SunCoke Energy to Slash Capex for 2016, Focus on Indiana Harbor Performance

Researched by Industrial Info Resources (Sugar Land, Texas)--Metallurgical coke producer SunCoke Energy, Incorporated (NYSE: SXC) (Lisle, Illinois) plans to pare down capital expenditures by more than 41% to $45 million in 2016 as part of a cost-cutting program, but will keep its focus on improving the performance of the Indiana Harbor facility, company executives said Thursday. Industrial Info is tracking six active SunCoke projects worth $863.50 million.

Speaking at SunCoke's Investor Day event, Chief Executive Officer Fritz Henderson, noted the current year has offered "more than its fair share of challenges" to U.S. coke and steel producers, with low steel prices, massive steel imports from China and a disappointing performance by SunCoke's Indiana Harbor facility.

Still, Henderson said he expects the company to achieve earnings before interest, depreciation and amortization (EBITDA) of $210 million to $235 million in 2016, up from the 2015 guidance of $180 million to $190 million. The earnings increase will be driven by a contribution of at least $50 million from the company's Convent Marine Terminal in Louisiana. One of the Gulf Coast's largest coal export facilities, the terminal was acquired for $412 million in third-quarter 2015.

SunCoke executives said they expect capital expenditures to remain at the $45 million level for 2017 and 2018 as the company focuses on stability and reducing debt. Capital expenditures for all of 2015 are expected to run between $75 million and $80 million.

Planned capital expenditures for 2016 include $18 million for improvements at the Indiana Harbor facility, where coke production is expected to total 1.05 million short tons in 2016, up by 75,000 short tons from 2015.

Henderson said the company's goal is to stabilize operations at Indiana Harbor, which is located in East Chicago, Indiana. SunCoke refurbished the facility in 2013-14, but that investment did not produce the desired results.

The company rebuilt 32 Indiana Harbor coke ovens in September at a cost of $330,000 per oven, and rebuilt 14 more in November, Henderson said. In 2016, 19 more ovens will be rebuilt, Henderson said. The new improvements are expected to result in an annual EBITDA increase of $10 million to $20 million from the facility.

Company executives repeatedly referenced the company's focus on stability and reducing debt. As such, the company plans to reduce corporate expenses by roughly 17% next year, with a substantial cut in the engineering and capital projects group. Industrial Info is tracking SunCoke's planned $400 million metallurgical coke manufacturing plant in South Shore, Kentucky is still listed as active, but delayed due to current market conditions.

For related information, see October 13, 2015, article - SunCoke Cuts Capital Spending as Coal Market, Performance Issues Batter Bottom Line in Third-Quarter 2015.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.