Suncoke Energy, Inc. · NYSE:SXC
Suncoke Energy — Q4 2014 Earnings Presentation
37 slides from Suncoke Energy's earnings presentation, Jan 29, 2015
Slide 1: SunCoke Energy, Inc. Q4 2014 Earnings & 2015 Guidance
SunCoke Energy, Inc. Q4 2014 Earnings & 2015 Guidance Conference Call January 29, 2015
Slide 2: Forward-Looking Statements
Forward-Looking Statements TM This slide presentation should be reviewed in conjunction with the Fourth Quarter 2014 earnings and 2015 guidance release of SunCoke Energy, Inc. (SXC) and the conference call held on January 29, 2015 at 11:30 a.m. ET. Some of the information included in this presentati
Slide 3: 2014 Overview
2014 Overview TM Accomplishments & Challenges Operating Performance • Sustained solid full year operating, safety and environmental performance in coke, logistics and coal despite weather-challenged Q1 • Completed Indiana Harbor refurbishment, but facility turnaround still in progress; delivered F
Slide 4: Granite City Dropdown Transaction
Granite City Dropdown Transaction TM 75% dropdown of Granite City executed at ~9.9x total EBITDA multiple Potential Impact to Estimated Expected Impact from Dropdown SXC Equity Value EBITDA Multiple 1 Direct • ~$52M additional LP/GP units Transaction structured Direct Transaction • $135M debt pay
Slide 5: Q4 & FY 2014 Earnings Overview
Q4 & FY 2014 Earnings Overview TM (1) Adjusted EBITDA from Cont. Ops. Adj. EBITDA from Cont. Ops. up $7.2M in ($ in millions) Q4 and $16.0M in FY • Improvement at Indiana Harbor, Jewell Coke $221.8 $237.8 and Brazil plus lower Corporate costs $62.8 $70.0 • FY benefited from Coal Logistics acquisitio
Slide 6: Q4 & FY 2014 Financial Results
Q4 & FY 2014 Financial Results TM ($ in millions, except volumes and per share) Q4 '14 Q4 '13 Q4 '14 vs. Q4 '13 FY '14 FY '13 FY '14 vs. FY '13 Continuing Ops. Adj. EBITDA (79) up 11.5% in Q4 and 7.2% in FY Domestic Coke Sales 1,103 1,047 56 4,184 4,263 Volumes Coal Transloading Volumes 4,301 3,649
Slide 7: Adjusted EBITDA – Q4 '14 vs. Q4 '13
Adjusted EBITDA(1) – Q4 ‘14 vs. Q4 ‘13 TM Improved Indiana Harbor results & lower Corporate costs benefited Q4 ($ in millions) ($2.8) $2.6 $7.3 ($0.6) $0.7 • Brazil: $0.8M ($13.3) • India: ($3.6M) • Employee costs ($4.9) • Volume & yield: $4.9M $70.0 $62.8 • O&M recovery: $2.1M • Black Lung valuatio
Slide 8: Adjusted EBITDA – FY '14 vs. FY '13
Adjusted EBITDA(1) – FY ‘14 vs. FY ‘13 TM Indiana Harbor and Coal Logistics benefited FY results ($ in millions) $2.9 $9.6 ($17.1) ($1.2) $13.2 ($8.5) • Brazil: $2.8M ($10.0) • India: ($4.0M) $237.8 $221.8 • Q1 ‘14 weather • Black Lung: ($14.3M) impact: ($7.0M) $210.7 • Increased fixed fee: $7.5M •
Slide 9: Diluted EPS – Q4 '14 vs. Q4 '13
Diluted EPS(1) – Q4 ‘14 vs. Q4 ‘13 TM India impairment and Legacy costs drove Q4 ‘14 EPS loss ($ per share) $0.03 $0.10 ($0.12) • Impairment: ($0.46) $0.07 • India performance: $0.02 ($0.22) $0.22 $0.01 • Indiana Harbor Accelerated D&A: ($0.04) • Coal Prep. Plant Impairment: ($0.03) ($0.44) • Coal P
Slide 10: Diluted EPS – FY '14 vs. FY '13
Diluted EPS(1) – FY ‘14 vs. FY ‘13 TM India and Prep. Plant impairment, depreciation and Legacy costs drove FY ‘14 EPS loss ($ per share) • Debt extinguishment costs: ($0.17) • Lower interest expense: $0.01 $0.25 ($0.52) $0.11 ($0.25) $0.13 $0.58 • Impairment: ($0.44) • Coal Prep. Plant impairment:
Slide 11: Domestic Coke Business Summary
Domestic Coke Business Summary TM Q4 ‘14 Adjusted EBITDA per ton of $58 FY ‘14 Adj. EBITDA per ton of $59 impacted by Q1 weather Domestic Coke Production Domestic Coke Adjusted EBITDA(1) Per Ton (thousands of tons) ($ in millions, except per ton amounts) 1,059 1,090 1,083 $67/ton 1,056 154 944 155 1
Slide 12: Indiana Harbor Performance
Indiana Harbor Performance TM Q4 ‘14 production below guidance 2014 Coke Production (thousands of tons) • Exited year with solid yields Q4 ‘14 Guidance • Ovens pushed per day challenged 285K – 295K tons 275 270 264 – Experienced two major equipment failures – Oven-push cycle and scheduling below tar
Slide 13: Discontinued Operations
Discontinued Operations TM Q4 ‘14 Adj. EBITDA from Disc. Adj. EBITDA from Disc. Ops. Ops. loss of $4.9M vs. $4.6M in Q4 ‘13 Q4 ‘14 FY ‘14 • Average coal sales price down $17 per ton, largely offset by Loss on Disc. Ops., net of tax ($40.1M) ($106.0M) lower cash costs and volumes Exit Costs (contract
Slide 14: Liquidity Position
Liquidity Position TM Ended quarter with solid cash position and significant revolver capacity $11.9 Attributable ($15.8) ($8.9) $139.0 to SXCP $32.0 ($3.8) ($0.7) $114.8 $33.3 • Ongoing: $9.6M $25.2 • Environmental project: $6.2M $26.9 SXCP revolver ($15.7) availability: $250M • India Impairment: $
Slide 15: Guidance
GUIDANCE SXC Q4/ FY 2014 Earnings & 2015 Guidance Call 14
Slide 16: 2015 Priorities
2015 Priorities TM 2015 priorities include sustained focus on operations excellence, growth initiatives and capital optimization to enhance valuation • Sustain high-level operating, safety & environmental performance Operations • Improve Indiana Harbor performance; return to name plate run-rate Exce
Slide 17: 2015 Domestic Coke Business Outlook
2015 Domestic Coke Business Outlook TM 2015E Adj. EBITDA per ton of $55 – $60 reflects Jewell Coke standalone impacts and outlook for Indiana Harbor Domestic Coke Adjusted EBITDA(1) Per Ton 2015 Domestic Coke Adj. EBITDA ($ in millions, except per ton amounts) outlook of $240M - $255M $59/ton $55 -
Slide 18: 2015 Indiana Harbor Outlook
2015 Indiana Harbor Outlook TM Indiana Harbor expected 2015 Adj. EBITDA of $25M – $35M reflects Q1 production outlook and contract cost recovery economics Operating environment remains challenged • Steep learning curve on post-refurbishment oven performance and new equipment • Existing equipment rel
Slide 19: 2015 Coal Rationalization Plan
2015 Coal Rationalization Plan TM Plan preserves optionality to sell while balancing impact to Jewell Coke Dec. 2014 2015 Coal Long-term Announcement Rationalization Plan Coal Supply • Reduced coal production by • Implement contract mining model • Maintain optionality for >50%, idling mines, elimina
Slide 20: Benefits of Coal Rationalization Plan
Benefits of Coal Rationalization Plan TM Expect rationalization plan to generate $20M run-rate difference vs. operating status quo FY 2013 FY 2014 FY 2015E(1) FY 2016E(1) Adjusted EBITDA ($6.3M) ($10.0M) ($31.5M) ($31.5M) from Disc. Ops. Status Quo Excludes Capital ($20.1M) ($7.1M) ($9.0M) ($9.0M) $
Slide 21: Expected 2015 Adjusted EBITDA
Expected 2015 Adjusted EBITDA(1) TM 2015 Adj. EBITDA(1) outlook is flat, with Jewell Coke standalone cost impacts offset by Indiana Harbor improvement ($ in millions) $9 - $19 $225 - $245 ($10) – ($13) ($7) - $1 • Standalone costs, including Coal ~($15) handling and moisture impacts • OPEB/employee
Slide 22: Consolidated Guidance Summary
Consolidated Guidance Summary TM Metric 2014 Actual 2015 Guidance Adjusted EBITDA(1) Continuing Operations $237.8 million $225 – $245 million Consolidated $210.7 million $190 – $210 million Attributable to SXC $150.0 million $115 – $130 million Capital Expenditures ~$125 million ~$90 million Domesti
Slide 23: Shareholder Value Creation
Shareholder Value Creation TM Shareholder value creation via organic and inorganic growth projects, backed by disciplined capital management Pursue organic growth projects that Acquire industrial-facing processing leverage our operational strengths and and handling assets to drive further greenfield
Slide 24: Steel Industry
Steel Industry TM Recent capital markets sentiment & industry environment has shifted negatively for steelmakers US primary demand outlook reasonable • Resilient automotive demand • Continued non-residential construction recovery • Expect challenges within tubular/oil & gas segment Steel pricing und
Slide 25: SXC Share Price Correlation
SXC Share Price Correlation TM SunCoke Energy historical share price performance highly correlated to AK Steel and US Steel (1,2) (1,2) Historical Share Price Correlation to AK Steel Historical Share Price Correlation to US Steel 200% 200% Correlation Coefficient = 0.90 Correlation Coefficient = 0.8
Slide 26: Key Investment Considerations
Key Investment Considerations TM Strong investment thesis remains intact • Long-term, take-or-pay contracts at strategic customer assets Stable, Long-Term • Profit and return on capital generated via fixed-fee structure Cash Flows • Pass-through of coal and operating costs in addition to taxes, tran
Slide 27: Questions
QUESTIONS SXC Q4/ FY 2014 Earnings & 2015 Guidance Call 26
Slide 28: Investor Relations
Investor Relations 630-824-1907 www.suncoke.com
Slide 29: Appendix
APPENDIX SXC Q4/ FY 2014 Earnings & 2015 Guidance Call 28
Slide 30: Definitions
Definitions TM Adjusted EBITDA represents earnings before interest, taxes, depreciation, depletion and amortization (“EBITDA”) adjusted for impairments, costs related to exiting our Coal business, sales discounts and the interest, taxes, depreciation, depletion and amortization attributable to our e
Slide 31: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA TM ($ in millions) FY 2014 Q4 2014 Q3 2014 Q2 2014 Q1 2014 FY 2013 Q4 2013 Q3 2013 Q2 2013 Q1 2013 Net Income/(Loss) ($101.8) ($55.8) $6.4 ($48.6) ($3.8) $50.1 $18.7 $12.3 $12.7 $6.4 Subtract: Net Loss from Discontinued Operations (106.0) (40.1) (18.5)
Slide 32: Reconciliation of Net Income to Adjusted EBITDA from Discontinued Operations
Reconciliation of Net Income to Adjusted EBITDA from Discontinued Operations TM ($ in millions) FY 2014 Q4 2014 Q3 2014 Q2 2014 Q1 2014 FY 2013 Q4 2013 Q3 2013 Q2 2013 Q1 2013 Net Loss from Discontinued Operations ($106.0) ($40.1) ($18.5) ($41.2) ($6.2) ($15.5) ($4.4) ($3.6) ($2.8) ($4.7) Depreciati
Slide 33: Reconciliation of Segment Adjusted EBITDA and Adjusted EBITDA per ton
Reconciliation of Segment Adjusted EBITDA and Adjusted EBITDA per ton TM Reconciliation of Segment Adjusted EBITDA and Adjusted EBITDA per Ton Domestic India Corporate / Continuing Discontinued ($ in millions, except per ton data) Coke Brazil Coke Coke(1) Coal Logistics Other Operations Operations L
Slide 34: 2015E Guidance Reconciliation
2015E Guidance Reconciliation TM 2015E 2015E ($ in millions) Low High Net Income $21 $38 Subtract: Net Loss from Discontinued Operations (16) (13) Net Income from Continuing Operations $37 $51 Depreciation, depletion and amortization 89 89 Interest expense, net 68 66 Income tax expense 12 20 Legacy
Slide 35: Balance Sheet & Debt Metrics
Balance Sheet & Debt Metrics TM As of 12/31/2014 Proforma(1) Post-Granite City Transaction Balance Balance SXC Attributable SXC Attributable Attributable Attributable Consolidated to SXCP Consolidated to SXCP ($ in millions) to SXC to SXC Cash $139 $33 $106 $188 $82 $106 Revolver Capacity 398 250 14
Slide 36: Capital Expenditures
Capital Expenditures TM 2014 Capex (1) ($ in millions) SXC SXCP Consolidated Ongoing (2) $27 $17 $44 Expansion 4 0 4 Environmental Project 1 45 46 Indiana Harbor Refurbishment 24 0 24 Total CapEx from Continued Operations $56 $62 $118 Ongoing: Discontinued Operations (3) 7 0 7 Total CapEx (Consolida
Slide 37: Q4 and FY 2014 Charges
Q4 and FY 2014 Charges TM ($ in millions) Segment Financial Classification Q1 '14 Q2 '14 Q3 '14 Q4 '14 FY '14 Asset Impairment - Disc. Ops. Disc. Ops Net Income from Disc. Ops. - $88.0 $16.4 $29.1 $133.5 Asset Impairment - Cont. Ops. Cont. Ops. Net Income from Cont. Ops. - 15.1 - 1.7 16.8 Coal Exit