[ad_1]
SunCoke Vitality, Inc. (NYSE:SXC) Q2 2024 Earnings Convention Name July 31, 2024 11:00 AM ET
Firm Contributors
Shantanu Agrawal – Vice President, Finance and TreasurerKatherine Gates – PresidentMark Marinko – Senior Vice President and Chief Monetary Officer
Convention Name Contributors
Lucas Pipes – B. Riley SecuritiesNathan Martin – Benchmark
Operator
Good morning. Thanks all for attending the SunCoke Vitality Second Quarter 2024 Earnings Name. My identify is Brika, and I will likely be your moderator in the present day. All strains will likely be muted through the presentation portion of the decision with a possibility for questions and solutions on the finish.
I’d now wish to go the convention over to your host, Shantanu Agrawal, VP Investor Relations at SunCoke Vitality Thanks. Chances are you’ll proceed, Shantanu.
Shantanu Agrawal
Thanks, Brika. Good morning, and thanks for becoming a member of us this morning to debate SunCoke Vitality’s second quarter 2024 outcomes. With me in the present day are Katherine Gates, President and Chief Government Officer, and Mark Marinko, Senior Vice President and Chief Monetary Officer.
Following administration’s ready remarks, we’ll open the decision for Q&A. This convention name is being webcast stay on the Investor Relations part of our web site, and a replay will likely be out there later in the present day. If we don’t get to your questions on the decision in the present day, please be happy to achieve out to our Investor Relations workforce.
Earlier than I flip issues over to Katherine, let me remind you that the assorted remarks we make on in the present day’s name relating to future expectations represent forward-looking statements. The cautionary language relating to forward-looking statements in our SEC filings apply to the remarks we make in the present day. These paperwork can be found on our web site as are reconciliations to non-GAAP monetary measures mentioned on in the present day’s name.
With that, I will now flip issues over to Katherine.
Katherine Gates
Thanks. Shantanu. Good morning and thanks for becoming a member of us on in the present day’s name. This morning, we introduced SunCoke Vitality’s second quarter outcomes. I wish to share a number of highlights earlier than turning it over to Mark to debate the ends in element.
First, I wish to thank all of our staff for his or her contributions to our outcomes. Our home coke crops continued to run at full capability and our logistics terminals once more had sturdy outcomes, dealing with 6 million tons through the quarter. Via our collective efforts, we delivered consolidated adjusted EBITDA of $63.5 million through the quarter. This sturdy efficiency within the first half of the yr positions us effectively to realize the excessive finish of our full yr 2024 adjusted EBITDA steerage vary.
We additionally introduced in the present day that the Board of administrators authorised a 20% improve in our quarterly dividend from $0.10 to $0.12 per share. The will increase affected the subsequent quarterly cost date of September 3, 2024. This improve displays the arrogance of our Board and administration workforce within the energy and stability of our underlying core companies. Our gross leverage remained beneath 2 occasions at roughly 1.93 occasions on a trailing 12-month adjusted EBITDA foundation on the finish of the quarter. We proceed to deal with executing in opposition to our 2024 key initiatives and now count on to realize the excessive finish of our full yr adjusted EBITDA steerage vary of $240 million to $255 million.
With that, I will flip it over to Mark to evaluate our second quarter earnings intimately. Mark?
Mark Marinko
Thanks, Katherine. Turning to Slide 4. Our internet earnings attributable to SunCoke was $0.25 per share within the second quarter of 2024, up $0.01 versus the prior yr interval. The rise was pushed by decrease depreciation, tax and internet curiosity expense, which was principally offset by decrease gross sales volumes and pricing in our home coke phase.
Consolidated adjusted EBITDA for the second quarter of 2024 was $63.5 million in comparison with report second quarter ends in the prior yr of $74 million. The lower in adjusted EBITDA was primarily pushed by decrease blast coke gross sales volumes as a consequence of timing of spot gross sales within the prior yr quarter, decrease coal-to-coke yields and decrease API2 value adjustment profit at CMT partially offset by increased transloading volumes at our home logistics terminals.
Transferring to Slide 5 to debate our home coke enterprise efficiency intimately. Second quarter home coke adjusted EBITDA was $57.9 million and coke gross sales volumes had been 973,000 tons. Whereas the home coke fleet continued to run at full capability, the lower in adjusted EBITDA as in comparison with the report prior yr interval was primarily pushed by decrease blast coke gross sales volumes as a result of timing of spot blast coke gross sales within the prior yr interval. Decrease coal-to-coke yields on our long run take or pay contracts additionally impacted second quarter outcomes. As we talked about in our first quarter name, all spot blast and foundry coke gross sales are finalized for the total yr. Our full yr home coke gross sales ton steerage stays roughly 4.1 million tons and we’re reaffirming our full yr home coke adjusted EBITDA steerage of $238 million to $245 million.
Now shifting on to Slide 6 to debate our logistics enterprise. Our logistics enterprise generated $12.2 million of adjusted EBITDA within the second quarter of 2024, in comparison with $11.7 million within the second quarter of 2023. The rise in adjusted EBITDA was primarily as a consequence of increased transloading volumes from our home terminals, partially offset by decrease pricing at CMT as a consequence of restricted API2 value adjustment profit through the quarter. We count on some restoration of the API2 value adjustment profit within the third quarter. Our terminals dealt with mixed throughput volumes of roughly 6 million tons through the second quarter of 2024 as in comparison with 5.2 million tons throughout the identical prior yr interval. Our home coke terminals dealt with 3.5 million tons within the second quarter of 2024 as in comparison with 2.8 million tons throughout the identical prior yr interval, pushed by new enterprise.
We’re happy with the sturdy outcomes from our logistics phase within the first half of the yr. We skilled very restricted excessive water prices within the first and second quarters, which contributed to our favorable outcomes. Moreover, our home terminals dealt with a complete of seven.1 million tons, representing finest first half efficiency by way of quantity previously 5 years. For the second half of the yr, whereas we count on strong working efficiency from the logistics phase to proceed, we anticipate a modest decline in complete logistics dealing with tons as in comparison with the primary half. Our sturdy first half logistics efficiency coupled with our outlook for the rest of the yr positions us effectively to exceed logistics full yr 2024 Adjusted EBITDA and quantity steerage.
Now turning to Slide 7 to debate our liquidity place for Q2. SunCoke ended the second quarter with a money stability of $81.9 million and a totally undrawn revolver of $350 million. Web money utilized in working actions was $9.3 million and was negatively impacted by the timing of roughly $68 million of money receipts at quarter finish. We count on working money move to normalize over the rest of the yr, and we’re reaffirming our full yr working money move steerage of $185 million to $200 million. We paid $8.4 million in dividends on the price of $0.10 per share this quarter and spent $17.5 million on CapEx. In complete, we ended the quarter with a robust liquidity place of $431.9 million.
With that, I’ll flip it again over to Katherine.
Katherine Gates
Thanks, Mark. Wrapping up on Slide 8. As at all times, security is our first precedence, and we are going to proceed to deal with sturdy security and environmental efficiency. Strong security and environmental requirements set SunCoke aside and are central to our dependable supply of high-quality coke and logistics providers. We stay targeted on safely executing in opposition to our working and capital plan for full utilization of our coke-making property. We additionally proceed to deal with including new enterprise at our logistics terminals.
We’re happy with the outcomes of our efforts to date, with new enterprise largely driving the best first half volumes at our home terminals within the final 5 years. And whereas we had been in a position to finalize all of our spot blast and foundry coke gross sales for the total yr, we proceed to pursue future alternatives to broaden our buyer base. As we have demonstrated previously, we are going to pursue a balanced but opportunistic strategy to capital allocation. From a development perspective, we proceed to work on growing the Granite Metropolis GPI venture. The 20% quarterly dividend improve aligns with our capital allocation objective of rewarding long-term shareholders and displays the energy and stability of our enterprise. We repeatedly consider the capital wants of the enterprise, our capital construction and the necessity to reward our shareholders, and can make capital allocation choices accordingly.
Lastly, we’re more than happy with the sturdy ends in the primary half of the yr, and matched with our outlook for the stability of the yr, we now count on to realize full yr consolidated adjusted EBITDA on the excessive finish of our steerage vary of $240 million to $255 million.
With that, let’s go forward and open up the decision for Q&A.
Query-and-Reply Session
Operator
Thanks. We are going to now start the query and reply session. [Operator Instructions] Your first query comes from Lucas pipes with B. Riley securities. Chances are you’ll proceed.
Lucas Pipes
Thanks very a lot, operator. Good morning, everybody. My first query is regarding the current…
Katherine Gates
Good morning, Lucas.
Lucas Pipes
My first query is regarding the current announcement out of your largest buyer on an acquisition in Canada. Clearly, nonetheless has to shut, however I puzzled the way you count on this deal impacting your future coke gross sales to this buyer, particularly in mild of the June 2025 contract expiration? Thanks very a lot.
Katherine Gates
Thanks, Lucas. Yeah. So after we take a look at the Stelco acquisition, we do not see any change in provide or demand so far as coke within the North American market and due to this fact, no change within the total coke stability.
Lucas Pipes
Obtained it. So, by way of, like, any displacement from Canada coming into Cleveland, for instance, you would not — you would not count on that?
Katherine Gates
Effectively, what I mentioned was that there is no change within the total coke stability. So we do not know what Cliffs will resolve to do. But when we — if the idea kind of in your query is that if Cliffs is utilizing Stelco’s extra coke, and as an alternative of Stelco promoting that coke to a different buyer that they in flip took that extra coke and used it for themselves, from our perspective, we might see the client that Stelco was promoting to as a possibility to probably pursue that buyer.
And since, once more, there is no change within the macro provide and demand we might do what we have at all times completed, which is to intention to run full and promote out, and we’d look to promote our coke to both that potential buyer, different prospects within the North American marketplace for our spot blast coke gross sales, foundry coke gross sales or after all, the seaborne market.
Lucas Pipes
That could be very useful. I respect that, that readability. A fast follow-up on the logistics aspect. First, did you see any profit from the Baltimore outage by way of volumes getting rerouted right down to the Gulf? After which a serious Illinois basin producer commented earlier this week that sulfur reductions are a bit increased than they’ve been, after which so, I’m wondering type of what you count on for Q3, This fall by way of volumes by means of CMT? Thanks very a lot.
Katherine Gates
Positive. So with respect to the unlucky incident in Baltimore, we did profit from that unlucky incident within the first half, and we talked about that in our first quarter name. So if you see us discuss having a softer second half, that is actually as a result of increased volumes that we noticed within the first half that are not getting replicated within the second half.
Lucas Pipes
Thanks. May you — are you able to communicate to the market?
Shantanu Agrawal
Sure. I can take that. I imply — from an Illinois basin coal perspective, proper, like should you take a look at the API2 futures type of pricing right here, we do not — I imply, that has stabilized fairly a bit after a extremely risky 2023 and early 2024. So from an volumes or a requirement perspective, what goes by means of our terminals, we’re not seeing an enormous change going from first half to the second half. In order that’s mainly what our expectation is for the second half of the yr proper now.
Lucas Pipes
Very useful. Thanks. After which congratulations on the dividend improve. That’s nice to see. Katherine, any, any read-through to future development? Or would you say that is extra of a mirrored image of type of the strong outcomes so far, and it would not actually change your priorities if it involves Granite Metropolis pig iron for instance, would respect your ideas on that. Thanks.
Katherine Gates
Effectively, completely. So we proceed to work with U.S. Metal on the GPI venture. That’s nonetheless ongoing. Our engineering work remains to be ongoing. There was no change in our focus with respect to the GPI venture as our primary development focus and development alternative. I feel it is simply vital to keep in mind that the basics of that venture are so sturdy.
And it is definitely taken a very long time. And I feel it is that may be a frustration. However should you actually take into consideration the basics of that low-cost iron ore, the provision of the blast furnace, the placement of our coke plant, and the flexibility to ship that high-quality GPI then to Large River, that is actually onerous to copy out there. And so we proceed to strongly imagine within the fundamentals of that venture. We proceed to work on it. U.S. Metal continues to work on it with us.
So the rise in our dividend, and it is the third yr that we’ve got elevated our dividend, it absolutely displays the GPI venture with respect to the flexibility to extend that dividend. And we’ll proceed to deal with capital allocation that rewards our long-term shareholders.
Lucas Pipes
Katherine, I respect all the colour in the present day. Thanks very a lot. And to you and the workforce, better of luck.
Katherine Gates
Thanks, Lucas.
Operator
Thanks. Your subsequent query comes from Nathan Martin with the Benchmark Co. Chances are you’ll proceed.
Nathan Martin
Thanks, operator. Good morning, everybody.
Shantanu Agrawal
Good morning, Nathan.
Katherine Gates
Good morning.
Nathan Martin
Let’s follow the logistics for a second right here, an enormous pickup, clearly, quarter-over-quarter at CMT specifically. It seems like that was seemingly materials aside from coal. what — are you able to discuss a number of the new enterprise you guys have secured there and the way you see that taking part in out going ahead?
Katherine Gates
So, Nathan, thanks. We’re seeing the brand new enterprise at our home terminal. So CMT continues to run effectively. However that is actually at our home terminals, the place we’re seeing that enterprise. And this isn’t the unlucky kind of Baltimore bridge enterprise for lack of a greater time period that we noticed within the first half, however that is precise new enterprise that is coming in. We won’t discuss particular prospects, however that is at our home terminals. And that is why you are seeing such excessive volumes for these home terminals, the best that we have had within the final 5 years.
Nathan Martin
Okay. So then — that is smart, Katherine. Then the rise you are saying at CMT quarter-over-quarter was actually simply selecting up some shipments that had been diverted away from Baltimore?
Katherine Gates
That is appropriate. And we had barely increased volumes from a timing foundation than anticipated within the first half.
Shantanu Agrawal
Sure, Nate, I imply. we didn’t get any profit at CMT from the Baltimore incident. It was all on the home terminals. When you look — should you’re evaluating Q2 2023 to Q2 2024, I feel — I am unsure which comparability you are speaking about, however it’s roughly 130,000 tons pickup on CMT, which is, which is fairly regular. It is nothing like excellent. Are you evaluating Q1 2024 versus Q1 — Q2 2024? I simply wish to make it possible for we are able to tackle that.
Nathan Martin
Sure. I used to be wanting sequentially, Shantanu, as a result of it was up 650,000 tons plus or minus.
Shantanu Agrawal
Okay. Sure, sure. No, I imply, positively the second quarter for CMT was a lot better than the primary quarter. Clearly, as we talked about, should you bear in mind after we gave our 2024 steerage, we had been coming into the yr with a really, very tender market, which I type of referenced to being a risky market, and that was type of factored in our unique steerage, proper? And Q1 got here in somewhat bit softer, however we noticed a pickup within the Q2, and that is what you’ll be able to see within the quantity, and that is for normalizing. And it is simply type of the traditional volumes that we’re seeing at CMT. So — however majority of the brand new enterprise, the pickup within the EBITDA and the rationale behind the rise within the steerage is coming from the home logistics terminals.
Nathan Martin
Okay, bought it. So you continue to type of really feel like CMT goes to normalize someplace round possibly 2 million tons plus or minus per quarter, that type of run price then?
Shantanu Agrawal
Yep, yep, that is type of what’s factored within the steerage, proper? Like type of we give the amount steerage, yeah.
Nathan Martin
Okay, sure, I used to be simply attempting to determine if, if you recognize, which quantity is nearer to what you guys count on shifting ahead, the 1.8 million tons within the first quarter, the two.5 million tons within the second quarter. Okay, bought it. I will depart that one. I imply, I assume actually what all of it comes right down to, proper, is I assume the primary half for the logistics enterprise, you guys did, you recognize, $25 million EBITDA, you recognize full yr steerage is $30 million to $35 million.
Clearly, you now count on to exceed that vary. However I imply, might we get any ideas on what sort of magnitude you are baking in at this level? I imply, is it $5 million, $10 million? You probably did word, clearly, the expectation for quantity to decelerate considerably within the second half, however it could be nice to get your ideas on the forecast there.
Shantanu Agrawal
Sure, Nate, I imply, at this level, we’re not offering a brand new steerage vary. We’re simply saying that we’re going to exceed the steerage vary. So sure, I imply, clearly, we have to see how the second half performs out and it’ll get an concept, however we really feel very comfy that we’ll be type of above our steerage vary based mostly on the primary half efficiency.
After which going again to type of your first query, proper? Like so our full yr steerage for CMT was 4.1 million tons for coal and three.8 million tons for different merchandise. And that’s you recognize — we mentioned that we’re going to exceed the volumes, however for CMT, you’ll be able to take into consideration that the steerage on these volumes stay unchanged. Majority of the pickup is coming by means of the home terminals.
Nathan Martin
Okay, bought it. That is useful, Shantanu. I respect that. After which possibly simply shifting over to the home coke enterprise shortly. You guys talked about final quarter some deliberate outages, I feel, right here within the second half. Is that also the case? And the way do you count on that to affect possibly EBITDA per ton in gross sales within the second half versus what you noticed within the first half? I feel, sometimes, gross sales stay pretty constant, however it could simply be nice to get your ideas.
Shantanu Agrawal
Sure. I imply, the expectation, as we’re reaffirming our steerage for $238 million to $245 million, that also stays the case. Sort of this yr, the timing of the gross sales and manufacturing have aligned very well, not like the final quarter, the place Q2 of 2023 was a report quarter principally pushed by the timing of the cargo you’ll be able to see, proper? Like we bought 46,000 tons greater than what we produced final quarter in 2023.
However for 2024, our gross sales and manufacturing are fairly effectively aligned. We did point out that we’ve got some outages into the second — within the second half of the yr, which is factored in. So yeah, I feel it must be fairly constant. When you take a look at sequentially quarter-over-quarter, with — and historically, This fall has been type of our weakest quarter with manufacturing and getting — sorry, with outages and us preparing for winter and every thing. So we count on that to be comparable story this yr as effectively.
Nathan Martin
Okay. Obtained it. Typical seasonality. Okay. Excellent. I respect that, Shantanu. I will depart it there. Better of luck to you guys within the second half.
Shantanu Agrawal
Thanks.
Katherine Gates
Thanks, Nathan.
Operator
Thanks, Nathan. We have now no present questions. [Operator Instructions] We have now no questions registered. So I wish to hand it again to Katherine Gates, President and CEO with SunCoke Vitality for some ultimate remarks.
Katherine Gates
Thanks all once more for becoming a member of us this morning and to your continued curiosity in SunCoke. Let’s proceed to work safely and create worth for all of our stakeholders.
Operator
Thanks all for becoming a member of the SunCoke Vitality second quarter 2024 earnings name. Chances are you’ll now disconnect from the decision, and please get pleasure from the remainder of your day.
[ad_2]
Source link
