Sunoco Inc. (SUN) filed Quarterly Report for the period ended 2009-09-30.
Sunoco Inc. is principally a petroleum refiner and marketer with interests in cokemaking. Sunoco's petroleum refining and marketing operations include the manufacturing and marketing of a full rangeof petroleum products including fuels lubricants and petrochemicals and the transportation of crude oil and refined products. These operations areconducted principally in the eastern half of the United States. Sunoco'scokemaking operations are conducted in Virginia and Indiana. Sunoco Inc. has a market cap of $3.59 billion; its shares were traded at around $30.68 with a P/E ratio of 4 and P/S ratio of 0.1. The dividend yield of Sunoco Inc. stocks is 3.9%. Sunoco Inc. had an annual average earning growth of 16.9% over the past 10 years.
Highlight of Business Operations:
The $927 million decrease in results attributable to Sunoco, Inc. shareholders in the first nine months of 2009 was primarily due to lower margins from continuing operations in Sunoco’s Refining and Supply business ($554 million), higher provisions for asset write-downs and other matters ($396 million), lower production of refined products ($64 million), lower average retail gasoline margins ($70 million) and lower results attributable to Sunoco’s Chemicals business ($45 million). Partially offsetting these negative factors were lower expenses ($167 million).
In December 2008, Sunoco announced its intention to sell the Tulsa refinery or convert it to a terminal by the end of 2009 because it did not expect to achieve an acceptable return on investment on a capital project to comply with the new off-road diesel fuel requirements at this facility. On June 1, 2009, Sunoco completed the sale of its Tulsa refinery to Holly Corporation. The transaction also included the sale of inventory attributable to the refinery which was valued at market prices at closing. Sunoco recognized a $20 million net after-tax gain on divestment of this business, which is reported separately in Corporate and Other in the Earnings Profile of Sunoco Businesses. Sunoco received a total of $157 million in cash proceeds from this divestment, comprised of $64 million from the sale of the refinery and $93 million from the sale of the related inventory. As a result of the sale, the Tulsa refinery has been classified as a discontinued operation for all periods presented in the condensed consolidated financial statements herein.
Chemicals had a loss of $5 million in the first nine months of 2009 versus income of $40 million in the first nine months of 2008. The $45 million decrease in results was due primarily to lower margins ($48 million) and sales volumes ($39 million), partially offset by lower expenses ($30 million) and the reversal of a lower of cost or market adjustment to its polypropylene inventory that had been previously recorded in the fourth quarter of 2008 ($12 million). The lower expenses were largely the result of lower costs for purchased fuel and utilities attributable to price declines and lower production volumes. Sunoco permanently shut down its Bayport polypropylene facility in March 2009. Sunoco also intends to sell its Chemicals business if it can obtain an appropriate value. In the event Sunoco elects to move forward with the divestment of all or a portion of this business, it is likely that a significant write-down of the asset would be required.
Coke earned $102 million in the first nine months of 2009 versus $77 million in the first nine months of 2008. The $25 million increase in earnings was due primarily to improved results from Jewell operations largely associated with higher price realizations from coke production and the receipt of a $6 million after-tax dividend from the Brazilian cokemaking operations.
Net Financing Expenses and Other – Net financing expenses and other were $33 million after tax in the first nine months of 2009 versus $17 million after tax in the first nine months of 2008. The $16 million increase was primarily due to lower interest income ($7 million) and higher interest expense ($12 million), partially offset by higher capitalized interest ($4 million).
Asset Write-Downs and Other Matters – During the first nine months of 2009, Sunoco recorded a $278 million after-tax provision in connection with a plan to idle indefinitely all process units at the Eagle Point refinery, of which $254 million after tax represents noncash charges; established a $92 million after-tax accrual for employee terminations and related costs in connection with a business improvement initiative, of which $62 million after tax was attributable to a noncash provision for pension and postretirement settlement and curtailment losses; and recorded a $25 million after-tax provision to recognize loss accruals related to the shutdown of Chemicals’ polypropylene plant in Bayport, TX and to write down to estimated fair value certain other assets primarily in the Refining and Supply business, including $3 million after tax attributable to discontinued Tulsa operations. During the first nine
SUN is in the portfolios of Brian Rogers of T Rowe Price Equity Income Fund, Richard Aster Jr of Meridian Fund.
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