SunCoke Energy, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Announced acquisition of Phoenix Global for $325 million, expected to close on August 1 with regulatory approvals received faster than anticipated.
• Amended and extended revolving credit facility, maturing in July 2030 with similar covenants to previous agreement.
• Announced $0.12 per share dividend payable on September 2, 2025.
• Second quarter 2025 consolidated adjusted EBITDA was $43.6 million, driven by timing and mix of coke sales and lower volumes at CMT.
• Phoenix acquisition expected to be immediately accretive with annual synergies of $5-$10 million, funded by cash on hand and revolver borrowing.
• Phoenix is a strategic fit, adding new industrial customers and global footprint, with operations to be combined with Logistics to form new Industrial Services segment.
• Domestic Coke second quarter adjusted EBITDA $40.5 million; Logistics generated $7.7 million of adjusted EBITDA.
• Barge unloading capital expansion project at KRT completed and operating, expecting benefits from new coal handling agreement in Q3.

Segment Performance

• Domestic Coke: Second quarter 2025 adjusted EBITDA was $40.5 million with coke sales volumes of 943,000 tons. It contributed approximately 92.89% to the consolidated adjusted EBITDA of $43.6 million.
• Logistics: Generated $7.7 million of adjusted EBITDA in the second quarter, with terminals handling combined throughput volumes of 4.8 million tons. It contributed approximately 17.66% to the consolidated adjusted EBITDA.

Guidance

• Reaffirmed full year Domestic Coke adjusted EBITDA guidance range: $185 million to $192 million.
• Reaffirmed full year Logistics adjusted EBITDA guidance range: $45 million to $50 million.
• Reaffirmed full year consolidated adjusted EBITDA guidance range: $210 million to $225 million.
• Free cash flow guidance revised to between $103 million and $118 million due to transaction costs related to Phoenix acquisition, changes in tax laws, and lowered CapEx guidance.

Risks

• Impact of commodity price volatility on Phoenix's operations though Phoenix doesn't take ownership of major consumables.
• Market conditions affecting Logistics volumes, particularly lower transloading volumes at CMT.
• Uncertainty around contract negotiations with major customers like Cliffs.

Question and Answer Q: Walk us through the drivers of the improvement in EBITDA for the remainder of the year and assumptions around coke sales volumes?

A: As mix of contract and spot sales normalizes, expect 2-2.1 million tons of coke sales in the second half with an average adjusted EBITDA margin of $46 to $48 per ton. Logistics volumes at CMT were lower in May-June but picking up in July, with full year guidance reaffirmed.

Q: Macro drivers of Phoenix Global?

A: Excited about EAF exposure diversifying customer base; opportunities to expand services with SunCoke's operational excellence and engineering expertise.

Q: Cliffs' internal coke production affecting Haverhill contracts?

A: In active discussions with Cliffs, but also looking to profitably sell coke to other customers, including in the foundry market and seaborne market if profitable.

Q: Logistics weakness at CMT, product mix, and export coal demand?

A: CMT volumes mix includes coal, iron ore, pet coke; higher domestic demand impacts export volumes; no price adjustment contemplated in 2025 guidance.

Q: Revolver capacity impact on Phoenix financing and GPI project?

A: Borrowing for Phoenix is ~$200-210 million, leaving enough capacity for working capital; GPI project would be a separate financing deal when pursued.