SXC - Earnings call transcript Q1 2018

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Operator

Good morning. My name is Matthew and I will be your conference operator today. At this time, I would like to welcome everyone to the SunCoke Energy Q1 2018 Earnings Conference 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 [Operator Instructions] Thank you. Director Relations, and your may Treasurer conference. Kellogg, of you Investor begin Andy

Andy Kellogg

thank us Chief me for discuss morning Senior Executive you Good and West, Fay joining our and first our XXXX Officer and Rippey, President SunCoke quarter this Officer. earnings. Mike With and are Vice President Chief Financial Energy's to morning

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

remarks that any make on on are call as turn filings are things constitute statements. today. future SEC These today’s turn forward-looking we I'll that, expectations to to apply regarding I our documents things cautionary statements to me financial in over remarks forward-looking various language remind make regarding now over to The Mike. let on our website, we Before call. With the Mike, you non-GAAP available measures the reconciliations today's that discussed

Mike Rippey

thank this the for all morning. and joining Andy Thanks, you call

our start good making are to off We a progress XXXX towards and achieving objectives.

and making. performance results quarter financial to we're testament First are the progress a

May. In XXXX campaign will our performance XXXX group and in sustained to in an XXXX continue the which times, work and we early rebuilt have and assets in logistics on production ovens are the Indiana are coke our operating and in be results Harbor. encouraged at rebuild our both demonstrating from the We weights began solid pleased see of ovens back of and in with and yields. higher the rebuilt we safety charge service and increase performance anticipate XXX to be first the ovens overall March, of coking resulted

to campaign ovens A as fully rebuild battery. year’s part As of this we XX will rebuild a reminder, our

that early, be we XX% on facility. and are encouraged rebuilt results. our we year, on volumes results throughput million program quarter. anticipate of Convent, schedule in seeing will tons rebuilt budget After handled reflected quarter with completed have first still this and rebuild the than We're we're in will ovens, While from the in November. At greater over are record which the by this X.X our of first year's we

in netbacks with Given throughput increasing are attractive expectations capabilities start anticipate we favorable to coal year, remain dynamics, the unique CMT’s achieve to on tons customers a be between fiscal export a XXXX. XX to and targets. guidance and the will million market we strong our to XX.X with strong XXXX our positioned we're year, well to million tons to year And start lastly,

earnings. first Fay the Now, quarter I'll to our review call turn to over Fay?

Fay West

Thanks, good Mike morning, and everyone.

X, over the quarter XX% from operating and corporate $X.XX expense our and year by share. to our performance was costs. by operating up CMT the Turning was up strong attributable which EPS offset $X.X to first prior net income per higher from period to due SXC was year partially interest slide million was performance, or $X.XX adjusted driven prior volumes legacy business, million increased coke strong last lower debt our QX The of year. $XX period. significantly EBITDA refinancing at was increase in

first Moving EBITDA consolidated the quarter. with on prior up the see, $X.X performance over the adjusted as are bridge strong to adjusted pleased can detailed year. we X, is you slide EBITDA million And the in

is of segment $X.X first quarter coke $X million adjusted the this period. year Indiana EBITDA well performed quarter. prior million almost up versus Harbor’s Our

driving and increase an operating higher ovens, We from continue to production yields. see rebuilt sustained are performance in which

customer. higher $X.X cost our sharing reset contractual the the of received Harbor Additionally, Indiana mechanism dollars reimbursement, to with O&M in O&M million due

Indiana contract, reminder, XXXX. a an and through we As in XXXX end budget is in the the XXXX reimbursed that rate the annual had fixed based on mechanism Harbor’s of versus O&M through

of the balance expected. the on Harbor, Indiana coke performed Excluding business remainder as

at First facility. Haverhill did quarter quarter costs adjusted maintenance We in have not EBITDA was any first outages impacted yields and timing the of by our of the outage XXXX. lower

quarter-over-quarter affects timing this comparability. results were So by Quarterly maintenance planned impacted projects. also other of the

unfavorable Additionally, were year we various experienced anticipated across compared our full recovery included to as and an coke year. XXXX coal at cost prior and business minuses pluses in These Jewell the guidance. the

both the Ohio but with affected adversely water dynamics the from affected energy Something logistics coal production content to X operations. City $XXX,XXX River pricing at our for High in was that export inland and our affected $XXX,XXX. in used shipments. for coal issues the and CMT on on healthy for EBITDA contemplated supporting and time This transportation attractive due coke was benefit quarter approximately volumes continues that was current at the Adjusted turn moistures business increased impact to had customers. for in coal CMT. weather market our not export trans-loading up guidance, primarily moisture waterways. of Elevated Granite first impact coal our levels XXXX results the API margins was lock the record co-production our EBITDA

barge were related domestic tempered that the On side, due logistics to activities. river volumes slightly conditions disrupted

adjusted a coalmining costs lapping XXXX Overall, solid also are off transaction and the in of expenses. first million corporate and segment to other Our lower legacy of in quarter. EBITDA the with start $XX benefited one-time from we

in X, offset by in first ton benefit $XX at ton These experienced cost were and production. EBITDA significant as domestic production adjusted fleet yields of on was as a expenses Harbor. reflect and strong on outage slide the discussed maintenance improvement per partially quarter balance Indiana EBITDA across previously the per results on The coke tons well $XXX,XXX quarter. Looking

which that in period. During ovens a the planned during into coal outage, charged is reduced, production lower results

are improved improvement helped versus The Mike a previous consistent mentioned, batteries performing annual which per rebuilt ovens experiencing greater XX,XXX Harbor As times tons & D expected period. ton rebuilt the production and the with run Indian previously XXX,XXX drive as are at C coking rate than battery. yields,

to also Our production This with and taken achieve production year. will quarter plan the We remain second oven offline rebuilds to increase ovens adjusted will million This the include CMT X.X over the adjusted reduce tons. Slipping associated near adjusted Indiana million tons $XX.X to EBITDA not EBITDA to and first EBITDA does significant water are take in portion a quarter. revenue handled CMT XXXX on complete logistics prior levels and the costs guidance. demolition volumes of volumes coke on on rebuild temporarily during on over pay is Harbor generated the a logistics track record $X.X adjusted $XX the of project contribution third quarter, full our an business, million to have in of EBITDA. impact our River. year or slight contributed slide higher EBITDA discuss the period. year significantly quarter, million X despite the during as related high of Mississippi deferred of historic

levels on you have of an loading unloading effect As the operations, vessels activities. barge water specifically, would and our expect,

result, a during approximately costs As quarter. incurred we $XXX,XXX incremental the of first

levels in water mid-May. will that expect to normal return sometime We

XXXX. anticipate full tons this original tons XX.X tons now million or to from we start, in XXXX Convent’s strong pay guidance increasing million the Given Convent’s total in volumes X XX million tons throughput facility. of We X.X year at take X.X million to base of are million to

XXXX. EBITDA volumes limited million to pay on increased We is there reminder, our nature guidance take pick the achieve for due remain track $XX up contracts. logistics $XX adjusted of dollars a from to solidly EBITDA to base the or As our of

which and liquidity X cash flow slide capital interest benefit, Strong to Turning payments with our coupled for of quarter. position operating the in first $XX contributed of to included performance timing a the million working QX. operating

CapEx million due quarter. note approximately in these we And the expect strong gas complete in approximately and and second quarter with over the and line work the In to As million $XXX of on project oven approximately quarter and included total, of million benefit Harbor million full of $XX cash during of remain approximately such, We of million, million to the $X $XX normalize a flow the working reminder, we as CapEx Granite second fourth XXXX. work. third are million quarters and generated payments with the Indiana $X $XXX SXCP’s throughout capital City sharing rebuild the related we of senior interest anticipate plan and CapEx ended XXXX, in in higher projects of liquidity. year cash $XX as we our in combined year.

Directors allocation unit slide down at This announced its priorities SXCP Looking our $X.XX annually. quarter's unit $X.XX distribution cents unit $X.XX annually, per of or unit Board XXXX per XX.X QX of or distribution from of capital morning last per the per X. on

board and SXCP’s board to allow or distribution on achieve directors’ has additional of help to be in goal success. on cash as balance a distributions flexibility long lower expected to positioning perform SXCP by in While the X.X times term will The to debt to SXCP our EBITDA reduction operations and Management for and holder and of that continue achieve reduce reduction will pace debt adjusted guidance, to SXCP’s its unit its XXXX. remain continues deploy end been of and EBITDA we sheet. the a provide strength SXCP’s focus to determined

refinanced As successfully reminder, extended and debt SXCP a last materially maturities. year,

its in to to current cushion provision, to ample refinancing, this revolving achieve As under a establish covenant of EBITDA XXXX. has maximum today has leverage June from gross down step a allows taken SXCP SXCP’s times debt time ratio this ahead SXCP’s leverage of action X.X to that debt to EBITDA board X gross the the target. part times comfortable down term of long facility of credit steps which The

distribution liquidity the norms increase policy portion financial project remediation in City. and which are historical flexibility to meet at capital Granite its expenditures cash final its of improve to the elevated already also to due It primarily to balance environmental Additionally, new strong the SXCP XXXX, greater back position. provides allows

by in will basis, free to reduction $XX approximately positive approximately reduce will $XX SXC year in SXCP’s full a to cash generate on or million XXXX, the flow. distribution sufficient SXC million continue cash While flow

significant future continue the and most ability a minimal Mike. SXC sheet will policy to free positive will growth continue increase a flow value our most turn that, balance grow sheet, and to projects, summary, In over distribution long balance With with efficient flexibility potential for has outstanding to the SXCP Additionally, balance to cash SXC profile. manner QX $XXX SXCP’s liquidity. sheet the to of liquidity, capital I over and the will solid business. in deploy largest sheet has significant asset we maintain and of tuck-ins. debt back fund as end including we balance shareholders. maintains of maximize strong liquidity believe strengthen modified million a SXC SXC to on approximately the and shareholders it strong term of SXC’s and to a cash million value the $XXX with

Mike Rippey

execution, logistics Thanks, on year’s of we performance and capabilities at Fay. coke Harbor. oven slide ensuring of and up Wrapping Indiana assets the on XX, successful maximizing this the campaign focused operational execution rebuild our the and remain

leveraging capabilities and We for incremental are the unique on in after to continuously so With on open targets call finally, also our executing CMT's to a QX. strong up let’s year And on shareholders we track that, commitments achieving continue start Q&A. secure by focused financial to remain to on do focus business. full XXXX our

Operator

line with FBR. from [Operator comes Riley of first question the B. Our Lucas Pipes Instructions]

Lucas Pipes

far full in ask for job Indiana wanted facility? thus of strengthen results I Good and to particular at the case to extent rebuilt what the Harbor entire the

Fay West

in Indiana that. So, results quarter Harbor very kind were and of we are performance with the pleased to the the -- speak we by

whether all but that We year ovens battery, the a our what communicate B on portion on yet or or are are none have that do B have we made by do plan operating. B later not battery, remaining rebuilding ovens. this way We is battery the the been XX encouraged plan of rebuilt to decision we

stay So tuned.

Lucas Pipes

would that? Did when you say this year? refine you Sorry. you that determination later make exactly Could or just

Fay West

Yes.

the back half the I'll in I be So year. think of probably

Lucas Pipes

that the making of they in ovens that what decision, of what you're some that looking exactly the terms is what clear thresholds are or operating, And upon? sort are terms in to the currently at of of have decision metrics would predicated

Fay West

kind is, We're they're structure. the out, at the of looking their we how of the production of coke kind we're performance oven, the balance how the evaluating ovens obviously oven, the charge the battery. how also what So maintaining of

our work been work the most know you battery would additional has As that to in B past what rebuild battery is -- to those need be what challenged required ovens. and additional

Lucas Pipes

question. picture that. a bigger Okay. Thank you for then maybe And

that integrated observation And think the gained has country you've Over years, domestic consistently would what customers? share need couple and the made coke do the in argument been industry. additional some the of the ovens are those last coke for that there you it need of of my maybe and with this market capacity your point in at have when capital conversations in making is you've you

Fay West

as batteries know, will over capacity when So, if those that coke that's decision been operate, you existing incremental be a come there and decision few come the years. some our made by has of last on customers out kind The our that's customers. out

and that or And course But and there's something something next demands renewal. as is monitoring as of so required. well production if incremental that couple that's into that's might we're XXXX I when monitoring years. mindful our the of it think just exist evaluating Certainly, production something we of we're over really we're as that any increased it’s go

Operator

from Seaport Global Hernandez [Operator of next Instructions] question Our with comes Derek Securities. line the

Derek Hernandez

to congratulations Harbor. Indiana wanted great year. you in quarter my add being wanted for roughly also your Harbor neutral your at a really mentioned believe EBITDA reiterating I begin for to that I anticipation of the comments, and you’re Indiana

the QX leaves way about that Indiana improved year, Is that than over million further a X the think I rest year. about given about right the the incremental X results higher at think XXXX? million the that of were performance Harbor for to last increase

Fay West

guidance. annual give we So,

but was of strong first earnest What was in -- limited didn’t number XXXX kind -- out that by And plant, there is a were were service. don't the the very campaign annual things The of limited see the We rebuild quarterly a on talk the basis. there campaign ovens so about performance guidance rebuild until quarter during breakeven an on of start basis. you March.

increase in activity. and an to So what in are third second the we're rebuild the quarter going see

the service, that's through as going run those on of incremental rebuild EBITDA. take and ovens you demolition to an it's impact So going obviously EBITDA, have ovens also out additional to costs

third I think going EBITDA to results how Indiana based the in see based what together XXXX you're year Harbor schedule and on guidance. quarter full we and rebuild our that's second So put tempering some of we -- on the

Derek Hernandez

your plan then believe And Yes. good. Very November. I ends about

kind imply QX, of pick in would that quarter kind presume work this QX and I correct? of fourth in seasonal a So the higher from up intensity

Fay West

Yes.

You're that. right on

Derek Hernandez

course somewhat the of to units quarters the your units this main accumulating in in over SXCP, tempered few thinking of Okay. from XXXX. you given this a of over the capital distribution -- reported maybe XXXX allocation announced this there, strategy increase quarter returns continue, the Excellent. reduced going the And Is year end how turning the last interest LP slight is is over the around to today. your and the or what's currently

Fay West

say the -- of plan given value. is remaining to And authorization progresses. in it SXC does. capital remaining those additional would deploy of have way so, option in still we the to evaluate said have repurchase I So, to units in That we past, time as to the our units. -- we've kind maximize possible. shareholders do What most obviously is we time for as that And we’ll purchasing do do the future. authorization as the decisions have efficient

Derek Hernandez

recent of logistics I with say, something or you segment presentation business in tuck-in other see. being consider, M&A. in in particular should maybe also your considered. then Thank you. that some we mentioned Is line your potential additions line And also

Fay West

and focus certain exploring are We're that on logistics obviously So of is spending acquisitions the that a where has size. we’ve been some our primary been space so time.

time, spending space in at it you wanted that's, characterize the is really time. if where so And this we're our logistics to I think

Derek Hernandez

a rest for really congratulations on the again, of taking my luck thanks year Well, quarter. the Good great and it. questions. for Got

Fay West

you. Thank

Operator

are at the There back no call further I'll over questions this to turn time. you.

Mike Rippey

together we everyone end Okay. quarter. Again, will look the the your again and second for I'd SunCoke. investment soon thank be to And to and we just interest forward at your talking today in to end, like of will

your So for thanks again participation.

Operator

today's concludes conference call. This

not may You disconnect.

SunCoke Energy (SXC) 26 Apr 182018 Q1 Earnings call transcript