SunCoke Energy reports loss for Q1 2015; coal operations still for sale

SunCoke Energy (NYSE: SXC) on April 23 reported a first quarter 2015 loss from continuing operations attributable to shareholders of $2.0 million, as compared to a loss of $1.8 million in the same prior year period, as an improvement in its cokemaking operations was offset by Granite City dropdown transaction and financing costs.

“Anchored by our focus on operations, we delivered nearly a $10 million improvement in Adjusted EBITDA from continuing operations in the first quarter despite challenging winter weather,” said Fritz Henderson, Chairman and Chief Executive Officer of SunCoke Energy. “Our continued commitment to delivering strong operating performance across our business, underpinned by our long-term, take-or-pay coke contracts, supports our outlook to achieve our previously disclosed 2015 financial guidance. It also underscores our ability to continue to prudently return capital to shareholders as we recently did with the 28 percent increase to our quarterly cash dividend and through additional capital allocation initiatives we intend to pursue.”

The company’s Domestic Coke segment consists of cokemaking facilities and heat recovery operations at the Jewell (Virginia), Indiana Harbor (Indiana), Haverhill (Ohio), Granite City (Illinois) and Middletown (Ohio) plants.

Loss from discontinued operations, net of tax, and Adjusted EBITDA loss from discontinued operations was $2.0 million and $3.1 million in first quarter 2015, respectively. Discontinued operations consists of the company’s Coal Mining business, located mainly in southwest Virginia near its Jewell coke plant. “While we continue to pursue a strategic exit from our Coal Mining business, we are executing on our previously announced coal rationalization plan by implementing a contract mining model, eliminating positions and purchasing coal from third-party providers,” SunCoke noted.

In July 2014, SXC’s Board of Directors authorized the sale and/or disposition of the coal mining business. As a result, the coal mining operations are reflected as discontinued operations. Prior periods have been reclassified to reflect discontinued operations and held-for-sale presentation.

The company reaffirmed its 2015 guidance:

  • Domestic coke production is expected to be approximately 4.3 million tons
  • Domestic coke Adjusted EBITDA per ton is expected to be between $55 per ton and $60 per ton
  • Adjusted EBITDA from continuing operations is expected to be between $225 million and $245 million
  • Consolidated Adjusted EBITDA including discontinued operations and legacy costs is expected to be between $190 million to $210 million
  • Adjusted EBITDA attributable to SXC is expected to be between $115 million and $130 million, reflecting the impact of public ownership in SXCP
  • Capital expenditures are projected to be approximately $90 million
  • Cash generated by operations is estimated to be between $125 million and $145 million
  • Cash taxes are projected to be between $10 million and $15 million

SunCoke Energy Inc. supplies high-quality coke to the integrated steel industry under long-term take-or-pay coke contracts that pass through commodity and certain operating costs to customers. It utilizes an innovative heat-recovery cokemaking technology that captures excess heat for steam or electrical power generation. It is the sponsor of SunCoke Energy Partners LP (NYSE: SXCP), a publicly traded master limited partnership, holding a 2 percent general partner interest, 56 percent limited partnership interest and all of the incentive distribution rights. In addition, it owns approximately 110 million tons of proven and probable coal reserves in Virginia and West Virginia, which are the operations now up for sale.

SunCoke Energy Partners on April 23 separately reported first quarter 2015 net income attributable to SXCP of $12.6 million, down slightly from the prior year period. Current period results reflect year over year improvement in coke operating performance, increased ownership interest in the Haverhill and Middletown cokemaking facilities, as well as the impact of the January 2015 dropdown of a 75% interest in the Granite City cokemaking operation, offset by transaction and financing costs.

“SXCP has grown considerably versus first quarter of last year,” said Henderson, Chairman and Chief Executive Officer of SunCoke Energy Partners. “Our business has benefited from stronger operations as well as the acquisition of a 75 percent interest in the Granite City cokemaking operations and increased ownership interest in our Haverhill and Middletown facilities. This drove significant growth in distributable cash flow and supported strong and consistent increases to cash distributions per unit. Our current outlook is to exit 2015 with an annualized cash distribution per unit rate of $2.42, up 12 percent from our annualized per unit fourth quarter 2014 rate and 47 percent higher than our minimum distribution.”

Its Domestic Coke segment consists of its interesst in the Haverhill, Middletown and Granite City cokemaking facilities, located in Franklin Furnace and Middletown, Ohio; and Granite City, Illinois, respectively.

The Coal Logistics segment consists of coal handling and blending operation at Lake Terminal in East Chicago, Indiana, and Kanawha River Terminals LLC, which has terminals along the Ohio, Big Sandy and Kanawha rivers in West Virginia and Kentucky. The coal handling terminals have the collective capacity to blend and transload more than 30 million tons of coal each year and are strategically located to reach key U.S. ports in the Gulf Coast, East Coast and Great Lakes.

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.