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01/10 21:37
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call revealed several negative aspects, including a decrease in EPS and Domestic Coke Adjusted EBITDA, lower coke sales volumes, and unresolved contract breaches. Despite some positive aspects like increased Industrial Services EBITDA and liquidity, the lack of specific guidance on critical issues like the Algoma contract breach and future production contracts, coupled with management's evasive responses, suggests a negative market reaction.
Consolidated Adjusted EBITDA (Q3 2025) $59.1 million, down from $75.3 million in the prior year period. The decrease was primarily driven by the mix of contract and spot coke sales, unfavorable economics on the Granite City contract extension, lower transloading volumes at logistics terminals, and the absence of a $9.5 million gain on the elimination of legacy black lung liabilities recorded in Q3 2024. This was partially offset by the addition of 2 months of Phoenix Global results.
Net Income Attributable to SunCoke (Q3 2025) $0.26 per share, down $0.10 versus the prior year period. The decrease was driven by the mix of contract and spot coke sales, lower economics from the Granite City contract extension, and the absence of a gain on the elimination of legacy black lung liabilities recorded in Q3 2024. Transaction and restructuring costs also impacted by $0.09 per share. These were partially offset by a $0.32 per share improvement from lower income tax expense due to capital investment tax credits.
Domestic Coke Adjusted EBITDA (Q3 2025) $44 million, down from $58.1 million in the prior year period. The decrease was due to a change in the mix of contracted and spot coke sales, lower pricing, lower economics and volumes at Granite City from the contract extension, lower cold coke yields at Haverhill, and a weather event at Indiana Harbor.
Coke Sales Volumes (Q3 2025) 951,000 tons, down from 1,027,000 tons in the prior year period. The decrease was attributed to lower production volumes due to lower cold coke yields at Haverhill and a weather event at Indiana Harbor.
Industrial Services Adjusted EBITDA (Q3 2025) $18.2 million, up from $13.7 million in the prior year period. The increase was driven by the addition of 2 months of Phoenix Global results, partially offset by lower volumes at logistics terminals due to unfavorable market conditions.
Liquidity Position (Q3 2025) Cash balance of $80.4 million and revolver availability of $126 million, totaling $206 million in liquidity. Net cash provided by operating activities was $9.2 million, negatively impacted by $29.3 million in Phoenix Global acquisition-related costs and $23 million in timing of cash receipts, which were received in October. Without these impacts, operating cash flow would have been approximately $52 million higher.
Capital Expenditures (Q3 2025) $25.5 million spent on CapEx during the quarter.
Dividends (Q3 2025) $10.1 million paid at a rate of $0.12 per share.
Acquisition of Phoenix Global: Completed on August 1, 2025, and integration activities are progressing well. Phoenix's financial results will be reported in the new Industrial Services segment.
Coke-making agreement extension: Extended agreement with U.S. Steel at Granite City through the end of 2025.
Adjusted EBITDA: Q3 2025 consolidated adjusted EBITDA was $59.1 million, a sequential improvement over Q2 but below expectations. Full-year guidance revised to $220-$225 million.
Domestic Coke segment performance: Q3 adjusted EBITDA was $44 million, down from $58.1 million in the prior year. Sales volumes were 951,000 tons, impacted by a breach of contract and operational challenges.
Industrial Services segment performance: Generated $18.2 million in adjusted EBITDA in Q3 2025, up from $13.7 million in the prior year, driven by Phoenix Global results but offset by weak logistics volumes.
Dividend policy: Announced a quarterly dividend of $0.12 per share, marking the 25th consecutive quarter of dividends. Commitment to continue rewarding shareholders.
Free cash flow guidance: Revised to negative $10 million to $0 for 2025 due to customer breach of contract and Phoenix acquisition-related costs.
Customer Breach of Contract: A customer breached a contract, leading to the deferral of the sale of approximately 200,000 tons of coke. This has resulted in unsold inventory, impacting financial guidance and cash flow for 2025.
Weak Market Conditions: Persistent weak market conditions have negatively affected logistics terminal volumes and the overall performance of the Industrial Services segment.
Granite City Contract Economics: Lower economics from the Granite City contract extension have contributed to reduced adjusted EBITDA in the Domestic Coke segment.
Production Challenges: Lower cold coke yields at Haverhill and a weather event at Indiana Harbor have led to reduced production volumes.
Cash Flow Impact from Phoenix Acquisition: The acquisition of Phoenix Global has led to significant cash outflows, including $29.3 million in management incentive plan and transaction costs, impacting operating cash flow.
Deferred Cash Receipts: Timing issues with cash receipts at quarter-end have temporarily reduced operating cash flow by $23 million.
Spot Market Weakness: Weakness in the spot market, particularly affecting the Haverhill plant, has contributed to lower sales and financial performance.
Uncertain Contract Negotiations: Ongoing contract negotiations with Cleveland-Cliffs have not yet been finalized, creating uncertainty for future operations.
Consolidated Adjusted EBITDA Guidance for 2025: Revised to a range of $220 million to $225 million, inclusive of 5 months of Phoenix Global results and the impact of a deferral of approximately 200,000 coke tons due to a customer breach of contract. Any changes to these assumptions could impact the guidance range.
Domestic Coke Adjusted EBITDA Guidance for 2025: Updated to a range of $172 million to $176 million, reflecting the impact of the deferral of approximately 200,000 coke sales tons.
Industrial Services Adjusted EBITDA Guidance for 2025: Updated to a range of $63 million to $67 million, reflecting 5 months of Phoenix Global contribution and lower volumes at logistics terminals due to weak market conditions.
Capital Expenditures (CapEx) Guidance for 2025: Updated to approximately $70 million, reflecting lower CapEx at coke plants and the inclusion of Phoenix's portion of CapEx.
Free Cash Flow Guidance for 2025: Revised to a range of negative $10 million to 0, impacted by a $70 million unfavorable impact from the deferral of cash receipts due to a customer breach of contract and $29.3 million related to Phoenix's management incentive plan and transaction costs.
2026 Outlook: Optimistic about 2026 with expectations of improved results over 2025. Anticipates a full year of Phoenix Global adjusted EBITDA contribution and modest recovery in the logistics business. Long-term positive outlook for the Industrial Services segment.
Quarterly Dividend: Announced a quarterly dividend of $0.12 per share payable to shareholders on December 1, 2025. This marks the 25th consecutive quarter of dividend payments. The dividend is evaluated on a quarterly basis by the Board, with an expectation to continue rewarding long-term shareholders.
Dividend Continuation: The company intends to continue utilizing free cash flow to reward shareholders with a regular dividend, which is reviewed and approved quarterly by the Board of Directors.
The earnings call revealed several negative aspects, including a decrease in EPS and Domestic Coke Adjusted EBITDA, lower coke sales volumes, and unresolved contract breaches. Despite some positive aspects like increased Industrial Services EBITDA and liquidity, the lack of specific guidance on critical issues like the Algoma contract breach and future production contracts, coupled with management's evasive responses, suggests a negative market reaction.
The earnings call reveals several challenges: unfavorable economics on the Granite City contract, decreased net income, and lower adjusted EBITDA across segments. The Q&A highlights uncertainties in contract renewals and macroeconomic challenges, with management providing limited clarity. Despite some positive guidance reaffirmations, the negative financial results and unclear management responses weigh heavily. The lack of a market cap makes it difficult to assess the exact impact, but the overall sentiment leans towards a negative reaction, likely resulting in a stock price decrease of -2% to -8%.
The earnings call reveals challenges: lower EPS, decreased EBITDA, and weak market conditions. Despite a dividend increase, risks in the domestic coke business, regulatory delays, and economic challenges weigh heavily. Management's lack of clarity on growth opportunities and cautious CapEx spending add to uncertainties. These factors, combined with weak guidance and market volatility, suggest a negative sentiment, likely leading to a stock price decline.
The earnings call reflects several challenges: lower economics and sales volumes in the domestic coke segment, a weak pricing environment, supply chain delays, and cautious capital expenditure due to market uncertainties. The Q&A revealed unclear management responses, especially regarding future growth opportunities and market conditions. Despite a strong liquidity position and a commitment to dividends, the negative factors outweigh the positives, suggesting a likely stock price decline.
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