SunCoke Energy Inc. (NYSE:SXC) Q2 2017 Earnings Conference Call - Final Transcript
Jul 27, 2017 • 11:00 am ET
[Operator Instructions] And your first question does come from the line of Adam Gui with Mangrove. Your line is open.
Thanks. This is Nathaniel on for Adam again. It sounds like you have increased your rebuilding activity at Indiana Harbor. Could you help us understand what the incremental expenses associated with that and how much of that goes through capex as opposed to how much goes through your income statement?
Sure, Nathaniel, so first thing I would say is that we've been encouraged by this beginning of our 2017 program as well as by the performance of the 2016 ovens that we rebuild. With that, we decided to expand the scope in 2017 from 53 to 58. That would increase capital spending slightly - it will increase capital spending at the harbor, but obviously as Fay mentioned, we intend to stay within our $80 million approximate estimate for capital spending across the company.
With respect to the capital associated with additional five, what you should think about it is you've got about $400,000 of capital and $100,000 of expense for oven. That's a good general rule or $500,000 in total. The ovens can differ slightly based upon their level of degradation, but in on average that's about what it is.
Do you also incur incremental expense associated with taking the adjacent ovens out of service?
Well, it obviously affects production, but I wouldn't call it expense. But it does affect production for sure, because you do have -- what we've been doing - and one of the batteries have been moving down. So in this particular case, every time we take a block of ovens out of service, you do take two other ovens out of production that surround that block.
In the particular case that I'm talking about here, we've had very little levels of production in that particular battery. But I think in general as I mentioned early on, when we take a block of ovens out, there's always two ovens around it that come down at the same time. Not expense, but it does affect production and profitability.
Great, okay. So by moving your rebuild activity from 53 to 58 and also adding in the 48 additional ovens that you're doing additional refurbishments on, how much does production get affected in 2017 relative to your original production thoughts and then how much is EBITDA affected?
So first thing is as Fay mentioned, we do expect to be able to operate the plant in line with our targets for this year of about $13 million adjusted EBITDA loss. Production will be approximately 850,000 tons. We came into the year. We thought it could be close to 900,000 tons.
What we saw in the first quarter itself was because of the work that carried over from 2016 into the first quarter 2017. We saw lower production in the first quarter, but the good cost control of the plant away - I mean one, we've been executing the oven rebuild program