SXC - Earnings call transcript Q3 2017

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Chris and I will be your conference operator today. At this time, I would like to welcome everyone to the SunCoke Energy Third Quarter 2017 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator may conference. you begin Law, your Jonathan

Jonathan Law

Chairman, Thanks joining third us morning West, everyone Senior Henderson, quarter and and Executive you for and thank our Fritz to are Financial earnings. Vice me Chris. and Fay With Chief Officer; Good XXXX today President Chief discuss Officer. President SunCoke Energy's

our replay the remarks, please out to we reach the Q&A. be is call Relations conference live the prepared a will on for Investor site a to call to Following our few we being Relations questions Investor website, available on of weeks. today, section This the free on will don't open the and your webcast for feel line get If team.

we let remarks the quarter, apply SEC regarding you as we language With remarks turn statements, call the this our do today's make we call. on expectations forward-looking over me available that, documents to various are measures constitute on future financial Fritz. forward-looking filings to reconciliation to regarding non-GAAP, cautionary things every that are our discussed These remind website, I'll in today. on any make statements As

Fritz Henderson

us thanks and add Jonathan, me for all morning. my let you of joining Thanks this to

against priorities, right progress to through the accountable results. third goals Position I our as by our and quarter changing Fay looking about controlling business the about prior relative progress this initiatives SunCoke’s year presentations holding report of at for Then Q&A, in we first our the while maximize to this our pleased company’s at talk [Indiscernible] view year. cost investors normally happy third to progress the of going these We performance to nine you [Indiscernible] upfront. our operating up think there this profitability. to I’m morning are a means also Before the the wind with it takes to think the the growth the at help in be detail, while against understand through to organic [Indiscernible] We’ll detail more our our and for results front. Then year. chart ourselves quarter plant we’ll early talk months efficiently wins about of new

We and committed increasing our our offering and logistics continue to trends to expand volume diversify remain fleet. across loading

are are well to report We rebuild result and year the line Indiana full for Indiana our successfully executing our with initiative Harbor in expectation Harbor year. positioned

XXXX, as additional the later and relative insights have to details hold my the remarks then. until some on progress XXXX so performance as deck in We I’ll well some slide

During the the quarter, performance as top range. a end we most of create we guidance year positioned believe year-to-date, additional we SXCP full confident result are operating results adjusted at towards units also opportunity which our and SXC shareholders. capital And for to well to we our are purchased EBITDA value deliver financial finally of deploying the the

to again achieve to positioned products full to we continues. [Indiscernible] the to quarter had led date, the deferred look slide it to And best customer now adjusting timing once four fourth each we facilities our revenues, results. year, recognition and the well to our at at it well range our of the $XXX delivered as The we’ve over mix of the are specifically we adjusted and to EBITDA performance EBITDA’s years upon based to operating top quarter expansion for think and in in of fact our Convent end Fay the rebuild after year. was third occurs including in adjusted Turning occur urban we infact three looking performed review were to the across operationally – and And I’ll $XXX the the year for range was million guidance our campaign strong actually we’ve results does quarter at Financially originally Harbor. turn million.

Fay West

good everyone. Thank and morning, Fritz, you,

X, was the the up year income share. extinguishment interest the absence SXC net gains. per our impact from $X.XX Turning or quarter to despite third prior attributable of Slide quarter of period in debt to was in this million higher expense EPS the $XX.X $X.XX

of the a As million renewals. maturities by on the adjusted this operating our our our of a third of bridge $XX.X and pushing across adjusted in comprehensive performance in slide. EBITDA reminder, year we prior contract was SXCP XX% our completed businesses, detailed year. the quarter logistics which driven capitals over debt Coke QX in both structure refinancing strong May The next EBITDA have performance of of outside up was many we

the Our this offset Indiana of more results [Indiscernible] quarter. Harbor across than remaining well coke performed were campaign coke strong plant. impacts by their The operating rebuilt business

technology also coke domestic in driven preferred interest of from QX, yield effort. transaction favourably comparison. quarterly were we our from which costs, licensing ongoing incremental benefited by facility. reduction Our allocated fees central making coke equity and from cost benefitted The our timing a favourable facilities influenced performance Coke of that which result redemption results resulting XXXX lower cost [Indiscernible] in outage our in announced also

and full fourth As fees XXXX. the to we time benefit of Note year XXXX. a the $X.X at the last the in transaction, of this ratably we a quarter expect million transaction received in result of of earn annually began an recognizing this $X.X technology that but incremental licensing million we through

results which other adjusted business $X.X due quarter EBITDA. from coal third corporate benefit to million $XX.X in finished the And at Coal increased the when or our CMT, at attractive XX% export was market dynamics. volumes segment, Our million up continue and to favourable Logistics in adding

Domestic next on Looking at Coke slide. the

ton of our yield of quarter. plant which it’s XXXX this up portion fleet, a history. controls and outage per cost outside the third you were corporate at These cost to per benefit been by results strong the can falling driven you – and gains from highest significantly recent both can EBITDA level ton across adjusted see the as quarter in the chart was $XX Third the from is see

you currently outage a executing here are Granite QX our QX. As scheduled and at scheduled had facility we we recall, our outage in Middletown its City may in at facility

While with have of of successfully are to segment third full the remaining Harbor EBITDA the remains Through well we rebuilt XX adjusted full from Through the results with report the outage range X. adjusted on to to ovens benefitted remain results flat guidance and were quarter coke year and in ton per with Referring the ovens XX our end to expectations Harbor $XX. cost and timing expect to Indiana throughout full three inline EBTIDA at high line year positioned production campaign, track operating to rebuilt levels quarters, of our total outages, we within in the be XXXX. total slide XXXX expectations third we line deliver original of production brought the Indiana QX. on XX our The by of of end back $XX online October. being are XX which guidance. at our

to We by November. remaining remains on our on campaign. XX XXXX are progress completed end of the the campaign with pleased track of rebuilt rebuilt on with and This be schedule the budget year’s

are rebuilt and more a the this are higher environment. increased we we will which of rates ovens stable production contribute seeing performing and time, improved both half to than well facility. of Rebuilt more completion charge With campaign and have operating coking this of years

XXXX. to in the have adjusted will the say improved Fritz we slides, have positioned outlook significantly completed our a oven While report over few results years EBITDA about few IHO to have more rebuilt in last us

quarter, on up at Looking logistics year-on-year. generated co-logistics adjusted slide sequentially business the XX% XX% and of $XX.X during nine, million third our EBITDA

quarter QX, loading line hovering by our dampened ton. XXXX. have were stabilization in total, usage. XX% We around healthy $XX up per summer in API weather the here thermal In logistics of XXXX. impacted seen which export volumes benchmark markets were remain largely U.S. coal comparable was Throughput margins in sequentially mild current facility QX, Volumes X the with the with the coal trans and versus KRT and at

customers not of doubled market revenue to from CMT tons revenue to volumes $X.X volume. the $XX.X totalled CMT dynamics. million benefited million million. year However, EBITDA take including to contributed total, pay export Year-to-date deferred prior strong In than adjusted related deferred more X.X million as CMT or the period $X.X QX their versus

As revenue a CMT occurs on as revenue GAAP the we or recognized is generated it deferred at quarter recognized which when reminder, of take fourth pay in tons year. each

interest in capital the Looking flow. with at slide, on to operating also timing next contributed coupled $XX include payments performance the liquidity million quarter the of impacts strong cash operating which working of

quarter guidance cash included As in on during our activities, of million August part of rebuilt with the to CMT $XX of year as project It which Harbor $XX related revolver million of the $XX which and of year in hand. million. repaid borrowing a combination $X using we CapEx our to call million. debt $XX and seller-financing Granite the refinancing includes our remains discussed we XQ City also sharing $X guidance Indiana with of gas million inline million inline of full our remains full also work

our you Based of inline ended XXX of year than through full the on we top XX liquidity million. well year positioned guidance with first – $XXX our deliver the of targets million the are quarters QX target include this a will to full XXXX mentioned strong is end QX. CapEx at can see quarter Additionally, results in deferred cash more from and slide to expectation. Viewing revenue XXX. a CMT. adjusted solid with ongoing also All-in-all $XXX EBITDA towards that balance chart as full expect of approximately we we three of results guidance year on of recognition

we of units than open cash at unit $X million capital in annually. million. that an we flow purchased they know SXCP during approximately in will which May, our we the QX SXCP We cash highly quarter And believe units SunCoke on market open attractive use that more is $X it Since of and we and return and XX, additional additional best is in and through began adjusted a as $X.X process. provides purchasing slide XXX,XXX million market purchased acquire units to the total cash deploying for price operate. remain we asset will priorities risk generate SXCP expect we purchases Looking towards expect disciplined are the units the

the both on back been have as Frit. rebuilt. including well of that, Granite we our as million Indiana turn City to efficiently are focussed CapEx Harbor I’ll our project Additionally, With sharing gas $XX it managing

Fritz Henderson

Thanks, Fay.

that was the grow importantly XX, volumes also XXXX, unique were next a acquired and and Turning capabilities is to located Convent of part When regarding in late strategic rationale the acquiring with earnings. we to Marine there facility opportunity terminal our we large Convent. strategically slide sizeable the a

we we few transload we'd our serve to crush or Now the – with bring quarter been firm business mentioned we strategic stone volumes bolster one To services an of [Indiscernible] end to new storage wins terminal. which delivery customers working that offer, very acquisition products multi we contract call. and ground first Marine that the been and pieces. our have Convent on hard original that In aggregate acquisition vessel under terminal. like took has first has priorities Today the year the our earnings in our to going our the third quarter, second team of a from ocean the share our we through our new development since we

quarter [Indiscernible] As between now in and Gas heart of linked you an raw located infrastructure Shale may to Chemical home. the the know development. and for plant the Convent transloads important developments material accelerating activity Construction New is Orleans Convent in is

while shipment excited successfully that infrastructure is Coke first Convent road Pet fourth adjusted of unique EBITDA from number partners extend and even more rail business. million two are Coke. provides and are Pet part alongside they at Convent at been to Coke recently we refiners of Pet additional wins to business We $X affected to advantages We’ve the the [Indiscernible] most able XXXX. the ready, to signal that of and Mississippi. to EBTIDA lower quarter Pet And our $XX the unloaded million volumes working our on market $X these are of start been two separate to importantly footprint down and about to Convent. $X there incremental Together, for nice in years the in the these test train wins within targeting logistics between we at represent refinery willing Another beyond. win our that focus customers in Coke a to believe I expect generates the the contribute million and payment, have have believe we new million

XX ahead the chart next we additional looking Now prospects at are the term. on growth in the excited about near Convent

coal bulk similar higher partners to and further additional potential volumes, aggregate dry our targeting business. and export other of volumes new refinery Coke are Pet We material

the we expansion adding In to have the this product shipments. will and world This reach land addition, business. our terminal, Longer in have our total term, in the loading grow class capability our me river we liquidity attractive most categories and leverage existing the and excuse options most busy believe markets, bulk a an what infrastructure we and liquids to small for look customers. for expand existing and site both we to capabilities potential we and barge new the into order are Convent already to provide to terminal operation the attractive make to into is one of multiple for

battery, distinct we with future of forward rebuild set to my attention the you the on touched set XX an throughout into C/D sides, respect it in Switching slide B, of is quarter. side We can focusing Slide now feel gears Harbor divide ovens known already effort Fred sets oven four rebuilds, a learning to on based less of cost-effective facility. facility. to plant two XX. initial XXXX on began each across scalable the the D, XX, equal in oven, ovens ovens mechanical as the these as set and turnaround grouping I’d Indiana are and We with the like C A, look process wins of for A/B first started oven. another the XXX equates one you see progress updating less facility. of this We design C/D by build XX side, with to multiyear of we more made Indiana to is and from results made on Harbor side turn up calls. the this We mechanical chart, the we’ve on encouraged and the in the

So, and larger even based quarter our something the this in five cover scope we’ve this number year, rebuilds. more year’s of anticipated with originally experience on beginning we’ve you than second of at to of of learnings increased the recently in ovens reviewed campaign year. XX total, the the

and As facility. rebuild facility by includes our total To-date we’ll of on we technique. implementation Fred than and feel with C/D rebuilt work schedule to XXX on third previously entire rebuilds have or we remain ovens these the in rebuild Total budget the the design of more result our half are through and quarter and side year-end. oven been encouraging confidence

and As past rebuild standard to campaign time. an two often we’ve weight detailed the rate. the accelerating degradation most and measures; continue critical in comprehensive over at degrade rebuild on time to non-rebuild return back performance stops This charge the oven oven talking

When coking of into operating As also well, stable coke. are Coke the is XX a time is production charge and coal takes windows the are five coal performance to oven, reminder is or And convert oven weights charge of consistent, completed. is rebuilds times volume consistent and weight into the time after loaded performance the approximately cycle constant. oven measuring the that each on cycle before therefore we both relatively both days IHO’s are focus a at and and plant time

talking and which XX% significant charge the over XXXX versus and rebuild at our back the campaign create increases weight of time previously on both improvement production yield degraded ovens rebuild oven prior we oven. Looking on on

approximately initiative in plant. XXXX, campaign on undertaking the have cost are largest understanding the Based on XXXX. in the this at Given these of this since rebuild the but oven. be execute A execute will launching XXXX we we can results and believe late condition oven ovens all these resources knowledge planning her across XX comparable oven battery rebuilds experiences on of we we A-battery the per year's execute of that from rebuilds a $XXX,XXX target our

estimated XXXX approximately XX% remaining year, this and will case capital the spend. be XX% been it or As the spend

further XX% on fully plants will oven address XXXX will slide XX operational. next are our rebuilt three Harbor the and and entirely Indiana the campaign looking we of our battery, once chart, from Harbor to C and A, into Indiana the Outlook fold completed D Turning XX, ovens be

oven in impact facility XX has plant The that that five the expectations B-battery battery that years challenged just contributed performance larger of finished XXXX, last monitor The our we and up XXXX, over operating with operationally to rebuilt that ovens of to XX last Consistent as and within historical B-battery to oven and weight been. time as talking in charge B-battery to Our three battery, relative results to-date rebuilt approach oven intend D-battery. did other as return non-rebuild has said, a most our [Indiscernible] is met we had With performance. compared that well is remaining B-battery and few batteries challenge. XX. have

the As we Through remaining a the would likely our more none we economic progress see of formulate plan based though, portion upon expected for XXXX based $XXX,XXX rebuilds or on the conditions ovens. portfolio return we all, we work the rebuilding and return in XX is oven B-battery. cost through estimate remaining of anticipate today economic the approximately will

our we’re and the of B-battery share assessment updates XXXX and campaign we it provide rebuilt doing progress we’ll to quarter as rebuild addition As comes intend regular also information this on together.

fixed the OEM an performance under XXX,XXX mechanism, the cost and to million operating XXXX full anticipate to capacity year oven and year and be level process, driven on reimbursement is Returning which also Harbor impact I on has plan. in Indiana Harbor when Indiana per production for expect next In plants a covered, the our A- nameplate contract rebuilt budgeted with adjusted rebuild the up the Including entering year. C for XXXX. will as the overall during the the from last recovery. OEM we campaign three performance been XXXX battery return if years benefit we sharing rebuild perspective plan X.XX XXXX XXX,XXX, to oven, budgeted ton to with of D the by XXXX in EBITDA profitability and improved SunCoke with ton a XXXX benefit Harbor for ovens Thus just for will which to the Indiana of in XXXX. Battery ton now OEM the XXXX plan you with including these full From campaign we entirely outlook Turning return rate profitability. a have combined rebuild

along We’re we’re specific the still normal have our quarter plants time. harbor in not the as of to all the we with financial project to well the of community. do provide our Again fourth of We our details guidance of self working research customer, the committed making therefore earnings company provide with our surrounding OEM in XXXX the expect the this and XXXX call. customer overall budget for shareholders but through a success this our do course XXXX our and for have full specific as Indiana at to targets

call As rebuild a we basis that that, ones XXXX out, update part on XXX,XXX forward. before is forward. between opening had total oven of expect should produce completed regular for to Q&A. we going have campaign and will XXXX pointed a up tons the XXX,XXX continue Pay capability to Wrapping investors going the

year made progress on are against XXXX for deliver top of long guidance this and financial heard we’ve to commitments our range. morning full result you’ve our As well-positioned

to of for Now the and our acknowledge here our I’d in women effort XXXX like a with the strongly. a year and direct SunCoke people, moment men success the to at focus the family. quarter up our the just third book the here launch take closing

opportunity take thank to like team for their I’d effort. members the this all So to

the for of as result. and and made We’re XXXX market coming model stronger we’ve moving proud a our progress late tough business resilient out in more and XXXX a

longer collective the call and efforts of success. thus up what We’re we the encouraged to With open company’s by for term for see far that, like our I’d questions. because

Operator

first of comes Platou. from Lee Instructions] Your [Operator question Clarksons MacMillan

line open. is Your

Lee MacMillan

on caught helpful the everything sorry, for there. again. I’m sure I Hello, Thanks I’m Harbor. Indiana update not

I XXX,XXX remaining B-Batteries that think the would already that of I XXX,XXX say instead rate? with be

Fritz Henderson

XXX, certainly cost and seen that today suggest that’s would estimate other than on to our level higher going we’ve they’re batteries. the our today the experience be of degradation

Lee MacMillan

Okay.

the like of of so state the sort not batteries cost? it’s So escalating and if external

Fritz Henderson

more extensive level No, no, of it’s just repair. the much

Lee MacMillan

Okay, understood.

Fay West

rebuilds as the be going at going level in what we’d experienced just I’ll XXXX are same XXXX. say, the to here to past

entire. for just XXX,XXX, So about XXXX to that’s want I just

Fritz Henderson

Thank you.

Lee MacMillan

I Okay. side. on did B-batteries remaining then, if okay. making them, the And And question the a got [Indiscernible] you that.

plan fourth You’re was customers there impact or high the having the quarter? of maybe see will might to indication lower fourth sort quarter. just curious maintenance I making during be just requirements of unusually seem if amount could certain on still Thanks. then your is

Fritz Henderson

Not No. point, this Lee.

Lee MacMillan

Okay. Thanks a lot.

Operator

question of next Our Pipes from Company. Instructions] Lucas & comes FBR [Operator

line open. is Your

Lucas Pipes

guys. for [Indiscernible] Hey, Ted Pipes. Lucas

job good thing quarter. on First the

Fritz Henderson

you. Thank

Unidentified Analyst

go So front remind my first question secondly in you again mean, anyway. sorry of what the us I in like for like – XXXX it can look would A. loaded battery or build schedule ahead. And lumpy

Fritz Henderson

Go ahead.

Unidentified Analyst

all just a that battery this I it question. out like kind to battery can expect of in the say, A when in secondly force to were is first full we we of is rebuild D? [Indiscernible] BXB If going [Indiscernible] the going battery decided XXXX economical different and

Fritz Henderson

a So, time. at one step

commence actually. some to what this expected of We year did we

March commence year to activities cool on where we start depending of in down. whether XXXX expect next would likely to We the

any not campaign we work – the actually invariably at not don’t XXXX, we up XXXX did this plan, January, We’re do in ended it do XXXX, try but in finishing year.

what we’ve to year, it year. then do then you would without that’s lead progressively through work activity, November. will we we the and complete commenced to done the January, February the the pretty and work by this And March end trying similar in of we’re So,

So now your second question.

the more we that XX in a frankly XXXX, done. do handful to any planning got not We’re that’s than getting

into be XXXX that the monitor remaining oven as producing as throughout the as year or – from and probably on remaining continue And then do we whether get we We’re rebuild we all not much get throughout year. the will we’ll that we’ll portion ovens or performance D we makes of confident to of rebuild non to to are of or D-battery XX up. quite But producing, in battery battery done. summer that what not want whether XX the to able spring the we the be call as year to next

Unidentified Analyst

Okay. in great. to the then refurbishment Indiana my That the so trading sounds cost combination agreement going look Harbor And change and XXXX is with question, how to from this XXXX second if program going on?

Fritz Henderson

OEM actual finalized we estimated spend is to differential K. estimated number actually fixed $XX on experience our will less spends OEM But just continuing and the and function we’re number cost, be what in the X.XX actual What So to But budgeted that last cost XX-K our the upon is divided effective share levels our articulated is way work we of look number outlined by And million we disclosure approximately in |So mechanism ton. is us customer. budgeted million. use less the year. OEM not been XXXX is. sharing OEM OEM we’re the happens will depend we million the our been the customer. producing still hasn’t recovered, nameplate. with the based a because yet with the recovery with But as to a than it’s XXXX, plants because That under what X.XX we X.XX tone run the the the basically back capacity. OEM nameplate under ultimately the which what share

Unidentified Analyst

and great. with quarter guys, good Sounds Thank again. much the you very job

Fritz Henderson

Thank you, Ted.

Operator

call questions further presenters. no are to There this time. I our return at the

Fritz Henderson

your hit we Okay. talk next subsequently with SunCoke and talking look Again and much to our you Thank thank in investor portfolio road is result. relations be the we’ll about and the very forward your you you. with and investments for business the interest time

Operator

concludes conference today's call. This

You disconnect. now may

SunCoke Energy (SXC) 26 Oct 172017 Q3 Earnings call transcript