Good morning, everyone, and welcome to the SunCoke Energy First Quarter 2024 Earnings Call. My name is Angela, and I will be coordinating your call today. [Operator Instructions] I will now hand you over to your host, Shantanu Agrawal, Vice President, Finance and Treasurer. Please go ahead.

Thanks, Angela. Good morning and thank you for joining us this morning to discuss SunCoke Energy's first quarter 2024 results. With me today are Mike Rippey, Chief Executive Officer; Katherine Gates, President; and Mark Marinko, Senior Vice President and Chief Financial Officer. Following management's prepared remarks, we'll open the call for Q&A. This conference call is being webcast live on the Investor Relations section of our website, and a replay will be available later today. 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, Shantanu. Good morning and thank you for joining us on today's call. Before we get started, I'd like to congratulate Mike Rippey on his previously announced retirement in two weeks. Mike's leadership and contributions have been crucial to the success of SunCoke during his tenure. I've had the privilege of working closely with Mike over the past several years and look forward to having him as an adviser for the company. The entire SunCoke team wishes him the best in his retirement. Moving to first quarter results, I wanted to share a few highlights before turning it over to Mark to discuss the results in detail. First, I'd like to thank all of our SunCoke employees for their contributions to our very good first quarter results. Our domestic coke plants continue to run at full capacity with strong operational performance. Our logistics terminals delivered excellent results, handling 5.5 million tons during the quarter. We saw higher volumes at our domestic terminals due in part to East Coast port congestion caused by the unfortunate incident in Baltimore, which favorably impacted results. Through our collective efforts, we delivered consolidated adjusted EBITDA of $67.9 million. From a balance sheet perspective, we ended the first quarter with a strong liquidity position of $470.1 million. Our gross leverage was approximately 1.86x on a trailing 12-month adjusted EBITDA basis at the end of the quarter. Looking ahead, we're pleased to have all of our spot blast and foundry coke sales finalized for the full year. With this strong start, we are well positioned to achieve our full year adjusted EBITDA guidance range of $240 million to $255 million. With that, I'll turn it over to Mark to review our first quarter earnings in detail. Mark?

Thanks, Katherine. Turning to Slide 4. Net income attributable to SunCoke was $0.23 per share in the first quarter of 2024, up $0.04 versus the prior year period. Adjusted EBITDA for the first quarter 2024 was $67.9 million compared to $67.1 million in the first quarter 2023. The increase in adjusted EBITDA was primarily driven by higher blast coke sales volumes and higher volumes at our domestic logistics terminals, partially offset by lower volumes at CMT. Moving to Slide 5 to discuss our domestic coke business performance in detail. First quarter domestic coke adjusted EBITDA was $61.4 million and coke sales volumes were 996,000 tons. The domestic coke fleet continues to run at full capacity and the increase in adjusted EBITDA as compared to the prior year period was primarily driven by higher blast coke sales volumes. Our full year domestic coke sales tons guidance remains approximately 4.1 million tons. As Katherine mentioned earlier, all spot blast and foundry coke sales are finalized for the full year. Given the strong performance this quarter from our domestic coke segment, we are well positioned to achieve full year domestic coke adjusted EBITDA within our guidance range of $238 million to $245 million. Now moving on to Slide 6 to discuss our logistics business. Our logistics business generated $13 million of adjusted EBITDA in the first quarter of 2024 compared to $13.5 million in the first quarter of 2023. The decrease in adjusted EBITDA was primarily due to lower throughput volumes at CMT, partially offset by higher volumes at our domestic terminals. CMT also recognized limited API2 price adjustment benefit during the quarter. Our terminals handled combined throughput volumes of approximately 5.5 million tons during the first quarter of 2024 as compared to 5.3 million tons during the same prior year period. Our…

Thanks, Mark. Wrapping up on Slide 8, as always, safety is our first priority, and we will continue to focus on strong safety and environmental performance, robust safety and environmental standards set SunCoke apart and are central to our reliable delivery of high-quality coke and logistics services. We remain focused on safely executing against our operating and capital plan for full utilization of our cokemaking assets. We also continue to concentrate our efforts on adding new business at our logistics terminals. And while we were able to finalize all of our spot, blast and foundry coke sales for the full year, we are still focused on future opportunities to broaden our customer base. As we have demonstrated in the past, we will pursue a balanced yet opportunistic approach to capital allocation. From a growth perspective, we continue to work on developing the Granite City GPI project. We continuously evaluate the capital needs of the business, our capital structure and the need to reward our shareholders and will make capital allocation decisions accordingly. Finally, we are very pleased with the strong results in the first quarter and we expect to achieve our full year consolidated adjusted EBITDA guidance of $240 million to $255 million. With that, let’s go ahead and open up the call for Q&A.

Thank you, Katherine. [Operator Instructions] The first question is from Lucas Pipes with B. Riley Securities. Your line is open.

Hey good morning everyone. How are you?

Good morning, Lucas.

So, my first question is on kind of the longer-term outlook for the utilization rates. One of your customers recently commented on an earnings call about kind of the Middletown contract and their desire to replace that blast furnace with the DRI. And I saw you just renewed a maintenance contract with Fluor. So it seems like you have confidence in the long term need of your existing coke fleet. But if you could maybe comment on that and what your outlook is maybe, first, through the end of this decade and then maybe post 2032. I would really appreciate it. Thank you.

Sure. Thanks, Lucas. With respect to – I think you are referring to the Cliffs’ announcement for their Middletown works. And with respect to that, that announcement really has no impact on us. Our contract with Cliffs runs through the end of 2032. In terms of sort of the next decade, if you will, I mean, there is a long way to go until 2033. We are not going to speculate on the opportunities that are available to us in 2033 today. But what we have said before is that we have the newest coke-making assets, and we continue to make significant investments in them. We do that because we believe we're best positioned to serve the blast furnaces long term.

Got it. And so when you think about the upcoming more near-term contract renewals, I think, there is U.S. Steel at the end of this year then Cleveland-Cliffs, I think, it's two contracts next year and then Algoma after that. Do you expect more of those tons to shift into either the foundry or merchant, or rather spot blast furnace coke market, or would you expect kind of your current proportion of contracted to spot volumes to stay roughly the same through the next two, three years?

Well, with respect to the Granite City coke contract, as we've said in the past, that coke contract is part of our GPI project and part of those negotiations. And with respect to our other contracts with other customers, we are always in dialogue with our customers, but we are not going to comment on any kind of contract discussions.

Okay. But if Middletown were to convert to DRI in – were to convert to DRI 2029, I guess, Middletown coke would maybe backfill some of the Haverhill tons. So, should we expect that those contract renewals go maybe shorter in nature than they've historically been?

Lucas, as I said before, I mean, we are not going to comment on our contract discussions with our customers, and we're not going to speculate. So I really can’t – I can’t help you more than that.

Okay. That’s appreciated. On the Granite City side, could you maybe update us on kind of what the most recent update us in terms of your conversations with U.S. Steel, obviously, we’re all following the news and seems tricky, but I would appreciate your color on where the project stands today.

Sure. Well, with respect to the GPI project, we are continuing to work with U.S. Steel on the GPI project. We are doing the detailed engineering for what would be a first-of-its-kind project right now. And so we’ll continue to work with U.S. Steel on the GPI project, and we would look forward to working with Nippon in the future.

Got it. Any sort of timing when that detailed engineering might be completed?

That’s an ongoing project with U.S. Steel, and I’m not going to comment further on it.

Okay. Okay. And order of magnitude if – what sort of capital might we be looking at? I assume there are costs for conversion. So I’d be curious about kind of the cash component, but then also any sort of reclamation liabilities that might be assumed would be very helpful to understand what the capital commitments might be? Thank you.

Hey Lucas, yes, this is Shantanu. I mean, as we have said before, right, I mean, obviously, kind of as when we announced this project, we said like based on – at that point of time, the project was kind of assumed, and that’s how we are progressing right now is it’s going to be a thinking about from a cash CapEx perspective, it’s two years of our free cash flows plus some revolver borrowing, right? And that still is the case as we move forward with this project. So we haven’t really given out cash like a specific number, but that’s kind of the order of magnitude is roughly you can think about it as two years of our free cash flows plus some revolver borrowing.

That is very helpful. I appreciate all the color. I’ll turn it over for now. Thank you.

Thank you.

Thanks, Lucas.

Thank you. [Operator Instructions] The next question is from Nathan Martin with Benchmark. Your line is open.

Thanks, operator. Good morning, everyone. Congrats on the first quarter results, and Mike congratulations on your retirement, best of luck.

Much appreciated. Thanks.

Maybe moving over to Logistics segment for a second, multi-year highs, tons handled there, I think that’s mainly logistics ex-CMT. You guys mentioned in your prepared remarks, a lot of that was driven by increased shipments due to the outage at Baltimore. No update to your logistics volume guidance, it didn’t look like. So is the expectation that tons kind of come down in subsequent quarters as Baltimore reopens? Or is there a possibility you exceed that original guidance if current levels kind of remain elevated?

Thanks, Nathan. I mean, yes, as we said, Q1 from a domestic terminals perspective was one of the – was the best quarter in the last five years, right? So it was definitely an exceptional quarter as we have seen, right, like you saw the last year, the logistics business could be quite volatile, right? So I mean, as we sit here today, what we’re looking at the market, we are affirming our guidance if the market kind of remain up and down and weak, that’s what we expect. But if we see a pickup in the out year – later half of the year, we can pick up more volumes, and you will see that in the results. But as we sit here today, what we are seeing we confirm our guidance, and we stick with the $30 million to $35 million of logistics EBITDA.

Appreciate that, Shantanu. I guess just thinking the Baltimore port looks like the main deep draft terminals and that’s scheduled or targeted to be reopened until the end of May. It would just make some sense; maybe you still think you’ll have some benefit here in the second quarter?

Not much. I mean, we saw kind of some pickup at the start, like when it happened. And then we saw some in Q2, but it’s really not driving the results that much as we sit here today.

Okay. That’s fair. And then maybe specifically at CMT, you guys talked about the weak commodity markets, weak coal exports. Just curious, did you hit your coal take-or-pay minimum during the first quarter from a volume perspective? Can you remind us, is that looked at on a quarterly basis? Or is that annual? Because I think it’s 4 million tons annually. And then great just get your thoughts on how you view export coal demand in here over the next few quarters? And how do you expect your API2 price adjustment to trend and maybe if we use this first quarter result as a baseline?

Yes. So on the take or pay it’s an annual take or pay, Nathan. So I mean, obviously, you can see we don’t provide like kind of coal tons separately. The total CMT did 1.8 million tons which is kind of pretty much in line and what kind of our expectation was. And we do expect to hit the take-or-pay minimum for the full year, for this year. Again, going back to kind of what the expectation for the volumes and the price of the API2 is, I mean, if you look at the futures, API2 look pretty decent, right? I mean, it's kind of come back from the lows. But it can move pretty quickly as we have seen in the past, right? Like kind of it can move $10, $20, $30 in a matter of a couple of days. And there is some – our profitability, as you know, is derived from that. So it's hard to predict, right? What we have put in the guidance, I think we feel pretty good about it. The long run outlook of the CMT terminal remains pretty attractive. And that's why we really like having this terminal. And as in the past, it has performed really well, and we continue to believe in this terminal.

Thanks for that, Shantanu. Maybe just shifting over to the Domestic Coke segment real quickly. EBITDA per ton looks like came in above your full year guidance range. Maybe can you talk about the drivers behind that outperformance?

So Q1 normally is one of the quarters where we don't have a lot of outages. We are just coming out of the winter, just trying to kind of get back our facility to run really well in Q2 and Q3. And this quarter, except the first couple of weeks of January, the weather was pretty good as well and it helped us kind of perform really well. On top of that, we talk about kind of higher blast coke sales volume in Q1. And that is actually timing of that, and that is the spot blast coke sales volume timing where it was unusually front-loaded in Q1 versus the previous year. So that helped our Q1 to be really, really good in terms of domestic coke performance. For the rest of the year, I think, as we reaffirm our domestic coke EBITDA guidance of $238 million to $248 million, it kind of tells you that we expect to run kind of as expected as we announced when we came about our guidance initially and we kind of are on track to meet that guidance.

Okay, I appreciate that color. Just to make sure I followed correctly. You said the spot last coke sales volumes were kind of front loaded, so more in the first quarter than maybe typical. So if that's true, how do we think about maybe the mix, the sales mix in 2Q, 3Q, 4Q? Again, as you allude to, the adjusted EBITDA per ton is going to need to come down, obviously, just to within your full year guidance. But is there any kind of additional planned maintenance in any given quarter that could pressure EBITDA per ton maybe in 3Q or 4Q, just for instance, or any sales mix or headwind, tailwind we should be thinking about?

No. I mean, there's obviously, as I mentioned, there was no outages in Q1. So we expect to have outages and not expect, we have planned outages in Q3 and Q4 of the year, right? So that will impact our performance during that time. And kind of from our contracted sales perspective, it's kind of pretty ratably laid out. And then spot coke, if first quarter was heavily loaded, obviously, like the rest of the year would kind of even out based on that, as we said, we have 650,000 equivalent blast and foundry cokes tons to sell, and that just laid out for the year, it's just heavily loaded in the first quarter. So it's going to be lower in the rest half of the year.

Got it. I appreciate those comments. I'll leave it there. Best of luck in the second quarter. Thank you.

Thank you. We have a follow-up question with Lucas Pipes with B. Riley Securities. Your line is open.

Thank you so much, operator. Thank you so much for taking my follow-up question. I wondered if you could maybe give us a little bit of an update on to kind of the size of the North American blast furnace coke market. There's been the idling at Granite City. There have been some other changes on the utilization rate of the blast furnace fleet. Obviously, there are changes if you look out in the years ahead, as discussed earlier. But kind of what's the status quo? Where would you put the size of the market today? Thank you.

Lucas, I mean, apart from the Granite City idling, things haven't really changed that much in the North American market, right? I mean, there is obviously a lot of announced EAF capacity coming online in the future in two, three, four years. But as we sit here today and you kind of think about versus the last two, three years, apart from the Granite City blast furnace shut down, the utilization or the coke demand hasn't changed as a whole in the North America.

Okay. Okay. So what's the market size, roughly?

It's roughly, kind of, as we have said in our earnings deck, it's around 8.5 million to 10 million tons of coke what is kind of being produced in the U.S. – in the North American market.

Got it. So this would include Algoma and Dofasco and Stelco up in Canada?

Correct. Correct.

And so kind of fair to say you have, what kind of 50%, 40% of the market today?

We say we have roughly 30%, 35% to 40% of the market because we only sell 3.6 million tons of contracted capacity, right?

Got it. Yes, and then you sell some other blast furnace coke in North America as well, right, on a spot basis?

Yes. In North America and all over the world, yes, and foundry as well, right?

Yes.

Which we are not including in that, right?

Yes. So the 30% to 35% would just be your contracted volumes?

Correct. Correct. Yes.

And then do you have a – what is the competition on the merchant coke side? Kind of the next closest merchant coke supplier, how large would they be?

I mean this is also, again, as we discussed the only other merchant coke producer in the U.S. is DTE and their capacity is in the like 800,000 to 1 million tone range.

Got it. And they don't have a byproduct is that, right?

They do have byproduct. They have the traditional coke production – coke production methodology.

Got it. Got it. Okay. That make sense. So kind of the – if I just kind of look at this high level, integrated capacity is still around 50%, is that about right?

Yes. A little more than 50%, I would say, yes.

And how would you describe that fleet? Has it been generally well maintained? Or do you have a view on that capacity?

I mean, as kind of you know the coke plants would have shutdown recently, right? So obviously, there hasn't been much capital spend on that.

Which are the ones that shutdown? Coke facility?

The recent announcement was the Clairton right, the two batteries that shutdown.

What was the utilization rate prior to that shutdown?

Well, Lucas, for that, I guess, kind of – we don't follow that closely or you got to ask U.S. Steel for that.

Okay. That's helpful. But your view is that you can compete effectively with that integrated capacity and kind of take share from there?

Yes. I mean if you look at last three years, right, like what we have done since coming out of COVID, right, we have maneuvered the market really well. The market has been constantly changing as we have talked about, and we have been able to run full and kind of run really profitably, and we continue to believe that we will be able to do that in the future.

Okay. In terms of kind of your spot coke sales today, have there been increased opportunities due to customer outages in terms of the spot blast furnace coke market in North America?

Lucas, on the kind of – we don't talk about spot blast furnace coke separately. We always talk about spot blast and foundry coke on a combined basis given the size of the market. And that part hasn't changed. That's the 650,000 equivalent blast furnace coke that we sell, and we intend to sell in 2023 – 2024.

Okay. All right. I really appreciate the additional colour. Thanks so much for taking my follow-up questions and best of luck.

Thank you.

Thank you. We currently have no further questions. So I hand back over to Katherine to conclude.

Thank you all again for joining us this morning and for your continued interest in SunCoke. Let's continue to work safely and create value for all of our stakeholders.

Thank you. This concludes today's call. Thank you for joining. You may now disconnect your lines.