Good morning. Thank you all for attending the SunCoke Energy Second Quarter 2024 Earnings Call. My name is Brika, and I will be your moderator today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, Shantanu Agrawal, VP Investor Relations at SunCoke Energy Thank you. You may proceed, Shantanu.

Thanks, Brika. Good morning, and thank you for joining us this morning to discuss SunCoke Energy's second quarter 2024 results. With me today are Katherine Gates, President and Chief Executive Officer, 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. This morning, we announced SunCoke Energy's second quarter results. I want to share a few highlights before turning it over to Mark to discuss the results in detail. First, I would like to thank all of our employees for their contributions to our results. Our domestic coke plants continued to run at full capacity and our logistics terminals again had strong results, handling 6 million tons during the quarter. Through our collective efforts, we delivered consolidated adjusted EBITDA of $63.5 million during the quarter. This strong performance in the first half of the year positions us well to achieve the high end of our full year 2024 adjusted EBITDA guidance range. We also announced today that the Board of directors approved a 20% increase in our quarterly dividend from $0.10 to $0.12 per share. The increases affected the next quarterly payment date of September 3, 2024. This increase reflects the confidence of our Board and management team in the strength and stability of our underlying core businesses. Our gross leverage remained below 2 times at approximately 1.93 times on a trailing 12-month adjusted EBITDA basis at the end of the quarter. We continue to focus on executing against our 2024 key initiatives and now expect to achieve the high end of 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 second quarter earnings in detail. Mark?

Thanks, Katherine. Turning to Slide 4. Our net income attributable to SunCoke was $0.25 per share in the second quarter of 2024, up $0.01 versus the prior year period. The increase was driven by lower depreciation, tax and net interest expense, which was mostly offset by lower sales volumes and pricing in our domestic coke segment. Consolidated adjusted EBITDA for the second quarter of 2024 was $63.5 million compared to record second quarter results in the prior year of $74 million. The decrease in adjusted EBITDA was primarily driven by lower blast coke sales volumes due to timing of spot sales in the prior year quarter, lower coal-to-coke yields and lower API2 price adjustment benefit at CMT partially offset by higher transloading volumes at our domestic logistics terminals. Moving to Slide 5 to discuss our domestic coke business performance in detail. Second quarter domestic coke adjusted EBITDA was $57.9 million and coke sales volumes were 973,000 tons. While the domestic coke fleet continued to run at full capacity, the decrease in adjusted EBITDA as compared to the record prior year period was primarily driven by lower blast coke sales volumes due to the timing of spot blast coke sales in the prior year period. Lower coal-to-coke yields on our long term take or pay contracts also impacted second quarter results. As we mentioned in our first quarter call, all spot blast and foundry coke sales are finalized for the full year. Our full year domestic coke sales ton guidance remains approximately 4.1 million tons and we are reaffirming our full year domestic coke adjusted EBITDA guidance of $238 million to $245 million. Now moving on to Slide 6 to discuss our logistics business. Our logistics business generated $12.2 million of adjusted EBITDA in the second quarter of 2024, compared to…

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 coke-making assets. We also continue to focus on adding new business at our logistics terminals. We are pleased with the results of our efforts so far, with new business largely driving the highest first half volumes at our domestic terminals in the last five years. And while we were able to finalize all of our spot blast and foundry coke sales for the full year, we continue to pursue future opportunities to broaden our customer base. As we've 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. The 20% quarterly dividend increase aligns with our capital allocation goal of rewarding long-term shareholders and reflects the strength and stability of our business. 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 half of the year, and coupled with our outlook for the balance of the year, we now expect to achieve full year consolidated adjusted EBITDA at the high end of our guidance range of $240 million to $255 million. With that, let's go ahead and open up the call for Q&A.

Thank you. We will now begin the question and answer session. [Operator Instructions] Your first question comes from Lucas pipes with B. Riley securities. You may proceed.

Thank you very much, operator. Good morning, everyone. My first question is in regards to the recent...

Good morning, Lucas.

My first question is in regards to the recent announcement from your largest customer on an acquisition in Canada. Obviously, still has to close, but I wondered how you expect this deal impacting your future coke sales to this customer, especially in light of the June 2025 contract expiration? Thank you very much.

Thanks, Lucas. Yeah. So when we look at the Stelco acquisition, we don't see any change in supply or demand as far as coke in the North American market and therefore, no change in the overall coke balance.

Got it. So, in terms of, like, any displacement from Canada coming into Cleveland, for example, you wouldn't -- you wouldn't expect that?

Well, what I said was that there's no change in the overall coke balance. So we don't know what Cliffs will decide to do. But if we -- if the assumption sort of in your question is that if Cliffs is using Stelco's excess coke, and instead of Stelco selling that coke to another customer that they in turn took that excess coke and used it for themselves, from our perspective, we would see the customer that Stelco was selling to as an opportunity to potentially pursue that customer. And since, again, there's no change in the macro supply and demand we would do what we've always done, which is to aim to run full and sell out, and we would look to sell our coke to either that potential customer, other customers in the North American market for our spot blast coke sales, foundry coke sales or of course, the seaborne market.

That is very helpful. I appreciate that, that clarity. A quick follow-up on the logistics side. First, did you see any benefit from the Baltimore outage in terms of volumes getting rerouted down to the Gulf? And then a major Illinois basin producer commented earlier this week that sulfur discounts are a bit higher than they have been, and then so, I wonder kind of what you expect for Q3, Q4 in terms of volumes through CMT? Thank you very much.

Sure. So with respect to the unfortunate incident in Baltimore, we did benefit from that unfortunate incident in the first half, and we talked about that in our first quarter call. So when you see us talk about having a softer second half, that's really due to the higher volumes that we saw in the first half that aren't getting replicated in the second half.

Thank you. Could you -- can you speak to the market?

Yes. I can take that. I mean -- from an Illinois basin coal perspective, right, like if you look at the API2 futures kind of pricing here, we don't -- I mean, that has stabilized quite a bit after a really volatile 2023 and early 2024. So from an volumes or a demand perspective, what is going through our terminals, we are not seeing a huge change going from first half to the second half. So that's basically what our expectation is for the second half of the year right now.

Very helpful. Thank you. And then congratulations on the dividend increase. That is great to see. Katherine, any, any read-through to future growth? Or would you say this is more of a reflection of kind of the solid results to date, and it doesn't really change your priorities if it comes to Granite City pig iron for example, would appreciate your thoughts on that. Thank you.

Well, absolutely. So we continue to work with U.S. Steel on the GPI project. That is still ongoing. Our engineering work is still ongoing. There has been no change in our focus with respect to the GPI project as our number one growth focus and growth opportunity. I think it's just important to remember that the fundamentals of that project are so strong. And it's certainly taken a long time. And I think it's that can be a frustration. But if you really think about the fundamentals of that low-cost iron ore, the availability of the blast furnace, the location of our coke plant, and the ability to send that high-quality GPI then to Big River, that's really hard to replicate in the market. And so we continue to strongly believe in the fundamentals of that project. We continue to work on it. U.S. Steel continues to work on it with us. So the increase in our dividend, and it's the third year that we have increased our dividend, it fully reflects the GPI project with respect to the ability to increase that dividend. And we'll continue to focus on capital allocation that rewards our long-term shareholders.

Katherine, I appreciate all the color today. Thank you very much. And to you and the team, best of luck.

Thank you, Lucas.

Thank you. Your next question comes from Nathan Martin with the Benchmark Co. You may proceed.

Thanks, operator. Good morning, everyone.

Good morning, Nathan.

Good morning.

Let's stick with the logistics for a second here, a big pickup, obviously, quarter-over-quarter at CMT in particular. It sounds like that was likely material other than coal. You know what -- can you talk about some of the new business you guys have secured there and how you see that playing out going forward?

So, Nathan, thank you. We're seeing the new business at our domestic terminal. So CMT continues to run well. But this is really at our domestic terminals, where we're seeing that business. And this is not the unfortunate sort of Baltimore bridge business for lack of a better term that we saw in the first half, but this is actual new business that's coming in. We can't talk about specific customers, but this is at our domestic terminals. And that's why you're seeing such high volumes for those domestic terminals, the highest that we've had in the last five years.

Okay. So then -- that makes sense, Katherine. Then the increase you're saying at CMT quarter-over-quarter was really just picking up some shipments that were diverted away from Baltimore?

That's correct. And we had slightly higher volumes from a timing basis than expected in the first half.

Yes, Nate, I mean. we did not get any benefit at CMT from the Baltimore incident. It was all at the domestic terminals. If you look -- if you're comparing Q2 2023 to Q2 2024, I think -- I'm not sure which comparison you're talking about, but it's roughly 130,000 tons pickup on CMT, which is, which is pretty normal. It's nothing like outstanding. Are you comparing Q1 2024 versus Q1 -- Q2 2024? I just want to make sure that we can address that.

Yes. I was looking sequentially, Shantanu, because it was up 650,000 tons plus or minus.

Okay. Yes, yes. No, I mean, definitely the second quarter for CMT was much better than the first quarter. Obviously, as we mentioned, if you remember when we gave our 2024 guidance, we were coming into the year with a very, very soft market, which I kind of referenced to being a volatile market, and that was kind of factored in our original guidance, right? And Q1 came in a little bit softer, but we saw a pickup in the Q2, and that's what you can see in the volume, and that's for normalizing. And it's just kind of the normal volumes that we're seeing at CMT. So -- but majority of the new business, the pickup in the EBITDA and the reason behind the increase in the guidance is coming from the domestic logistics terminals.

Okay, got it. So you still kind of feel like CMT is going to normalize somewhere around maybe 2 million tons plus or minus per quarter, that kind of run rate then?

Yep, yep, that's kind of what's factored in the guidance, right? Like kind of we give the volume guidance, yeah.

Okay, yes, I was just trying to figure out if, if you know, which number is closer to what you guys expect moving forward, the 1.8 million tons in the first quarter, the 2.5 million tons in the second quarter. Okay, got it. I'll leave that one. I mean, I guess really what it all comes down to, right, is I guess the first half for the logistics business, you guys did, you know, $25 million EBITDA, you know full year guidance is $30 million to $35 million. Obviously, you now expect to exceed that range. But I mean, could we get any thoughts on what kind of magnitude you're baking in at this point? I mean, is it $5 million, $10 million? You did note, obviously, the expectation for volume to slow down somewhat in the second half, but it would be great to get your thoughts on the forecast there.

Yes, Nate, I mean, at this point, we are not providing a new guidance range. We are just saying that we are going to exceed the guidance range. So yes, I mean, obviously, we need to see how the second half plays out and it will get an idea, but we feel very comfortable that we'll be kind of above our guidance range based on the first half performance. And then going back to kind of your first question, right? Like so our full year guidance for CMT was 4.1 million tons for coal and 3.8 million tons for other products. And that is you know -- we said that we are going to exceed the volumes, but for CMT, you can think about that the guidance on those volumes remain unchanged. Majority of the pickup is coming through the domestic terminals.

Okay, got it. That's helpful, Shantanu. I appreciate that. And then maybe just shifting over to the domestic coke business quickly. You guys mentioned last quarter some planned outages, I think, here in the second half. Is that still the case? And how do you expect that to impact maybe EBITDA per ton in sales in the second half versus what you saw in the first half? I think, typically, sales remain fairly consistent, but it would just be great to get your thoughts.

Yes. I mean, the expectation, as we are reaffirming our guidance for $238 million to $245 million, that still remains the case. Kind of this year, the timing of the sales and production have aligned really well, unlike the last quarter, where Q2 of 2023 was a record quarter mostly driven by the timing of the shipment you can see, right? Like we sold 46,000 tons more than what we produced last quarter in 2023. But for 2024, our sales and production are pretty well aligned. We did mention that we have some outages into the second -- in the second half of the year, which is factored in. So yeah, I think it should be pretty consistent. If you look at sequentially quarter-over-quarter, with -- and traditionally, Q4 has been kind of our weakest quarter with production and getting -- sorry, with outages and us getting ready for winter and everything. So we expect that to be similar story this year as well.

Okay. Got it. Typical seasonality. Okay. Perfect. I appreciate that, Shantanu. I'll leave it there. Best of luck to you guys in the second half.

Thanks.

Thanks, Nathan.

Thank you, Nathan. We have no current questions. [Operator Instructions] We have no questions registered. So I would like to hand it back to Katherine Gates, President and CEO with SunCoke Energy for some final remarks.

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 all for joining the SunCoke Energy second quarter 2024 earnings call. You may now disconnect from the call, and please enjoy the rest of your day.