SUNCOKE ENERGY INC 2026 Q3 Earnings Call

You may begin. Thanks, Jael.

Good morning, and thank you for joining us to discuss SunCoke Energy's third 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, and thank you for joining us on today's call. This morning, we announced SunCoke Energy's third quarter results. I want to share a few highlights before turning it over to Shantanu to discuss the results in detail. We are extremely pleased with our third quarter results, with strong consolidated Adjusted EBITDA of $76.9 million. Both of our operating segments delivered excellent performance. Domestic Coke benefited from a favorable mix of contract and spot coke sales and favorable coal-to-coke yields, while Industrial Services benefited from one additional month of Phoenix results compared with the prior year period and higher terminals handling volumes. We also announced this morning that we reached a settlement agreement related to our 2025 claim against Algoma Steel. The agreement was executed in October, and we can confirm that we were made whole. Turning to capital allocation. Earlier today, we also announced a quarterly dividend of $0.12 per share payable to shareholders on December 1, 2026.

This is our 29th 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. Our operating segments continue to perform strongly and consistently. Based on our year-to-date results and outlook for the remainder of the year, we expect to modestly exceed the high end of our full year 2026 consolidated Adjusted EBITDA guidance range of $250 million to $265 million. With that, I will turn it over to Shantanu to review our third quarter earnings in detail.

Shantanu. Thanks, Katherine. Turning to slide 4.

Net income attributable to SunCoke was $0.25 per share in the third quarter of 2026, down $0.01 from the prior year period. The benefits from our operating performance and the insurance recoveries from the 2023 Jewell flood event were offset by the absence of capital investment tax credits recorded in the third quarter of 2025. Excluding that item, the underlying earnings performance improved materially. While the insurance recovery was a substantial benefit to our net income and earnings per share during the quarter, the majority of the recovery proceeds were attributable to property damage and therefore excluded from Adjusted EBITDA. Consolidated Adjusted EBITDA for the third quarter of 2026 was $76.9 million, an increase of $17.8 million from the prior year period.

Domestic Coke increased by $7.1 million, primarily driven by a change in the mix of contract and spot coke sales and favorable coal-to-coke yields, partially offset by lower coke sales volumes due to Haverhill I shutdown. Industrial Services increased by $13.9 million, primarily driven by one additional month of Phoenix results compared with the third quarter of 2025 and higher terminal handling volumes. Corporate and other expenses increased by $3.2 million, driven by higher employee-related expenses. Moving to slide 5 to discuss our Domestic Coke business performance in detail. Third quarter Domestic Coke Adjusted EBITDA was $51.1 million, and coke sales volumes were 875,000 tons compared to $44 million and 951,000 tons in the prior year period.

The increase in Adjusted EBITDA was primarily driven by a change in the mix of contract and spot coke sales and favorable coal-to-coke yields, partially offset by lower coke sales volumes due to the Haverhill I shutdown. We are pleased with the excellent performance from our coke operations and with a solid outlook for the remainder of the year, we are well-positioned to achieve the high end of our full year 2026 Domestic Coke Adjusted EBITDA guidance range of $172 million to $178 million. Now moving on to slide 6 to discuss our Industrial Services results. Our Industrial Services segment generated $32.1 million of Adjusted EBITDA in the third quarter of 2026, compared with $18.2 million in the prior year period. The increase primarily reflects one additional month of Phoenix results compared with the third quarter of 2025 and higher terminals handling volumes.

Third quarter terminals handling volumes were 6.4 million tons and steel customer volume serviced were 5.9 million tons. Our Industrial Services segment continues to perform very well, and we now expect to exceed the high end of our full year 2026 Industrial Services Adjusted EBITDA guidance range of $110 million to $115 million. Now turning to slide seven to discuss our liquidity position for Q3. SunCoke ended the third quarter with ample liquidity of approximately $276 million. Gross leverage was 2.34 times on a trailing 12-month Adjusted EBITDA basis. Net cash provided by operating activities during the third quarter was $94.8 million. We used $53.5 million to pay down our revolver balance, spent $20.9 million on capital expenditures, and paid $10.1 million in dividends at the rate of $0.12 per share. We also received $6.9 million of insurance recoveries related to the 2023 Jewell flood event.

SunCoke has a strong track record of generating steady free cash flow, and we expect the trend to continue through the balance of the year. Year to date, we have reduced debt substantially while simultaneously increasing our free cash flow outlook to $180 million-$185 million, which reflects the impact of the settlement agreement with Algoma. 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 will turn it back over to Kat.

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. As we look ahead, we continue to be confident in all aspects of our business. Our long-term coke business is underpinned by the three pillars of Indiana Harbor, Middletown, and Jewell Foundry, which have consistently delivered excellent performance and results. With our Haverhill II and Granite City cokemaking contracts in place and all spot blast and foundry coke sales finalized, we are sold out for the full year. Our Industrial Services segment is also well-positioned going forward. Phoenix is performing as we expected, and 2026 will benefit from a full year of Phoenix Adjusted EBITDA.

We also see solid market conditions at our terminals and are focused on growing both our Phoenix and logistics businesses. 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 plan to continue returning capital via the quarterly dividend approved by our board, which has always been well-received by our long-term shareholders. Our focus is also on profitable growth opportunities to further reward our long-term shareholders. This commitment to maximizing value for all stakeholders means operating and investing in our assets in the best and most efficient way possible to support our customers and to further grow the business.