Q1 2025 SunCoke Energy Inc Earnings Call
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Speaker Change: I would now like to turn the conference over to Mr. Chattanooga World, Vice President Finance and Treasurer. Please go ahead.
Speaker Change: Good morning, and thank you for joining us this morning to discuss <unk> Energy's first quarter 2025 results with me today are Katherine Gates, President and Chief Executive Officer, and Mark Marine Coe Senior Vice President and Chief Financial Officer. Following management's prepared remarks, we'll open the call for Q&A. This conference.
Katherine Gates: And we also expected that the price environment for this year was not going to get stronger. That's why we made the decisions to sell early in the year and are essentially sold out. So, I think what I can say is the price environment for the Coke, we feel good about having made those decisions to sell at the beginning of the year at the price we did, not the price we wanted, certainly. But I think that that was a sound decision, given what we're seeing this year.
Speaker Change: Call is being webcast live on the Investor Relations section of our website and a replay will be available later today, if we do not 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.
Katherine Gates: Really beyond that, very hard to say what the price environment looks like. And with respect to our, you know, our work with CLIFS, we're continuously in dialogue with them regarding our contract at Haverhill. So, that, that, those discussions move ahead even as, you know, we sit here in this, this otherwise, you know, kind of challenging environment. Okay, got it.
Speaker Change: 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 are reconciliations to non-GAAP financial measures discussed on today's call with that I'll now turn things over to Katherine.
Katherine Gates: Thanks, Anthony and good morning, and thank you for joining us on today's call. This morning, we announced Sanchez Energy's first quarter results I wanted to share a few highlights before turning it over to mark to discuss the results in detail.
Nathan Martin: I guess I would say even against that backdrop, you know, your EBITDA per ton, the domestic coke segment was $55. It was well above the $48 high end of your four-year guidance.
Shantanu Agrawal: So, you know, any thoughts there? Yeah, Nate, I mean, on that, you know, kind of you saw that like kind of in Q1 last year, we had some spot blast Coke sales, which we had very minimal of that this year. So that, you know, impacted on a profitability margin basis that kind of drove our EBITDA per tonne for Coke higher. But if you look at full year, I think we're going to go back to kind of what our guidance range is so that there's a little bit of timing factor that is getting played in. And you're going to see the impact of those lower margin blast Coke sales come into into the later half of the year.
Katherine Gates: We delivered strong results for the quarter and I want to thank all of our employees for their contributions to our results.
Katherine Gates: Our logistics business continued to perform well and as expected our domestic coke business was impacted by the granite city contract extension economics, as well as the weak spot market.
Katherine Gates: Together, we delivered consolidated adjusted EBITDA of $59 $8 million during the quarter.
Katherine Gates: As we discussed on our prior call the spot Glasgow pricing environment continues to be highly challenged but there is demand for our coke and we have essentially all spot blast in foundry Coke sales finalized for the full year.
Katherine Gates: Earlier today, we also announced a 12 cents per share dividend payable to shareholders on June <unk> 2025.
Nathan Martin: Okay, got it.
Shantanu Agrawal: Shantanu, just kind of going back to your answer to an earlier question, you know, the production from Haverhill, 200,000 tons in a quarter, well below your normal rates, you know, behind the four-year guidance, which is a little over a million tons. Was that kind of a timing thing too? Did I understand that correctly? Maybe just confirm. Yeah, that was planned, like kind of when we went out with the guidance, you know, in early this year, given what Katherine mentioned about challenges in the spot coke market and what we are seeing out ahead, what the, you know, pricing and the demand market environment looks like, that was planned that we will have a lower production in Q1 for Haverhill.
Katherine Gates: From a balance sheet perspective, we ended the first quarter with a strong liquidity position of $543 $7 million.
Katherine Gates: Our gross leverage was approximately 189 times on a trailing 12 month adjusted EBITDA basis at the end of the quarter.
Katherine Gates: Looking ahead, we have extended our granite city Coke supply agreement with U S. Steel through September 32025, with the option for U S steel to extend for an additional three months.
Katherine Gates: We continuously monitor the challenging market conditions, but do not see a significant impact to our operations at this time.
Shantanu Agrawal: And, you know, that's kind of built into our 4 million tons, approximately sales number for our domestic coke. Okay, great.
Katherine Gates: As a result, we are reaffirming our full year consolidated adjusted EBITDA guidance range of $210 million to $225 million.
Katherine Gates: With that I will turn it over to Mark to review, our first quarter earnings in detail Mark.
Nathan Martin: I'll leave it there. Appreciate the time and best of luck. Thank you.
Mark: Thanks Catherine.
Mark: Turning to slide four.
Mark: Net income attributable Suncook was <unk> 20 per share in the first quarter of 2025 down <unk> <unk> versus the prior year period.
Operator: Anyone who wishes to ask a question, please press star then 1.
Mark: Consolidated adjusted EBITDA for the first quarter of 2025 was $59 $8 million compared to $67 9 million in the prior year period the.
Operator: This concludes our question and answer session.
Katherine Gates: I would like to turn the conference back over to Katherine Gates, Chief Executive Officer and President, for any closing remarks. Thank you all again for joining us this morning and for your continued interest in SunCoke. We're well positioned to navigate the challenging market conditions and create value for shareholders.
Mark: The decrease in adjusted EBITDA was primarily driven by lower economics on the granite city contract extension and lower spot last Coke sales volumes in the Coke segment, partially offset by lower legacy black lung expenses and employee related costs in the corporate and other and higher transalta.
Katherine Gates: Let's continue to work safely today and every day. Thank you.
Mark: The volumes at CMT and logistics segment.
Mark: Moving to slide five to discuss our domestic coke business performance in detail.
Operator: The conference has now concluded. Thank you for attending today's presentation.
Operator: You may now disconnect.
Mark: First quarter domestic Coke adjusted EBITDA was $49 9 million in Coke sales volumes were 898000 tons the.
Mark: The decrease in adjusted EBITDA as compared to the prior year period was primarily driven by the lower economics and volumes at granite city from the contract extension.
Mark: Domestic coke results were additionally impacted by lower spot blast coke sales volumes due to timing and challenging market conditions.
Mark: While the steel industry outlook remains uncertain and volatile our coal production and sales plans remain on track or.
Mark: Our 2025 domestic coke guidance contemplated the lower sales during the first quarter and we are reaffirming our domestic coke adjusted EBITDA guidance range of $185 million to $192 million.
Mark: As a reminder, our guidance includes the assumption that our granite city Coke, making agreement will be extended for an additional three months through the end of 2025 now.
Mark: Now moving on to slide six to discuss our logistics business.
Mark: Our logistics business generated $13 7 million of adjusted EBITDA in the first quarter of 2025 as compared to $13 million in the first quarter of 2024.
Mark: The increase in adjusted EBITDA was primarily driven by higher trans loading volumes at CMT, partially offset by the absence of an index price adjustment benefit in Q1 2025.
Our terminals handled combined throughput volumes of pipe 7 million tonnes. During the first quarter of 2025 as compared to $5 5 million tons. During the same prior year period.
Mark: CMT handled two 4 million tons during the first quarter of 2025 as compared to $1 8 million in the prior year period.
Mark: Our previously announced barge unloading capital expansion project at <unk> is currently on time and on budget.
Mark: We're pleased with the strong performance from our logistics business in the first quarter.
Mark: As is the case with our domestic coke business. The market is volatile and things can change very quickly.
Mark: However, we do not currently expect a significant impact to our operations through the remainder of the year and reaffirm our full year logistics adjusted EBITDA guidance range of $45 million to $50 million.
Mark: Now turning to slide seven to discuss our liquidity position for Q1.
Mark: Suncook ended the quarter with a cash balance of $193 7 million and a fully undrawn revolver of $350 million.
Mark: Net cash provided by operating activities was $25 $8 million. The first quarter was impacted by a buildup of coal inventory, but we expect this to reverse during the year and our full year operating cash flow guidance is unchanged.
Mark: We spent $4 9 million on Capex and paid $10 9 million in dividends at the rate of <unk> 12 per share this quarter in.
Mark: In total we ended the quarter with a strong liquidity position of $543 $7 million with that I will turn it back over to Katherine.
Mark: Wrapping up on slide eight.
Mark: As always safety is our first priority and we are dedicated to maintaining our strong safety and environmental performance.
Mark: Safety and environmental standards that Sun Coke apart and are the foundation for our reliable delivery of high quality Coke and logistics services, we remain.
Mark: Focused on safely executing against our operating and capital plan and maintaining the strength of our core businesses as we navigate difficult market conditions.
Mark: At the same time as we are providing high quality Coke and logistics services, we are continually pursuing opportunities to grow our business and broaden our customer base.
Mark: As always we take a balanced yet opportunistic approach to capital allocation. The GPI project continues to be a top priority for us the strong fundamentals of the project remain unchanged. Despite our frustration with the ongoing government delays.
Mark: 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: Finally, we are reaffirming our full year consolidated adjusted EBIT guidance range of $210 million to $225 million.
Mark: With that let's go ahead and open up the call for Q&A.
Mark: Thank you.
Mark: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
Mark: If youre using a speakerphone please pick up your handset before pressing the keys.
Mark: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Mark: At this time, we will pause momentarily to assemble our roster.
Mark: The first question comes from Nick <unk> with B Riley Securities. Please go ahead.
Nick: Hey, good morning, everyone. Thanks for taking my questions. My first one is your annual guidance does imply an uplift in quarterly adjusted EBITDA from here. So I was wondering if you could speak to cadence.
Nick: Specifically as it relates to any assumptions in the second half as some contracts move around.
Nick: Theres more spot exposure.
Nick: I would have assumed that EBITDA should be somewhat stronger in the first half. So just wanting to get your take there.
Nick: Hey, Nick Good morning. This is Sean Im assuming youre talking about the domestic coke EBITDA right.
Nick: Correct, yes.
Nick: Yes, yes so.
Nick: That is true right like kind of so what's happening here is as you know that our cliff barn tracked.
Nick: At Haverhill, two as supposed to expire in June 2025.
Nick: But we are working with them to kind of have that shipment.
Nick: Kind of laid out more or less even leave it for the rest of the year or throughout the year.
Nick: So you will see some of those kind of.
Nick: Margins from those shipments come in the second half of the year.
Nick: That's what's kind of causing our.
Nick: Youre seeing a lower EBITDA in the first quarter, where you saw lower.
Nick: Domestic sales at low domestic and glass sales, but we expect to pick that up in the second half of the year.
Nick: Okay.
Nick: Got it that's very helpful. John Sir I appreciate that.
Nick: My next one was really just curious to hear an updated view on capital allocation priorities.
Nick: Really my question is while the GPI project remains on the drawing board.
Nick: What are their long term growth opportunities could you be considering.
Nick: Okay.
Nick: No great question.
Nick: Now as we've said and talked about last quarter, we continue to look for profitable growth opportunities beyond the GPI project.
Nick: We remain very very disciplined and looking for those long term or for those growth opportunities really they would have to be profitable and take into account the environment that we sit in today.
Nick: In order to reward our long term shareholders at the same time, we have we've said that we are going we expect to continue our dividend.
Nick: In 2025, and we think that that is a.
Nick: They're a very good way to deploy our capital to reward our long term shareholders.
Nick: And with the dividend we've been able to.
Nick: Continue that while still preserving cash to be able to do the granite city project. So the dividend fully takes into account the ability to do that.
Speaker Change: Janet City project as well.
Speaker Change: Got it no thanks for that Catherine I guess.
Speaker Change: As we think about other potential projects should we think about something thats similar to.
Speaker Change: The GPI project in nature would it be something more on the logistic side any any.
Speaker Change: Flavor of what what other opportunities could be.
Speaker Change: Well I think when I say that we're very disciplined we know that we need to look for growth opportunities in areas, where we can add value and where we already have.
Speaker Change: Theory, and so while I can't get into any specifics I think you can think about it in terms of areas, where we already have a level of expertise and we think that we can bring value to any potential growth opportunity just as we see ourselves being able to bring.
Speaker Change: That value to the GPI project.
Speaker Change: Yeah.
Speaker Change: Fair enough.
My last question was just curious what drove the inventory build on the coal side was this driven by weaker than expected spot cement or was this more attributable to shipment timing for instance.
Mark: Yes. This is mark.
Mark: It's really just at the beginning of the year you get a new coal blend in and we were just building the inventories for the year. It didn't have anything more than that its you will see some seasonality of that happening at this time of year in the first quarter or late Q4, so it's a fairly normal but we are.
Mark: Like I said, we expect that to reverse and we're reaffirming our cash flow guidance.
Mark: Got it.
Mark: Guys. Thanks for all the color I'll jump back in the queue, but continued best of luck.
Mark: Thank you.
Mark: Thank you.
Speaker Change: And if you have a question. Please press Star then one.
Nathan Martin: The next question comes from Nathan Martin with Benchmark Company. Please go ahead.
Nathan Martin: Thanks, operator, and good morning, everyone.
Nathan Martin: I wanted to start with Capex I noticed you guys spent $5 million it looked like in the first quarter.
Nathan Martin: In maintaining your full year guidance of 65 million catheter and I know I asked you last quarter about a possible cadences spend and I think you should be pretty steady so just.
Nathan Martin: What might have changed there.
Nathan Martin: Yes, no great question and really given some of the uncertainties that.
Nathan Martin: That we we obviously are all seen as.
Nathan Martin: As we look out ahead, we're just being very judicious with our spending.
Nathan Martin: At this point in time, we are likely to not spend the $65 million that we had planned for at the end of the year and again, that's really just about being judicious in light of this environment and making appropriate deferrals.
Nathan Martin: We will continuously evaluate those investment decisions, but we really at this point are just being very very cautious.
Speaker Change: Can I get some color around maybe what youre looking at deferring I think and you still had about 5 million left for the growth there.
Nathan Martin: I'm, assuming that's going to be finished up with any additional thoughts there.
Nathan Martin: Yes, and Thats correct I mean, the K R. T project is it's on track it's on budget. So yes, we will be we will be spending that capital.
Nathan Martin: Here in the next.
Nathan Martin: Couple of months as that project is completed beyond that what I would say is that we make appropriate deferrals for our projects that are.
Nathan Martin: Our let's say longer term or are not in immediate top priority at some of our plans as we've always said we.
Nathan Martin: We are investing in our plants as the long term reliable supplier of of Coke and logistics services. So we continue to invest and ensure that our assets are are there and ready to be the top performing assets over the longer term.
Nathan Martin: But at the same time as as you know we invest a lot of Capex in these businesses and that gives us some flexibility for things that are not immediate priority to be deferred when we're sitting in an environment like the one we are today.
Speaker Change: Okay. So could possibly include some things like deferred maintenance and things like that as well.
Nathan Martin: Yeah, that's correct.
Speaker Change: Okay perfect I appreciate that.
Speaker Change: Information.
Speaker Change: Might also be helpful to get some some additional thoughts on the health of the foundry export Coke markets. I mean, you guys called out essentially sold out there, but you also highlighted once again extreme challenges there I mean, how could you.
Speaker Change: How long could the weakness persists, what do you think.
Speaker Change: Tightens the market backup eventually.
Speaker Change: So they're taking taking the last part of that question first I mean, I think it's just where we're very we're very closely monitoring the environment I think it's very hard to know and I think you've heard from others. It's very hard to know exactly what the market is going to look like out ahead.
Speaker Change: I think we though it saw that the pricing environment and certainly the the work that cliffs is doing this year was such that we expected to not be contracting with cliffs for more coke beyond the contracts that we have with them for this year and.
Speaker Change: We also expected that the price environment for this year was not going to get stronger. That's why we made the decision to sell early in the year and are essentially sold out. So I think what I can say is the price environment for the Coke, we feel good about having made those decisions to sell at the beginning of the year at the price we did not the price.
Speaker Change: We wanted certainly, but I think that that was a sound decision given what we're seeing this year really beyond that very hard to say, what the price environment looks like and with respect to our our.
Speaker Change: Our work with cliffs, we're continuously in dialogue with them regarding our contracted have are held so that.
Speaker Change: That that those discussions move ahead, even as we sit here in this this otherwise kind of challenging environment.
Speaker Change: Okay got it.
Speaker Change: I guess I would say even against that backdrop your EBITDA per ton on domestic Coke segment was $55 was well above the $48 high end of your full year guidance.
Speaker Change: Any thoughts there.
Speaker Change: Yes.
Speaker Change: Nathan on back kind of you saw that like kind of in Q1 last year, we had some spot blast coke sales.
Speaker Change: We had very minimal of that this year, so that you know.
Speaker Change: Impacted on a profitability margin basis that kind of drove our EBITDA per ton.
Speaker Change: Cook higher but if you look at full year I think we're going to go back to kind of what our guidance ranges. So theres a little bit of timing factor that is getting played in and youre going to see the impact of those lower margin Glasgow sales come into into the later half of the year.
Speaker Change: Okay got it on the shelf and I was just kind of going back to the answer to an earlier question.
Speaker Change: The production from Robert Hill, 200000 tons in the quarter, well below normal rates behind the full year guidance, which is a little over a million tons.
Speaker Change: Was that kind of a timing thing to did I understand that correctly.
Speaker Change: Yes confirmed yes.
Speaker Change: Yes that was planned like kind of when we went out with the guidance.
Speaker Change: In our lead this year.
Speaker Change: Given what Katherine mentioned about challenges in the spot market and what we're seeing out ahead, what what the pricing and the demand environment looks like that was planned that we will have a lower production in Q1 for Howard Hill, and that's kind of built into our 4 million tons.
Speaker Change: Approximately the sales number for our domestic coke.
Speaker Change: Okay great.
Speaker Change: I'll leave it there I appreciate the time best of luck.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Anyone who wishes to ask a question. Please press Star then one.
Kathryn: This concludes our question and answer session I would like to turn the conference back over to Kathryn <unk>, Chief Executive Officer, and President for any closing remarks.
Kathryn: Thank you all again for joining us this morning and for your continued interest in Sun Coke, we're well positioned to navigate the challenging market conditions and create value for shareholders lets continue to work safely today and every day.
Kathryn: Thank you.
Speaker Change: Conference has now concluded. Thank you for attending today's presentation you may now disconnect.