SUNCOKE ENERGY 2026 Q2 Earnings Call

Good morning, thank you for joining us this morning to discuss SunCoke Energy's second quarter 2026 results. With me today are Katherine Gates, President and Chief Executive Officer, and Shantanu Agrawal, Senior Vice President and Chief Financial Officer. This conference call is being webcast live on the investor relations section of our website, and a replay will be available later today. Following management's prepared remarks, we will open the call for Q&A. If we do not get to your questions on the call today, please feel free to reach out to our investor relations team. Before I turn things over to Katherine, let me remind you that the various remarks we make on today's call regarding future expectations constitute forward-looking statements. The cautionary language regarding forward-looking statements in our SEC filings apply to the remarks we make today.

These documents are available on our website as are reconciliations to non-GAAP financial measures discussed on today's call. With that, I'll now turn things over to Katherine.

Thanks, Sharon. Good morning, thank you for joining us on today's call. This morning, we announced SunCoke Energy's second quarter results. I want to share a few highlights before turning it over to Shantanu to discuss the results in detail. We're very pleased with our second quarter results with strong consolidated adjusted EBITDA of $69.6 million. Our industrial services segment delivered the highest adjusted EBITDA since the acquisition of Phoenix, with substantially higher handling volumes at our terminals as compared to the prior year period. Our domestic coke segment benefited from favorable coal-to-coke yields, and the Middletown turbine was returned to service with power production resuming in May. Earlier today, we also announced a quarterly dividend of $0.12 per share payable to shareholders on September 2nd, 2026. This is our 28th consecutive quarterly dividend.

While the dividend is evaluated on a quarterly basis by our board, we expect the dividend to continue as part of our well-balanced capital allocation strategy. As previously discussed in our first quarter earnings call, we are running at full capacity and sold out for the full year. We expect continued strong operating performance for both business segments, and with a solid outlook through the second half of the year, we are increasing our full year 2026 consolidated adjusted EBITDA guidance range to $250 million-$265 million. With that, I'll turn it over to Shantanu to review our second quarter earnings in detail.

Shantanu? Thanks, Katherine. Turning to slide four.

Net income attributable to SunCoke was $0.15 per share in the second quarter of 2026, up $0.13 versus the prior year period. The increase was primarily driven by the addition of Phoenix results and higher terminal handling volumes. Consolidated adjusted EBITDA for the second quarter of 2026 was $69.6 million, compared to $43.6 million in the prior year period. The increase in adjusted EBITDA was primarily driven by the addition of Phoenix, higher terminal handling volumes, and favorable coal-to-coke yields, partially offset by lower coke sales volumes due to the Haverhill 1 shutdown and higher employee expense accrual driven by the company's strong financial performance. Moving to slide five to discuss our domestic coke business performance in detail.

Second quarter domestic coke adjusted EBITDA was $42.5 million, and coke sales volumes were 878,000 tons compared to $40.5 million and 943,000 tons in the prior year period. The increase in adjusted EBITDA was primarily driven by favorable coal-to-coke yields due to improved operating conditions, partially offset by lower coke sales volumes due to the Haverhill 1 shutdown. We are pleased with the improvement in our coke operations during the second quarter and with the return of power production at Middletown earlier than anticipated. We expect this strong operational performance to continue throughout the second half of the year and are increasing our full-year domestic coke adjusted EBITDA guidance range to $172 million-$178 million. Moving on to slide six to discuss our industrial services results.

Our industrial services segment generated $34.4 million of adjusted EBITDA in the second quarter of 2026, compared to $7.7 million in the prior year period. The increase in adjusted EBITDA was primarily driven by the addition of Phoenix results and higher terminal handling volumes. Second quarter total terminals handling volumes were 6.7 million tons, and steel customer volumes serviced were 5.8 million tons. We are increasing our full year 2026 industrial services adjusted EBITDA guidance range to $110 million-$115 million, driven by continued solid outlook for the second half of the year. Turning to slide seven to discuss our liquidity position for Q2. SunCoke ended the second quarter with a cash balance of $42.7 million and revolver availability of $164.5 million, representing ample liquidity of $207 million.

Net cash used in operating activities was $27.2 million and was negatively impacted by the timing of approximately $65 million of cash receipts at the quarter end, which were subsequently received in July. We expect operating cash flow to normalize over the remainder of the year and are increasing our full-year operating cash flow guidance to $240 million-$260 million. During the quarter, we used $6.5 million for debt paydown, spent $15.9 million on CapEx, and paid $10.2 million in dividends at the rate of $0.12 per share. SunCoke has a strong track record of generating steady free cash flow, and we expect the trend to continue throughout the year.

As Katherine mentioned earlier, we intend to continue utilizing our free cash flow to pay down debt, as well as to reward our long-term shareholders via dividends, which is reviewed and approved on a quarterly basis by our board of directors. With that, I'll turn it back over to Katherine.

Thanks, Shantanu. Wrapping up on slide eight. As always, safety is our first priority, and our team remains committed to maintaining strong safety and environmental performance throughout the year. Robust safety and environmental standards set SunCoke apart and are central to our reliable delivery of high-quality coke and industrial services. We continue to be confident in our operations for 2026 with our profitable long-term coke business underpinned by the three pillars of Indiana Harbor, Middletown, and Jewell Foundry, which have consistently delivered excellent performance and results. With our Haverhill 2 and Granite City coke making contracts in place and all spot blast and foundry coke sales finalized, we're sold out for the full year. We also maintain a positive outlook for our industrial services segment. 2026 will benefit from a full year of Phoenix adjusted EBITDA, as well as solid market conditions at our terminals.

As always, we take a balanced yet opportunistic approach to capital allocation. Our focus will remain on utilizing our free cash flow to support our capital allocation priorities, including paying down our revolver balance. We also plan to continue returning capital via the quarterly dividend as approved by our board, which has always been well-received by our long-term shareholders. We continuously evaluate the capital needs of the business, our capital structure, and the need to reward our shareholders, and we'll make capital allocation decisions accordingly. We're committed to maximizing value for all of our stakeholders, which means operating and investing in our assets in the best and most efficient way possible. We will continue to focus on maintaining the strength of our core businesses, as well as assessing new growth opportunities across all areas of our business.

Overall, we see the strong fundamentals of our business and expect our 2026 results to be reflective of that. We are confident that we'll be able to deliver full-year consolidated adjusted EBITDA within our revised guidance range of $250 million-$265 million. Let's go ahead and open up the call for Q&A.