Illinois-based coke producer
SunCoke Energy Inc.
) announced its operational and financial outlook for 2013. The
company's targeted capital investment is set around $200 million
for 2013 versus $70 million in 2012.
Included in the capital outlay is $75 million allocated for
the revamping of the Indiana Harbor facility. Environmental
remediation projects at the Haverhill and Granite City facilities
in Chicago and the $67 million investment in the VISA SunCoke
joint venture are also included in the capital guidance.
The company expects its Middletown facility in Ohio to provide
a thrust to operations. The Indiana Harbor facility could also be
a major draw in 2013. Offsetting these prospects are the expected
decline in value of coal-to-coke yield benefits accrued in 2012
owing to lower purchased coal costs per ton.
With projected coke production to exceed 4.3 million tons,
SunCoke expects capacity utilization to be more than 100%. For
2013, the company's domestic coke business will continue to
realize Adjusted Earnings before Interest, Tax, Depreciation and
Amortization (EBITDA) of $55 to $60 per ton.
Going forward, SunCoke expects its coke making fleet to do
moderate business as it estimates a $40 per ton downside in the
average selling prices in the coal mining segment. Furthermore,
SunCoke anticipates EBITDA in the range of $205−$230 million in
2013, representing a decline of $40 million to $50 million from
the 2012 level.
However, to weather the weak coal price fundamentals, SunCoke
would bring online a coal action scheme which entails
cost-containment and efficient resource utilization measures at
its Jewell underground mining prospect in Virginia.
The company also intends to boost volume from its Revelation
surface mining venture and purchase more of lower-priced
third-party coal. Taking these coal dynamics into account, the
company expects a slight uptick in 2013 coal sales to 1.7 million
tons as opposed to an estimated 1.5 million in 2012.
On the financial front, SunCoke anticipates free cash flow of
$240 million by the end of 2012. However, with the recent VISA
SunCoke joint venture investment, the company expects a cash flow
deficit of roughly $65 million in 2013.
Looking ahead, SunCoke estimates both its effective tax rate
and cash tax rate to be in the range of 17% to 22% for 2013.
We believe these sizeable development endeavors will offer
stability in earnings to the company given the current stalemate
in the U.S. thermal coal market as well as the soft overseas met
coal market. SunCoke presently has a short-term Zacks #3 Rank
Another Zacks #3 Ranked coke major,
Alpha Natural Resources
) has also cut back its production to bring about supply-demand
equilibrium. The company also responded to the tepid demand by
lowering production of its lower quality metallurgical coal by 3
to 4 million tons annually.
SunCoke expects 2013 earnings to be in the range of 60 cents
to 85 cents per share. The Zacks Consensus Estimates for the full
year 2012 and 2013 presently stand at $1.37 per share and 73
cents per share, respectively. With a market capitalization of
$1.05 billion, SunCoke has 1,160 employees.
ALPHA NATRL RES (ANR): Free Stock Analysis
SUNCOKE ENERGY (SXC): Free Stock Analysis
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