SunCoke Energy Inc. (NYSE:SXC) Q3 2019 Earnings Conference Call - Final Transcript

Nov 05, 2019 • 10:30 am ET


SunCoke Energy Inc. (NYSE:SXC) Q3 2019 Earnings Conference Call - Final Transcript


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Thank you for standing by and welcome to the SunCoke Third Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to your speaker today Shantanu Agrawal, Director of Investor Relations. Please go ahead.

Shantanu Agrawal

Good morning and thank you for joining us today to discuss SunCoke Energy's third quarter 2019 earnings. With me today are Mike Rippey, President and Chief Executive Officer and Fay West, Senior Vice President and Chief Financial Officer. Following management's prepared remarks, we'll open the call for Q&A.

This conference call is being webcast live on the Investor Relations section of our website and a replay will be available later today. If we don't get to your questions on the call today, please feel free to reach out to our Investor Relations team.

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

With that I will now turn things over to Mike.

Michael G. Rippey

Thanks Shantanu. Good morning and thank you all for joining us on today's call. We have quite a few things to cover, so let's just get right into it. I'd like to start with our logistics business and walk through some meaningful challenges we are experiencing. In previous quarters, I have talked about the thermal coal export market and how it continues to face headwinds with weak power demand, increased Russian exports, and an oversupply of LNG. During the quarter, that trend continued and was exasperated by significant deterioration in the business of our two largest customers for CMT. As you know, CMT is underpinned by two long-term take-or-pay contracts, each contract for 5 million tons of throughput.

Our customers Murray Energy and Foresight Energy account for the majority of CMT's adjusted EBITDA and have been challenged by both market conditions and their respective capital structures. The sharp decrease in coal export prices coupled with declining domestic coal demand have negatively impacted Murray and Foresight's free cash flows and liquidity positions. Last week, Murray filed for Chapter 11 bankruptcy protection and Foresight extended the grace period repayment on interest by another 60 days. These developments have decreased the number of coal export tons that CMT handled during the quarter and is expected to handle for the balance of 2019. We now anticipate the throughput volumes for the full year at CMT will be approximately 6.5 million tons, 5 million of which will come from our coal export customer Foresight Energy, Murray has not shipped any meaningful volumes through CMT during the first nine months of 2019 nor made any payments under its take-or-pay agreement and we do not