SunCoke Energy, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Safety is the first priority, with strong safety and environmental performance being a foundation for reliable delivery of coke and logistics services.
• Logistics business performed well; Domestic Coke was impacted by the Granite City contract extension economics and weak spot blast coke market.
• Extended Granite City coke supply agreement with U.S. Steel through September 30, 2025, with an option for U.S. Steel to extend for an additional 3 months.
• Ended Q1 with a strong liquidity position of $543.7 million, including $193.7 million cash balance and fully undrawn revolver of $350 million.
• Declared a $0.12 per share dividend payable on June 2, 2025.
• Reaffirmed full year consolidated adjusted EBITDA guidance of $210 million to $225 million.
• GPI project remains a top priority despite ongoing government delays.

Segment Performance

• Domestic Coke: First quarter adjusted EBITDA was $49.9 million with coke sales volumes of 898,000 tons. Its adjusted EBITDA contribution to consolidated adjusted EBITDA (which was $59.8 million) was approximately 83.4%. The 2025 Domestic Coke adjusted EBITDA guidance is in the range of $185 million to $192 million, with the assumption that the Granite City cokemaking agreement will be extended for an additional three months through the end of 2025.
• Logistics: Generated $13.7 million of adjusted EBITDA in the first quarter of 2025, compared to $13 million in the prior year. Throughput volumes for terminals were 5.7 million tons in Q1 2025 vs. 5.5 million tons in the prior year period, and CMT handled 2.4 million tons in Q1 2025 vs. 1.8 million in the prior year. The full year Logistics adjusted EBITDA guidance is $45 million to $50 million.

Guidance

• Reaffirmed full year consolidated adjusted EBITDA guidance range of $210 million to $225 million.
• Domestic Coke adjusted EBITDA guidance range remains $185 million to $192 million, assuming the Granite City cokemaking agreement is extended for an additional three months through the end of 2025.
• Logistics adjusted EBITDA guidance range remains $45 million to $50 million.
• Granite City coke supply agreement extended through September 30, 2025, with an option for U.S. Steel to extend for an additional 3 months.

Risks

• Spot blast coke pricing environment is highly challenged.
• Steel industry outlook is uncertain and volatile.
• Government delays are impacting the GPI project.
• Inventory build on the coal side was due to building inventories for the new coal blend at the start of the year, a normal seasonal occurrence.

Q: Nick Giles asked about the cadence of annual guidance implying an uplift in quarterly adjusted EBITDA and spoke to the Domestic Coke EBITDA.

A: Shantanu Agrawal said that the Cliffs contract at Haverhill II is being worked on to have shipments laid out more evenly throughout the year, with margins expected to pick up in the second half.

Q: Nick Giles asked about updated capital allocation priorities and other long-term growth opportunities.

A: Katherine Gates said they are disciplined in looking for profitable growth opportunities in areas where they have expertise, similar to the GPI project but in areas where they already have experience.

Q: Nick Giles asked about the driver of coal inventory build.

A: Mark Marinko said it was just building inventories for the new coal blend at the start of the year, a normal seasonal occurrence.

Q: Nathan Martin asked about CapEx spend.

A: Katherine Gates said they are being judicious with spending, likely not spending the full $65 million planned at the end of the year, deferring projects not immediate priorities.

Q: Nathan Martin asked about the health of foundry and export coke markets.

A: Katherine Gates said they are closely monitoring the environment, but it's hard to predict how long the weakness will persist.

Q: Nathan Martin asked about production at Haverhill.

A: Shantanu Agrawal said the lower production in Q1 was planned due to challenges in the spot coke market and is built into the full year Domestic Coke sales number.