Coke and coal producer SunCoke Energy Inc. (NYSE: SXC) on July 24 reported a second quarter 2014 net loss attributable to shareholders of $49.2m.
This result includes $51m of costs for the net after-tax impact of a $103.1m Coal Mining segment impairment charge. Excluding these non-cash charges, second quarter 2014 net income was $1.8m. Second quarter 2013 net income was $5.7m.
“Excluding impairment charges, Adjusted EBITDA in the second quarter was driven by the contribution of our new Coal Logistics business and higher fees earned at Indiana Harbor due to last fall’s contract renewal,” said Fritz Henderson, Chairman and Chief Executive Officer of SunCoke Energy,. “Our coal mining business performed as expected and benefited from a favorable contingent consideration adjustment and lower cash production costs. We continue to expect to generate full year Adjusted EBITDA of between $220 million and $240 million, excluding impairment and exit costs related to our coal mining business.”
Total revenues fell 7.8% to $372.2m in second quarter 2014 versus same prior year period due to the pass-through of lower coal prices and reduced coke sales volumes in the Domestic Coke segment and a nearly $16 per ton decline in average coal sales price and lower sales volumes in the Coal Mining segment. Offsetting these declines was revenue contributed by the new Coal Logistics business.
Domestic Coke consists of cokemaking facilities and heat recovery operations at the Jewell (Virginia), Indiana Harbor (Indiana), Haverhill (Ohio), Granite City (Illinois) and Middletown (Ohio) plants. Sales volume in the second quarter was 1.059 million tons, against 1.074 million tons in the year-ago quarter. Adjusted EBITDA increased $3m due to a higher fee per ton of coke sold at Indiana Harbor and improved performance at Granite City, partly offset by lower coal-to-coke yields and higher costs at Haverhill.
Coal Mining consists of metallurgical coal mining activities conducted in southwest Virginia and southern West Virginia. A substantial portion of the metallurgical coal produced by the coal mining operations is sold to the Jewell Coke facility for conversion into coke. Coal output was 336,000 tons last quarter, down from 367,000 tons in the year-ago period. The average sales price was $98.64/ton last quarter, compared to $114.18/ton in the second quarter of 2013.
Adjusted EBITDA in the Coal Mining segment reflects the negative impact of lower average sales price and volumes, offset by a $4.3 million favorable fair value adjustment to a Harold Keene Coal Co. Inc. (HKCC) contingent consideration arrangement and $4 per ton reduction in cash production costs.
Effective in the third quarter 2014, the Coal Mining segment will be considered as “held for sale” and will be reflected as discontinued operations for future financial reporting.
The Coal Logistics segment consists of the coal handling and blending services operated by SXCP as a result of its acquisitions of Lake Terminal in third quarter 2013 and Kanawha River Terminals LLC (KRT) in fourth quarter 2013. SXCP’s coal handling and blending terminals are located in East Chicago, Ind., and along the Ohio, Big Sandy and Kanawha rivers in West Virginia and Kentucky. Coal Logistics handled 5,605 thousand tons of coal, contributing $5m to Adjusted EBITDA.
SunCoke is predicting that domestic coke production will be approximately 4.2 million tons this year.
Excluding impairment charge and costs related to the exit from the Coal Mining segment, consolidated Adjusted EBITDA is expected to be between $220m and $240m. Adjusted EBITDA attributable to SXC is expected to be between $160m and $177m
SunCoke Energy is the largest independent producer of coke in the Americas, with 50 years of experience supplying coke to the integrated steel industry. Through its 56% ownership of SXCP (SunCoke Energy Partners), it has an interest in SXCP’s coal logistics business, which has the collective capacity to blend and transload more than 30 million tons of coal annually.