Attached files
| file | filename |
|---|---|
| EX-99.1 - EX-99.1 - SunCoke Energy, Inc. | d578133dex991.htm |
| 8-K - 8-K - SunCoke Energy, Inc. | d578133d8k.htm |
 SunCoke Energy, Inc. Q1 2018 Earnings Conference Call April 26, 2018 Exhibit 99.2 |
 Forward-Looking Statements
2 SXC Q1 2018 Earnings Call This slide presentation should be reviewed in conjunction with the First Quarter 2018 earnings release of SunCoke Energy, Inc. (SXC) and
conference call held on April 26, 2018 at 11:00 a.m. ET.
Except for statements of historical fact, information contained in this
presentation constitutes “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking
statements are based upon information currently available, and
express management’s opinions, expectations, beliefs, plans, objectives, assumptions or projections with respect to anticipated future performance of SXC or SunCoke Energy Partners, L.P. (SXCP). These statements are not guarantees of future
performance and undue reliance should not be placed on them.
Although management believes that its plans, intentions and expectations reflected in, or suggested by, the forward-looking statements made in this presentation are reasonable, no assurance can be given that these plans, intentions or expectations will be
achieved when anticipated or at all.
Forward-looking statements often may be identified by the use of
forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “contemplate,” “estimate,” “predict,” “guidance,” “forecast,”
“potential,” “continue,” “may,” “will,” “could,” “should,” or the negative of these terms or similar expressions. Such statements are subject to a number of known and unknown risks, and uncertainties, many of which
are beyond the control of SXC and SXCP, or are difficult to
predict, and may cause actual results to differ materially from those implied or expressed by the forward-looking statements. Each of SXC and SXCP has included in its filings with the Securities and Exchange Commission (SEC) cautionary language identifying
important factors (but not necessarily all the important factors)
that could cause actual results to differ materially from those expressed in any forward-looking statement. Such factors include, but are not limited to: changes in industry conditions; the ability to renew current customer, supplier and other material
agreements; future liquidity, working capital and capital
requirements; the ability to successfully implement business strategies and potential growth opportunities; the impact of indebtedness and financing plans, including sources and availability of third-party financing; possible or assumed future results of
operations; the outcome of pending and future litigation;
potential operating performance improvements and the ability to achieve anticipated cost savings from strategic revenue and efficiency initiatives. For more information concerning these factors, see the SEC filings of SXC and SXCP. All
forward-looking statements included in this presentation are
expressly qualified in their entirety by the cautionary statements contained in such SEC filings. The forward-looking statements in this presentation speak only as of the date hereof. Except as required by applicable law, SXC
and SXCP do not have any intention or obligation to revise or
update publicly any forward-looking statement (or associated cautionary language) made herein, whether as a result of new information, future events, or otherwise after the date of this presentation.
This presentation includes certain non-GAAP financial measures intended to
supplement, not substitute for, comparable GAAP measures. Furthermore, the non-GAAP financial measures presented herein may not be consistent with similar measures provided by other companies. Reconciliations
of non-GAAP financial measures to GAAP financial measures are
provided in the Appendix at the end of the presentation. Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those measures provided in the Appendix. These data should be read in
conjunction with the periodic reports of SXC and SXCP previously
filed with the SEC. Due to rounding, numbers presented throughout this presentation
may not add up precisely to the totals indicated and percentages may not precisely reflect the absolute figures for the same reason. Industry and market data used in this presentation have been obtained from industry publications and sources as well as from research
reports prepared for other purposes. SXC and SXCP have not
independently verified the data obtained from these sources and cannot assure investors of either the accuracy or completeness of such data. |
 Q1 2018 Highlights
Achieved strong safety and operating performance across
coke and logistics fleet in line with expectations
Strong Q1 ’18 Adj. EBITDA of $64.0M; ended quarter with
ample liquidity position of >$370M of liquidity
Began 2018 oven rebuild campaign at IHO; improved IHO
production due to sustained operating performance from
rebuilt ovens Handled record coal export volumes at CMT; Increasing 2018 CMT total throughput expectations to 10.0Mt - 10.5Mt Remain well positioned to achieve FY 2018 Adj. EBITDA guidance of $240M to $255M 3 SXC Q1 2018 Earnings Call |
 Q1 2018 Financial Performance
(1) For a definition and reconciliation of Adjusted EBITDA, please see appendix.
(2) Coke Adjusted EBITDA includes Domestic Coke and Brazil Coke. (3) Corporate and Other includes the results of our former coal mining business, contributing Adjusted EBITDA losses of $2.3
million and $3.5 million to Corporate and Other during the
three months ended March 31, 2018 and 2017,
respectively. Q1 ‘18 EPS of $0.13, up from $0.02 in
the prior year quarter
• Strong cokemaking operating performance, partially offset by higher interest expense Consolidated Adj. EBITDA (1) of $64.0M up $8.4M or 15%; represents strongest first quarter since IPO • Coke operations up $4.9M, primarily driven by strong operating performance at Indiana Harbor • Improved throughput volume at CMT • Lower Corporate and Other costs 4 SXC Q1 2018 Earnings Call ($/share) ($ in millions) Earnings per Share (diluted) Consolidated Adj. EBITDA (1) $64.0 Q1 ‘18 Q1 ‘17 $55.6 Q1 2018 Earnings Q1 ‘18 Q1 ‘17 $0.02 $0.13 ($ in millions, except volumes) Q1 '18 Q1 '17 Q1 '18 vs. Q1 '17 Domestic Coke Sales Volumes 974 946 28 Logistics Volumes 5,821 5,719 102 Coke Adj. EBITDA (2) $59.0 $54.1 $4.9 Logistics Adj. EBITDA $13.6 $13.1 $0.5 Corporate and Other Adj. EBITDA (3) ($8.6) ($11.6) $3.0 Adjusted EBITDA (Consolidated) (1) $64.0 $55.7 $8.4 |
 Adjusted EBITDA
(1) – Q1 ‘17 to Q1 ‘18 $55.6 $64.0 $8.9 $0.5 $3.0 Logistics Q1 2017 Adj. EBITDA Indiana Harbor ($4.0) Domestic & Brazil Coke (excl. IHO) Corporate and Other Q1 2018 Adj. EBITDA Q1 ‘18 performance driven by solid domestic coke production, strong
CMT volume, and lower corporate costs
(1) For a definition and reconciliation of Adjusted EBITDA, please see appendix.
(2) Corporate and Other includes the results of our former coal mining business, contributing Adjusted EBITDA losses of $2.3 million and $3.5
million to Corporate and Other during the three months ended
March 31, 2018 and 2017, respectively. (1)
(1) • $1.5M – Lapping of one- time transaction costs • $1.2M – Lower legacy coal mining expenses 5 SXC Q1 2018 Earnings Call • $5.8M – Strong volume and yield from rebuilt ovens • $2.7M – Benefit from increased O&M recovery • $1.9M – Higher throughput volume at CMT • ($0.7M) – Impact of high water conditions • ($0.4M) – Net lower volumes at domestic terminals • ($2.4M) – Timing of planned outage and maintenance costs • ($1.2M) – Jewell unfavorable coal cost recovery • ($0.8M) – Higher coal moisture from adverse weather and logistics conditions resulted in lower production and energy revenue at Granite City ($ in millions) (2) |
 Domestic Coke Business Summary
Solid Q1 ‘18 cokemaking
performance supports FY 2018 outlook
Domestic Cokemaking Performance
177 179 182 183 179 204 205 204 213 230 259 260 267 267 245 159 158 174 171 156 149 148 154 148 153 $56/ton Q4 ‘17 982 962 950 $46/ton Q1 ‘17 948 $53/ton $41/ton Q3 ‘17 981 $57/ton Q2 ‘17 Q1 ‘18 Haverhill Indiana Harbor Jewell Granite City Middletown Adjusted EBITDA/ton 946K 953K 975K 977K Sales Tons (Production, Kt) 974K Delivered Adj. EBITDA/ton (1) of ~$56 on 962K tons production • Strong yield performance; partially offset by planned outage at Haverhill Sustained operating performance from rebuilt ovens at IHO • Rebuilt C & D batteries continue to perform as expected; each battery producing at >300k tons annual run- rate • Significant improvement on both production and yield • 2018 A-battery rebuild campaign underway (1) For a definition and reconciliation of Adjusted EBITDA and Adjusted EBITDA per ton, please see appendix.
6 SXC Q1 2018 Earnings Call (1) |
 Logistics Business Summary
Improved Q1 ‘18 performance driven primarily by
significant increase in CMT volumes
2,075 1,827 1,762 2,384 2,528 3,644 3,346 3,372 3,206 3,293 Q4 ‘17 5,821 Q1 ‘18 $13.6M 5,590 $35.1M Q3 ‘17 5,134 $12.6M Q2 ‘17 5,173 $10.0M Q1 ‘17 5,719 $13.1M CMT (coal & liquids) Total Logistics Adj. EBITDA ($M) Logistics (ex. CMT) (Tons Handled, Kt) Delivered Q1 ‘18 Adj. EBITDA of $13.6M • Solid volumes due to continued favorable coal export market dynamics • Increase CMT 2018 base take-or-pay volumes to 8.5Mt - 9.0Mt from 6.5Mt; total throughput up to 10.0Mt - 10.5Mt Convent contributed $12.0M to Q1 ‘18 Adjusted EBITDA • Highest quarterly volume despite near- historic water levels adversely impacting operations • Adj. EBITDA does not include $1.2M of deferred revenue in Q1 volume shortfall to be recognized in Q4 ‘18 Logistics Performance $10.9M $7.2M $9.7M $29.5M CMT Adj. EBITDA $12.0M (1) (1) 7 SXC Q1 2018 Earnings Call (1) Adjusted EBITDA includes Logistics deferred revenue when it is recognized as GAAP revenue. For a
definition and reconciliation of Adjusted EBITDA, please see
appendix. (2)
Q4 2017 Adjusted EBITDA includes $16.4M recognition of previously deferred
revenue related to take-or-pay shortfalls throughout
2017. (2) |
 Q1 2018 Liquidity
$57.3 $147.0 $120.2 Consol. Cash @ Q1 2018 Other ($1.1) Cash Distributions to Public ($10.6) SXCP Unit Purchases ($3.4) CapEx ($15.4) Net Cash Provided by Ops. Activities Consol. Cash @ YE 2017 Maintain strong consolidated liquidity of >$370M, including ~$180M of SXC standalone liquidity 8 SXC Q1 2018 Earnings Call • Distribution of $0.5940/unit paid in Q1 ‘18 Consolidated Revolver Availability: $227M (Consolidated) Q1 ‘18 Q4 ‘17 Total Debt $887M $887M Gross Leverage (1) 3.58x 3.78x (1) Gross leverage for Q1 2018 calculated using midpoint of FY 2018E Consolidated Adjusted EBITDA guidance; Q4 2017 based on 2017
actuals •
Strong Q1 operating
performance
• $12.4M benefit from change in working capital primarily due to timing of SXCP senior note interest payments • $7.3M Granite City Remediation CapEx • $3.2M IHO oven rebuild |
 SXC Capital Priorities
SXC maintains significant financial flexibility and will generate positive CF in
2018 SXCP’s
BoD recently declared modified capital allocation policy, which reduced quarterly distributions to $0.40/unit, or $1.60/unit annually • SXCP will use savings to replenish cash and reduce debt to achieve its 3.5x or lower
leverage target by year-end 2019; max leverage covenant step-down to
4.0x in June 2020 •
SXC’s annual GP/LP/IDR cash flows lower by ~$28M on full-year basis
vs. previous distribution
Expect SXC will continue to generate sufficient positive cash flow in 2018 and
beyond
SXC also has significant stand-alone liquidity of ~$180M, including $106M of
cash and $74M revolver capacity as of Q1 2018
• Minimal debt attributable to SXC ($44.7M as of Q1 2018) Continuing to
deploy capital to most efficiently maximize value for shareholders
• Maintain flexibility to fund future growth projects, including potential tuck-in M&A
9 SXC Q1 2018 Earnings Call |
 2018 Key Initiatives
• Drive strong operational & safety performance while optimizing asset utilization
Deliver Operations Excellence and Optimize Asset Base
• Complete 67 planned A-battery oven rebuilds and deliver near-breakeven FY ‘18 Adj. EBITDA
Complete 2018 Indiana Harbor Oven Rebuild Campaign
• Secure further new business to contribute towards $5M – $10M EBITDA target in next 2 years Leverage CMT Capabilities to Diversify Customer & Product Mix • Achieve $240M – $255M Consol. Adj. EBITDA and $150M – $165M Op. Cash Flow guidance Accomplish 2018 Financial Objectives 10 SXC Q1 2018 Earnings Call |
 QUESTIONS |
 Investor Relations
630-824-1907
www.suncoke.com |
 APPENDIX |
 Definitions Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted for any loss (gain) on
extinguishment of debt, impairments and/or changes to our
contingent consideration liability related to our acquisition of CMT. EBITDA and Adjusted EBITDA do not represent and should not be considered alternatives to net income or operating income under GAAP and may not be
comparable to other similarly titled measures in other
businesses. Management believes Adjusted EBITDA is an important measure of the operating performance and liquidity of the Company's net assets and its ability to incur and service debt, fund capital expenditures and
make distributions. Adjusted EBITDA provides useful
information to investors because it highlights trends in our business that may not otherwise be apparent when relying solely on GAAP measures and because it eliminates items that have less bearing on our operating performance and
liquidity. EBITDA and Adjusted EBITDA are not measures
calculated in accordance with GAAP, and they should not be considered a substitute for net income, operating cash flow or any other measure of financial performance presented in accordance with GAAP.
EBITDA represents earnings before interest, taxes, depreciation and amortization.
Adjusted EBITDA attributable to SXC/SXCP
represents Adjusted EBITDA less Adjusted EBITDA attributable to noncontrolling
interests. Adjusted
EBITDA/Ton represents Adjusted EBITDA divided by tons sold/handled. 14 SXC Q1 2018 Earnings Call |
 Reconciliation to Adjusted EBITDA
(1) The Partnership recorded a loss on extinguishment of debt as a result of its debt refinancing activities which occurred during the second
quarter of 2017. (2)
In conjunction with the adoption of ASU 2017-07, the non-service type
expense associate with the postretirement benefit plans was excluded from operating income and recorded in interest expense, net on the Consolidated Statements of Operations during the periods presented.
Amounts in prior periods were immaterial and therefore were not reclassified
in the reconciliation of Adjusted EBITDA to net income and net
cash provided by operating activities. (3)
As a result of changes in the fair value of the contingent consideration
liability, the Partnership recognized a benefit of $1.7 million
during 2017. (4)
In 2014, we finalized the required permitting and engineering plan for a
potential new cokemaking facility to be constructed in Kentucky.
However, in June 2017, due to our focus on renewing our existing
customer contracts and the lack of any long-term customer commitment for a majority of the facility’s capacity, we decided to terminate the project. As a result, during the second quarter of 2017, the Company wrote-off previously capitalized engineering and land deposit costs of $5.3 million.
(5)
Reflects non-controlling interest in Indiana Harbor and the portion of the
Partnership owned by public unitholders. 15
SXC Q1 2018 Earnings Call
($ in millions)
Q1 '17 Q2 '17 Q3 '17 Q4 '17 FY '17 Q1 '18 Net cash provided by operating activities 29.5 $ 24.9 $ 73.9 $ 20.2 $ 148.5 $ 57.3 $ Depreciation, depletion and amortization expense 33.3 33.3 30.6 31.0 128.2 32.9 Loss / (gain) on extinguishment of debt (1) 0.1 20.2 0.1 - 20.4 0.3 Deferred income tax (benefit)/expense 65.8 14.0 (9.4) (157.6) (87.2) 0.2 Changes in working capital and other (12.0) (11.1) 33.8 (27.1) (16.4) 10.9 Net Income (loss) (57.7) $ (31.5) $ 18.8 $ 173.9 $ 103.5 $ 13.0 $ Depreciation, depletion and amortization expense 33.3 33.3 30.6 31.0 128.2 32.9 Loss / (gain) on extinguishment of debt (1) 0.1 20.2 0.1 - 20.4 0.3 Interest expense, net (2) 13.7 15.2 16.1 15.6 60.6 15.8 Income tax expense / (benefit) 66.2 4.7 (1.5) (151.0) (81.6) 2.0 Contingent consideration adjustments (3) - 0.3 (2.0) - (1.7) - Expiration of land deposits and write-off of costs related to potential new cokemaking facility (4) - 5.3 - - 5.3 - Adjusted EBITDA 55.6 $ 47.5 $ 62.1 $ 69.5 $ 234.7 $ 64.0 $ Adjusted EBITDA attributable to noncontrolling interest (5) (21.6) (17.5) (21.9) (25.4) (86.4) (19.0) Adjusted EBITDA attributable to SXC 34.0 $ 30.0 $ 40.2 $ 44.1 $ 148.3 $ 45.0 $ |
 Reconciliation of Segment Adjusted EBITDA and Adjusted EBITDA per
Ton ($ in millions, except per ton data)
Domestic Coke Brazil Coke Logistics Corporate and Other (1) Consolidated Q1 2018 Adjusted EBITDA $54.3 $4.7 $13.6 ($8.6) $64.0 Sales Volume (thousands of tons) 974 441 5,821 Adjusted EBITDA per Ton $55.75 $10.66 $2.34 FY 2017 Adjusted EBITDA $188.9 $18.2 $70.8 ($43.2) $234.7 Sales Volume (thousands of tons) 3,851 1,761 21,616 Adjusted EBITDA per Ton $49.05 $10.34 $3.28 Q4 2017 Adjusted EBITDA $39.6 $4.7 $35.1 ($9.9) $69.5 Sales Volume (thousands of tons) 977 445 5,590 Adjusted EBITDA per Ton $40.53 $10.57 $6.28 Q3 2017 Adjusted EBITDA $55.6 $4.6 $12.6 ($10.7) $62.1 Sales Volume (thousands of tons) 975 444 5,134 Adjusted EBITDA per Ton $57.03 $10.36 $2.45 Q2 2017 Adjusted EBITDA $44.0 $4.5 $10.0 ($11.0) $47.5 Sales Volume (thousands of tons) 953 437 5,173 Adjusted EBITDA per Ton $46.17 $10.30 $1.93 Q1 2017 Adjusted EBITDA $49.7 $4.4 $13.1 ($11.6) $55.6 Sales Volume (thousands of tons) 946 435 5,719 Adjusted EBITDA per Ton $52.54 $10.11 $2.29 Reconciliation of Segment Adjusted EBITDA and Adjusted EBITDA per ton (1) Corporate and Other includes the results of our legacy coal mining business which, incurred Adjusted EBITDA losses of $2.3 million and
$3.5 million during the three months ended March 31, 2018 and
2017, respectively. 16
SXC Q1 2018 Earnings Call |
  Balance Sheet & Debt Metrics
(1) Represents mid-point of FY 2018 guidance for Adj. EBITDA (Consolidated), Adj. EBITDA attributable to SXCP, and Adj. EBITDA
attributable to SXC. 17
SXC Q1 2018 Earnings Call
($ in millions)
SXC Consolidated Attributable to SXCP Balance Attributable to SXC Cash 147 42 106
Available Revolver
Capacity 227
153
74
Total
Liquidity 374
195
179
Gross Debt (Long and
Short-term) 887
842
45
Net Debt (Total
Debt less Cash) 740
801
(61)
FY 2018E Adj. EBITDA
Guidance (1)
247.5 220.0 165.5 Gross Debt / FY 2017E Adj. EBITDA 3.58x 3.83x 0.27x Net Debt / FY 2017E Adj. EBITDA 2.99x 3.64x 0.00x As of 03/31/2018 2018 2019 2020 2021 2022 2023 2024 2025 Consolidated Total SXCP Revolver - - - - 130.0 - - - 130.0 SXCP Sr. Notes - - - - - - - 700.0 700.0 SXCP Sale Leaseback 2.0 2.8 7.3 - - - - - 12.1 SXC Term Loan 0.8 1.1 3.4 3.4 36.0 - - - 44.7 Total 2.8 $ 3.9 $ 10.7 $ 3.4 $ 166.0 $ - $ - $ 700.0 $ 886.8 $ As of Q1 2018 ($ in millions) SXC & SXCP Debt Maturities Schedule |
 2018 Guidance Summary
Metric 2017 Results 2018 Guidance (published Jan. ‘18) Adjusted EBITDA (1) Consolidated Attrib. to SXC $234.7M $148.3M $240M – $255M $160M – $171M Capital Expenditures (2) $74.5M ~$95M Domestic Coke Production 3.86 Mt ~3.9 Mt Dom. Coke Adj. EBITDA/ton $49 / ton $50 – $52 / ton Operating Cash Flow $148.5M $150M – $165M Cash Taxes (3) $6.8M $7M – $14M (1) For a definition and reconciliation of Adjusted EBITDA, please see other appendix materials.
(2) FY 2017 results include $18.3M for Granite City gas sharing project and excludes $1.1M of capitalized interest.
(3) Included in Operating Cash Flow. Guidance remains unchanged from January 2018 announcement 18 SXC Q1 2018 Earnings Call |
 2018 Capital Expenditures
19 SXC Q1 2018 Earnings Call (1) 2017 ongoing CapEx includes approximately $51M in ongoing Coke Capex and $3M ongoing Logistics.
(2) 2018 ongoing CapEX includes approximately $54M in ongoing Coke CapEx and $5M ongoing Logistics. 2017 CapEx ($ in millions) SXC SXCP Consolidated Ongoing (ex. IHO rebuilds) $6 $19 $25 IHO Oven Rebuild Initiative 30 0 30 Total Ongoing CapEx (1) $36 $19 $55 Other / Expansion 0 1 1 Environmental Project (Gas Sharing) 0 18 18 Total CapEx $36 $38 $74 2018 Expected CapEx ($ in millions) SXC SXCP Consolidated Ongoing (ex. IHO rebuilds) $7 $25 $32 IHO Oven Rebuild Initiative 27 0 27 Total Ongoing CapEx (2) $34 $25 $59 Other / Expansion 0 1 1 Environmental Project (Gas Sharing) 0 35 35 Total CapEx $34 $61 $95 |
 2018E Guidance Reconciliation
(1) Reflects non-controlling interest in Indiana Harbor and the portion of the Partnership owned by public unitholders.
20 SXC Q1 2018 Earnings Call ($ in millions) 2018E Low 2018E High Net cash provided by Operating activities $150 $165 Depreciation and amortization expense (137) (129) Changes in working capital and other 22 14 Net Income $35 $50 Depreciation and amortization expense 137 129 Interest expense, net 63 63 Income tax expense 5 13 Adjusted EBITDA (Consolidated) $240 $255 Adjusted EBITDA attributable to noncontrolling interests (1) (80) (84) Adjusted EBITDA attributable to SXC $160 $171 |
 Thermal Coal Export Profitability
$86 $41 BTU Premium API 2 Benchmark ($8) Mine Netback ($8) Ocean Freight Sulfur Penalty ($13) Metric to Short Conversion ($21) Inland Freight $5 (in $ per metric tonne) Solid API2 benchmark price should continue to support CMT ILB producers’ competitiveness in maintaining viable exports (1) Netback calculation example assuming $86 per metric tonne prompt API 2 benchmark (Q1 2018 average). (2) Ocean Freight for 70,000 metric tonne US Gulf/ARA Coal Panamax freight. (3) Consists of CN rail transportation from ILB coal mines to CMT and terminal transloading costs.
(1) (2) Believe ILB export thermal solidly profitable at Q1 ‘18 API2 benchmark pricing of ~$86/t • Based on average ILB cash cost, netback calculation implies attractive margins CMT well-positioned to serve existing ILB thermal coal producers (in $ per short ton) (3) 21 SXC Q1 2018 Earnings Call |