SunCoke loses money in 2014; still unable to sell its coal mining operations

SunCoke Energy Inc. (NYSE: SXC) on Jan. 29 reported a fourth quarter and full year 2014 consolidated net loss attributable to SXC of $65.4m and $126.1m, respectively.

These results include losses from discontinued operations, net of tax, of $40.1m in fourth quarter and $106m in full year 2014. Fourth quarter and full year 2013 consolidated net income attributable to shareholders was $11m and $25m, respectively.

“2014 was a year of transformation for SunCoke Energy, as we achieved solid operating performance across most of our domestic cokemaking fleet, began our transition to a pure-play GP with our first cokemaking asset dropdown, launched a $150 million share repurchase program and paid our first cash dividend,” said Fritz Henderson, Chairman and Chief Executive Officer of SunCoke Energy, Inc. “We faced our share of challenges as well. We weren’t able to sell the coal business. While we continue to explore coal sale options in 2015, we have aggressively rationalized these operations to reduce ongoing cash losses. Our Indiana Harbor turnaround is taking longer than we anticipated and we did not achieve our growth objectives in 2014. Each of these areas remain top priorities in 2015.”

The company expects 2015 Adjusted EBITDA from continuing operations to be between $225m and $245m. This outlook reflects a view for sustained solid operations in the Domestic Coke and Coal Logistics businesses and continued improvement at the Indiana Harbor coking facility in Indiana, offset by the standalone cost impact to the Jewel Coke facility in Virginia from the downsizing of the coal mining operations nearby that supply the plant with most of its coal.

Separately, pursuant to the previously announced phased plan to downsize the Coal Mining business, effective immediately, SunCoke is idling one mine and further reducing the Coal Mining business workforce. In addition, beginning in February, the company expects to retain contractors to operate its remaining two mines.

Total revenues from continuing operations of $388.1m was flat in fourth quarter 2014 compared with the same prior year period, reflecting the pass-through of lower coal prices on higher volumes in the Domestic Coke segment. Full year 2014 total revenues from continuing operations declined $112.8m from full year 2013 due to the pass-through of lower coal prices and lower volumes in the Domestic Coke business, partly offset by revenues contributed by the Coal Logistics business.

Total net loss attributable to SXC of $65.4m in fourth quarter and $126.1m in the full year 2014, include loss from discontinued operations, net of tax, of $40.1m and $106m, respectively. Discontinued operations consists of the Coal Mining business. In the fourth quarter of 2014 the company implemented a plan to rationalize coal mining operations, which included reducing coal production by 50%, eliminating positions and reducing operations at the coal preparation plant.

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.

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, Indiana, and along the Ohio, Big Sandy and Kanawha rivers in West Virginia and Kentucky. Coal Logistics handled 4,301 thousand tons of coal, contributing $3.4m to Adjusted EBITDA in fourth quarter 2014. Tons handled and Adjusted EBITDA in fourth quarter 2013 was 3,649 thousand and $4m, respectively.

2015 OUTLOOK

SunCoke’s 2015 guidance is as follows:

  • Domestic coke production is expected to be approximately 4.3 million tons
  • Adjusted EBITDA from continuing operations is expected to be between $225m and $245m
  • Adjusted EBITDA attributable to SXC is expected to be between $115m and $130m, reflecting the impact of public ownership in affiliate SXCP
  • Consolidated Adjusted EBITDA including discontinued operations and legacy costs is expected to be $190m to $210m
  • Capital expenditures are projected to be approximately $90m
  • Cash generated by operations is estimated to be between $125m and $145m
  • Cash taxes are projected to be between $10m and $15m

SunCoke Energy Inc. (SXC) is the largest independent producer of coke in the Americas. Its U.S. cokemaking facilities are located in Illinois, Indiana, Ohio and Virginia, and the global coke operations include facilities in Vitoria, Brazil, and Odisha, India. Through a 58% ownership of SunCoke Energy Partners LP (NYSE: SXCP), it has an interest in its coal logistics business that has the collective capacity to blend and transload more than 30 million tons of coal annually. It also holds about 90 million tons of proven and probable coal reserves in Virginia and West Virginia.

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.