Suncoke Energy, Inc. · NYSE:SXC
Suncoke Energy — Investor Presentation (May 2019)
42 slides from Suncoke Energy's investor presentation, May 22, 2019
Slide 1: SunCoke Energy Investor Presentation
Exhibit 99.1 SunCoke Energy Investor PresentationExhibit 99.1 SunCoke Energy Investor Presentation
Slide 2: Important Notice to Investors
2 Important Notice to Investors This communication includes important information about the proposed and pending acquisition by SXC of all publicly held common units of SXCP. SXC has filed a registration statement on Form S-4 with the Securities and Exchange Commission (“SEC”) containing a draft joi
Slide 3: Forward-Looking Statements
3 Forward-Looking Statements Except for statements of historical fact, information contained in this presentation constitutes “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such forw
Slide 4: SunCoke Overview
4 SunCoke Overview Leading raw materials processing and handling company with existing operations in cokemaking & logistics Business Segments Key Financial Highlights (1) Adjusted EBITDA • Largest independent coke producer in North America serving all 3 major blast furnace $270 $263 steel producers
Slide 5: Advantaged Assets Driving Value Creation
5 Advantaged Assets Driving Value Creation Advantaged Assets with Attractive Industry Steady Cash Flow Balanced Capital Leading Market Positions Dynamics Generation Allocation Strategy • Industry leading • Steel and coal • Significant value • Supported by long- cokemaking and industry tailwinds crea
Slide 6: Strategically Located Network of Assets
6 Strategically Located Network of Assets North American Operations Cokemaking Advantages Legend • Domestic assets strategically located to 1 Jewell Coke serve customers’ blast furnace assets ME 2 Indiana Harbor – Three facilities co-located with VT MN NH customer BF and remaining two 3 Haverhill I
Slide 7: Simplification Positions SunCoke for Long-Term Success
7 Simplification Positions SunCoke for Long-Term Success Illustrative SXC adjusted free Simplifies (1) cash flow per share • Reduces complexity and simplifies governance SunCoke’s Organizational and • Aligns interests of SXC shareholders and SXCP unitholders Capital Structure 27% • Accelerates debt
Slide 8: Cokemaking Overview
Cokemaking OverviewCokemaking Overview
Slide 9: Durable Model with Strong Market Dynamics
9 Durable Model with Strong Market Dynamics Stable Long-term Favorable Long-term Coke Superior Asset Characteristics Business Model Supply/Demand Dynamics • Steady cash flow generation • Newest fleet of cokemaking • Long-run steel demand stable, facilities and equipment in the and any increased dome
Slide 10: Long-term, Contracted Earnings Stream
10 Long-term, Contracted Earnings Stream Long-term, take-or-pay contracts generate stable cash flow and insulate business from industry cyclicality Contract Observations Take-or-Pay Contract Provisions • Customers required to take the contract-maximum coke General Provisions • Long-term, take-or-pay
Slide 11: Industry Leading Technology
11 Industry Leading Technology SunCoke’s cokemaking technology is the basis for U.S. EPA MACT standards and makes larger, stronger coke SunCoke’s Heat Recovery Cokemaking Technology • Negative Pressure Ovens - MACT standard for heat recovery / non-recovery batteries • Cogeneration potential (convert
Slide 12: Tightly Balanced North American Coke Market
12 Tightly Balanced North American Coke Market 2019E U.S. Coke Capacity Commentary (1) (2) • U.S. coke market in balance Nameplate Capacity: 14.0 million tons Effective Capacity: 12.0 million tons - Increase in utilization or further closures of coke capacity would tip to shortfall 10% 8% - Estimate
Slide 13: Shrinking Coke Supply Base Creates Opportunity
13 Shrinking Coke Supply Base Creates Opportunity Expect aging by-product battery closures to continue, creating opportunity for SunCoke Aging Cokemaking Facilities Aging Capacity Creates Opportunity % of U.S. and Canada Average Age • Closures driven by combination of deteriorating facilities and Co
Slide 14: Performance Improvement at Indiana Harbor
14 Performance Improvement at Indiana Harbor (1) (2) Anticipate run-rate IHO Adj. EBITDA of ~$50M after the final phase of oven rebuild project is completed in 2019 (1) (1) Indiana Harbor Rebuild Progress Indiana Harbor Performance Outlook ~$50 • To-date, ~80% of the facility completely rebuilt (A/C
Slide 15: SunCoke's Superior Assets Will Drive Contract Renewals
15 SunCoke’s Superior Assets Will Drive Contract Renewals Value Proposition Competitive Advantage • Advantaged operating cost structure and capital investment requirements • SunCoke’s average asset age is ~15 years compared Superior Asset Age to ~48 years for all other US/Canadian capacity • Improve
Slide 16: Logistics Overview
Logistics OverviewLogistics Overview
Slide 17: Strategic Network of Low Cost Facilities
17 Strategic Network of Low Cost Facilities Well Positioned • Strategically located assets with access to barge, rail and truck Domestic Logistics • Provide key logistics services for various met. and thermal coal producers and consumers Facilities • Only dry-bulk, rail-serviced terminal on lower Mi
Slide 18: CMT Positioned for Continued Throughput Opportunities
18 CMT Positioned for Continued Throughput Opportunities World class facility on Gulf Coast with direct rail access and cape size loading capabilities • CMT strategically located as only dry-bulk, rail-serviced terminal on lower Mississippi - Fastest shiploader on lower Mississippi • Low-cost, effic
Slide 19: Global Seaborne Thermal Coal Expected to Remain Stable
19 Global Seaborne Thermal Coal Expected to Remain Stable (1) Global Seaborne Thermal Coal Outlook (2015-2022E) Commentary (million metric tonnes) • Coal fired generation will continue as primary global energy 975 967 960 952 source 934 940 899 884 • Demand for seaborne coal may exceed supply by 400
Slide 20: ILB Netback Economics
20 ILB Netback Economics Commentary Thermal Coal Mine Netback – Rotterdam • Believe ILB export thermal coal profitable into $66 $0 $3 Europe at mid-May API2 Q3 2019 benchmark ($15) pricing of ~$66/t ($5) - Premiums to API2 offered on shipments into ($22) $27 Egypt, South America and Asia • CMT remai
Slide 21: 2019 Financial Performance Outlook
2019 Financial Performance Outlook2019 Financial Performance Outlook
Slide 22: Expected 2019 Adjusted EBITDA
22 Expected 2019 Adjusted EBITDA (1) Expect 2019 Consolidated Adjusted EBITDA of $265M – $275M, due to anticipated improved performance at Granite City and Indiana Harbor ($ in millions) ~($2) $9 – $15 $0 – $2 $265 – $275 $263.2 ($3) – ($5) • Improved • Higher employee- $234.7 performance at related
Slide 23: 2019 Guidance Summary
23 2019 Guidance Summary (1) Expect 2019 Adjusted EBITDA of $265M to $275M; 24% increase in Adjusted EBITDA since 2016 (1) Metric 2018 Results 2019 Guidance Pro-forma Guidance (2)(3) Adjusted EBITDA $266M - $276M Consolidated $263.2M $265M – $275M $226M - $232M Attrib. to SXC $181.2M $182M – $188M (
Slide 24: 2019 Strategic Growth Priorities
24 2019 Strategic Growth Priorities • Growing market share in the North American coke market • Disciplined expansion and optimization of logistics assets • Developing additional business lines within Logistics Steel International the domestic Adjacencies Coke Licensing • Continue build-out of Conven
Slide 25: Balanced Capital Allocation Priorities
25 Balanced Capital Allocation Priorities Initiate Dividend • Expect to establish $0.06 quarterly dividend; $0.24 annually Reduce Debt • Accelerate delevering efforts to reach 3.0x gross Debt / EBITDA • Pursue organic growth projects and M&A opportunities Invest In Growth - Simplified structure impr
Slide 26: Compelling Value Creation Opportunity
26 Compelling Value Creation Opportunity Well Positioned for to Drive Long-Term Value for SunCoke Stakeholders Advantaged Attractive Steady Cash Balanced Capital Assets with Leading Industry Dynamics Flow Generation Allocation Strategy Market Positions26 Compelling Value Creation Opportunity Well Po
Slide 27: Appendix
AppendixAppendix
Slide 28: Legal and Capital Structure Overview
28 Legal and Capital Structure Overview SXC Owns: 2% GP interest Market Cap: $523M 60% LP Interest Unconsolidated TEV: $452M 100% IDRs Unconsolidated Liquidity: $217M (1) 85% Indiana Harbor Brazil Coke (Licensing and Operating) Market Cap: $527M TEV: $1,345M Total Liquidity: $188M 100% Jewell Coke 1
Slide 29: Cokemaking Process
29 Cokemaking Process Heat Recovery Cokemaking Process Generator Turbine Grid Condenser Steam Cooling Tower Feed Water Heaters, Emergency Pumps, Deaerators Vent Stack Cooled Flue Gas Hot Flue Gas Blended Coal Heat Recovery Flue Gas Fan Main Steam Generators Desulfurization Stack C.A C.A C.A C.A Syst
Slide 30: Reconciliation to Illustrate SXC FCF/Share
30 Reconciliation to Illustrate SXC FCF/Share ($ in millions, except per share amounts) Status Quo ($ in millions, except per share amounts) Pro Forma Net cash provided by Operating Activities $ 188 Net cash provided by Operating Activities $ 188 Depreciation and amortization expense (148) Depreciat
Slide 31: Q1 2019 Financial Performance Commentary
31 Q1 2019 Financial Performance Commentary Q1 2019 Earnings Overview ) (1 Consolidated Adj. EBITDA Earnings per Share (diluted) Q1 ‘19 EPS of $0.15, up $0.02 from the prior year ($ in millions) ($/share) quarter • Strong cokemaking performance, partially offset by higher depreciation expense (1) $0
Slide 32: Q4 & FY 2018 Financial Performance Commentary
32 Q4 & FY 2018 Financial Performance Commentary Q4 and FY 2018 Earnings Overview • Q4 ‘18 EPS of $0.03 and FY ‘18 EPS of $0.40 (1) Earnings per Share (diluted) Consolidated Adj. EBITDA ($ in millions) ($/share) - Full-year EPS comparisons primarily driven by: › Favorably impacted by operating perfo
Slide 33: Adjusted EBITDA – FY '17 to FY '18
33 Adjusted EBITDA – FY ‘17 to FY ‘18 (1) FY 2018 Adj. EBITDA up $28.5M, or 12.1%, vs. FY 2017 driven by strong improvement at Indiana Harbor and lower Corporate costs ($ in millions) $33.7 ($14.5) $263.2 $7.5 $1.8 $234.7 • $21.7M – 16% • $1.0M – Favorable yield • Higher CMT • $4.5M – Lower employee
Slide 34: 2019 Domestic Coke Business Outlook
~4,100Kt 4,016Kt 3,861Kt 34 2019 Domestic Coke Business Outlook (1) Expect Strong Domestic Coke operations in 2019; Domestic Coke Adj. EBITDA expected to be $217M – $223M Commentary Domestic Coke Performance (Coke Production, Kt) • Anticipate a $9M to $15M increase in Domestic Coke Adj. $217M – $223
Slide 35: 2019 Logistics Business Outlook
35 2019 Logistics Business Outlook (1) Expect tons handled in 2019 to be in line with 2018; Logistics Adjusted EBITDA guidance of $73M – $75M Commentary Logistics Performance (Tons Handled, Kt) • Expect strong Logistics performance in 2019 $73M – $75M $72.6M $70.8M - Anticipate CMT will handle ~10.5
Slide 36: 2019 CapEx Overview
36 2019 CapEx Overview 2019 projects include final phase of IHO oven rebuild initiative and completion of Granite City gas sharing project 2019 Capex Overciew ($ in millions) Low High Ongoing $64 $66 IHO Oven Rebuilds 40 48 (1) Total Ongoing CapEx $104 $114 (2)(3) Environmental Project (Gas Sharing)
Slide 37: Definitions
37 Definitions Adjusted EBITDA represents earnings before interest, loss (gain) on extinguishment of debt, taxes, depreciation and amortization (“EBITDA”), adjusted for impairments, coal rationalization costs, changes to our contingent consideration liability related to our acquisition of CMT and th
Slide 38: Adjusted EBITDA Reconciliation
38 Adjusted EBITDA Reconciliation ($ in millions) FY '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 FY '18 Q1 '19 Net cash provided by operating activities $ 148.5 $ 57.3 $ 2 8.0 $ 85.3 $ 1 5.2 $ 1 85.8 $ 35.3 Depreciation and amortization expense 128.2 32.9 3 2.0 35.4 4 1.3 1 41.6 37.2 (1) Loss on extinguishment
Slide 39: Adjusted EBITDA and Adjusted EBITDA per ton
39 Adjusted EBITDA and Adjusted EBITDA per ton Reconciliation of Segment Reconciliation of Segment Adjusted EBITDA and Adjusted EBITDA per Ton (1) (2) ($ in millions, except per ton data) Domestic Coke Brazil Coke Logistics Corporate and Other Consolidated Q1 2019 Adjusted EBITDA $58.5 $4.5 $12.7 ($
Slide 40: 2019E Guidance Reconciliation
40 2019E Guidance Reconciliation ($ in millions) 2019E Low 2019E High Net cash provided by Operating activities $180 $195 Depreciation and amortization expense (150) (145) Changes in working capital and other 14 1 Net Income $44 $51 Depreciation and amortization expense 150 145 Interest expense, net
Slide 41: Balance Sheet & Debt Metrics
41 Balance Sheet & Debt Metrics As of 3/31/2019 Balance SXC Attributable Attributable Consolidated to SXCP to SXC ($ in millions) Cash $ 144 $ 3 $ 1 41 Available Revolver Capacity 261 185 76 Total Liquidity $ 4 05 $ 1 88 $ 2 17 Gross Debt (Long and Short-term) $ 8 53 $ 8 09 $ 44 Net Debt (Total Debt
Slide 42: SunCoke Energy
SunCoke Energy”