SunCoke Energy, Inc. (SXC) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals a negative sentiment due to significant challenges, including a $53.6M decrease in revenue, a breach of contract with Algoma causing potential $70M losses, and a net loss of $0.52 per share. Despite some offset by Phoenix Global's contribution, the overall financial performance is weak, with lower EBITDA and ongoing litigation risks. The Q&A indicates unresolved issues and uncertainties, particularly regarding Algoma litigation and turbine failure. The shareholder return is modest, but overall, the negative factors outweigh the positives, suggesting a negative stock price reaction.
Key Financial Performance
Consolidated Adjusted EBITDA (Q4 2025) $56.7 million, down $9.4 million year-over-year. The decrease was mainly driven by lower coke sales volumes due to the breach of contract by Algoma, lower economics on the Granite City contract extension, and lower terminals handling volumes due to market conditions, partially offset by the addition of Phoenix Global.
Consolidated Adjusted EBITDA (Full Year 2025) $219.2 million, down $53.6 million year-over-year. The decrease was primarily driven by the change in mix of contract and spot coke sales, lower economics on the Granite City contract extension, lower coke sales volumes due to the breach of contract by Algoma, and lower terminals handling volume due to market conditions, partially offset by the addition of Phoenix Global.
Domestic Coke Adjusted EBITDA (Full Year 2025) $170 million, down $64.7 million year-over-year. Results were impacted by the change in mix of contract and spot coke sales, the lower Granite City contract extension economics, and the Algoma breach of contract.
Industrial Services Adjusted EBITDA (Full Year 2025) $62.3 million, up $11.9 million year-over-year. The increase was primarily driven by the addition of Phoenix Global, partially offset by lower terminals handling volumes due to market conditions.
Corporate and Other Expenses (Full Year 2025) $13.1 million, an increase of $800,000 year-over-year.
Operating Cash Flow (2025) $109.1 million. Negatively impacted by two items: $29.3 million related to Phoenix Global's acquisition price and $30 million impact from the breach of contract by Algoma. Without these, operating cash flow would have been approximately $59 million higher.
Net Loss Attributable to SunCoke (Q4 2025) $1 per share, down $1.28 year-over-year. Primarily driven by one-time items totaling $0.85 per share net of tax, including a noncash asset impairment charge, site closure costs, and transaction costs related to the acquisition of Phoenix. Also impacted by lower coke sales volumes due to the breach of contract by Algoma.
Net Loss Attributable to SunCoke (Full Year 2025) $0.52 per share, down $1.64 year-over-year. The decrease was primarily driven by one-time items totaling $0.97 per share net of tax, including a noncash asset impairment charge, acquisition-related transaction and restructuring costs, and Phoenix operating site closure costs. Also impacted by the change in mix of contract and spot coke sales and lower economics on the Granite City contract extension, partially offset by lower income tax expense driven by capital investment tax credits.
Capital Expenditures (2025) $66.8 million, slightly below the revised guidance of $70 million due to the timing of CapEx payments.
Shareholder Returns (2025) Approximately $41 million returned via quarterly dividend.
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Operating Highlights
Phoenix acquisition: The integration of Phoenix is progressing well, and it is expected to contribute to growth potential in the business.
Haverhill I closure: Closure of Haverhill I operations due to the breach of contract by Algoma, resulting in a reduction of 500,000 tons in coke production and sales.
Granite City contract extension: Extended the Granite City coke making contract with U.S. Steel through December 2026 at similar economics to the 2025 extension.
Haverhill II contract extension: Extended the Haverhill II contract with Cleveland-Cliffs through December 2028 with similar economics to previous contracts.
Take-or-pay coal handling agreement: A new take-or-pay coal handling agreement at KRT began in Q2 2025, expected to benefit the company in 2026.
Safety performance: Achieved a total recordable incident rate of 0.55, reflecting strong safety performance.
Adjusted EBITDA: Delivered consolidated adjusted EBITDA of $219.2 million in 2025, with expectations of $230 million to $250 million in 2026.
Free cash flow: Generated positive free cash flow in 2025 and expects $140 million to $150 million in 2026.
Capital allocation: Focused on deleveraging by using excess free cash flow to pay down outstanding borrowing on the revolver, targeting a gross leverage of 2.45x by the end of 2026.
Dividend policy: Returned $41 million to shareholders in 2025 via quarterly dividends and plans to continue this in 2026.
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Risk or Challenges
Breach of contract by Algoma: The breach of contract by Algoma has led to lower coke sales volumes, impacting financial performance and resulting in a $30 million negative impact on operating cash flow.
Closure of Haverhill I operations: The closure of Haverhill I operations due to the Algoma breach of contract resulted in a reduction of approximately 500,000 tons of coke production and sales, representing the company's lowest margin tons.
Lower economics on Granite City contract extension: The Granite City contract extension has lower economics compared to previous terms, negatively affecting the Domestic Coke segment's financial performance.
Market conditions affecting terminals handling volumes: Lower terminals handling volumes driven by market conditions have negatively impacted the Industrial Services segment's financial results.
Turbine failure at Middletown coke plant: A turbine failure during a planned outage at the Middletown coke plant has impacted power production, with the turbine expected to be back in operation midyear. This is an insured event but still affects operations in the short term.
Severe winter weather impacts: Severe winter weather has disrupted several operations, contributing to a slower-than-normal start to 2026.
Phoenix Global acquisition-related costs: The acquisition of Phoenix Global incurred significant transaction and restructuring costs, including $29.3 million flowing through operating cash flow, impacting financial performance.
Increased corporate expenses: Corporate expenses are expected to rise in 2026 due to normalized employee bonus expenses and Phoenix integration-related IT costs.
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Guidance & Outlook
2026 Consolidated Adjusted EBITDA: Expected to be between $230 million and $250 million.
Domestic Coke Adjusted EBITDA: Expected to be between $162 million and $168 million in 2026, with sales of approximately 3.4 million tons. The closure of Haverhill I operations will result in a 500,000-ton reduction in coke production and sales, representing the lowest margin tons. The coke fleet will operate at full utilization in 2026.
Industrial Services Adjusted EBITDA: Estimated to be between $90 million and $100 million in 2026, driven by a full year of Phoenix Global and improved market conditions for terminals. Approximately 24 million tons of terminal handling volumes and 22 million tons of steel customer volumes are expected.
Capital Expenditures (CapEx): Expected to be between $90 million and $100 million in 2026, driven by a full year of Phoenix CapEx requirements.
Operating Cash Flow: Expected to be between $230 million and $250 million in 2026.
Free Cash Flow: Expected to be between $140 million and $150 million in 2026.
Leverage Target: Plan to achieve year-end gross leverage around 2.45x in 2026, below the long-term target of 3x.
Dividend Policy: Intend to continue quarterly dividend payments throughout 2026, subject to Board approval.
Market Conditions: Anticipate meaningful recovery in 2026 with improved market conditions for terminals and a full year of Phoenix Global.
Operational Challenges: Middletown coke plant turbine failure and severe winter weather have impacted operations early in 2026, but these events are reflected in the guidance.
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Shareholder Return Plan
Quarterly Dividend in 2025: Approximately $41 million was returned to shareholders via quarterly dividends in 2025. The company plans to continue its quarterly dividend throughout 2026.
Dividend Growth: The company has increased its net dividend each year for three consecutive years.
2026 Dividend Plan: The company intends to continue utilizing free cash flow to reward shareholders with regular dividends, reviewed and approved quarterly by the Board of Directors.
Capital Allocation Priorities: The company has prioritized returning capital to shareholders by establishing a quarterly dividend and increasing it annually for three years.
Free Cash Flow Utilization: Excess free cash flow will be used to pay down outstanding borrowing on the revolver and to reward shareholders with dividends.
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Key Q&A
Q:What is the current status of the Algoma contract litigation and its likely outcomes?
A:The company is pursuing arbitration and all legal means to recover losses from Algoma, which they believe is a clear breach of contract. The breach impacts sales in 2025 and 2026, with potential losses up to $70 million in 2025. They have mitigated some losses through third-party sales and facility turndown. However, the litigation is active, and no further details on outcomes can be provided.
Q:Are you still anticipating an annual EBITDA contribution of roughly $60 million and synergies of $5 million to $10 million from Phoenix Global in the 2026 guidance?
A:Yes, the company is still anticipating these figures.
Q:What were the onetime integration costs incurred with Phoenix Global in 4Q, and should we expect any more in 1Q of this year?
A:The onetime costs related to Phoenix Global included $3.9 million for site closures and $600,000 in transaction costs. No additional costs for 1Q were mentioned.
Q:Is the Haverhill I closure permanent, and what savings are expected from the closure?
A:The closure is not permanent but restarting would require significant capital investment and 12-18 months. Current market conditions and Algoma's breach make reopening unlikely. Savings include workforce reduction and reduced O&M costs, with no environmental remediation costs.
Q:What is the expected EBITDA cadence for the year, considering the Middletown turbine failure and Arctic weather impacts?
A:The Middletown turbine failure and Arctic weather caused a $10 million impact in Q1. The turbine outage will continue to affect the first half, with no earnings from power production until it is repaired and insurance recoveries are received. The company expects to make up for lost production in the balance of the year.
Q:Is there any impact on power production from the Haverhill I closure?
A:No, Haverhill I did not produce power, so there is no impact.
Q:What is driving the expected improvement in tons handled in the industrial segment?
A:The improvement is driven by a full year of the new KRT contract that began in mid-2025, modest recovery across KRT and CMT, and some small take-or-pay contracts for 2026.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the outcome of the Algoma litigation, citing its active status. They also did not provide plant-specific EBITDA figures or detailed breakdowns of the Middletown turbine failure costs.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
II contract
Industrial Services
Phoenix Global
Phoenix integration
Phoenix site
Slide segment
SunCoke
acquisition Phoenix
addition Phoenix
asset impairment
breach contract
capacity
change mix
charge closure
coke fleet
condition addition
condition terminal
contract Cleveland
contract Granite
contract economics
economics extension
expense
extension II
extension coke
foundry spot
item
leverage
loss
mix contract
priority
sale economics
tax
terminal volume
transaction
volume market
year
SXC Transcript
SunCoke Energy, Inc. (SXC) Q4 2025 Earnings Call Transcript
Unknown2-17
The earnings call reveals a negative sentiment due to significant challenges, including a $53.6M decrease in revenue, a breach of contract with Algoma causing potential $70M losses, and a net loss of $0.52 per share. Despite some offset by Phoenix Global's contribution, the overall financial performance is weak, with lower EBITDA and ongoing litigation risks. The Q&A indicates unresolved issues and uncertainties, particularly regarding Algoma litigation and turbine failure. The shareholder return is modest, but overall, the negative factors outweigh the positives, suggesting a negative stock price reaction.
SunCoke Energy, Inc. (SXC) Q3 2025 Earnings Call Transcript
Unknown11-4
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.
SunCoke Energy, Inc. Q2 2025 (SXC) Earnings Call Transcript
Unknown7-30
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%.
SunCoke Energy, Inc. (NYSE:SXC) Q1 2025 Earnings Call Transcript
Unknown5-1
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.
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SXC Report
Frequently Asked Questions
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