SunCoke's Algoma Cloud Breaks — and the Beat Wasn't the Insurance Check
A $76.9M EBITDA quarter and a raised guide are the headline; a confidential settlement that ends two years of litigation is the actual news
SXC · Earnings Call · 2026-10-27
A settlement dressed as an earnings beat
SunCoke posted $76.9M of consolidated Adjusted EBITDA in Q3, up $17.8M year over year, and told investors to expect the full year to “modestly exceed the high end of our guidance range of $250 million-$265 million” — Katherine Gates, President and Chief Executive Officer · 2026-10-27, with free cash flow guidance lifted to $180M-$185M. Both segments beat: Domestic Coke contributed $51.1M and Industrial Services $32.1M against $18.2M a year ago. Nice quarter. But the quarter's actual content sits in the first minute of prepared remarks, not the numbers: the company settled its 2025 claim against Algoma Steel and, in the CEO's words, "we were made whole."
To appreciate the change, go back eight months. In February, Katherine Gates was still litigating:
We continue to pursue Algoma in an arbitration. We are pursuing all legal means to recover our losses. So we absolutely believe we have an enforceable contract. This is a clear breach of contract by Algoma, and we expect to prevail.
That dispute, the settlement agreement now in hand, is the reason Haverhill I was shut cold and the reason receivables ballooned. Which is why the balance sheet line is the tell: receivables had climbed to 44% of revenue, up 27 percentage points year over year. Analyst Nathan Martin asked directly whether the working-capital headwind was now reflected; Gates answered in two words: "That's correct."
What management won't do is put a number on it.
You can appreciate that this is a confidential settlement, and beyond that, we don't talk about the economics of specific customers or specific contracts. What I can say is that we're really pleased with the resolution of the matter. We were made whole.
So the market is asked to trust a qualitative claim. The corroboration is that the guidance raise exists at all and that the Algoma settlement is explicitly baked into it.
The disclosure that shrank while guidance rose
Here is the subtle part, and it argues the beat is higher quality than it looks. In July, the Middletown turbine insurance recovery was inside the numbers. “And the other piece, which is also included in the second half of the year, is the insurance recovery proceeds, which we lost, not having the turbine during the first half of the year. That is also built into our guidance for the second half.” — Shantanu Agrawal, Senior Vice President and Chief Financial Officer · 2026-07-30
Three months later it is out: “The claims process for the turbine may not be complete at the end of 2026. This may go into early 2027. As a result, the insurance recovery for the turbine is not included in our guidance.” — Katherine Gates, President and Chief Executive Officer · 2026-10-27 Meanwhile the Jewell flood proceeds, $8.7M total, contributed only $1.8M to Adjusted EBITDA, with the rest running through net income and excluded from the metric. Strip both insurance recovery items out and the guide still goes up — that is an operating beat plus a settlement, not a claims beat. The margin confirmation: operating income of $29M, up 196% year over year and 559% sequentially.
Industrial Services is no longer the side story
The phrase topping this quarter's keyword set is Industrial Services, and for once the ranking matches reality: one extra month of Phoenix plus “higher terminals handling volumes” — Shantanu Agrawal, Senior Vice President and Chief Financial Officer · 2026-10-27 pushed terminals to 6.4Mt handled and 5.9Mt of steel customer volume serviced, and management now expects to exceed the high end of a $110M-$115M segment range and beat its original 24Mt/22Mt full-year volume targets. This is a multi-quarter build, not a blip — the trajectory ran from addition of Phoenix a year ago, through terminal handling volumes last quarter, to segment economics this quarter.
But Shantanu Agrawal was refreshingly honest about its character: this is "the segment where there is the most volatility in our business," and Q4 should normalize toward Q1 levels as steel mills throttle back over Thanksgiving and Christmas. Anyone annualizing the Q3 print will be disappointed.
2027, and what the tape already believes
Domestic Coke is where the real question lives. Volumes fell to 875,000 tons from 951,000 on the Haverhill I shutdown, yet EBITDA per ton of $58.40 was the strongest in recent quarters — a mirror of spot coke versus contract mix. As the CFO put it, “In Q3, obviously there was a bigger portion of contract coke going out, versus the spot coke, and that's why you see the Adjusted EBITDA per ton being higher.” — Shantanu Agrawal, Senior Vice President and Chief Financial Officer · 2026-10-27 He also flagged the seasonality of coal to coke yield — Q2 and Q3 are structurally better than the cold, wet Q1 and Q4. Mix, not genius.
The unresolved loop is December. Two contracts — Javelin at CMT and U.S. Steel Nippon at Granite City Works — expire, and active discussions has now been the operative phrase for at least four straight quarters. “We are in active discussions with both of those parties and expect to move forward with them in 2027.” — Katherine Gates, President and Chief Executive Officer · 2026-10-27 That is polite, unverifiable, and the single largest swing factor in the 2027 model.
On solvency the picture is improving but not pristine: gross leverage of 2.34x, roughly $276M of liquidity, and $53.5M of revolver paydown in the quarter against an effective net cash position of -$618M, still 97% worse year over year, with interest coverage at 3.1x — half the 6.6x reached in 2024. Against an $899M market cap, $180M-$185M of guided free cash flow looks extraordinary, but trailing price-to-free-cash-flow of 26.9x is the honest reminder that the series swings violently quarter to quarter, from +$55M in Q1 to -$46M in Q2.
The tape has already voted: the stock is up 26.5% over the last 90 days in a single unbroken climb, and still sits 56.6% below its 2014 peak of $24.42. The commodity backdrop cooperates — the coal and oil complex has firmed, with Gulf of America and barrel of oil among the market's 90-day advancers, and SunCoke's Convent price kicker now reads off New Orleans rather than export indices, which it confirmed it is collecting.
So: a two-year legal overhang removed, a segment re-rated, an insurance item prudently pushed outside the guide, and a raised EBITDA guidance range that no longer leans on claims. The bull case is cleaner than it was in July. The risk is entirely 2027's contract book — and management, understandably, isn't showing its hand before December.