, modestly exceeding the high end of our guidance range of $265 million. Strong domestic coke operational performance drove our results, while our logistics business faced headwinds due to challenging market conditions. We generated $138.9 million of free cash flow, exceeding the high end of our guidance range of $120 million.

The increase was primarily driven by higher coal to coke yields and favorable O&M recovery on long term take or pay contracts from our domestic coke plants, partially offset by lower volumes at CMT and higher noncash legacy liability expense at corporate.

On a full year basis, we delivered adjusted EBITDA of $268 8 million down $28 $9 million versus record results of $297 7 million in 2020 to the.

The year over year decrease was primarily driven by lower contribution margins on non contracted blast coke sales lower volumes and logistics segments and higher noncash legacy liability expense, partially offset by higher cold the whole coal to coke yields and lower employee related costs.

Turning to slide five to discuss the year over year adjusted EBITDA variance in detail.

Catherine Gates: We continue to build on the success of our Foundry Coke business with the completion of the Foundry Screener Project in 2023. This investment improves our handling efficiency and allows us to continue growing our foundry market participation. Our plants ran full in 2023, and we were able to successfully sell all non-contracted tons into the Foundry and Spot Blast Coke market. We also extended our Indiana Harbor contract with Cleveland Cliffs through September 2035 with key provisions similar to the prior agreement. The renewal affirms our mutually beneficial relationship with Cleveland Cliffs and positions Indiana Harbor well for the future.

Our domestic coke business operated at full capacity, but was impacted by lower contribution margins from non contracted blast Coke sales. This was partially offset by higher coal to coke yields on long term take or pay contracts. The domestic coke segment delivered full year adjusted EBITDA of 247.

8 million modestly above our full year domestic coke guidance range.

The results from our Brazil Coke segment were impacted by the absence of technology fees, which expired at the end of 2022.

Including Brazil, our Coke operations delivered adjusted EBITDA of $256 9 million.

Catherine Gates: We also made great progress on our capital allocation priorities in 2023. We deployed free cash flow to reduce our gross debt by approximately $44 million, ending the year with a gross leverage ratio of 1.86 times on a last-12-month adjusted EBITDA basis. We returned approximately $31 million to our shareholders, having increased our quarterly dividends from $0.08 per share to $0.10 per share during 2023. We expect the continuation of our quarterly dividends throughout 2024. And lastly, we continue to work on the development of the GPI project at Granite City. With that, I'll turn it over to Mark to review our fourth quarter and full year earnings in detail. Mark.

The logistics segment, adjusted EBITDA decreased by $5 $4 million year over year, driven by lower throughput volumes at CMT as a result of weak commodity market conditions. The logistics segment delivered full year adjusted EBITDA of $44 3 million.

Finally, our corporate and other expenses were higher by $2 5 million year over year, mainly due to higher noncash legacy liability expenses, which were partially offset by lower employee related expenses.

Turning to slide six to discuss capital deployment in 2023.

We generated very strong operating cash flow of $249 million during 2023, partially driven by the timing of favorable working capital changes, which allowed us to make good progress on our capital deployment initiatives.

Mark W. Marinko: Thanks, Catherine. Turning to slide four. The fourth quarter net income attributable to Sunco was $0.16 per share, up $0.02 versus the fourth quarter of 2022. Our full year 2023 net income attributable to SUNCOPE was 68 cents per share, down 51 cents versus the full year 2022. Tax adjustments of 29 cents per share recorded in the third quarter of 2022 and the third quarter of 2023 impacted EPS, primarily due to tax law changes in the U.S. and Brazil in both 2022 and 2023. Excluding the impact of these adjustments, EPS was lowered by 22 cents per share year over year, primarily driven by lower contribution margins on non-contracted Blasco sales.

Capital expenditures came in at $109 2 million, which was above our guidance, mainly due to the timing of certain projects.

We expect to see an offset in 2024, which is why our capex guidance of $75 million to $80 million is lower than our normal run rate.

We reduced gross debt outstanding by $43 8 million in 2023 with no outstanding balance on our revolver at year end.

During 2023, we also returned capital to our shareholders in the form of a 36 per share annual dividend.

Which was a use of approximately $31 million of cash as.

As mentioned by Catherine we increased our dividend by 25% that is from <unk> <unk> per share during the third quarter of 2023.

Mark W. Marinko: Consolidated Adjusted EBITDA for the fourth quarter of 2023 was $62.3 million, up $3.4 million versus the fourth quarter of 2022. The increase was primarily driven by higher cold coke yields and favorable O&M recovery on long-term take-or-pay contracts from our domestic coke plant, partially offset by lower volumes at CMT and higher non-cash legacy liability expense at corporate. On a full year basis, we delivered adjusted EBITDA of $268.8 million, down $28.9 million versus record results of $297.7 million in 2022. The year-over-year decrease was primarily driven by lower contribution margins on non-contracted blast coke sales, lower volumes in the logistics segments, and higher non-cash legacy liability expense, partially offset by higher cold coke yields and lower employee-related costs.

In total we ended 2023 with a cash balance of $140 1 million and strong liquidity of approximately $490 million setting the stage for continued progress against our capital allocation priorities in 2024.

Now I'd like to turn to our guidance expectations for 2024.

We expect consolidated adjusted EBITDA to be between $240 and $255 million in 2024.

Domestic coke adjusted EBITDA is expected to be lower by $3 million to $10 million driven primarily by our expectation of lower coal to coke yield value on contracted blast coke sales due to lower coal pricing, we expect to come to continue running our coal fleet at full capacity.

Brazil, Coke adjusted EBITDA will be flat to better by $1 million.

As a reminder, the Brazil Coke facility is owned by our solar Middle Brazil, and Suncorp provides the operating and technological services pursuant to an operating agreement.

Logistics adjusted EBITDA is expected to be lower by 9% to $14 million in 2024, we anticipate lower volume and pricing at CMT year over year, driven by weak commodity markets.

Mark W. Marinko: Turning to slide five, we discuss the year-over-year adjusted EBITDA variance in detail. Our domestic coke business operated at full capacity, but it was impacted by lower contribution margins from non-contracted blast coke sales. This was partially offset by higher coal-to-coke yields on long-term take-or-pay contracts. The Domestic Coke segment delivered full-year adjusted EBITDA of $247.8 million, modestly above our full-year domestic Coke guidance. Results from our Brazil Coke segment were impacted by the absence of technology fees, which expired at the end of 2022. Including Brazil, our coke operations delivered adjusted EBITDA of $256.9 million. The logistics segment's adjusted EBITDA decreased by 5.4 million year-over-year, driven by lower throughput volumes at CMT as a result of weak commodity market conditions. The logistics segment delivered a full-year adjusted EBITDA of $44.3 million. Finally, our corporate and other expenses were higher by $2.5 million year-over-year, mainly due to higher non-cash legacy liability expenses, which were partially offset by lower employee-related expenses.

Lastly, we expect our corporate and other segment expense to be higher by approximately $3 million to $5 million driven by normalized noncash legacy liability expenses.

Moving on to slide nine to discuss the domestic coke segment in detail.

In 2024, we expect our domestic coke adjusted EBITDA to be between 238% and $245 million with sales of approximately $4 1 million tons, which includes contract foundry and spot Glasgow.

We expect to continue to run running the full domestic coke fleet at full capacity.

<unk> $3 6 million tons are contracted under long term take or pay agreements in 2024, we.

We anticipate selling the remaining 650000 furnished equivalent tonnes in the foundry and spot markets as.

As a reminder, foundry tons do not replace blast furnace tons on a ton per ton basis.

For example, due to differences in the production process a single ton of foundry Coke replaces approximately two tons of blast furnace coke.

The order books for foundry and spot blast Coke are solid with the substantial portion of our 2024 sales finalized.

Mark W. Marinko: Turning to slide six to discuss capital deployment in 2023, we generated a very strong operating cash flow of $249 million during 2023, partially driven by the timing of favorable working capital changes, which allowed us to make good progress on our capital deployment initiative. Capital expenditures came in at $109.2 million, which was above our guidance, mainly due to the timing of certain projects. We expect to see an offset in 2024, which is why our CapEx guidance of $75 to $80 million is lower than our normal run rate. We reduced gross debt outstanding by $43.8 million in 2023, with no outstanding balance on a revolver at year end.

While we expect to continue running at full capacity the lower year over year. Adjusted EBITDA is primarily due to lower coal to coke yield value on a long term take or pay contracts due to lower coal pricing.

Moving to slide 10 to discuss logistics in more detail.

2020 for logistics adjusted EBITDA is estimated to be between 30% and $35 million.

This estimate is driven by significantly weaker market conditions at CMT.

Our outlook considers the low expectations for thermal coal export volumes from the Gulf Coast as a result of tepid demand due to milder weather lower cost lower cost gas imports and ample coal inventory in Europe.

Mark W. Marinko: During 2023, we also returned capital to our shareholders in the form of a 36 cents per share annual dividend, which was a use of approximately 31 million of cash. As mentioned by Catherine, we increased our dividend by 25%, that is from 8 cents to 10 cents per share, during the third quarter of 2023. In total, we ended 2023 with a cash balance of $140.1 million and strong liquidity of approximately $490 million, setting the stage for continued progress against our capital allocation priorities in 2024. Now, I'd like to turn to our guidance expectations for 2024. We expect Consolidated Adjusted EBITDA to be between $240 and $255 million in 2024. Domestic Coke Adjusted EBITDA is expected to be lowered by $3 to $10 million, driven primarily by our expectation of lower cold coke yield values on contracted blast coke sales due to lower coke prices. We expect to continue running our Coke fleet at full capacity, and Brazil Coke Adjusted EBITDA will be flat to better by $1 million.

We also expect the lower API, two price adjustment benefit as compared to 2023, which is factored into our guidance.

We anticipate approximately $4 1 million tons of coal to be exported through CMT and approximately $3 8 million tons of non coal throughput such as iron ore pet Coke and other products.

Moving to the 2024 guidance summary on slide 11.

Once again, we expect consolidated adjusted EBITDA to be between $240 and $255 million or.

Mr. Koch business expected to run at full capacity, but with lower coal to coke yield value on contracted coke sales due to lower coal pricing.

We expect to save face significant headwinds due to weak commodity markets and logistics segment impacting both volumes and pricing.

As indicated earlier, we anticipate our capex requirements in 2024 to be between $75 million and $80 million, which is lower than our normal annual run rate.

We expect 2020 for operating cash flow to be between $185 and $200 million driven by the reversal of favorable working capital build in 2023.

Our free cash flow is expected to be between 105 and $125 million.

With that I'll turn it back over to Katherine.

Wrapping up on slide 12.

As always safety is our first priority and we will continue to focus on strong safety and environmental performance in 2024.

Mark W. Marinko: As a reminder, the Brazil Coke facility is owned by ArcelorMittal Brazil, and SunCoke provides the operating and technological services pursuant to an operating agreement. Logistics costs have been adjusted, but that is expected to be lower by $9 to $14 million in 2024. We anticipate lower volume and pricing at CMT year over year, driven by weak commodity markets. Additionally, we expect our corporate and other segment expense to be higher by approximately $3 to $5 million, driven by normalized non-cash legacy liability expenses.

Robust safety and environmental standards that suncook, apart and are central to our reliable delivery of high quality Coke and logistics services.

In 2024, we will continue to focus our efforts on adding new customers and products at CMT as well as further broadening our foundry in spot <unk> customer base.

As we've demonstrated in the past, we will pursue a balanced yet opportunistic approach to capital allocation.

From a growth perspective, we continue to work on developing the granite city GPI project.

We continuously evaluate the capital needs of the business, our capital structure and the need to reward our shareholders and we will make capital allocation decisions accordingly.

Mark W. Marinko: Moving on to slide nine to discuss the domestic coke segment in detail, in 2024, we expect our domestic cope Adjusted EBITDA to be between $238 and $245 million, with sales of approximately 4.1 million tons, which includes contract, foundry, and spot blast coke. We expect to continue to operate, running the full domestic coke fleet at full capacity.

Looking beyond 2024, we see some hope being well positioned for long term success.

We believe the Coke supply will continue to exit the market as many assets are under invested in significantly aging.

<unk> has the newest coke, making facilities in North America with our leading technology, we continue to invest in our facilities to ensure that they are safe efficient reliable and environmentally compliant.

This strong operational performance that comes from these investments provides us with the basis to grow and diversify our customer and product base.

Mark W. Marinko: Approximately 3.6 million tons are contracted under long-term taker pay agreements in 2024. We anticipate selling the remaining 650,000 furnished equivalent tons in the foundry and spot coat market. As a reminder, foundry tons do not replace blast furnace tons on a ton-for-ton basis. For example, due to differences in the production process, a single ton of foundry coat replaces approximately two tons of blast furnace coat.

With that let's go ahead and open up the call for Q&A.

Thank you as a reminder, if you'd like to register any audio questions. Please press star one if you change your mind. Please press star two please ensure you're on mute when speaking.

Our first question comes from Lucas pipes of B Riley Securities Lucas the longest yours.

Thank you very much operator, good morning, everyone.

Mark W. Marinko: The order books for Foundry and Spot Blast Coke are solid, with a substantial portion of our 2024 sales finalized. While we expect to continue running at full capacity, the lower year-over-year adjusted EBITDA is primarily due to lower call-to-call yield values on our long-term take-or-pay contracts due to lower call prices. Moving to slide 10 to discuss logistics in more detail, 2024 logistics adjusted EBITDA is estimated to be between $30 and $35 million. This estimate is driven by significantly weaker market conditions at CMT.

My first question.

My first question is on the <unk>.

Balance sheet.

Can you remind us what are your.

Net debt target.

Ultimately.

What is the goal.

Is it to get to net debt zero.

Some of your peers in the industry have done that.

Do you look to built.

Sufficient cash buffer to kind of pay off.

With the debt.

Kind of as you generate the cash or will create create a balance to take out the maturity when it comes to.

Are you ultimately looking to refinance it I would appreciate it.

Color on that thank you.

Yes, Lucas this is Jonathan I can take that question.

Mark W. Marinko: Our outlook considers the low expectations for thermal coal export volumes from the Gulf Coast as a result of tepid demand due to milder weather, lower cost gas imports, and ample coal inventory in Europe. We also expect a lower API 2 price adjustment benefit as compared to 2023, which is factored into our guidance. We anticipate approximately 4.1 million tons of coal to be exported through CMT and approximately 3.8 million tons of non-coal throughput, such as iron ore, pet coke, and other products. Moving to the 2024 Guidance Summary on slide 11. Once again, we expect Consolidated Adjusted EBITDA to be between $240 and $255 million. Our domestic coke business is expected to run at full capacity, but with a lower coke-to-coke yield value on contracted coke sales due to lower coal prices. We expect to face significant headwinds due to weak commodity markets in the logistics segment, impacting both volumes and prices.

Our long term target has been always a gross leverage of three times or lower and that still remains the target right. Now we are in a position that.

We are well below that target and we are already happy with that but that's kind of our long term target then as we have discussed before we have this GPI project that we're working on.

Which will potentially require which will be potentially funded from <unk>.

Cash flow then some borrowing on the revolver.

Kind of what we have.

Kind of in front of us to make sure that we have.

We are within the target debt.

And so.

Yes.

I guess it'd be helpful to understand how much lower than three times.

Mike consider going.

For this year 2024.

How should we think about.

Uses of excess cash that you're generating free cash flow.

You have a you have a dividend.

What happens to the cash above and beyond that thank you.

Yes, so Lucas.

The way to think about is that one.

Mark W. Marinko: As indicated earlier, we anticipate our CapEx requirements in 2024 to be between $75 million and $80 million, which is lower than our normal annual run rate. We expect 2024 operating cash flow to be between $185 million and $200 million, driven by the reversal of favorable working capital billed in 2023. Our free cash flow is expected to be between $105 and $125 million.

Yes.

If he signs of GPI project and this project goes ahead, and we start spending capital on that.

Expect our leverage to go back to three times or so right. So the cash flow.

But we are going to be generating in 2024 is in anticipation to do kind of the same.

Dave for this project and spend on this project.

Okay.

Are you in discussions with the potential new owners of granite city.

Let's start there.

Yes so.

Catherine Gates: With that, I'll turn it back over to Kathy, who is wrapping up on slide 12. As always, safety is our first priority, and we'll continue to focus on strong safety and environmental performance in 2024. Robust safety and environmental standards that set Coke apart and are central to our reliable delivery of high quality Coke and logistics services. In 2024, we will continue to focus our efforts on adding new customers and products at CMT, as well as further broadening our Foundry and Spot Blast Coke customer base. As we've demonstrated in the past, we will pursue a balanced yet opportunistic approach to capital allocation. From a growth perspective, we continue to work on developing the Granite City GPI project. We continuously evaluate the capital needs of the business, our capital structure, and the need to reward our shareholders, and we will make capital allocation decisions accordingly. Looking beyond 2024, we see Suncoast being well-positioned for long-term success. We believe that Coke's supply will continue to exit the market as many assets are underinvested and significantly aging. Suncoke has the newest coke-making facilities in North America with the leading technology.

Lucas This is Catherine.

We are working with U S steel now on the ground and the GPI project and we look forward to working with <unk> in the future.

And.

Is it reasonable to expect that you could conclude a deal prior to the sale of U S steel to Nippon steel closing.

What do you think.

That's the all needs to close first before you can close.

Got it.

If any.

At all.

Yeah, Lucas what I would say is we're just continuing to work with the U S steel now and and that's really what our focus is on the GTI project and we'd welcome marking but net bond, but we can continue to work with U S steel on the project now.

Okay.

I appreciate it I'll turn it over thank you.

As a reminder that star one to register a question. Our next question comes from Nathan Martin of the Benchmark Company Nathan. Please go ahead.

Thanks, operator, good morning, everyone. Congratulations on a full year 'twenty three results and thanks for taking my questions.

Maybe just a quick follow on to Lucas's granite city line of questioning.

The other piece to consider grant city's contract I believe expires at the end of this year. So does that maybe put a little bit more pressure or speed up the process at all as far as coming to a decision ahead of the contract expired.

Operator: We continue to invest in our facilities to ensure that they are safe, efficient, reliable, and environmentally compliant. The strong operational performance that comes from these investments provides us with the basis to grow and diversify our customer and product base. With that, let's go ahead and open up the call for Q&A. Thank you. As a reminder, if you'd like to register any audio questions, please press star one. If you change your mind, please press star two, and please ensure you're unmuted when speaking. Our first question comes from Lucas Pipes of B Riley Securities. Lucas, the line is yours. Thank you very much, Operator. Good morning, everyone.

Thanks, Nathan co contract its actually part of our discussions with U S steel on the GPI project.

Third as expected.

The question was does that speed up the process at all you think or I mean can those things be mutually exclusive.

Could you extend that contract and still not come to an agreement on the CPI project.

Well, we are certainly continuing to work with U S steel and that the co contract as part of that I mean, we would expect as as part of the GPI project that the Coke plant would continue to supply the pope needed for GPI and run throughout the time that the project is being developed and constructed.

Lucas N. Pipes: My first question, my first question is on the balance sheet. Can you remind us what your... How do you kind of reflect on net debt targets and, ultimately, what is the goal? Is it to get to net debt zero? Some of your peers in the industry have already done that. Do you look to build a sufficient cash buffer to kind of pay off the debt kind of as you generate the cash or create a balance to take out the maturity when it comes due? Or are you ultimately looking to refinance it? Color.

Right and I think you said, obviously the goal would be to extend the contract maybe for another 10 years post completion of the project, assuming with absolutely LIBOR, especially.

Exactly you would envision that that contract would be coterminous with any jeep GPI.

Agreement.

Okay got it.

Maybe moving to the logistics business you guys mentioned in your prepared remarks in the slide deck as well, obviously about some pressures on the export coal front do you expect to lead to coal shipments being down this year at CMT.

Shantanu Agrawal: Yeah, Lucas, this is Shantanu. I can take that question. You know, our long-term target has always been a growth leverage of three times or lower. And that still remains the target, right? Right now, we are in a position where we are well below that target.

First I think you still have a take or pay there. How many turns is that is that true and then second I'd also looks like guidance implies year over year decline in the other product shipments from CMT as well.

Shantanu Agrawal: And we are already happy with that. But that's kind of our long-term target. And as we have discussed before, we have this GPI project that we are working on, which will potentially require funding from our cash flows and some borrowing on the revolver. And that's kind of what we have in front of us to make sure that we are within the target. And so. Yeah, I guess it would be helpful to understand how much lower than three times you might consider going, um, for this year 2024.

Is that right and then maybe could you update us on some of those initiatives you have going to increase shipments of some of those other products. I think you mentioned that a little bit in your closing remarks.

Thanks, Nathan Yes, I mean, so we do have a take or pay at CMT.

With our customer far full.

It's about 4 million tons. So we are going to be handling a little bit in excess of our guidance contemplates handling a little bit in excess of that minimum take or pay.

On the other product side, you know the guidance is a little bit lower than last year, but not significantly lower so.

Obviously as Katherine mentioned in our prepared remarks, one of our initiatives for this year is to kind of continue to look for opportunities at CMP and continue to look for other products additional products with TMT and Thats, what we are going to focus on this year.

Shantanu Agrawal: How should we think about? The opinions rendered herein are those of the guests and not necessarily those of Douglas. Yeah, so Lucas, I mean, the way to think about it is that once, you know, if we sign the GPI project, and this project goes ahead, and we start spending capital on that, we expect our leverage to go back to, you know, three times or so, right? So the cash flow that we're going to be generating in 2024 is an anticipation to save for this project and spend on this project. Okay. Have you been in discussions with the potential new owners of Granite City, or should we start there? Yeah, so Lucas, this is Catherine.

I appreciate that shop Noonan just to confirm is this the last year for the take or pay on the coal side of the business.

The contract can be extended and javelin is obviously a customer of ours and we're in continuous dialog with them.

Got it. Thank you Catherine and then maybe just one more.

On the domestic coke side of the business, you mentioned $3 6 million tons contracted already for this year remaining going through the year the foundry.

The spot market.

I think it would be helpful to get some more color from you guys on the health of both the foundry and even the export coal market today, and just how you see that shaping out shaping up excuse me for the rest of 2024.

Catherine Gates: We are working with U.S. Steel now on the GPI project, and we look forward to working with Nippon in the future, and, Is it reasonable to expect that you could conclude a deal prior to the sale of U.S. steel to Nippon Steel Closers? What do you think? That deal needs to close first before you can close the..., and many others. Yeah, Lucas, what I would say is, you know, we're just continuing to work with U.S. Steel now, and that's really what our focus is on the GPI project, and we'd welcome working with Nippon, but we can continue to work with U.S. Steel on the project now. Okay, I appreciate it. I'll turn it over.

Yeah, absolutely. So we're sold out for the first quarter on our spot sales and as we've said, we finalized a substantial portion of the foundry and the glass sales.

We expect to run ball as we have in the past, but we have to remember that the seaborne markets don't contract a year out.

So there is obviously, we expect to sell out, but where we're just going to be doing that in due course, and then on the foundry the foundry markets are strong and.

Those sales are <unk>.

Substantially finalized for 2024 or so.

We felt that looking out ahead.

Operator: Thank you. As a reminder, that's star one to register a question. Our next question comes from Nathan Martin of the Benchmark Company. Nathan, please go ahead. Thanks, operator. Good morning, everyone.

Alright, great.

I appreciate the comments thanks for the time I'll leave it there best of luck in 'twenty four.

Thank you.

We now have a follow up question from Lucas pipes of B Riley Securities Lucas The line that's yours.

Thank you again operator, thank you for taking my follow on question.

Sorry, if I missed it but.

Nathan Martin: Congratulations on your full year 23 results. And thanks for taking my questions. Maybe just a quick follow-on to Lucas's Grant City line of questioning. The other piece to consider is that Grant City's contract, I believe, expires at the end of this year, so does that maybe put a little bit more pressure on or speed up the process at all as far as coming to a decision ahead of that contract expiry? Thanks, Nathan. The co-contract is actually part of our discussion with U.S. Steel on the GPI project. Fair and as expected. So the question was, does that speed up the process at all, you think? Or, to put it another way, can those things be mutually exclusive?

What is the amount of.

Coke business that is not.

Not fixed or committed at this point.

That's the 650000 ton look is it the same as last year right and we mentioned that the mix the whole 650000 basketball rather than price and Thats, what we are selling into that foundry in spot glass book market.

Got it and Thats equivalent so that's some amount of foundries some amount of flash.

And I guess, you take the foundry times two to make it equivalent.

And so the way to think about it those those targets would be.

Catherine Gates: Like, you know, could you extend that contract and still not come to an agreement on the GPI project? Well, we're certainly continuing to work with U.S. Steel, and the Coke contract is part of that. I mean, we would expect, as part of the GPI project, that the Coke plant would continue to supply the Coke needed for GPI and run throughout the time that the project is being developed and constructed. Right, and I think you said obviously the goal would be to extend that contract maybe for another 10 years post-completion of the project, assuming that that moves forward eventually. Yeah. Exactly. You would imagine that that co-contract would be co-terminus with any GPI agreement.

Kind of.

Open to price movement, starting Q2, and then through the rest of the year.

The spot piece is foundry sales the way it works is more or less as Catherine said, we have finalized.

Sales of the foundry equal throughout the year and the price, but those are fixed at the start of the year.

<unk> side, which can fluctuate on the pricing Q2 and beyond.

And is that also a 650000 tonnes or is that a different a different number.

Catherine Gates: Okay, got it. Maybe moving to the logistics business, you guys mentioned in your prepared remarks, and I think it was in the slide deck as well, obviously, about some pressures on the export coal front that you expect to lead to coal shipments being down this year at CMT. First, I think you still have a take or pay there. How many tons is that? Is that true?

I don't know.

The total of foundry and spot glass is 650.

And what is the amount subject to spot price variation.

That is again I think just going back to what we said before Lucas.

B do not are not in a position to disclose the differential between the foundry index spot Glasgow because of the small nature of both the foundry and the spud last 12 markets.

Shantanu Agrawal: And then second, it also looks like guidance applies a year-over-year decline in the other product shipments from CMT as well. Is that right? And then maybe could you update us on some of those initiatives you have going to increase shipments of some of those other products? I think you mentioned that a little bit in your closing remarks, Gavin. Thanks, Nathan.

So so but you can you can think about right like out of the 650. There is a portion of foundry and there is a portion of spot. So the amount is.

Shantanu Agrawal: Yes, I mean, we do have a take or pay at CMT with our customer for full, which is for 4 million tons. So we're going to be handling a little bit in excess, or Guidance Contemplates handling a little bit in excess of that minimum take or pay. On the other product side, you know, the guidance is a little bit lower than last year, but not significantly lower. So, you know, obviously, as Katherine mentioned in her prepared remarks, one of our initiatives for this year is to, you know, kind of continue to look for opportunities at CMT and continue to look for other products, additional products at CMT. And that's what we are going to focus on this year. Appreciate that, Shantanu. And just to confirm, is this the last year for the take or pay on the poll side of the business?

Not significant.

Okay.

Okay.

A couple of hundred thousand tonnes is probably the right way to think about it that's subject to price.

Not I cannot comment on that.

And.

But differently.

Have you have you purchased have you committed a price.

For all the coal.

To convert into this coke.

Are you locked in on the <unk>.

No no Lucas we haven't.

Since we started doing this thought plus spot sales, we have kind of aligned.

Aligned our call part chooses to go with the Spyglass sales right as spotlight fields don't sell out more than three to six months in advance we tried to tie our coal purchases with that now obviously.

We're doing a mix of art and foundry. So we have to kind of think about that but we haven't fully bought our 2024 call needs because theres. Some sales up bought glasscock outstanding in the later half of the year.

Catherine Gates: The contract can be extended, and, you know, Javelin is obviously a customer of ours, and we're in continuous dialogue with them. Got it. Thank you, Catherine. And then, maybe just one more.

Got it.

Got it so essentially if you will.

Catherine Gates: On the domestic coke side of the business, you mentioned 3.6 million tons contracted already for this year, with the remaining going to the foundry and the spot market. I think it'd be helpful to get some more color from you guys on the health of both the foundry and even the export coke market today and just how you see that shaping up for the rest of 2024. Yeah, absolutely. So we're sold out for the first quarter on our stock Coke sales.

Try to kind of match that up in real time on the supply side is exactly right.

Got it okay. That's all.

Helpful.

And then.

Thank you very much Chuck.

In terms of the granite city.

Operations.

Yes.

Right.

Kind of.

On the Nippon steel.

U S steel.

Deal announcement, there there's been a lot of.

Coverage regarding the union and commitments to workers.

Catherine Gates: And, you know, as we've said, we finalized a substantial portion of the foundry in the blast sales. We expect to run full, you know, as we have in the past. But we have to remember that the Seabourn markets don't contract a year out.

Kind of across.

Across the island.

When you think about.

The labor impact of granite city.

And the pigs pig iron conversion project.

Catherine Gates: So, you know, obviously, we expect to sell out, but we're we're just going to be doing that in due course. And then on the foundry, you know, the foundry markets are strong. And, you know, those sales are substantially finalized for twenty twenty four. So we feel good looking out ahead.

What's your message on that I would appreciate your thoughts thank you.

Well the message there is that it.

Well the message there is that it.

The granite city GPI project is is something where we would look forward to working with the Union. We are working with U S steel now.

Nathan Martin: All right, great. I appreciate the comment. Thanks for your time. I'll leave it there, and best of luck in 24.

We work well with the United Steelworkers.

As you know most of our plants are unionized with the steelworkers, we worked well with them and we look forward to working with them on the GTI project.

Operator: Thank you. We now have a follow-up question from Lucas Pipes of B Riley Securities, Lucas Delilah-Jules. Thank you again, operator. Thank you for taking my follow-on question. Sorry if I missed it, but what is the amount of the coke business that is not?

Has the union taken a position on this conversion.

They have not.

Okay.

Alright, well I appreciate the color and.

Lucas N. Pipes: not fixed or committed at this point. That's 650,000 tons, Lucas. It's the same as last year, right? And we've mentioned, and it's the mix, the whole, that's a 650,000 blast scope equivalent, right? And that's what we are selling into the foundry and spot blast scope market. Got it. And that's equivalent. So that's some amount of foundry, some amount of blast. I guess you take the foundry times to make it equivalent. And so the way to think about it is that those times would be kind of open to price movement starting Q2, then through the rest of the year. The spot piece is foundry sales. The way it works is, more or less, as Katherine said, we have finalized the sales of the foundry folks throughout the year, and the price for those is fixed at the start of the year. It's the spot side, which can fluctuate on the pricing for Q2 and beyond. And is that also 650,000 tons, or is that a different number? No, no, no. The total of foundry and spot blast is 650. And what is the amount subject to the spot price variation?

To you and the whole team best of luck. Thank you.

Thank you.

We have no further questions on the lines with that I'll hand back to Katherine Gates President.

I wanted to thank everyone for joining us today and again, thank the <unk> team for their hard work. We're looking forward in 2024, and we see great potential to meet our financial targets and to create value for our stakeholders. So thank you.

Yes.

Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines.

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Shantanu Agrawal: That is, you know, again, I think just going back to what we said before, Lucas, we do not, are not in a position to disclose the differential between the foundry and the spot glass scope because of the small nature of both the foundry and the spot glass markets. So, but you can think about, right, like out of the 650, there is a portion of foundry, and there's a portion of spot, so the amount is... not the number. Okay, so a couple hundred thousand tons is probably the right way to think about it. That's subject to price.

Shantanu Agrawal: Not, I cannot comment on that, and put differently, have you purchased or committed a price for all the coal to convert into this code? Are you locked in on the internet side? No, no, Lucas, we haven't, you know, since we started doing these spot sales, we have kind of aligned our coal purchases to go with the spot blast sales, right? As spot blast sales don't sell out more than three to six months in advance, we try to tie our coal purchases to that.

Shantanu Agrawal: Now, obviously, you know, we're doing a mix of pot and foundry, so we have to kind of think about that, but we haven't fully bought our 2024 coal needs yet because there are some sales of spot blast coke outstanding in the later half. Got it, got it. So essentially, if you would try to kind of match that up in real time on the supply side, exactly. And then you would get it.

Shantanu Agrawal: Okay, that's, that's helpful. And yeah. And then, thank you very much, Shantanu. In terms of the Granite City deliberations, on a kind of on the issue of Nippon steel, U.S. steel. Steel announcement. There's been a lot of coverage regarding the union and commitments to workers, kind of across the aisle. And when you think about The Labor Impact of Granite City and the Pig Iron Conversion Project. What's your message on that? I would appreciate your thoughts and comments.

Catherine Gates: Well, the message there is that the Granite City GPI project is something we would look forward to working with the union. We're working with U.S. Steel now, and we work well with the United Steelworkers. As you know, most of our plants are unionized with steelworkers. We work well with them, and we look forward to working with them on the GPI project. Has the union taken a position on this conversion? They have not, um, all right.

Lucas N. Pipes: Well, well, I appreciate the color and, to you and the whole team, best of luck. Thank you. We have no further questions on the line, so with that, I'll hand back to Catherine Gates, President. I want to thank everyone for joining us today. And again, thank the Suncoast team for their hard work. We're looking forward to 2024, and we see great potential to meet our financial targets and to create value for our stakeholders.

Catherine Gates: So thank you. Ladies and gentlemen, this concludes today's call. Thank you for joining us. You may now disconnect your lines.