SunCoke Energy (SXC) Q3 2026 earnings review
SunCoke operating profit jumps 30%, while customer receivables nearly double
SunCoke Energy, which makes coke fuel for steel blast furnaces and runs bulk terminals, lifted operating profit even though revenue stood still. Operating profit before depreciation and one-offs rose 30% to $77 million, as coke profit per ton jumped to $58 and export terminal volumes stayed high. Chief executive Katherine Gates said full-year profit will modestly beat the top of the $250 million to $265 million plan, and the company settled its contract dispute with Algoma Steel.
| Revenue | $485.9M -0.2% from a year ago |
|---|---|
| Adjusted Ebitda (operating profit excluding one-offs) | $76.9M +30% from a year ago |
| Domestic Coke profit per ton | $58.40 $48.41 last quarter |
| Full-year operating cash flow outlook | Raised $27.5M middle of the range: $277.5M |
⚖️ Verdict: 🟢 Bullish
The story got better because both divisions answered last quarter's doubts while the Algoma settlement cleared a legal overhang and lifted the cash flow plan by $28 million. Export terminal volumes held near their peak instead of dropping as management had warned, and cash flow paid down $54 million of credit-line debt. Two cautions remain: unpaid customer bills on the balance sheet nearly doubled since December to $209 million, and the U.S. Steel contract at the Granite City plant expires in two months with no renewal announced.
The question now is whether SunCoke can extend the Granite City coke contract before December 31 and collect the cash tied up in customer bills. If U.S. Steel renews and those bills are paid, debt falls sharply again; if the contract lapses, SunCoke faces a second plant shutdown in a year. Fourth-quarter results and the 2027 outlook will settle both.
🐂 Bull Case
Industrial Services Keeps Beating a Cautious Plan
SunCoke's Industrial Services division runs bulk export terminals and handles molten slag, a steelmaking byproduct, at steel mills after buying Phoenix Global in August 2025. Skeptics argue that temporary export coal prices and war-related shipping disruptions drove the division's second-quarter record. Last quarter, management's full-year outlook pointed to profit falling back toward $25 million to $27 million per quarter in the second half.
Instead, third-quarter segment Adjusted Ebitda — operating profit before depreciation and one-offs — reached $32.1 million, down slightly from $34.4 million in the second quarter. Inbound coal and bulk volumes at the export terminals reached 6.42 million tons, up 22.7% from a year ago. Steel customer volumes serviced rose 2.2% per active month of ownership by our math, to 5.86 million tons.
Because terminal volumes stayed near their second-quarter peak, the division is already at $92.7 million for the first nine months. SunCoke wrote in its presentation that the segment is "Well positioned to surpass the high-end of FY 2026 Industrial Services Adjusted EBITDA guidance range of $110M - $115M". By our math, the middle of that range leaves just $19.8 million for the fourth quarter.
What to watch: fourth-quarter terminal handling volumes when full-year results arrive in early 2027. A reading near 6 million tons would show that export coal throughput is holding up above the company's cautious fourth-quarter math.
Coke Profit per Ton Jumped on Mix
In Domestic Coke, which turns coal into fuel for steel blast furnaces and iron foundries, SunCoke needed a sharp second-half profit jump to meet its full-year target. Bears worried that reaching the target required $56 to $60 of profit per ton, up from $48.41 in the second quarter, and leaned on an unquantified insurance payout for a broken power turbine at its Middletown plant.
Domestic Coke Adjusted Ebitda per ton hit $58.40 in the third quarter, up 26.2% from $46.27 a year ago, as plant capacity utilization reached 99%. Chief executive Katherine Gates said "Our Domestic Coke segment benefited from a change in mix of contract and spot coke sales and favorable coal-to-coke yields". Across the company, the cost of making products fell 5.1 percentage points of revenue, to 78.7%, lifting operating margin by 5.6 percentage points.
SunCoke also collected $6.9 million of property insurance from a 2023 flood at its Jewell plant, which lifted GAAP operating profit to $40.6 million ($33.7 million excluding that payout by our math), but the company stripped that gain out of Adjusted Ebitda. Hitting $58.40 per ton leaves $57.27 per ton for the fourth quarter by our math to reach the middle of the segment's $172 million to $178 million plan.
What to watch: the quarterly filing's breakdown of Middletown turbine business-interruption insurance in Domestic Coke. A large one-time credit inside third-quarter segment profit would mean underlying coke margins are lower than $58.40 per ton.
Cash Flow Paid Down $53.5 Million of Debt
SunCoke borrowed heavily on its credit line in August 2025 to buy Phoenix Global, pushing gross debt — total borrowings before subtracting cash — to 3.16 times trailing 12-month Adjusted Ebitda by year-end. Management pledged to use surplus cash flow after its $0.12 quarterly dividend to pay down that credit line and bring the debt ratio below 3.0 times.
After customer payment timing caused negative $27.2 million of operating cash flow in the second quarter, cash generation rebounded to $94.8 million in the third quarter, leaving $73.9 million of free cash flow by our math. The steel-services group used that cash to pay down $53.5 million on its revolving credit line, cutting gross debt to $607 million and lowering its gross debt ratio to 2.34 times.
What to watch: revolver borrowings at year-end, which the company's new leverage target puts near $50 million to $80 million. Hitting that mark would mean the company collected its fourth-quarter cash windfall on schedule.
Algoma Steel Contract Dispute Is Settled
In the third quarter of 2025, customer Algoma Steel refused to take contracted coke tons, forcing SunCoke to shut down its Haverhill I plant and defer roughly $70 million of cash receipts. The legal dispute over those breached tons had gone unmentioned on last quarter's call, leaving open whether the coke producer would ever collect the owed cash.
Gates announced in the release that "Additionally, we are pleased to have reached a settlement agreement with Algoma Steel related to our 2025 claim" in October 2026. Alongside that October agreement, the company raised its full-year operating cash flow outlook by $25 million to $30 million, to a new range of $270 million to $285 million, without raising its earnings range by the same amount.
What to watch: the exact dollar value and payment schedule of the Algoma settlement on the conference call or in the quarterly filing. That disclosure will show how much of the fourth-quarter cash flow jump comes from this one-time legal recovery.
🐻 Bear Case
Receivables Jumped 87% Since December
SunCoke highlights $94.8 million of third-quarter operating cash flow and its raised full-year cash outlook as proof of steady cash conversion. Last quarter, management explained that roughly $65 million of customer payments had slipped past the June 30 cutoff and arrived in early July, which should have brought accounts receivable — money customers owe for delivered products — back down to normal levels by September 30.
The balance sheet shows the opposite. Net receivables stood at $208.9 million on September 30, up 87.4% from $111.5 million at the end of December and up 52.0% from a year ago, even though third-quarter revenue was flat from a year ago at $485.9 million.
- Accounts receivable: $208.9 million, up $97.4 million since December 31
- Nine-month working capital drag from receivables: negative $99.9 million on the cash flow statement
- Allowance for doubtful accounts: $0.3 million, down from $11.1 million in December
- Implied fourth-quarter operating cash flow: $137.2 million at the middle of the outlook by our math
Because receivables absorbed $99.9 million of cash over the first nine months, cumulative operating cash flow is only $140.3 million. Hitting the middle of the $270 million to $285 million full-year plan requires collecting $137.2 million in the fourth quarter alone by our math, nearly matching the first three quarters combined.
What to watch: accounts receivable on the year-end balance sheet. A balance still near $200 million would mean customers are taking permanently longer to pay and would threaten the fourth-quarter cash target.
Granite City Contract Expires in Two Months
SunCoke's Granite City cokemaking plant in Illinois has 650 thousand tons of annual blast-furnace capacity — about 18% of the company's domestic coke fleet — and sells its output to U.S. Steel. Management has previously stated that it would not keep running a cokemaking plant without a customer contract, and the current supply agreement expires in December 2026.
With just two months left on the agreement, the third-quarter earnings release and presentation include no contract renewal or closure plan. Slide 12 of the presentation still lists the plant as "Operating in a turn-down mode in 2026 as part of the contract extension" with an expiry date of December 2026, while the plant produced 149 thousand tons in the third quarter.
This matters because SunCoke already permanently closed its 500-thousand-ton Haverhill I facility earlier this year after losing Algoma's business. Losing Granite City as well would remove another 600 thousand tons of annual coke sales in 2027 and trigger new site-closure charges.
What to watch: an agreement announcement with U.S. Steel before December 31, 2026. Entering 2027 without an extension would mean Domestic Coke sales volumes and profit step down again next year.
Risks This Quarter Didn't Answer
Four standing concerns from prior quarters received no new figures or updates in the third-quarter earnings release and slide deck.
- Customer concentration: Cliffs Steel accounted for 61% of second-quarter revenue; the third-quarter customer breakdown awaits the quarterly filing's revenue footnote.
- Industrial Services split: SunCoke still combines Phoenix Global mill services with its older export terminals, hiding whether legacy terminal profit per ton is rising or falling.
- Granulated pig iron project: the U.S. Steel project at Granite City, once the company's main growth plan, went unmentioned except in a footnote on past transaction costs.
- Blast-furnace shift: North American steelmakers continue shifting toward electric arc furnaces that do not burn coke, raising the stakes on every contract renewal.
💲 Other KPIs
Coke sales volume fell 8.0% from 951 thousand tons a year ago and edged down from 878 thousand tons in the second quarter. The drop from last year reflects the permanent shutdown of the Haverhill I plant in early 2026. Nine-month sales stand at 2.60 million tons against the unchanged full-year plan of 3.4 million tons.
Spending on plants and equipment rose from $15.9 million in the second quarter and $17.0 million in the first quarter, bringing nine-month spending to $53.8 million (3.8% of revenue by our math). The company kept its full-year spending plan at $90 million to $100 million, which leaves $41.2 million for the fourth quarter at the middle of the range.
Unallocated corporate overhead, which also includes the Brazil cokemaking licensing business and legacy coal mining obligations, more than doubled from a $3.1 million expense a year ago. It improved slightly from $7.3 million in the second quarter. SunCoke attributed the year-over-year increase to higher employee-related costs, pushing nine-month net corporate expense to $18.6 million.
🔮 Guidance
Raised qualitatively. While the printed table kept the $250 million to $265 million numbers, Gates said SunCoke expects to "modestly exceed the high end of our full-year 2026 Consolidated Adjusted EBITDA guidance range of $250 million to $265 million". By our math, the $257.5 million middle of the range leaves $54.5 million for the fourth quarter (down 3.9% from a year ago), and the $265 million top leaves $62.0 million.
Raised qualitatively. The presentation says the segment is positioned to achieve the high end of the range, with per-ton profit held at $51 to $52 per ton. With $128.9 million earned in the first nine months, the $175 million middle of the range leaves $46.1 million for the fourth quarter by our math, down from $51.1 million in the third quarter.
Raised qualitatively. The presentation says the division is set to surpass the $115 million high end after earning $92.7 million in the first nine months. By our math, the $112.5 million middle of the printed range leaves $19.8 million for the fourth quarter, down from $32.1 million in the third quarter and $22.7 million a year ago.
Raised. The middle of the range moved up $27.5 million, to $277.5 million. It is the second raise this year: +$0M in the first quarter, +$10M in the second, and +$27.5M now. With $140.3 million generated through September, the plan leaves $137.2 million for the fourth quarter by our math, aided by working-capital collection and the Algoma settlement.
Raised. The middle of the range rose $27.5 million to $182.5 million, matching the operating cash flow increase. Moves across the last three quarters were +$0M, +$10M, and +$27.5M. By our math, subtracting $86.5 million of nine-month free cash flow leaves $96.0 million for the fourth quarter.
Trimmed at the bottom end by $1 million, moving the middle of the range to $32.0 million. Because nine-month consolidated net income is already $36.0 million, the middle of the range points to a $4.0 million fourth-quarter net loss by our math, while the $42 million top end leaves $6.0 million of profit.
Unchanged. The plan still calls for about 3.4 million tons of domestic coke sales and production, down 7.3% from 3.67 million tons sold in 2025 due to the Haverhill I closure. With 2.60 million tons sold through September, the outlook leaves about 805 thousand tons for the fourth quarter by our math.
Unchanged. Full-year capital spending stays at $90 million to $100 million, up 42.2% at the middle of the range from $66.8 million in 2025. Because SunCoke spent only $53.8 million in the first nine months, hitting the $95 million middle of the range requires spending $41.2 million in the fourth quarter by our math.
Unchanged. SunCoke still expects to receive $8 million to $12 million of net cash tax refunds for the full year, as refunds from prior-year tax credits more than offset 2026 tax payments. Through September, the company has collected $13.9 million in net tax refunds ($18.7 million of refunds minus $4.8 million of payments), meaning it will make net tax payments in the fourth quarter.
Improved. Management lowered its year-end debt-to-Ebitda target ranges by about 0.1 times on both a gross and net basis, assuming all free cash flow after $41 million of dividends goes to debt paydown. Gross leverage already reached 2.34 times on September 30, hitting the top of the prior year-end target a quarter early.
❓ Key Questions
What happens to Granite City after December 2026?
The U.S. Steel contract for the 650-thousand-ton Granite City plant expires in two months and the plant is already running on reduced output. Investors need to know whether a renewal is close or if SunCoke is preparing to shut the facility down.
How much cash does the Algoma settlement bring in?
SunCoke settled its 2025 contract breach claim with Algoma Steel in October and simultaneously raised its full-year operating cash flow target by $27.5 million at the middle of the range. Management has not disclosed the settlement dollar amount or when the cash arrives.
Why did accounts receivable climb to $209 million?
Net receivables jumped by $97.4 million since December even though revenue did not grow, and the $65 million payment delay from June was supposed to clear in July. What is driving the new buildup, and how quickly will it reverse?
Did Middletown business-interruption insurance lift Q3 coke profit?
While the $6.9 million Jewell flood payout was excluded from Adjusted Ebitda, management previously said second-half Domestic Coke profit would include insurance proceeds for five months of lost Middletown power. How much of the $58.40 per-ton profit came from that claim?
How did legacy terminals perform separately from Phoenix Global?
Management stopped reporting legacy logistics terminals separately after buying Phoenix Global, combining both inside Industrial Services. Without the split, investors cannot tell whether higher terminal volumes are translating into higher per-ton margins or being offset by lower handling rates.