SunCoke Energy(US:SXC)2021-02-04 20:21Financial Data and Key Metrics Changes - In 2020, SunCoke Energy delivered $205.9 million of adjusted EBITDA, exceeding the revised guidance range of $190 million to $200 million, despite sub-optimal utilization rates [8][12] - The fourth quarter net loss attributable to SXC was $0.06 per share, down $0.04 compared to Q4 2019, while full year 2020 net income was $0.04 per share, up $2.02 from 2019 [14] - Consolidated adjusted EBITDA for Q4 2020 was $37 million, down $13.8 million from Q4 2019, primarily due to lower volumes in the Domestic Coke segment [15][19] Business Line Data and Key Metrics Changes - Domestic Coke operations contributed $217 million to adjusted EBITDA in 2020, exceeding the revised guidance for the segment [8][17] - The Logistics segment's adjusted EBITDA decreased by $25.3 million year-over-year, mainly due to the bankruptcy of a coal customer [19] - The foundry coke initiative has progressed well, with commercial production now established, and plans to run at full capacity in 2021 [10][12] Market Data and Key Metrics Changes - The steel industry saw capacity utilization rates drop to a low of 52% during the pandemic but began to recover towards the end of 2020, with hot rolled prices reaching levels not seen in years [22] - API2 prices for thermal coal increased by approximately 15% in Q4 2020 compared to the prior quarter, indicating a recovery in the coal export market [24] - The company anticipates handling between 4 million tons and 5 million tons of coal exports from CMT in 2021, reflecting improved market conditions [30] Company Strategy and Development Direction - SunCoke is focused on entering new foundry and export markets to diversify its customer base and enhance market presence [24][35] - The company aims to reduce its gross leverage ratio to 3 times or lower, emphasizing the importance of debt reduction in its capital allocation strategy [21][36] - Investments in the youngest domestic coke-making facilities in the NAFTA region are expected to support long-term operational efficiency and environmental performance [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2021, anticipating continued recovery in the steel industry and potential infrastructure investments to drive demand [22][36] - The company highlighted the importance of maintaining strong customer relationships and adapting to market changes, particularly in light of the pandemic [9][60] - Management noted that environmental performance improvements are ongoing and emphasized the need for fair trade practices to support domestic producers [71][72] Other Important Information - SunCoke reduced gross debt by $110 million in 2020, including repurchasing senior notes at a discount [11][21] - The company paid a $0.24 per share annual dividend and repurchased 1.6 million shares during the first quarter of 2020 [11][21] - The 2021 adjusted EBITDA guidance is set between $215 million and $230 million, with expectations for improved performance across all segments [26][32] Q&A Session Summary Question: What was the reason for the strong out-performance in Q4? - Management indicated that favorable weather and successful cost reduction initiatives contributed to the strong performance in Q4 [40] Question: Can you explain the transition from 2020 to 2021 in Domestic Coke? - Management clarified that while production capacity is 4.2 million tons, contracted volumes are around 3.8 million tons, with the remaining being sold into export and foundry markets [41][43] Question: What are the margin differentials between foundry coke and long-term contract coke? - Management refrained from providing specific profit margin information but indicated that foundry coke margins are expected to be in line with blast furnace margins [47] Question: What is the potential for CMT in the coming years? - Management noted that CMT has underutilized capacity and could handle significantly more volumes with modest investments [64] Question: How is the company addressing environmental performance in the steel industry? - Management emphasized that the domestic industry has made significant progress in CO2 reduction and continues to seek improvements while advocating for fair trade practices [71][72]