SunCoke Energy, Inc reported second quarter 2012 net income attributable to shareholders of USD 22.7 million, up slightly from USD 22.5 million in second quarter 2011.
Mr Fritz Henderson chairman and Chief Executive Officer of SunCoke Energy, Inc said that "Our US cokemaking business delivered another strong quarter. The successful startup of our Middletown, Ohio facility, sustained improvement at Indiana Harbor and the continued strong performance of our other US cokemaking facilities were key drivers of the nearly USD 28 million increase in Adjusted EBITDA we achieved in the second quarter. While our coal business remains challenging, we made progress improving our mining productivity and lowering costs versus first quarter 2012. We believe we will successfully navigate the difficult current coal environment and expect to manage our coal business to be cash neutral in 2012."
Mr Henderson continued that "For full year 2012, we continue to expect to deliver between USD 250 million and USD 280 million in Adjusted EBITDA. We've updated our 2012 outlook for capital expenditures and free cash flow. We now expect 2012 capital expenditures to be about USD 85 million and free cash flow to be in excess of USD 100 million."
In second quarter 2012, total revenues rose 22 percent to USD 460.9 million versus second quarter 2011, primarily driven by sales at our Middletown facility and the pass-through of higher coal costs in our Jewell Coke segment. Our Middletown facility contributed USD 72.0 million to the increase in revenues in the second quarter.
The increases in operating income and Adjusted EBITDA, which grew 99 percent and 74 percent, respectively, versus second quarter 2011 reflect the contribution of our Middletown facility, improvement at our Indiana Harbor facility and continued strong performance in our Other Domestic Coke and Jewell Coke segments. This was partly offset by our Coal Mining segment due to weak results in our hi-volatile and thermal coal operations.
The slight increase in net income attributable to shareholders reflects strong operating performance offset by higher financing costs related to our standalone company capital structure as compared to second quarter 2011 when SunCoke was still owned by Sunoco, Inc.
Jewell Coke
The Jewell Coke segment consists of our cokemaking operations in Vansant, Virginia. Substantially all of the metallurgical coal used at our Jewell cokemaking facility is supplied from our coal mining operations. Beginning in first quarter 2012, the intersegment coal costs charged to the Jewell Coke segment are reflective of the contract price Jewell Coke charges its customer. Prior year periods have been adjusted to reflect this change.
Other Domestic Coke
Other Domestic Coke consists of cokemaking facilities and heat recovery operations at the Indiana Harbor, Haverhill, Granite City and Middletown plants. The Middletown cokemaking facility began operations in October 2011. On September 30, 2011, we increased our ownership interest in the partnership that owns the Indiana Harbor cokemaking facility from 66 percent to 85 percent by acquiring the interest held by one of the unaffiliated third-party partners.
International Coke
International Coke consists of a cokemaking facility in Vitória, Brazil, which we operate for a Brazilian affiliate of ArcelorMittal. International Coke earns operating and technology licensing fees based on production, and recognizes a dividend on its preferred stock investment, generally in the fourth quarter, assuming certain minimum production levels are achieved at the facility.
Segment Adjusted EBITDA declined USD 0.1 million to USD 0.7 million primarily due to lower volumes and higher legal costs partly offset by higher operating cost recovery.
Coal Mining
Coal Mining consists of our metallurgical coal mining activities conducted in Virginia and West Virginia. A substantial portion of the metallurgical coal produced by our coal mining operations is sold to our Jewell Coke segment for conversion into metallurgical coke. Beginning in first quarter 2012, intersegment coal revenues for sales to the Jewell Coke segment are reflective of the contract price Jewell Coke charges its customer. Prior year periods have been adjusted to reflect this change.
Coal Mining segment revenues (excluding sales to affiliates) benefited from higher sale prices for our mid volatile coal and increased volumes from our mining venture with Revelation Energy, partly offset by lower volumes and prices of our hi-volatile and thermal coal sales.
Adjusted EBITDA decreased in second quarter 2012 due to higher coal cash production costs and lower sales of hi-volatile and thermal coal, partly offset by higher sales of mid-volatile coal. Coal cash production costs per ton increased over the prior year due to a change in the mix of coal produced. Specifically, hi-volatile and thermal coals, which are generally mined at a lower cost per ton than mid-volatile coal, represented a smaller portion of sales and production in second quarter 2012 than in the same prior year period.
Source - SunCoke
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