Key Highlights

  • Adjusted EBITDA rose USD 17.8 million to USD 76.9 million, led by higher terminals volumes and favorable coke yields.
  • Revenue was USD 485.9 million, down slightly, and net income attributable was USD 21.8 million, or USD 0.25 per share.
  • Operating cash flow rose to USD 94.8 million from USD 9.2 million, and USD 53.5 million of revolver was repaid.
  • Free cash flow guidance rose to USD 180 million to USD 185 million, reflecting the Algoma Steel settlement.

Quarter Results

SunCoke Energy (NYSE:SXC) filed its quarterly report for the period ended Sept. 30 on Tuesday. Sales and other operating revenue were USD 485.9 million, compared with USD 487.0 million. Lower volumes after the shutdown of the Haverhill I cokemaking facility and the pass-through of lower coal prices were mostly offset by one additional month of Phoenix Global results and higher terminals handling volumes.

Operating income rose to USD 40.6 million from USD 13.4 million. Cost of products sold and operating expenses fell to USD 382.3 million from USD 407.9 million, while depreciation and amortization rose to USD 42.2 million from USD 37.4 million with the addition of Phoenix Global. Other income of USD 6.9 million reflected an insurance recovery tied to a 2023 flood at the Jewell cokemaking facility, which totaled USD 8.7 million, of which USD 1.8 million is in adjusted EBITDA.

Net income was USD 23.8 million, unchanged, as higher operating income was offset by income tax expense of USD 8.3 million compared with a benefit of USD 18.8 million that included capital investment tax credits. Net income attributable to the company was USD 21.8 million, or USD 0.25 per diluted share, versus USD 22.2 million, or USD 0.26.

Segment Results

Domestic Coke adjusted EBITDA rose USD 7.1 million to USD 51.1 million, mainly on a favorable mix of contract and spot coke sales. Sales volumes were 875,000 tons versus 951,000 tons, and adjusted EBITDA per ton rose USD 12.13 to USD 58.40. Capacity utilization was 99% versus 97%.

Industrial Services adjusted EBITDA rose USD 13.9 million to USD 32.1 million on higher handling volumes and the extra month of Phoenix results. Terminals handled 6.4 million tons versus 5.2 million, and steel customer volumes serviced were 5.9 million tons versus 3.8 million. Corporate and other expenses rose USD 3.2 million to USD 6.3 million on higher employee-related costs.

Nine Months, Cash and Capital

For the nine months, revenue rose to USD 1,416.3 million from USD 1,357.1 million, and adjusted EBITDA rose to USD 203.0 million from USD 162.5 million. Net income fell to USD 36.0 million from USD 46.7 million, reflecting the absence of the prior-year tax benefit, higher interest expense and higher depreciation. Operating cash flow was USD 140.3 million versus USD 52.5 million. The nine-month results also reflect lower energy revenues after a turbine failure at the Middletown cokemaking facility.

Cash was USD 57.6 million, and total borrowings were USD 607.0 million, including USD 500.0 million of 4.875% senior notes due 2029 and USD 107.0 million on the revolving facility, down from USD 193.0 million. Liquidity was USD 276 million and gross leverage was 2.34 times. The company declared a quarterly dividend of USD 0.12 per share, the 29th consecutive payment.

Guidance and Settlement

In October the company reached a settlement agreement on its claim against Algoma Steel. Management guided full-year free cash flow to USD 180 million to USD 185 million, higher on the settlement, and operating cash flow to USD 270 million to USD 285 million. Consolidated adjusted EBITDA is guided to modestly exceed the high end of the USD 250 million to USD 265 million range. Capital expenditures of USD 90 million to USD 100 million were maintained, with USD 20.9 million spent in the quarter. Management noted that anticipated insurance proceeds for the Middletown turbine are excluded from guidance, and that Industrial Services volumes typically slow in the fourth quarter.

Cokemaking Markers to Follow

Tracking points include Domestic Coke volumes after the Haverhill I shutdown, adjusted EBITDA per ton against USD 58.40, and terminals handling volumes against 6.4 million tons. Further items are the Middletown turbine insurance claim, revolver balance against USD 107.0 million, and seasonal fourth quarter volumes.