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8-K - FORM 8-K - SunCoke Energy, Inc. | d643235d8k.htm |
Exhibit 99.1
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Exhibit 99.1
SunCoke Energy, Inc.
2014 Guidance Call
December 16, 2013
SunCoke Energy TM
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Forward-Looking Statements TM
This slide presentation should be reviewed in conjunction with the 2014 Guidance Update of SunCoke Energy, Inc. (SXC) and the conference call held on December 16, 2013 at 11:00 a.m. ET.
Some of the information included 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. All statements in this presentation that express opinions, expectations, beliefs, plans, objectives, assumptions or projections with respect to anticipated future performance of SXC or SunCoke Energy Partners, L.P. (SXCP), in contrast with statements of historical facts, are forward-looking statements. Such forward-looking statements are based on managements beliefs and assumptions and on information currently available. Forward-looking statements include information concerning possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, the effects of competition and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and may be identified by the use of forward-looking terminology such as the words believe, expect, plan, intend, anticipate, estimate, predict, potential, continue, may, will, should or the negative of these terms or similar expressions.
Although management believes that its plans, intentions and expectations reflected in or suggested by the forward-looking statements made in this presentation are reasonable, no assurance can be given that these plans, intentions or expectations will be achieved when anticipated or at all. Moreover, such statements are subject to a number of assumptions, risks and uncertainties. Many of these risks are beyond the control of SXC and SXCP, and may cause actual results to differ materially from those implied or expressed by the forward-looking statements. Each of SXC and SXCP has included in its filings with the Securities and Exchange Commission cautionary language identifying important factors (but not necessarily all the important factors) that could cause actual results to differ materially from those expressed in any forward-looking statement. For more information concerning these factors, see the Securities and Exchange Commission filings of SXC and SXCP. All forward-looking statements included in this presentation are expressly qualified in their entirety by such cautionary statements. Although forward-looking statements are based on current beliefs and expectations, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date hereof. Neither SXC nor SXCP has any intention or obligation to update publicly any forward-looking statement (or its associated cautionary language) whether as a result of new information or future events or after the date of this presentation, except as required by applicable law.
This presentation includes certain non-GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. Reconciliations of non-GAAP financial measures to GAAP financial measures are provided in the Appendix at the end of the presentation. Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those measures provided in the Appendix.
SXC 2014 Guidance Call 1
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2013 Accomplishments
Continued operations excellence
Sustained solid Domestic Coke performance
Maintained top quartile coke and coal safety performance
Improved productivity and reduced production costs per ton in coal mining segment
Initiated environmental project and consent decree filed
Positioned SXC & SXCP for future growth
Entered India via VISA SunCoke JV
Renewed Indiana Harbor contract; refurbishment on track
Progressed on permit for potential new coke plant
SXCP completed two accretive coal logistics transactions
SXCP received favorable IRS ruling on ferrous activities
Built financial strength and flexibility
Expect to achieve 2013 financial targets
IPO of SXCP in January 2013 delivered as planned
SXC and SXCP capitalized for future growth
SXC 2014 Guidance Call
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SunCokes Existing Business
Strategy / Mission
Fuel our steel customers with coke, coal and power
SunCoke Strengths
Supply strategic blast furnaces with long expected useful lives
Possess secure long-term, take-or-pay contracts with key pass-through provisions
Deliver competitively priced coke to customers
Meet U.S. EPA Maximum Achievable Control Standard
Well-positioned to grow via aging battery replacement
Customer
Products
Integrated Steel Producers
Coke
Coal
Power
Potential Challenges
Customer concentration
EAF now the dominant steel making process in the U.S.
DRI can improve EAF steel quality and make blast furnaces more productive
Steel imports to the U.S. remain a competitive threat
SXC 2014 Guidance Call
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Transformational Strategy
Historical
Fuel our steel customers with coke, coal and power
Customer Products
Integrated Coke
Steel Coal
Producers Power
Capitalize on our Strengths
Replicate our Business Model
Leverage SXCP for Growth
Future
Leading supplier of raw materials processing and handling services to the steel industry
Integrated Coke Production
Steel Coal Handling /
Producers Processing
EAFs Iron Ore
Handling /
Raw Material Processing
Suppliers DRI Production
SXC 2014 Guidance Call
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2014 Priorities
Operations Excellence
Sustain high-level of operating performance and maintain top quartile safety performance in coke and coal
Drive mining efficiency gains to partially mitigate coal pricing headwinds
Stabilize India JV and generate cash flow
Drive Growth
Complete Indiana Harbor refurbishment and ramp up
Obtain permit for new coke plant
Leverage SXCP to pursue further opportunities in cokemaking, coal logistics and entry into ferrous value chain
Optimize Business and Capital Structure
Evaluate opportunities to enhance value of our coke and coal assets, and assess optimal capital structure for SXC and SXCP post expiration of SXCs tax-sharing agreement
SXC 2014 Guidance Call
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GUIDANCE
SunCoke Energy TM
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2014 Domestic Coke Business Outlook
Expect Domestic Coke business to generate Adj. EBITDA(1) per ton of between $60 and $65 in 2014
Outlook reflects expected ongoing solid operation across fleet
Production of approximately 4.3 million tons
Benefit of Indiana Harbor contract renewal and cost improvements
Expect 2H 14 to be stronger due to completion of refurbishment and blast furnace outage at Indiana Harbor
Domestic Coke Adj.EBITDA(1) and EBITDA per ton
($ in millions, except per ton amounts)
$57/ton
~$57/ ton
$60$65/ton
$249
$245$250
$255$270
FY 2012
FY 2013E
FY 2014E
Domestic Coke Adj. EBITDA/ton
Domestic Coke Adj. EBITDA
(1) For a definition of Adjusted EBITDA and Adjusted EBITDA/ton and reconciliations, see appendix.
SXC 2014 Guidance Call
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2014 Coal Mining Adj. EBITDA(1) Outlook
Continued coal price/demand headwinds expected to impact FY 2014 segment Adj. EBITDA(1) by ($5M) ($15M) vs. FY 2013
Outlook reflects expected
Challenging price environment offset in part by yield and productivity gains
Project average 2014 sales price of $100 to $105 per ton for internal and external sales
Production volume of ~1.3M tons and sales volume of ~1.7M tons
Consistent with 2013
($ in millions)
~($15)
($20) ($30)
($25) ($30)
$5$10
$5$10
FY 2013E Coal Adj. EBITDA
Price
Yield/ Productivity
Lower Cost (Royalties & Trucking)
FY 2014E Coal Adj. EBITDA
(1)
For a definition and reconciliation of Adjusted EBITDA, please see appendix.
SXC 2014 Guidance Call
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Expected 2014 Adjusted EBITDA(1)
FY 2014 Adj. EBITDA(1) expected to benefit from contract renewal and cost improvement at Indiana Harbor and new Coal Logistics business
($ in millions)
$215-$230
$10$20
$5$10
($5$15)
$10$15
($0$5)
$230$255
FY 2014E Adjusted EBITDA
Corporate Costs
Coal Logistics
Coal Mining
International
(2)
Coke
Domestic Coke
FY 2013E Adjusted EBITDA
(1) For a definition and reconciliation of Adjusted EBITDA, please see the appendix.
(2) Includes Brazil Coke and India Coke.
SXC 2014 Guidance Call
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Expected 2014 Earnings Per Share
FY 2014 EPS expected to benefit from improvement at Indiana Harbor and Coal Logistics
($ per share)
$0.35$0.55
$0.20$0.50
($0.07- $0.13)
~($0.01)
($0.09$0.14)
($0.04$0.07)
$0.35$0.60
FY 2013E EPS
FY 2014E EBITDA
FY 2014E Depreciation, Depletion & Amortization
FY 2014E Financing Costs
FY 2014E Taxes
FY 2014E Noncontrolling Interest
FY 2014E EPS
SXC 2014 Guidance Call
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Capital Allocation Priorities
2014E known Capex reflects:
Sustaining investment in current business
Completing Indiana Harbor refurbishment
Implementing environmental project
Evaluating potential 2014E Capex allocation opportunities to:
Initiate construction of new coke plant (~$30M)
Build new coal prep plant
($30-$60M in 2014, ~$70M total)
Pursue coke, coal logistics and/or iron processing acquisition opportunities
Consolidated Capex
($ in millions) 2013E 2014E(1)
On-Going(2) $48 $51
Environmental Project $26 $41
Indiana Harbor
$68 $13
Refurbishment
Coal Logistics & Other $2 $5
Total CapEx $144 $110
Investments $183 -
Total CapEx &
$327 $110
Investments
(1) Does not include spending to initiate construction of potential new coke plant (~$30M) or potential new coal prep plant ($30-$60M).
(2) In 2013, includes $28M in coke ongoing capex and $20M in coal. In 2014, includes $36M in coke ongoing capex and $15M in coal.
SXC 2014 Guidance Call
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Consolidated Guidance Summary
Metric Expected 2013 2014 Guidance
Adjusted EBITDA (1)
Consolidated $215 $230 million $230 $255 million
Attributable to SXC $175 $188 million $183 $203 million
EPS Attributable to SXC
$0.35 $0.55 $0.35 $0.60
Shareholders (diluted)
Cash Flow from Operations(2) ~$120 million ~$170 million
Capital Expenditures ~$130 million ~$110 million
Investments $183 million n/a
Effective Tax Rate 14% 20% 20% 26%
Cash Tax Rate 12% 20% 16% 22%
Domestic Coke Production ~4.3 million tons ~4.3 million tons
Coal Production ~1.4 million tons ~1.3 million tons
(1) Please see appendix for a definition and reconciliation of 2013E Adjusted EBITDA.
(2) Reflects shift of $20M AK Steel payment from 2013 to 2014 to accommodate customers request due to unexpected blast furnace outage at AK Middletown.
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QUESTIONS
SunCoke Energy TM
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DEFINITIONS AND RECONCILIATIONS
SunCoke Energy TM
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Definitions
Adjusted EBITDA represents earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) adjusted for sales discounts and the interest, taxes, depreciation, depletion and amortization attributable to our equity method investment. EBITDA reflects sales discounts included as a reduction in sales and other operating revenue. The sales discounts represent the sharing with customers of a portion of nonconventional fuel tax credits, which reduce our income tax expense. However, we believe our Adjusted EBITDA would be inappropriately penalized if these discounts were treated as a reduction of EBITDA since they represent sharing of a tax benefit that is not included in EBITDA. Accordingly, in computing Adjusted EBITDA, we have added back these sales discounts. Our Adjusted EBITDA also includes EBITDA attributable to our equity method investment. EBITDA and Adjusted EBITDA do not represent and should not be considered alternatives to net income or operating income under GAAP and may not be comparable to other similarly titled measures in other businesses. Management believes Adjusted EBITDA is an important measure of the operating performance of the Companys net assets. We believe Adjusted EBITDA is an important measure of operating performance and provides useful information to investors because it highlights trends in our business that may not otherwise be apparent when relying solely on GAAP measures and because it eliminates items that have less bearing on our operating performance. Adjusted EBITDA is a measure of operating performance that is not defined by GAAP, does not represent and should not be considered a substitute for net income as determined in accordance with GAAP. Calculations of Adjusted EBITDA may not be comparable to those reported by other companies.
EBITDA represents earnings before interest, taxes, depreciation, depletion and amortization.
Adjusted EBITDA attributable to SXC/SXCP equals Adjusted EBITDA less Adjusted EBITDA attributable to noncontrolling interests.
Adjusted EBITDA/ton represents Adjusted EBITDA divided by tons sold.
SXC 2014 Guidance Call
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Expected 2013 EBITDA Reconciliation
2013E 2013E
(in millions) Low High
Net Income $51 $57
Depreciation, depletion and amortization 96 95
Interest expense, net 54 54
Income tax expense 7 14
EBITDA $208 $220
Sales discounts 7 7
Adjustment to unconsolidated affiliate earnings(1) 3
Adjusted EBITDA $215 $230
EBITDA attributable to noncontrolling interests(2) (40) (42)
Adjusted EBITDA attributable to SXC $175 $188
(1) Represents SXC share of India JV interest, taxes and depreciation expense.
(2) Represents Adjusted EBITDA attributable to SXCP public unitholders and to DTE Energys interest in Indiana Harbor.
SXC 2014 Guidance Call
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Expected 2014 EBITDA Reconciliation
2014E 2014E
(in millions) Low High
Net Income $53 $71
Depreciation, depletion and amortization 105 100
Interest expense, net 55 53
Income tax expense 13 24
EBITDA $226 $248
Sales discounts
Adjustment to unconsolidated affiliate earnings(1) 4 7
Adjusted EBITDA $230 $255
EBITDA attributable to noncontrolling interests(2) (47) (52)
Adjusted EBITDA attributable to SXC $183 $203
(1) Represents SXC share of India JV interest, taxes and depreciation expense.
(2) Represents Adjusted EBITDA attributable to SXCP public unitholders and to DTE Energys interest in Indiana Harbor.
SXC 2014 Guidance Call
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Investor Relations: 630-824-1987 www.suncoke.com
SunCoke Energy TM