SunCoke Cuts Capital Spending as Coal Market, Performance Issues Batter Bottom Line in Third-Quarter 2015

Researched by Industrial Info Resources (Sugar Land, Texas)--Coke producer SunCoke Energy Incorporated (NYSE:SXC) (Lisle, Illinois) continued to endure rough coal market conditions in third-quarter 2015, as weak prices, low sales volumes and performance-related issues at an Indiana facility offset gains from a major terminal acquisition. Industrial Info is tracking $936.5 million in active projects involving SunCoke Energy Incorporated and SunCoke Energy Partners LP (NYSE:SXCP).

Among the SunCoke projects tracked by Industrial Info is the $400 million construction of a metallurgical coke facility in South Shore, Kentucky, as well as its planned, $450 million cogeneration plant expansion, both of which are facing delays due to the weak coal market conditions. Initially, the 600,000-ton-per-year coke-manufacturing plant will use SunCoke's heat-recovery coke-making process technology and to process 1.2 million tons per year of coal; the 90-megawatt (MW) cogeneration plant will consume waste heat from the South Shore plant.

Capital expenditures for the first three quarters of the year were reported to be $49.3 million, less than half of the $107.2 million in the first three quarter of 2014.

SunCoke reported a net loss of $23.5 million for the third quarter, compared with a net loss of $3.6 million in third-quarter 2014; and revenues of $336.9 million, a 10.64% decrease from the same period last year. In addition to the problems presented by the ongoing weakness in coal prices, SunCoke cited "performance challenges" at its Indiana Harbor cokemaking facility in East Chicago, Indiana, where the company now plans to rebuild several ovens. Industrial Info is tracking a $2 million maintenance program for 2016 at the Indiana Harbor facility.

SunCoke also dropped its investment in its VISA SunCoke facility in India, where import competition from China significantly diminished coal prices, thus depleting margins. The divestment resulted in a $19.4 million impairment charge for the quarter. The company also took a $2.9 million hit from the shuttering of Haverhill Chemicals LLC (Houston, Texas), with which SunCoke had a steam supply agreement.

SunCoke Energy Incorporated is the general partner and majority owner of SunCoke Energy Partners LP, a publicly traded master limited partnership that has a 98% interest in the Haverhill cokemaking facility in Franklin Furnace, Ohio; the Middletown cokemaking facility in Middletown, Ohio; and the Granite City facility in Granite City, Illinois. During the third quarter, SunCoke Energy Partners LP acquired for $412 million the Convent Marine Terminal, one of the Gulf Coast's largest export facilities, which contributed $5.4 million to third-quarter adjusted EBITDA. Before the end of the year, the facility is expected to benefit full-year adjusted EBITDA by about $20 million.

The terminal currently can export up to 10 million tons of coal per year, but SunCoke expects to invest $20 million to increase export capacity to 15 million tons. During the quarter, SunCoke Energy Partners LP also acquired the Granite City facility from SunCoke Energy Incorporated; Industrial Info is tracking a $3.5 million maintenance program for fourth-quarter 2016 at the facility.

SunCoke Energy Partners LP reported net income of $19.5 million for the third quarter, a 3.47% decrease from third-quarter 2015; and revenues of $210.2 million, a 3.04% decrease. Industrial Info also is tracking an ongoing, $3 million maintenance program at the Middletown facility, and an ongoing, $4 million maintenance program at the Franklin Furnace facility.

Capital expenditures for the full year are expected to be between $75 million and $80 million, which represents a drop in expectations from $90 million at the beginning of the year. Domestic coal production is expected to be between 4.1 million and 4.2 million tons.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and ten international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.