Q2 2024 SunCoke Energy Inc Earnings Call
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Sarah Harriet: I would now like to turn our call over to the director of Investor Relations at Methanex Mrs. Sarah Harry. Please go ahead Ms Harriet.
Speaker Change: Good morning, everyone welcome to our second quarter 2024 results conference call. Our 'twenty 'twenty four second quarter news release management's discussion and analysis and financial statements can be accessed from the financial reports tab of the Investor Relations page on our website at Methanex Dot Com I would like to remind our listeners that our COO.
Speaker Change: <unk> and answers to your questions today may contain forward looking information. This information by its nature is subject to risks and uncertainties that may cause.
Speaker Change: Coke sales in the prior year period.
Speaker Change: Lower coal to coke yields on our long term take or pay contracts also impacted second quarter results.
As we mentioned in our first quarter call all spot glass and foundry Coke sales are finalized for the full year.
Our full year domestic coke sales ton guidance remains approximately $4 1 million tons and we are reaffirming our full year domestic coke adjusted EBITDA guidance of $238 million to $245 million now.
Speaker Change: Moving on to slide six to discuss our logistics business.
Speaker Change: Our logistics business generated $12 2 million of adjusted EBITDA in the second quarter of 2024 compared to $11 7 million in the second quarter of 2023.
Speaker Change: The increase in adjusted EBITDA was primarily due to higher trans loading volumes from our domestic terminals, partially offset by lower pricing at CMT due to limited API two price adjustment benefit during the quarter we.
Speaker Change: We expect some recovery of the API two price adjustment benefit in the third quarter.
Speaker Change: Our terminals handled combined throughput volumes of approximately 6 million tonnes. During the second quarter of 2024 as compared to $5 2 million tons. During the same prior year period.
Speaker Change: Our domestic coke terminals handled $3 5 million tons in the second quarter of 2024 as compared to $2 8 million tons. During the same prior year period, driven by new business.
Speaker Change: We are pleased with the strong results from our logistics segment in the first half of the year.
Speaker Change: We experienced very limited high water costs in the first and second quarters, which contributed to our favorable results.
Speaker Change: Additionally, our domestic terminals handled a total of $7 1 million tons, representing best first half performance in terms of volume in the past five years.
Speaker Change: For the second half of the year, while we expect solid operating performance from the logistics segment to continue we anticipate a modest decline in total logistics handling tons as compared to the first half.
Speaker Change: Our strong first half logistics performance, coupled with our outlook for the remainder of the year positions us well to exceed logistics full year 2020 for adjusted EBITDA and volume guidance.
Speaker Change: Now turning to slide seven to discuss our liquidity position for Q2.
Speaker Change: Suncor ended the second quarter with a cash balance of $81 $9 million and a fully undrawn revolver of $350 million.
Speaker Change: Net cash used in operating activities was $9 3 million and was negatively impacted by the timing of approximately $68 million of cash receipts at quarter end.
Speaker Change: We expect operating cash flow to normalize over the remainder of the year and we are reaffirming our full year operating cash flow guidance of 185 million to $200 million.
Speaker Change: We paid $8 4 million in dividends at the rate of <unk> 10 per share this quarter and spent $17 5 million on capex.
Speaker Change: Opex.
Speaker Change: In total we ended the quarter with a strong liquidity position of $431 $9 million with that I will turn it back over to Katherine.
Katherine: Thanks, Mark wrapping up on slide eight.
Katherine: As always safety is our first priority and we will continue to focus on strong safety and environmental performance.
Speaker Change: Safety and environmental standards that song health apart and are central to our reliable delivery of high quality Coke and logistics services.
Speaker Change: We remain focused on safely executing against our operating and capital plan for a full utilization of our coke making assets.
Speaker Change: We also continue to focus on adding new business at our logistics terminals. We are pleased with the results of our efforts so far with new business largely driving the highest first half volumes at our domestic terminals in the last five years.
Katherine: And while we were able to finalize all of our spot blast and foundry Coke sales for the full year, we continue to pursue future opportunities to broaden our customer base.
Katherine: As we've demonstrated in the past, we will pursue a balanced yet opportunistic approach to capital allocation.
Katherine: From a growth perspective, we continue to work on developing the granite city GPI project.
Katherine: The 20% quarterly dividend increase aligns with our capital allocation goal of rewarding long term shareholders.
Katherine: And reflects the strength and stability of our business we.
Katherine: 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.
Katherine: Finally, we are very pleased with the strong results in the first half of the year and coupled with our outlook for the balance of the year. We now expect to achieve full year consolidated adjusted EBITDA at the high end of our guidance range of $240 million to $255 million.
Speaker Change: With that let's go ahead and open up the call for Q&A.
Speaker Change: Thank you.
Speaker Change: We will now begin the question answer session.
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Speaker Change: As a reminder, if you are using a speakerphone. Please pick up your handset before asking your question, we will pull it briefly ask questions have adjusted.
Speaker Change: Your first question comes from Lucas pipes with B Riley Securities You May proceed.
Lucas Nathaniel Pipes: Thank you very much operator, good morning, everyone.
Lucas Nathaniel Pipes: My first question is in regards to the recent.
Speaker Change: Good morning.
Lucas Nathaniel Pipes: First question is in regards to the recent announcement from your large the largest customer.
Speaker Change: On an acquisition in Canada.
Speaker Change: Obviously, they will have to close but I wondered how you expect.
Speaker Change: This deal.
Speaker Change: Impacting your future Coke sales to this customer, especially in light of the June 2025 contract expiration.
Speaker Change: You very much.
Lucas: Thanks Lucas.
Speaker Change: Yes, so when we look at the Stelco acquisition, we don't see any change in supply or demand.
Speaker Change: As far as Coke in the North American market and therefore, no change in the overall coke balance.
Speaker Change: Got it so so so in terms of like.
Speaker Change: Any displacement from.
Speaker Change: Canada coming coming into Cleveland for example, you wouldn't you wouldn't expect that.
Speaker Change: Well, what I said was that there was no change in the overall coke balance so we.
Speaker Change: We don't know what a cliff will decide to do.
Speaker Change: But if we if the assumptions sort of in your question is that if cliffs is using cell coast access co.
Speaker Change: And instead of <unk>.
Speaker Change: Co selling that hope to another customer that they in turn took that excess coke and used it for themselves.
Speaker Change: From our perspective, we would see the customer that style co with selling too as an opportunity to potentially pursue that customer and since again. There is no change in the macro supply and demand we would do what we've always done which is to aim to run fall in sell out and.
Speaker Change: We would look to sell arco to either that potential customer other customers in the north American market for our spot spot glass Coke sales foundry Coke sales are of course, the seaborne market.
Speaker Change: And it's very helpful. I appreciate that clarity.
Speaker Change: A quick follow up on the logistics side.
Speaker Change: First.
Speaker Change: Did you see any benefit from the Baltimore outage in terms of volumes getting rebound it down to the Gulf.
Speaker Change: And then a major Illinois basin producer commented earlier this week that.
Speaker Change: Sulfur discounts are bit higher than that than they have been in it. So I wonder kind of what you expect for Q3 Q4 in terms of volumes through CMT. Thank you very much.
Speaker Change: Sure so with respect to the unfortunate incident in Baltimore, we did benefit from that unfortunate incident in the first half and we talked about that in our in our first quarter. Paul So when when you see us talk about hobby.
Paul: A softer second half that's really due to the higher volumes that we saw in the first half that arent getting replicated in the second half.
Speaker Change: Thank you could you can you.
Paul: Speak to the markets.
Speaker Change: Yeah, Yeah, I can take that I mean.
Speaker Change: From from an Illinois Basin coal perspective, right like if you look at the API do futures kind of.
Speaker Change: Pricing here, we don't I mean that has stabilized quite a bit after a really volatile 2003 in early 2004, so from an.
Speaker Change: Volumes of our demand perspective, what is going through our terminals. We are not seeing a huge change going from first half for the second half so.
Speaker Change: That's basically what our expectation is for the second half of the year right now.
Speaker Change: Very helpful. Thank you and then congratulations on the dividend increase that is that it's great to see.
Speaker Change: Catherine.
Speaker Change: Any any read through too.
Catherine: Future growth or would you say this is more of a reflection of kind of solid results to date.
Catherine: And it doesn't it doesn't really change your priorities if it comes to granite City pig Iron for example would appreciate your thoughts on that thank you.
Speaker Change: Well, absolutely. So we continue to work with U S steel on the GPI project that is still ongoing our engineering work is still ongoing.
Speaker Change: There has been no change in our focus with respect to the GPI a project as our number one growth focus and growth opportunity.
Speaker Change: It's just important to remember that and you know the fundamentals of that project are so strong.
Speaker Change: And it's certainly taken a.
Speaker Change: A long time and I think.
Speaker Change: That can be that can be a frustration, but if you really think about the fundamentals of that low cost iron ore the availability of the blast furnace the location of our Coke plant and the ability to send that high quality GPI then to Big River, that's really hard to replicate in the market and so we continue to.
Speaker Change: Strongly believe in the fundamentals of that project. We continue to work on at U S. Steel continues to work on it with us.
Speaker Change: So the increase in our dividend and the third.
Speaker Change: Year that we have increased our dividend.
Speaker Change: It fully reflects the GPI project with respect to the ability to increase that dividend.
Speaker Change: And we will continue to focus on capital allocation that rewards our long term shareholders.
Speaker Change: Kathryn and I appreciate all the color today. Thank you very much and to you and the team best of luck.
Kathryn: Thank you Lucas.
Speaker Change: Thank you. Your next question comes from Nathan <unk> with the benchmark. Okay. You May proceed.
Nathan: Thanks, operator, good morning, everyone.
Nathan: Good morning.
Speaker Change: Cyclical logistics for a second here big pickup obviously quarter over quarter, our CMT in particular.
Speaker Change: It sounds like that was light green material other than coal.
Nathan Pierson Martin: Can you talk about some of the new business you guys have secured there.
Speaker Change: How you see that playing out going forward.
Speaker Change: So so Nathan. Thank you you know, we're seeing the new business at our domestic terminal so.
Speaker Change: PMT continues to run well, but this is this is really add our domestic terminals, where we're seeing that business.
Speaker Change: And this is this is not the unfortunate sort of Baltimore.
Speaker Change: Bridge business for lack of a better term that we saw on the first half, but this is actual new business. That's coming in we can't talk about specific customers, but this is at our domestic terminal.
Speaker Change: And that's why you're seeing such high volumes for those domestic terminals the highest that we've had in the last five years.
Speaker Change: Okay. So then that makes sense Katherine increase youre, saying that CMT quarter over quarter was really just picking up.
Speaker Change: Shipments that were diverted away from Baltimore.
Speaker Change: That's correct and we had slightly higher volumes from a timing basis than expected in the in the first half.
Speaker Change: I mean, we did not get any benefit at CMP from about two more in today. It was all of the domestic terminal.
Speaker Change: Look if you're comparing Q2 to 23 to <unk> 24.
Speaker Change: I think I'm, not sure, which competitor you're talking about but it's roughly a 130000 tons picked up on CMP, which is which is pretty normal. It's nothing like outstanding asks are you comparing Q1 'twenty versus Q1 234, I just wanted to make sure that it.
Speaker Change: Got that.
Speaker Change: Yes, I was looking sequentially shoffner, because it was up six.
Speaker Change: 650000 tonnes plus or minus.
Speaker Change: Okay, Yeah, no I mean definitely the second quarter for CMT was much better than the first quarter obviously.
Speaker Change: As we mentioned if you remember when we gave over.
Speaker Change: 2020 for guidance, we were coming into the year with a very very soft market, but Jay kind of a reference to being a volatile market and that was kind of factored in in our original guidance right. In Q1 came in a little bit softer, but we saw a pick up in Q2 and that's what you can see the volume in that store.
Speaker Change: <unk> and its just kind of the normal volumes that being at CMT, So, but majority of the new business that pickup in the EBITDA and the reason behind then feed in the guidance is coming from the domestic logistics terminals.
Speaker Change: Okay got it so you're still kind of feel like CMP is going to normalize somewhere around maybe 2 million tons plus or minus per quarter.
Speaker Change: What kind of run rate.
Speaker Change: Yes, that's kind of what's factored into guidance right like kind of we give the volume guidance yes.
Speaker Change: Okay. Yeah, I was just trying to figure out if you know, which number is closer to what you guys expect moving forward. The one point that in the first quarter of the two and a half in the second quarter.
Speaker Change: Okay got it.
Speaker Change: I'll leave that one I mean, just really what it all comes down to right is just.
Speaker Change: The first half for the logistics business, you guys did $25 million EBITDA.
Speaker Change: For your guidance was 30 to 35, obviously, you now expect to exceed that range I mean could we get any thoughts on or.
Speaker Change: What kind of magnitude you're baking in at this point I mean is it 5 million $10 million you Didnt note, obviously the expectation for oils has slowed down somewhat in the second half.
Speaker Change: It would be great to get your thoughts on your own.
Speaker Change: Forecaster.
Speaker Change: Yeah.
Speaker Change: I mean at this point, we are not providing a new guidance range. We are just saying that we are going to exceed the guidance range. So yeah. I mean, you know obviously, we need to see how the second half plays out and it will get an idea, but we feel very comfortable that we'll be in a kind of a below our guidance range based on the post.
Speaker Change: Top performance and I'm going back to kind of your first question right like so our full year guidance for CMP was $4 1 million tons for oil and $3 8 million tons, what other products and that.
Speaker Change: We said that we are going to exceed the volumes, but for CMT. You can think about the guidance on those volumes remain unchanged majority of the pickup is coming through the domestic terminal.
Speaker Change: Okay got it that's all.
Speaker Change: Sean I appreciate that and then maybe just shifting over to the domestic coke business quickly.
Speaker Change: You guys mentioned last quarter. Some planned outages I think here in the second half with industrial because of how do you expect that to impact maybe EBITDA per ton in sales in the second half versus what you saw in the first half I think typically sales remain fairly consistent but would just be great to get your thoughts.
Speaker Change: Yeah.
Speaker Change: Expectation as we as we report reaffirming our guidance for 230 year to $45 million.
Speaker Change: That still remains the case, you know kind of this year.
Speaker Change: <unk> of the sales and production have aligned really Val Unlike the last quarter of Q2 up 23 was a record quarter.
Speaker Change: Driven by the timing of the shipment you can see right like be stored 46000 tons more than what we produced last quarter and 23, but for 2024 hour sales and production are pretty well aligned we did mentioned that we have some outages into the second in the second half of the year, which is factored in.
Speaker Change: So, yes, I think I think it should be pretty consistent if you look at the Gwen surely quarter over quarter and traditionally Q4 has been kind of our weakest quarter with production in getting quite a bit with outages and us getting ready for the winter and everything so we expect backlog to be similar.
Speaker Change: This year as well.
Speaker Change: Typical seasonality okay perfect.
Speaker Change: Appreciate it that's something I'll leave it there best of luck to dogs in the second half.
Nathan: Thanks Nathan.
Nathan: Thank you Nathan.
Speaker Change: Question, just as a reminder, in store fleet by one to register for a question.
Speaker Change: Okay.
Speaker Change: We have no questions registered so I would like to hand, it back to Katherine gates, President and CEO.
Katherine T. Gates: Some quick energy for some final remarks.
Katherine T. Gates: Thank you all again for joining us this morning and for your continued interest in Stanhope, let's continue to work safely and create value for all of our stakeholders.
Speaker Change: Thank you all for joining the Suncor energy second quarter 2024 earnings call. You may now disconnect from the call and please enjoy the rest of your day.
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