SunCoke Energy, Inc.
) announced at its investor day that it plans to sell its
domestic coke making assets to
SunCoke Energy Partners, L.P.
). The company also announced its strategic plan to exit the coal
mining business altogether.
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The announcement failed to invoke any positive sentiment from the
investors with the share price falling nearly 6.0% to $21.28 from
SunCoke's domestic coke making and heat recovery operations are
conducted at its Jewell, Indiana Harbor, Haverhill, Granite City
and Middletown plants. Its coal mining business consists of
metallurgical coal mining activities in Virginia and West
The divestment of its domestic coke making operations will be
done on a part by part basis, with an initial dropdown of a 33%
interest at the Haverhill and Middletown operations. SunCoke
Energy Partners is already a 65% interest holder in these assets
while SunCoke Energy plans to retain a 2% interest in these
Though not confirmed, SunCoke Energy expects SunCoke Energy
Partners to fund this transaction through a combination of equity
and debt funding. If the above options are followed, the sale of
coke assets will enhance SunCoke Energy's cash balance and
enhance its ownership interest in the partnership.
SunCoke Energy reported a counterproductive Q4 and 2013 financial
statement with a decline in consolidated revenues and earnings.
As per the release, SunCoke reported a revenue drop of 21.8% in
domestic coke operations and 23.8% in its mining business. While
a decline in adjusted EBITDA of 9.5% was reported for domestic
operations, coal mining operations incurred a loss of $8.9
SunCoke Energy lowered its adjusted EBITDA projection for the
first quarter by $10-$15 million. For the full year, the company
expects adjusted EBITDA on the lower end of the $230-$255 million
range. The reduced guidance takes into account operational
challenges at its Indiana Harbor facility and unfavorable
Other Stocks to Consider
SunCoke Energy currently holds a Zacks Rank #4 (Sell). However,
other better ranked stocks in the same industry include
Hallador Energy Company
Rhino Resource Partners LP
). Both these stocks sport a Zacks Rank #1 (Strong Buy).