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Good morning, everyone and welcome to the SunCoke Energy Third Quarter 2023 Earnings Call. My name is Chad and I'll be coordinating your call today. [Operator Instructions] I'd now like to hand over to Shantanu Agrawal, VP Finance to begin. Please go ahead.

Thank you, Chad. Good morning and thank you for joining us this morning to discuss SunCoke Energy's third quarter 2023 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. Earlier today, we announced SunCoke Energy's Third Quarter Results. Before I turn it over to Mark to review the results in detail, I do want to share a few highlights from Q3. I'd like to start by thanking all of our SunCoke employees for their contributions to our third quarter results. Our domestic coke plants operated well and continued to run at full capacity. When compared to last year's record third quarter results, we delivered lower contribution margins on noncontracted blast coke sales. Similarly, our logistics terminals continued to operate well but saw lower volumes and pricing driven by weaker demand during the quarter. Through our collective efforts, we delivered consolidated adjusted EBITDA of $65.4 million. We continue to successfully navigate through challenging market conditions with all of our noncontracted blast furnace coke sales finalized for the remainder of the year. Earlier today, we announced a $0.10 per share dividend payable to shareholders on December 1, 2023. From a balance sheet perspective, we ended the third quarter with a strong liquidity position of $475.9 million. Our gross leverage was approximately 1.91x on a trailing 12-month adjusted EBITDA basis at the end of the quarter. Finally, we continue to execute against our 2023 objectives and remain well positioned to achieve the high end of our full year adjusted EBITDA guidance range of $250 million to $265 million. With that, I'll turn it over to Mark to review our third quarter earnings in detail. Mark?

Thanks, Katherine. Turning to Slide 4. Net income attributable to SunCoke was $0.08 per share in the third quarter of 2023, down $0.41 versus the prior year period. Tax adjustments of $0.29 per share impacted EPS, primarily due to tax law changes in the U.S. and Brazil in both 2022 and 2023. Excluding the impact of these adjustments, EPS was lower by $0.12 per share quarter-over-quarter, primarily driven by lower contribution margins on noncontracted blast coke sales, partially offset by favorable coal-to-coke yields. Adjusted EBITDA for the third quarter 2023 was $65.4 million, a decrease of $18.3 million from record results of third quarter 2022. The decrease in adjusted EBITDA was primarily driven by the lower contribution margins on noncontracted blast coke sales, partially offset by favorable coal-to-coke yields and lower transloading volumes and pricing in our Logistics segment. Moving to Slide 5 to discuss our Domestic Coke business performance in detail. Third quarter domestic coke adjusted EBITDA was $64 million and coke sales volumes were 1,016,000 tons. While the domestic coke fleet has continued to run at full capacity, the decrease in adjusted EBITDA as compared to the record prior year period was primarily driven by lower contribution margin on our noncontracted blast coke sales, partially offset by higher coal-to-coke yields. As Katherine mentioned, we continue to successfully navigate through difficult market conditions and all our coke sales are finalized for the rest of the year. Given the solid year-to-date performance of our Domestic Coke segment, we are well positioned to deliver domestic coke adjusted EBITDA on the high end of our guidance range of $234 million to $242 million. Now moving on to Slide 6 to discuss our Logistics business. Our Logistics business generated $8.4 million of adjusted EBITDA and handled combined throughput volumes of approximately 5 million tons during the third quarter of 2023 as compared to $12.9 million and 5.7 million tons, respectively, during the same prior year period. The decrease in adjusted EBITDA was primarily due to lower throughput volumes and a lower API2 price adjustment benefit at CMT. We continue to see volatility in thermal coal pricing as evidenced by CMT recognizing a limited API2 price adjustment benefit during the third quarter. However, we expect the API2 price adjustment to recover during the fourth quarter. Based on our year-to-date performance and anticipation of continued volatility in the market, we expect to deliver Logistics full year adjusted EBITDA at the low end of our guidance range of $47 million to $50 million. Now turning to Slide 7 to discuss our liquidity position for Q3. SunCoke ended the third quarter with a cash balance of approximately $126 million. Cash flow from operating activities generated approximately $94 million. For the quarter, cash flow was favorably impacted by working capital changes, mainly the timing of receivables and payables. We expect this favorability to reverse in the fourth quarter. We paid $8.4 million in dividends at the rate of $0.10 per share this quarter and spent $34.1 million on CapEx. In total, we ended the quarter with a strong liquidity position of approximately $476 million. With that, I will turn it back over to Katherine.

Thanks, Mark. Wrapping up on Slide 8. Safety, environmental and operational performance are top priorities for our company. We remain focused on safely executing against our operating and capital plan for full utilization of our coke-making assets. As mentioned in our second quarter earnings call, we completed the foundry expansion project on time and on budget. This project allows us to grow our foundry market participation while maintaining flexibility to make either blast or foundry coke. We will continue to pursue a balanced opportunistic approach to capital allocation as we've demonstrated in the past. We continuously evaluate the capital needs of the business and our capital structure and we'll make capital allocation decisions accordingly. As mentioned earlier, despite challenging market conditions, we were able to finalize all of our noncontracted blast furnace coke sales for the year. Finally, based on the reliability and performance of our operating segments, we look to achieve the high end of our full year consolidated adjusted EBITDA guidance of $250 million to $265 million. With that, let's go ahead and open up the call for Q&A.

[Operator Instructions] Our first question today comes from Lucas Pipes of B. Riley.

Just a few quick ones. The first one is on the blast furnace coke side and you mentioned kind of the weaker contributions there during the quarter. I wondered if you could remind us how those tons are typically priced and what causes variability in the contribution margin.

So thanks, Lucas. Appreciate the question. So the contribution margins are dependent on what the spot blast furnace coke price sales are. And so this quarter, we've just seen lower contribution margins based on the spot sales that we had remaining for this year.

And Lucas, I would add that, this is Shantanu, is like we are comparing this against the Q3 2022 last year quarter, right which was one of the highest points from spot market perspective where the blast coke was trading at. So the comparison is kind of a little bit unfair. And if you look at our quarterly performance over the last 3 quarters, it is more in line with that. So it is just kind of the comparison -- it's coming off of a really high record quarter of last year.

Got it. Got it. No, that's helpful. What are typically the lags or the lead times in that segment? So are you selling blast furnace spot coke today for Q4 or Q1 next year, for Q2 next year? How does that kind of typically flow through the business?

It's typically, Lucas, about 3 to 6 months.

It's like quarter, right, basically, that's what we have said before.

Got it. Got it. And this is essentially like the supply/demand for coke, kind of with that outlook, that kind of sets the price and the margin?

It does, Lucas.

And remind me is that true for both domestic and export? Or should we differentiate between the two?

No. It's the same whether we're selling into the North American market or into the seaborne market.

And is the seaborne market currently open given where international coal prices are relative to meet coal prices?

I mean, yes, the prices are a little bit depressed on the international seaborne market, right? Like there's a price at which the product will clear. It is definitely depressed but we kind of look at all our options and see where our coke can go.

Okay. Okay. And then couple of questions on Slide 8. The first is the foundry coke expansion project. And I wondered 2 things. First, can you remind us on the timing of that project and then also the capital intensity of that project.

Yes. So we completed that project actually before in Q2. And so that was actually finished a little bit early. We had originally said we would have it done by Q3. So we got that done on time. And we don't give the specifics. But as we said, we expected this to be -- typically, our CapEx is around $80 million to $85 million. We were at $95 million, so we had built in approximately $12 million to $15 million for that project, Lucas.

$12 million to $15 million. Got it. And is it operating at full capacity today?

It is. The screener itself is operating at full capacity. As we have said, our sales are finalized for the year.

Okay. And then on Slide 8, I don't see a mentioning of Granite City. Should we assume that project is kind of off the table or a low priority at this point?

That would be a no and no. So we are continuing to work with U.S. Steel on the GPI project. So that is continuing to move forward and it is a very, very high priority for us. I think it can be unsatisfying to have to wait to hear an announcement on this type of project. And Lucas, it's a complex project but we've continued to work with U.S. Steel and they've continued to work with us. And we just -- we really have a strong belief that if this is consummated, it's going to be meaningfully rewarding to our shareholders. And so it's really -- it's worth the time to continue to move forward with U.S. Steel on this.

And in light of the strategic process that U.S. Steel is running, has there been more or less activity since August?

We have continued to move forward. The activity remains the same.

The next question is from Nathan Martin from The Benchmark Company.

Just maybe 1 more, Katherine, on the Granite City GPI opportunity. Can you talk about maybe any of the biggest hurdles kind of remaining there on those negotiations?

I would just say, in saying it was complex, I mean, whether we're talking about the capital, we're talking about the siting, we're talking about all of those elements of it, those things just take time. They are absolutely things that we can work through but they do take time.

Okay. Got it. Maybe shifting over to the Domestic Coke segment. Obviously, you maintain your expectations for full year adjusted EBITDA at the high end of the range. If my math is correct, that only implies EBITDA of around $49 million in the fourth quarter to get you to that high end of the range which would -- should be down about $15 million quarter-over-quarter. So I guess the question is, given all your coke sales are finalized, I'm wondering what are the headwinds you see in the fourth quarter that caused you to believe maybe a sequential decline like that is possible? Or maybe are you baking a little bit of conservatism into your guidance?

I appreciate the question. Yes -- no, we're really pleased with our year-to-date performance and we have a significant amount of planned outage work in the fourth quarter. That's contemplated in our guidance. And I think we've said before, certain of our planned outages are largely expensed. And so this is really -- it's not dissimilar to, for example, last year and some of our other fourth quarters, Nathan. And it's -- actually it's why we don't give quarterly guidance. But with those planned outages and this planned work, we still remain well positioned to achieve the high end of our guidance range.

So Katherine, just maybe a little bit more on the planned outages. Are those going to affect adjusted EBITDA per ton? I mean, clearly, your sales volume guidance stayed around 4 million. So I guess that doesn't necessarily get affected much. How does that kind of affect the operations output?

So with these outages, there's higher O&M when they occur. It does affect our EBITDA per ton but that's fully contemplated in our guidance. It was contemplated at the beginning of the year.

Okay. Maybe I'll move over to the logistics business. I mean there, I guess you did adjust your full year guidance to the low end of the prior range which actually looks like it would imply a $5 million or so quarter-over-quarter EBITDA increase. Would be great to get your thoughts maybe on some puts and takes there in the fourth quarter. Also curious what you guys are assuming for full year throughput. I think original guidance was 22 million tons, with maybe 10 million from CMT. Is there any updates on that front?

So with respect to what we're seeing for fourth quarter, as Mark mentioned, the API2 price adjustment is recovering for us. So that's part of what you're seeing coming through. And then we do expect to see higher volumes on logistics.

To add to that, Nate, on a full year basis, our guidance was 10 million -- approximately 10 million tons for CMT and approximately 12 million for other logistics business. So we are going to be a little bit short of that on a full year basis. So if you look at kind of what we have performed earlier in the year that's kind of what Q4 is going to look like. But overall, the volumes will come in a little bit short but we are guiding towards the lower end of the EBITDA guidance.

Okay. Yes, Shantanu, that's kind of what's going to be my next question. So that makes sense that you may be a little short on a shipment guidance standpoint. I guess it would also be helpful, though, if you guys could give some more color around the split between coal shipments and other shipments at CMT. That was kind of the bulk of the quarter-over-quarter decline it looked like from a shipment perspective. Is it more weakness in coal? Or is it some of the other products you guys are moving through the terminal?

It's mostly coal. Yes. I mean, Nate, I mean on the CMT side, most of the variability comes from the coal side. The ancillary business is kind of more or less stable from a quarter-to-quarter basis. And obviously, it comes from what the demand is and that is kind of reflected in the API2 pricing which drives the demand of the coal. So most of the variability comes from the coal.

Okay. Got it. Very helpful. And then maybe just 1 last kind of modeling question for me. CapEx, Mark mentioned it was $34 million in the third quarter. I think that's what's your year-to-date spend already about $85 million, you maintain guidance of $95 million. It's a pretty big fall off, I guess, in the fourth quarter, roughly $10 million. Is it the right way to think about it or am I missing something?

No, that's the right way to think about it. I mentioned earlier that we have our own planned outages at our coke plants and those are really higher O&M. They're not CapEx heavy. So that's really what we're -- that's what we're seeing in the fourth quarter. So it's -- we're low on CapEx there but what we have seen is that we've seen the inflationary pressures related to our maintenance CapEx and that's throughout the year. We actually have some nominal capital spend on preliminary engineering work on the GPI project as well. So both that inflationary pressure and the GPI project was not anticipated at the time that we gave our CapEx guidance. So we actually anticipate CapEx coming in slightly above our guidance of the $95 million.

Got it. So slightly above $95 million, okay. So maybe it's again, a little more than that $10 million which would seem like it would be a little bit light just based on your run rate, okay?

Yes.

Great. That's very helpful. And then one more thing, actually, Katherine. The tax law changes you guys highlighted, is that just kind of a onetime thing? Or is there a new kind of tax rate we should assume going forward?

No. This is absolutely a onetime thing.

We have no further questions in the question queue. So I'd now like to hand back to Katherine Gates, President of SunCoke Energy.

All right. Well, thank you all for joining us today and thank you for your continued interest in SunCoke.