SunCoke Energy, Inc. Q3 FY2026 earnings call

• Strong Financial Performance: Consolidated adjusted EBITDA reached $76.9 million, an increase of $17.8 million year-over-year, driven by strong operating segments and insurance recoveries.
• Domestic Coke Strength: Improved yields and a favorable mix of contract versus spot sales offset lower volumes caused by the Haverhill 1 shutdown.
• Industrial Services Growth: Performance benefited from one additional month of Phoenix results compared to the prior year and higher terminal handling volumes (6.4 million tons).
• Settlement with Algoma Steel: A confidential settlement agreement reached in October resolved the 2025 claim, confirming SunCoke was made whole; this positively impacts full-year guidance.
• Insurance Recoveries: Received $6.9 million in net income from the 2023 Jewel Flood event, though most proceeds for property damage are excluded from adjusted EBITDA.
• Capital Allocation & Dividends: Maintained a quarterly dividend of 12 cents per share (29th consecutive quarter). Free cash flow outlook increased to $180–$185 million for the full year, primarily used for debt reduction and shareholder returns.
• Operational Safety: Emphasized safety and environmental standards as core priorities, ensuring reliable delivery of high-quality coke and industrial services.

Domestic Coke: Adjusted EBITDA of $51.1 million (up from $44 million in the prior year period), representing a contribution of approximately 66.5% to consolidated adjusted EBITDA. Industrial Services: Adjusted EBITDA of $32.1 million (up from $18.2 million in the prior year period), representing a contribution of approximately 41.7% to consolidated adjusted EBITDA. Note: The sum of segment contributions exceeds 100% due to Corporate/Other adjustments; consolidated adjusted EBITDA was $76.9 million.

• Full-Year 2026 Consolidated Adjusted EBITDA: Expectation raised to modestly exceed the high end of the previous range ($250–$265 million), driven by operational performance and the Algoma settlement.
• Domestic Coke Full-Year Adjusted EBITDA: Guidance maintained at the high end of the $172–$178 million range, supported by solid operational outlook.
• Industrial Services Full-Year Adjusted EBITDA: Guidance raised to exceed the high end of the $110–$115 million range, reflecting strong Phoenix performance and terminal volumes.
• Free Cash Flow: Outlook increased to $180–$185 million for the full year, reflecting the impact of the Algoma settlement and reduced debt levels.

• Insurance Claim Delays: The turbine failure claim at Middletown may not be fully resolved until early 2027; therefore, these proceeds are excluded from current guidance.
• Operational Disruptions: The Haverhill 1 shutdown negatively impacted domestic coke sales volumes in Q3.
• Market Volatility: The Industrial Services segment faces volatility based on steel mill operations and bulk product movement through rivers and export terminals.
• Contract Renewal Uncertainty: Active discussions are ongoing for key contracts expiring in December 2026 (Javelin/CMT and U.S. Steel Nippon/Granite City), with no guarantees regarding extension terms yet.

Q: Nathan Martin asked for details on the Algoma Steel settlement amount and its impact on Q4, noting management stated they were 'made whole.' He also questioned if insurance proceeds from the Middletown turbine failure would arrive in Q4 and if Joule flood proceeds had offset expected Middletown proceeds.

A: Katherine Gates confirmed the settlement is confidential but affirmed SunCoke was made whole, with the impact fully reflected in 2026 guidance. Shantanu Agrawal clarified that Joule flood proceeds ($8.7M total, $1.8M in adjusted EBITDA) are separate from Middletown. The Middletown turbine claim process may extend into 2027, so those proceeds are excluded from guidance; however, the Algoma settlement compensates for any potential delay in those insurance payouts.