Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SunCoke Energy Inc (SXC, Financial) achieved consolidated adjusted EBITDA of $63.5 million in Q2 2024, positioning the company to reach the high end of its full-year guidance range.
- The Board of Directors approved a 20% increase in the quarterly dividend, reflecting confidence in the company's core business strength and stability.
- Domestic coke plants operated at full capacity, and logistics terminals handled 6 million tons during the quarter, showcasing operational efficiency.
- The logistics segment experienced strong performance, with a 12.2% increase in adjusted EBITDA compared to the previous year, driven by higher transloading volumes.
- SunCoke Energy Inc (SXC) ended Q2 with a strong liquidity position of $431.9 million, including a cash balance of $81.9 million and a fully undrawn revolver of $350 million.
Negative Points
- Consolidated adjusted EBITDA decreased from $74 million in Q2 2023 to $63.5 million in Q2 2024, primarily due to lower blast coke sales volumes.
- Lower coal-to-coke yields and reduced API2 price adjustment benefits negatively impacted the domestic coke segment's performance.
- The company anticipates a modest decline in total logistics handling tons in the second half of the year compared to the first half.
- Net cash used in operating activities was $9.3 million, negatively impacted by the timing of approximately $68 million of cash receipts at quarter-end.
- The domestic coke segment faced challenges with lower sales volumes and pricing, affecting overall financial performance.
Q & A Highlights
Q: How will the recent acquisition by your largest customer in Canada impact your future coke sales, especially with the June 2025 contract expiration?
A: Katherine Gates, CEO: We don't anticipate any change in the supply or demand for coke in the North American market due to the Stelco acquisition. If Cliffs uses Stelco's excess coke internally, we see an opportunity to pursue Stelco's former customers. Our strategy remains to run full and sell out, targeting various markets including North America and the seaborne market.
Q: Did you benefit from the Baltimore outage in terms of logistics volumes, and what are your expectations for volumes through CMT in the second half of the year?
A: Katherine Gates, CEO: We benefited from the Baltimore incident in the first half, which contributed to higher volumes. However, we expect softer volumes in the second half. Shantanu Agrawal, Investor Relations Manager: The API2 futures pricing has stabilized, and we don't foresee significant changes in demand or volumes through our terminals for the second half.
Q: Can you provide insights into the logistics business, particularly the new business secured at CMT and its future outlook?
A: Katherine Gates, CEO: The new business is primarily at our domestic terminals, not CMT. The increase in CMT volumes was due to shipments diverted from Baltimore. Shantanu Agrawal, Investor Relations Manager: The second quarter was better than the first, but the majority of new business and EBITDA growth is from domestic terminals.
Q: With the logistics business exceeding expectations, can you provide more details on the magnitude of the guidance increase?
A: Shantanu Agrawal, Investor Relations Manager: We are not providing a new guidance range but expect to exceed the current range based on strong first-half performance. The increase is mainly from domestic terminals, while CMT volumes remain within the original guidance.
Q: Regarding the domestic coke business, are there any planned outages in the second half, and how will they impact EBITDA and sales?
A: Shantanu Agrawal, Investor Relations Manager: We reaffirm our guidance of $238 million to $245 million. Sales and production are well-aligned, and planned outages are factored into our expectations. Typically, Q4 is our weakest quarter due to seasonality and preparation for winter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
