SunCoke Energy, Inc. (NYSE:SXC) is the largest independent producer of high-quality coke in the Americas, with over 60 years of coke production experience. The company operates a diversified business model, encompassing both cokemaking and logistics operations, positioning it as a leading player in the steel industry supply chain.

Business Overview

SunCoke's cokemaking segment produces coke, a critical raw material used in the blast furnace steelmaking process, as well as in the foundry production of cast iron. The company owns and operates five cokemaking facilities in the United States with a collective nameplate capacity of approximately 4.2 million tons of blast furnace coke per year. Additionally, SunCoke operates one cokemaking facility in Brazil under licensing and operating agreements on behalf of ArcelorMittal Brazil, with an annual capacity of 1.7 million tons.

The company's logistics segment provides export and domestic material handling and/or mixing services to steel, coke, electric utility, coal producing, and other manufacturing-based customers. SunCoke's logistics terminals, strategically located to reach Gulf Coast, East Coast, Great Lakes, and international ports, have a collective capacity to mix and/or transload more than 40 million tons of coal and other aggregates annually, with storage capacity of approximately 3 million tons.

Financials

In the first quarter of 2024, SunCoke reported strong financial results, with net income attributable to the company of $20.0 million, or $0.23 per share. This represents a 23% increase compared to the prior-year period. The company's consolidated revenue for the quarter was $488.4 million, up slightly from $487.8 million in the first quarter of 2023. SunCoke's annual revenue for 2023 was $2,063.2 million, with net income of $57.5 million and operating cash flow of $249.0 million. The company's free cash flow for the year was $139.8 million.

The strong first-quarter performance was driven by higher blast coke sales volumes and improved logistics operations, partially offset by lower volumes at the company's Convent Marine Terminal (CMT) facility. Domestic coke adjusted EBITDA was $61.4 million, up from $60.4 million in the prior-year period, while the logistics segment generated $13.0 million in adjusted EBITDA, compared to $13.5 million in the first quarter of 2023.

Operational Performance

SunCoke's domestic coke plants continued to operate at full capacity during the quarter, with sales volumes of 996,000 tons. The company's long-term, take-or-pay coke sales agreements, which account for the majority of its domestic coke sales, were not impacted by fluctuations in global coke prices. Non-contracted blast coke sales, which utilize excess capacity beyond the long-term agreements, were also strong during the quarter.

In the logistics segment, the company's terminals handled a combined throughput of 5.5 million tons during the first quarter of 2024, up from 5.3 million tons in the prior-year period. The increase was driven by higher volumes at SunCoke's domestic terminals, partially offset by lower throughput at CMT. The company's domestic terminals handled 3.6 million tons in the first quarter, the best quarterly performance in the past five years, aided by the impact of the port congestion in Baltimore.

Outlook

Looking ahead, SunCoke is well-positioned to achieve its full-year 2024 adjusted EBITDA guidance of $240 million to $255 million. The company has finalized all of its spot blast and foundry coke sales for the year, providing visibility into its performance. Additionally, SunCoke's strong liquidity position, with $470.1 million in available liquidity at the end of the first quarter, supports its ability to execute on its strategic initiatives and maintain financial flexibility.

Recent Developments

One of SunCoke's key growth initiatives is the Granite City Granulated Pig Iron (GPI) project, which the company is developing in partnership with U.S. Steel. The project, which is currently in the detailed engineering phase, aims to leverage SunCoke's cokemaking expertise and U.S. Steel's steelmaking capabilities to produce a high-quality granulated pig iron product. While the company has not provided specific financial details on the project, it has indicated that the capital requirements are expected to be funded primarily through a combination of the company's free cash flow and limited borrowings.

Conclusion

SunCoke's diversified business model, strong operational performance, and strategic growth initiatives position the company well for continued success. The company's focus on safety, environmental compliance, and customer service has been a key differentiator, allowing it to maintain long-term relationships with its customers. As SunCoke navigates the evolving steel industry landscape, its ability to adapt and capitalize on new opportunities will be crucial to driving shareholder value.

In conclusion, SunCoke Energy, Inc. is a well-established player in the coke and logistics markets, with a proven track record of operational excellence and financial discipline. The company's diversified business model, strong liquidity position, and strategic growth initiatives make it an attractive investment opportunity for investors seeking exposure to the steel industry supply chain.