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    SunCoke Energy (SXC)

    SXC Q2 2024: 20% dividend hike on record logistics volumes

    Reported on Jul 31, 2024 (Before Market Open)
    Pre-Earnings Price$10.87Last close (Jul 30, 2024)
    Post-Earnings Price$10.75Open (Jul 31, 2024)
    Price Change
    $-0.12(-1.10%)

    What went wrong

    • Domestic Coke Business Risk: Planned outages and seasonal production challenges in the second half, as mentioned in Q&A, create uncertainty over consistent sales and EBITDA performance.
    • Logistics Volume Variability: Management noted that while Q2 volumes were strong, especially at domestic terminals, these gains may not replicate in the second half since volumes are normalizing, which could pressure future EBITDA.
    • Customer Acquisition and Market Uncertainty: The discussion around the largest customer’s acquisition and potential displacement from traditional markets introduces risks concerning customer retention and competitive dynamics in the North American coke market.

    Q&A Summary

    1. Customer Impact
      Q: Impact of Stelco acquisition on coke sales?
      A: Management noted that the Stelco acquisition does not change the overall coke balance; any potential displacement is seen as an opportunity to pursue new customers while maintaining full operations ( ).

    2. Logistics Volumes
      Q: Benefit from Baltimore outage and CMT normalization?
      A: They explained that while the Baltimore incident provided a slight short-term benefit, overall domestic terminal volumes improved sequentially, with CMT expected to normalize around 2 million tons per quarter ( ).

    3. Dividend & GPI
      Q: Does dividend increase reflect future growth?
      A: The dividend hike, now in its third consecutive year, underscores strong fundamentals and the ongoing focus on the GPI project with U.S. Steel, with no change in their growth priorities ( ).

    4. New Terminal Business
      Q: What drove domestic terminal volume growth?
      A: New business at domestic terminals has driven volumes to their best first-half performance in five years, highlighting robust market demand and effective customer acquisition ( ).

    5. Coke Outages
      Q: How will planned outages affect domestic coke EBITDA?
      A: Management expects the outages to be in line with typical seasonality, ensuring that domestic coke sales and EBITDA per ton remain consistent and within established guidance ( ).

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