SunCoke net income dips in Q3, but company expects strong 2013

SunCoke Energy (NYSE: SXC) on Oct. 25 reported third quarter 2013 net income attributable to shareholders of $6.2m, down from net income attributable to shareholders of $31.6m in third quarter 2012.

“In the third quarter, we delivered solid Adjusted EBITDA of more than $50 million despite continuing challenges in our coal mining business, the refurbishment of our Indiana Harbor cokemaking facility and higher corporate expenses primarily associated with our recent acquisitions,” said Fritz Henderson, Chairman and CEO of SunCoke Energy. “We laid important groundwork for future earnings growth with our 10-year Indiana Harbor contract extension, which provides for a return on our refurbishment capital. This, plus our recent acquisitions, are expected to add approximately $25 million to consolidated Adjusted EBITDA next year.”

Henderson added: “As for the rest of 2013, we expect to end the year in the upper half of our original guidance ranges. We now anticipate full year 2013 Adjusted EBITDA to be between $215 million to $230 million and earnings per share to be $0.35 to $0.55.”

In third quarter 2013, total revenues were down 18.7% to $390.5m versus third quarter 2012 due to the pass-through of lower coal prices in the cokemaking business and a $46 per ton decline in average coal sales price in the Coal Mining Segment in Virginia and West Virginia, partly offset by higher coal sales volume.

Operating income and Adjusted EBITDA declined by $25.4m and $23m in third quarter 2013, respectively, primarily due to lower performance in the Coal Mining Segment and Indiana Harbor cokemaking facility as well as higher corporate expenses primarily driven by acquisition costs. Also impacting operating income was $1.7m of accelerated depreciation at Indiana Harbor, which is undergoing a major refurbishment.

SunCoke sold about 1.1 million tons of domestic coke production in both the third quarter of this year and the same three-month period in 2012.

SunCoke’s coke plants bake metallurgical coal, which is mostly bought from outside coal producers, into coke for the steelmaking process. Coal Mining consists of metallurgical coal mining activities in Virginia and West Virginia. A substantial portion of the met coal produced by the coal mining operations is sold to the company’s Jewell Coke plant in Virginia for conversion into coke.

Coal production in the third quarter was 351,000 tons, against 349,000 tons in the year-ago quarter. The coal sales price per ton last quarter was $119.64, which excludes transportation costs, against $165.17/ton in the year-ago quarter.

SunCoke also has a Coal Logistics business that consists of the coal handling and blending terminal of Lakeshore Coal Handling Corp., which was acquired in August. In the future, this segment will also include the results of the Kanawha River Terminals LLC (KRT) acquisition, which closed on Oct. 1. The Coal Logistics Segment contributed $0.7m to Adjusted EBITDA on revenues of $1.1m in third quarter 2013, which reflects higher than expected volume and lower operating costs. Total coal handled by Lake Terminal in third quarter 2013 was 136,000 tons.

SunCoke’s 2013 guidance includes:

  • Domestic coke production is expected to be about 4.3 million tons
  • Coal production is projected to be around 1.4 million tons
  • Adjusted EBITDA is expected to be between $215m and $230m on a consolidated basis.

Under a deal with recently launched affiliate SunCoke Energy Partners LLC, SunCoke Energy anticipates making make-whole payments as a result of temporarily trimming coke production at the Middletown coke facility in Ohio to the nameplate capacity level in the second half of 2013 due to the customer’s (AK Steel) unplanned blast furnace outage in late June 2013.

SunCoke Energy is the largest independent producer of coke in the Americas, with 50 years of experience supplying coke to the integrated steel industry. Its U.S. cokemaking facilities are located in Virginia, Indiana, Ohio and Illinois.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.