Jul 25, 2013
Executives
Ryan Osterholm Frederick A. Henderson - Chairman, Chief Executive Officer and Chairman of Executive Committee Mark E.
Newman - Chief Financial Officer and Senior Vice President
Analysts
Garrett S. Nelson - BB&T Capital Markets, Research Division Derek Hernandez Nathan Littlewood - Crédit Suisse AG, Research Division Sam Dubinsky - Wells Fargo Securities, LLC, Research Division Mathew Barnett
Operator
Welcome to SunCoke Energy's Second Quarter 2013 Earnings Conference Call. My name is Adrienne, and I'll be your operator for today's call.
[Operator Instructions] Please note that this conference is being recorded. I'll now turn the call over to Ryan Osterholm.
Ryan Osterholm, you may begin.
Ryan Osterholm
Thank you. Good morning, everyone.
Thank you for joining us on SunCoke Energy and SunCoke Energy Partners Second Quarter 2013 Earnings Conference Call. With me are Fritz Henderson, our Chairman and Chief Executive Officer; and Mark Newman, our Senior Vice President and Chief Financial Officer.
Following the remarks made by management, the call will be open for Q&A. This conference call is being webcast live on the Investor Relations section of our websites at www.suncoke.com and www.sxcpartners.com.
There will be a replay available on our websites. If we don't get to your question during the call, please call our Investor Relations department at (630) 824-1907.
Now before I turn the call over to Fritz, let me remind you that the various remarks we make about future expectations constitute forward-looking statements and the cautionary language regarding forward-looking statements in our SEC filings applied to the remarks on our call today. These documents are available on our website as are reconciliations of any non-GAAP measures discussed on this call.
Now I'd like to turn over the call to Fritz.
Frederick A. Henderson
Thanks, good morning. On Chart 3 is a quick update of our second quarter, called milestones.
On the operating side of the business, we had another solid domestic coke quarter in terms of both profitability and EBITDA per ton. We did achieve additional reductions in coal cash cost -- coal cash production costs.
So we're hitting our targets -- actually ahead of our targets for coal cash production cost. And then finally, we did file the consent to create related to environmental projects at Haverhill and Granite City in line with our expectation.
So a number of things happening in the operating side of the business, which were positive. On the building the core or growing the business, we continued to execute on our Indiana Harbor refurbishment project.
The one coke plant that we had in the quarter that was -- actually, was lower production, was Indiana Harbor. Part of that is that we're in the process of refurbishing that plant while we run it.
We're about 40% complete with the project. We are seeing improved production in the ovens that are completed in line with our expectations.
And we expect the oven repairs, which is, I'll call, it 3 quarters of the project to be complete by the end of the year. There are other parts of that project, which will move into early next year, but that project is right on schedule.
And then we are making progress on our contract renewal with ArcelorMittal in Indiana Harbor. Nothing new to report today, but we remain highly confident that we'll reach a reasonable outcome and extend that agreement.
So that's what's going on in terms of building our domestic core. And then, finally, in terms of expanding our footprint, we did in the quarter, launch our VISA SunCoke joint venture.
My CFO, Mark Newman, reminds me that a year ago, in the second quarter call, we announced that our board had approved the last proceeding with formation of an MLP. So a year later, we think about it.
We took the company, we took the MLP, SXCP public in January. We're just recently announcing our first distribution increase, and this is our first acquisition, Lakeshore Coal Handling Corporation.
So good progress in terms of what we're doing to grow SunCoke Energy Partners. And we did request a private letter ruling on qualifying income status of iron ore processing in the quarter.
So we continue to make progress in terms of building the business. In terms of the results in the quarter on Page 4.
Earnings per share at $0.08 reflects -- does reflect the challenging coal environment. While we're in line with our expectations for coal, it's still down year-to-year.
So the coal business continues to have a negative influence in both EBITDA and EPS. We did also reflect some accelerated depreciation expenses in Indiana Harbor as we complete that project.
And then, finally, the income that we now attribute to SXCP public shareholders. We ended the quarter with almost $350 million of cash, $150 million -- $115 million, excuse me, attributable to SXCP, with a virtually undrawn revolvers, actually, 2 of them.
So we're well positioned, we think, to take advantage of growth opportunities. And then, finally, in terms of EBITDA, we, today, would affirm our guidance with respect to 2013.
The guidance has between $205 million and $230 million of EBITDA, $0.30 to $0.55 in terms of EPS. We did and are cooperating with AK Steel, and we have more to say later about this later in the presentation.
And our coke needs in light of the recent blast furnace outage, we've taken a number of measures, but none of them are expected to have a minimal effect on SXC going forward. At this point, let me turn it over to Mark.
Mark E. Newman
Thanks, Fritz. As Fritz said, I would characterize this as a solid quarter, which is in line with our full year guidance and expectations.
On the revenue front, we were down by about 12.4%, really, reflecting the lower coal price in the pass through on our coal agreements and on slight coke sales. Our coal sales volumes are up quite a bit in the quarter, reflecting higher production in purchased coal but, frankly, this is overwhelmed by a fairly dramatic drop in coal prices, $53 per ton year-over-year, which really is a primary driver of our year-over-year decline in adjusted EBITDA.
As Fritz mentioned, our domestic coke business performed well. We do have a small contribution in this quarter from India of India JV, which I'll talk about later.
And then, finally, on the EPS front, our EPS declined $0.24 to $0.08 per share, really reflecting the impact of coal on our adjusted EBITDA and the income attributable to SXC unitholders, as well as the accelerated depreciation at Indiana Harbor. I'll talk more about that later.
Turning to Chart 6. We have the adjusted EBITDA bridge of $52.4 million in the quarter compared to $66.8 million a year ago.
As you see, our coke business is essentially flat with the negative impact of Indiana Harbor being compensated by really strong production and yield at Middletown and Haverhill. We also recorded $0.8 million of adjusted EBITDA related to our India JV, and we'll talk more about India later.
Coal is down by $11.9 million, again, primarily reflecting price but, again, as Fritz mentioned, we had fairly strong cash cost improvement in the quarter, and we'll explain more about what we're doing there later. Finally, in corp cost.
We're down year-over-year about $3.1 million. I'd say, first off, we're comparing to a fairly light Q2 last year, and the cost that we incurred in this quarter really primarily relates to the MLP cost, higher incentive comp and some legal cost, as well as IT spending that we made a conscious decision to do this year.
Net-net, I would say our expectation on corporate costs is slightly up for the full year really in line with the MLP and higher incentive comp cost. On the EPS bridge, EBITDA accounted for $0.20 of the $0.24 reduction on a year-over-year basis.
Indiana Harbor accelerated depreciation, accounted for $0.04. Our full-year guidance still remains at approximately $0.14.
So we would expect lower impact from Indiana Harbor accelerated depreciation in the second half. And then, finally, net income attributable to noncontrolling interest both the MLP and Indiana Harbor represent about $0.08.
And then our taxes are better on account of the lower earnings and the higher noncontrolling interest. When we look at SXC liquidity, we have almost $350 million in cash on a consolidated basis and almost $250 million in combined revolving credit facility capacity at both SXC and SXCP.
If you look in the quarter, we had a fairly significant favorable working capital. You'll recall that in Q1, we received a payment from a customer one day late.
So we essentially moved the Q1 payment into Q2, which we received. We also received the cash payment of the Brazilian dividend of $9.5 million, which we accrued last Q4.
We also show a favorable interest payable in the quarter. As you know, on both the SXC and SXCP notes, our payments are in Q1 and Q3, and we accrued interest.
So that's favorably in the quarter, but I will unwind in Q3. On CapEx, you will notice we spent $30.9 million.
This is very similar to what we spent in Q1. And again Indiana Harbor, where the refurbishment is well underway, is the primary driver for the increased CapEx year-over-year.
We'll talk more about the full year CapEx and, actually, there is a schedule in the appendix that lays that out in pretty good detail. Turning to our Domestic Coke business summary on Page 9.
This is another quarter of consistent earnings of -- adjusted EBITDA of $57 per ton, in line with our guidance of $55 to $60 of EBITDA per ton. On the production front, you'll notice that we're down slightly year-over-year.
Again, this is primarily driven by Indiana Harbor. Interestingly, Indiana Harbor is up this quarter versus Q1 but still down year-over-year as a result of the refurbishment.
And their production volumes are partially offset by both Haverhill and Middletown, which are helping us well on the EBITDA side. Based on our first half production, as you'll see later, we're expecting full year production to still remain at slightly above 4.3 million tons, even with some of the actions that we're taking related to AK steel, which I'll talk about later.
We thought it would be helpful on Chart 10 to provide a little more detail as to what we've done with AK steel as a result of their recent blast furnace outage. As Fritz mentioned earlier, we are reaffirming our full year adjusted EBITDA EPS guidance, so the impact to us is quite minimal.
Specifically, the actions that we've taken is that we will manage production at Haverhill 2 to be consistent with the annual contract maximums that are in the Haverhill 2 contract. That's really a right that AK Steel has to enforce those contract maximums.
At Middletown, where there's no specific contract maximum in the contract, what we have agreed to do is to run second half production in line with the nameplate capacity, and we also will provide temporary extension of payment terms on December production at Middletown of about 50,000 tons. So this will result in $20 million of receivables from AK being pushed from 2013 into early 2014.
The impact -- again, we reaffirm guidance, but the impact that we'll see, quite frankly, is at the Middletown. First, on payment terms, what we have agreed to do per the omnibus agreement is for the additional payment terms to be provided by SXC, SunCoke Energy and it will not impact the MLP.
Further, we are estimating today that the impact to the MLP would be approximately $2 million. Again, this all relates to the reduction of about 20,000 tons at Middletown, and so based on this estimate, the MLP would be made hold to the tune of this amount.
We'll actually calculate this amount on an actual basis, as we go from quarter-to-quarter, but our estimate today is approximately $2 million. And again, this relates to the 65% of Middletown that is owned by the MLP.
I would just remind our listeners as well that 58% of SXCP is owned by SXC so a lot of these funds will ultimately come back the parent. On India coke, this is a new segment that we've added, we now have a Brazilian coke and an India coke segment.
We achieved EBITDA of $0.8 million, and this really represents the results from March 18 to May 31. We'll report our India JV earnings one month in arrears, so this again represents through May 31, where we earned $0.8 million and achieved approximately $31 of EBITDA per ton.
I would say we're off to a bumpy start in our JV. There's both market factors affecting India, relating to iron ore mining restrictions, as well as a weak coke market, in part, due to imports of Chinese coke.
And then we've also had some startup -- JV start-up issues, primarily around trade -- putting trade financing in place, which has led to certain delays and challenges on inbound coal imports. We expect that these difficulties will continue with us through Q3.
And our focus today is really on stabilizing coal supply and ensuring we have good operational execution at the JV with our partner, VISA Steel. In addition to the $0.8 million of adjusted EBITDA, this will show up on our income statement as an equity loss of $0.2 million, reflecting our share of the JVs earnings depreciation, interest and taxes.
Switching gears then to coal mining. Coal mining continues to be a drag on our year-over-year earnings comparison, but we're really encouraged by the continued progress from actions that we announced to investors at our Investor Day in Q4.
And you'll see the fairly dramatic change in our cost from the time we met with you in Q4, where we had overall cash cost of $144 per ton. Our Q3 EBITDA, as I mentioned earlier is down $11.9 million driven by a $53 per ton decline in price, and then partially offset by a $19 per ton reduction in cash cost.
Our focus, really, is on the cost side. And if you notice, while the year-over-year comparison is fairly bleak, if you look at our Q1 adjusted EBITDA to where we are today and taking to account that prices are down roughly $13 per ton since Q1, I think we take certainly some comfort in our ability to moderate our losses in our coal business based on improvement in our cash cost year-to-date.
Looking at our full year guidance on coal, we expect based on our first half performance and the work that we're doing on the cost side that we will be in line with our full year guidance. And it's probably a little early to speculate about 2014 but, obviously, prices will be down from what we will record in 2013 but with the work that we have ahead of us on the cost-reduction side, our view today is that our 2014 outlook will be consistent with 2013.
Turning to Chart 13. Our full year guidance.
As Fritz mentioned at the beginning of the call, adjusted EBITDA, EPS and production all remain unchanged, we're making really 2 changes to our full year guidance. One, cash flow from operations reflecting the $20 million of AK receivables that will be moved into 2014.
And then, finally, on capital expenditures and investments, we intend to spend more than we had originally guided to, primarily, as a result of the Lakeshore acquisition. And then we're also increasing our spend in this calendar year related to the environmental remediation at Haverhill and Granite City as a result of the progress that we've made and the consent decree there.
Then turning to Chart 15. I'd like to talk a little bit about SunCoke Energy Partners.
I described this as another great quarter at SXCP. We reported net income attributable to SXCP of $15.8 million or $0.49 per unit, really driven by strong production at Middletown and Haverhill and resulting in higher coke sales, improved yield and improved operating and maintenance cost recovery at our Middletown entity.
We reported adjusted EBITDA per ton of $81 compared to $69 a year ago. If you look at the -- I also wanted to mention too that, as Fritz mentioned at the beginning of the call, that we're continuing to work on or execute against our growth strategy.
We've announced the acquisition of Lakeshore. That will result in roughly a $31.4 million outlay, of which $29.6 million relates to the acquisition price.
We will make a payment of $1.8 million to DTE Energy, where we required their consent to do the transaction and to have it assigned to an SXC entity as in SXCP. We anticipate Lakeshore will contribute roughly $4 million annually in distributable cash flow and our expectation is that we will close the transaction shortly, probably towards the end of this month.
Turning to chart 16. On distributable cash flow.
We reported $18.7 million in the quarter as Fritz mentioned, we announced their first increase of distributions yesterday, a 2.4% increase over the minimum quarterly distribution $2.4 to $2.5 per unit, that will result in a $13.5 million payment, which will be paid on August 30 to holders of record on August 15. As we looked out towards the rest of the year, our expectation, as we communicated in Q1, is that there would be further increases in our distributions up to 7% increase over the MQD by our Q4 payment, which we will be made in February of 2014.
I'll just remind our listeners that this outlook, it does not include any impact related to the Lakeshore acquisition. And we will talk more about that when the transaction has been closed.
SXCP liquidity position, on Page 17, is strong, roughly $116 million of cash and $100 million of undrawn revolver. Nothing really significant to report in terms of the elements that drove cash flow in the quarter.
I will mention that the CapEx year-to-date -- the ongoing CapEx year-to-date has been about $3 million. Our -- and this is at 100% level, our forecast for the full year is approximately $13 million or $8.5 million at the MLP level, the 65% level so our expectation is that CapEx will pick up in the second half.
And, obviously, when we close the Lakeshore acquisition, that will also have an impact on our liquidity. Our full year outlook is on Chart 18.
We're leaving the full year guidance unchanged. We've, obviously, had a very strong first half.
In the second half, we'll have the impact of AK enforcing contract maximums at Haverhill. We also have some outages planned in Q3 at Haverhill, which we have included in our full year forecast.
I'd just highlight one change that we've made to this chart. The adjusted EBITDA attributable to SXCP, the very first line in the chart, now includes the estimated $2.5 million of public company costs that used to be reflected below that line.
And we received comments from a few investors that they thought it should be in the first line, which it is now. But, essentially, our guidance for the full year remains unchanged.
So with that, I'll turn it over to Fritz to wrap up the call.
Frederick A. Henderson
Thanks, Mark. Page 20.
We're sitting here halfway through 2013 outlines the second half priorities for 2013, what we're trying to get accomplished, following the similar structure of -- on operations, domestic growth and expanding our footprint. On operations, much are the same in terms of what we've seen in the first half.
I pay particular attention to what we're doing in our mining business to continue to drive down cash cost and position ourselves with the right kind of strategic flexibility as we move into next year and then executing against our environmental project at Haverhill and Granite City remains very high priorities for us. In terms of domestic growth, I've already touched on Indiana Harbor, both for furbishing the plant, as well as reaching a reasonable agreement with our ArcelorMittal on the contract renewal and also receiving a reasonable return on the refurbishment capital we're spending there.
As I said before, we're highly confident that that will get done. The work continues in terms of permitting our next U.S.
plant. As we've mentioned before, we thought that -- we think that the permit for this plant would likely be received early next year, might be late this year, but much more likely early next year.
And that we continue to evaluate coke-making acquisition in the U.S. and Canada.
And, finally, in terms of expanding our footprint, our job is to build our presence in India and execute at that venture, continue to evaluate adjacent business lines and business opportunities and work within our 2 capital structures, if you will, to efficiently allocate capital to optimize growth. Speaking of growth, Page 21, our North American growth strategy.
We'd separate up between coke making, coke handling and processing and ferrous or iron ore processing. And in coke-making, it's both about looking at opportunities that we -- for customers that might be able to use the coke that we would produce with our new plant, as well as evaluating coke acquisitions of existing byproduct ovens.
There's been a number of discussions with a number of different parties, which are in process but nothing new to report, nor would I expect to actually -- that anything here would close in 2013. On coal handling, there are things that can close in 2013.
So we've already talked about Lakeshore. We continue to look at opportunities here.
We've initiated discussions with potential parties. And then, finally, on iron ore processing, we have as I mentioned, really, a front -- requested a private letter ruling with a qualifying status -- a qualifying income status for certain activities in this area.
We are interested in potential greenfield DRI opportunities and evaluating that. And the focus in this area is to engage customers in developing opportunities, which might -- which our preference would be to develop strategies that would put us in the position of deploying capital in a tolling or pass-through business model.
With that, we'll wrap it up. Happy to take questions.
Operator
[Operator Instructions] And we have Garrett Nelson from BB&T Capital Partners on line with a question.
Garrett S. Nelson - BB&T Capital Markets, Research Division
I know you're restricted in terms of what you can talk about regarding your strategic plans following the expiration of the Sunoco tax sharing agreement in January. But can you discuss what some of your options might be, and how you might be able to further unlock value for shareholders of the c corp and MLP.
Frederick A. Henderson
Garrett, you actually half answered the question to a degree already in terms of the restrictions. Yes we do have certain restrictions.
For the benefit of the folks on the phone call, the restrictions are -- it's a 2-year tax sharing agreement. That tax sharing agreement expires January of next year.
After that, we could -- we have flexibility to consider additional activities. We've been asked about future drop downs.
We have no future plans -- we have no plans for future drop downs, but beyond January of next year, we could consider those. We've received lots of questions about coal, the truth is, today, our focus on coal is to optimize our cost position and do all the things we can do to maximize the strategic flexibility.
But again, both that expiration, we are flexible. We are able to do things with the coal business that we think are in the best interest of shareholders.
Those would be 2 that we've received a lot of questions on. And so I think as we look at January '14, it's not very far away and January 18, actually -- January of 2014, it's not that far away.
So I would say our focus today is, really, on operational excellence, and we'll leave that for 2014.
Garrett S. Nelson - BB&T Capital Markets, Research Division
And then I just wanted to clarify that the 2013 guidance for SXCP on Slide 18 does not include the Lakeshore acquisition and that the EBITDA and distributable cash flow numbers would be higher if doing so, all else equal.
Frederick A. Henderson
Correct and correct.
Operator
[Operator Instructions] And we have Lucas Pipes from Brean Capital.
Derek Hernandez
This is Derek Hernandez for Lucas Pipes this morning. First of all, I want to ask about how the contract negotiations with ArcelorMittal are continuing?
Frederick A. Henderson
They are continuing. The contract expires at the end of the third quarter.
There's been dialogue with ArcelorMittal, really, even dating back to the fourth quarter last year. We're, obviously, doing this while refurbishing the plant and while running the plant.
I would characterize the dialogue as very constructive. We are highly confident we'll reach an acceptable -- a mutually acceptable outcome.
At this point, if you look at it, we are their principal source of coke for their most important asset. They're our entire uptake for an extremely important asset for us.
So it's one of -- it's a situation, where I think both sides have an incentive to reach a reasonable outcome. And I fully expect that we will reach that outcome in the third quarter.
And it will a reasonable agreement for both parties.
Derek Hernandez
Okay, very good. And then moving over to your coal mining business.
Did I see correctly that your full year cost guidance is still $130 per ton?
Mark E. Newman
No, that's not correct. What we said is our full year guidance was $130.
We're now running close to -- onto $120, and so I think what we believe is that there's more work that we can do there to further improve that. So I think what we're highlighting is the fact that we're already past our full year guidance that we gave back in December based on actions that we've taken in the first half.
Derek Hernandez
Right. And do you have any update to that guidance yet?
Mark E. Newman
We don't at this point. I think what we are indicating today is based on the improvements that we believe we can achieve in cash cost that even if there are declines in prices -- coal prices going into '14, that we would expect '14 to look very similar to 2013.
We're not, at this point, ready to commit to a full year cash cost number.
Operator
And we have Nathan Littlewood from Credit Suisse.
Nathan Littlewood - Crédit Suisse AG, Research Division
I just had a follow-up question on these coal cash costs. I was hoping to understand a little better how these cost reductions have been achieved.
Are you playing with strip ratios, material movements, or what's going on there?
Frederick A. Henderson
So let me talk about what we've done in the cost side, and then what we've done on the productivity side. On the cost side, you might recall in the first quarter, we took some actions in reduction in force, which reduced our manpower -- underground manpower by 20% and both including contracted employees, as well as full-time employees.
Even with that, frankly, our production has increased, and so what we've seen is even with reduced manpower that we've continued to improve our advancement per shift and our productivity per person to a pretty significant degree, so cost-reduction on that side, manpower. We see a pretty significant reduction in cost on maintenance and repair.
We embarked on a refurbishment program for our underground equipment about 2 years ago, which was largely, at this point, completed, and what we've seen is a follow through significantly lower maintenance repair costs. So on the numerator side, if you will, in terms of cost, we've seen absolute reductions in costs.
We also had lower royalty cost, because prices have been down. We've seen some lower transportation cost, but the big issues have been manpower and maintenance.
On the denominator side, what we've seen is continued improvement in advancement and in productivity. We have not seen improvement in yield and part of it is just, because we continue to face challenging geological conditions, but we've seen good productivity in terms of the manpower and, particularly, we had -- 2 years ago, we had a high percentage of our workforce, which are red hats.
Today, we have virtually no red hats, and they're fully trained and productive. Last point I'd make is we've made some investments in our prep plant to improve the organic efficiency of the prep plant, including putting in a new circuit.
And that's also proven to be beneficial for us. So I would say we made progress in both the numerator and the denominator side.
And I would say it's been faster than what we have thought as we entered this year. So we're confident we can do even more.
Nathan Littlewood - Crédit Suisse AG, Research Division
Got it, okay. So, mean it sounds like you're managing these assets from margin, and there's more cost that can be taken out in order to protect that margin.
Should we assume that those cost reductions would stick? Or if we saw recovering coal prices, are those costs likely to follow them back up?
Frederick A. Henderson
I would say what we're trying to do with managing our margin -- actually, we have negative margin, so what we're trying to do, obviously, is get ourself back as close to breakeven as possible. We put our guidance out for this year, we said between 0 and negative 15.
We're quite confident at being able to operate at that range. I prefer to be 0 than negative 15.
But, obviously, year-to-date, we're not there yet. We can continue to do more work, and we do plan on it.
If prices were to rise, you would see increases in royalties, but we don't think we'd be given back any of the other factors we've seen in terms of productivity or cost reduction.
Operator
And we have Sam Dubinsky from Wells Fargo on line with a question.
Sam Dubinsky - Wells Fargo Securities, LLC, Research Division
I believe Mittal stated publicly that they're closing down their Dofasco coke plant in 2015. Does this have any positive implications for you?
Frederick A. Henderson
They're closing down one of their batteries at Dofasco. They did confirm that.
I think what I would say, Sam, is that we talked a number of times about our ability to grow based upon coke plants from existing customers or new customers wearing out, so I think this is another example of a very old coke plant, where they're decommissioning a portion. It's not all the batteries, but it's a pretty significant battery there.
So it's really playing out and what we thought in terms of what might happen with coke plants as they come out of production, which is why we continue to do the work to permit a new plant.
Sam Dubinsky - Wells Fargo Securities, LLC, Research Division
Okay, great. And then just a follow up on iron ore processing.
How long does it take to get a tax opinion? And then once you get a tax opinion, how long does it take to build a greenfield plant?
Frederick A. Henderson
Well, I would say present rulings are generally about 6 months, so -- and we filed earlier. So that gives you some sense of timing.
And then in terms of building a plant, a lot of it depends on what kind of plant you're building, but if you're taking a pellet plant, for example, it's -- you're typically 12 to 18 months, I think, not that we've built one.
Mark E. Newman
We can also buy existing assets, too. So, I mean, once we have clearance on the rulings, we can include this in our M&A activity, which we're really not doing today.
Sam Dubinsky - Wells Fargo Securities, LLC, Research Division
Okay, great. But there are assets up for sale somewhat immediately once the tax ruling goes through, if positive?
Mark E. Newman
There's a lot of assets out there involved in either iron ore extraction processing, pelletizing or transporting. So there's no shortage of assets there.
What I'd say is until we have a ruling, we're being -- trying not to get ahead of ourselves here.
Operator
[Operator Instructions] And we have Mathew Barnett with Jet Capital online with a question.
Mathew Barnett
I just have 2 questions. On your cash flow from operations guidance of $120 million, can you kind of give some color why you're only expecting to generate $30 million in the back half of the year, given that, historically, you've done significantly more than that?
Mark E. Newman
Yes, there are a number of items, Jeff, just looking at Ryan here, just to see if I can remember what they are but the Brazil dividend is certainly one. There are a number of nontraditional fuel tax credit that we pay out in Q3.
That's the big one. The 2 are really the Brazilian dividend, as well as the payout of nontraditional fuel tax credits, which we'll pay in Q3 based on timing of Sunoco filing their tax return in September.
Frederick A. Henderson
And, lastly, you've got the timing of CapEx. So you've got -- there's 3 or 4 factors which affect cash flow.
Obviously, CapEx has been in cash flow from operations, but as we think about our normal cash cycle, Mark's already talked about the working capital-related items, and in our view pretty normal. I guess, the last point we'd make is that if we think we did disclose AK, we would have the $20 million effect in the fourth quarter, if we proceed -- when we proceed to offer them terms in the last 50,000 tons.
Mathew Barnett
The 2 item -- the Brazil dividend and the nontraditional fuel tax credit, is that different this year than prior year's?
Mark E. Newman
Yes, well we didn't pay any nontraditional fuel tax credits last year. Again, it all ties off of Sunoco.
And so this year, the payments -- so you'll recall that in Q1, we made a payment to AK about $12 million related to this issue. And we actually paid it early.
We do have a payment to another customer of about $30 million in Q3. So, basically, the receipts of the dividend in the first half and the payment to a customer of about $30 million on tax credits in the second half results in sort of a poor comparison between first half and second half.
Frederick A. Henderson
But your point is good. The dividend was the same factor last year.
It was not -- well, it is different this year, is the $30 million. Last year, it wasn't paid, this year, it'll be paid.
Mathew Barnett
And then just on the CapEx -- kind of increasing CapEx, seem to be related to environmental remediation. Did those numbers go up in total versus your expectations?
Or do you think just some of those numbers got pulled forward from 2014 to 2013?
Frederick A. Henderson
No, it doesn't go up in total. What we found is we commissioned -- began to commission the project is that we started the project at our Haverhill plant.
We had originally thought about actually capping the project module by module in Haverhill. There's 2 modules in Haverhill, and what we found is opportunities to economize and be efficient by taking on more of both modules at the same time.
So we're not increasing the total project. What we're just doing is retiming, recall this is also prefunded as part of the MLP but, really, it's all about being efficient in terms of how we do the preparation work at the site across 2 modules.
Operator
We have no further questions at this time.
Frederick A. Henderson
So, we'll wrap up the call. Thanks, again, very much for your involvement and interest and for being a shareholder in SunCoke Energy and SunCoke Energy Partners.
Operator
Thank you, ladies and gentlemen. This concludes today's conference.
Thank you for participating. And you may now disconnect.