SunCoke Energy Inc. (NYSE:SXC) Q1 2018 Earnings Conference Call - Final Transcript

Apr 26, 2018 • 11:00 am ET

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SunCoke Energy Inc. (NYSE:SXC) Q1 2018 Earnings Conference Call - Final Transcript

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Presentation
Executive
Mike Rippey

And lastly, with a strong start to the year, we're well positioned to achieve our fiscal year 2018 guidance targets.

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

Executive
Fay West

Thanks, Mike and good morning, everyone. Turning to slide four, our first quarter net income attributable to SXC was $8.7 million or $0.13 per share. EPS was up $0.11 from the prior year period due to strong operating performance, which was partially offset by higher interest expense from our debt refinancing last year. Q1 adjusted EBITDA of $64 million was up 15% over the prior year period. The increase was driven by strong operating performance in our coke business, significantly increased volumes at CMT and lower corporate and legacy costs.

Moving to the detailed adjusted EBITDA bridge on slide 5, we are pleased with the strong performance in the first quarter. And as you can see, consolidated adjusted EBITDA is up $8.4 million over the prior year. Our Coke segment performed well this quarter. Indiana Harbor's first quarter adjusted EBITDA of $5.8 million is up almost $9 million versus the prior year period. We continue to see sustained operating performance from rebuilt ovens, which are driving an increase in production and higher yields. Additionally, Indiana Harbor received $2.7 million in higher O&M reimbursement, due to the contractual reset of the O&M cost sharing mechanism with our customer. As a reminder, in 2018 and through the end of the contract, Indiana Harbor's O&M is reimbursed based on an annual budget versus the fixed rate mechanism that we had in 2015 through 2017.

Excluding Indiana Harbor, the remainder of the coke business on balance performed as expected. First quarter adjusted EBITDA was impacted by the timing of outage costs and lower yields at our Haverhill facility. We did not have any maintenance outages in the first quarter of 2017. So this affects quarter-over-quarter comparability. Quarterly results were also impacted by the timing of other planned maintenance projects. Additionally, we experienced an unfavorable coal cost recovery at Jewell as compared to the prior year. These various pluses and minuses across the coke business were anticipated and included in our full year 2018 guidance.

Something that was not contemplated in our 2018 guidance, but affected our results was the impact that weather had on the inland waterways. High water levels and lock issues on the Ohio River increased transportation time for coal shipments. This in turn affected the moisture content of coal used for coke production at our Granite City operations. Elevated coal moistures adversely affected both coke and energy production and the EBITDA impact in the first quarter was approximately $800,000.

Adjusted EBITDA for our Logistics business was up $500,000 due primarily to record trans-loading volumes at CMT. CMT continues to benefit from attractive coal export market dynamics with current API 2 pricing supporting healthy export margins for our customers. On the domestic logistics side, volumes were slightly tempered due to river conditions that disrupted barge-related activities. Our