Sunoco Reports Weak Fourth Quarter Results after Rough 2009

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Petroleum refiner and chemicals manufacturer Sunoco Incorporated (NYSE:SUN) (Philadelphia, Pennsylvania) reported fourth-quarter net income of $26 million, an 87.3% decline year-over-year, and a full-year net loss of $329 million, compared to a net gain of $776 million in 2008. The company cited a worse-than-expected global downturn and weak demand for refining and chemical products as the most serious factors.

Sales revenues for the fourth quarter were $8.97 billion, which is actually a 3.8% year-over-year gain, but were only $31.31 billion for the full year, a 38.7% decline from 2008.

In a conference call, Sunoco CEO Lynn Elsenhans said: "The challenging market environment has continued to impact our volumes and our margins in both the petroleum and the chemical businesses, and the fourth quarter refining benchmark margins worsened from the previous quarter, and the rise in crude oil prices during the quarter negatively impacted our margins."

Sunoco saw the following segment results:

• Refining and supply, which includes products such as gasoline, middle distillates, residual fuel, petrochemicals and feedstocks, had a fourth-quarter loss of $135 million, compared to a gain of $146 million in the fourth quarter of 2008, and a full-year loss of $316 million, compared to a gain of $448 million in 2008.
• Retail marketing had $21 million in fourth-quarter income, a decline of 79.6% year-over-year, and $86 million in full-year income, a 57.2% decline from 2008.
• Chemicals had a fourth-quarter gain of $6 million, compared to a loss of $4 million in the same period of 2008, and a full-year gain of $1 million, compared to a $36 million gain in 2008.
• Logistics had $22 million in fourth-quarter income, a decline of 24.14% year-over-year, and $97 million in full-year income, a 14.1% gain from 2008.
• Coke had $78 million in fourth-quarter income, a gain of 178.6% year-over-year, and $180 million in full-year income, a 71.43% gain from 2008.

The decline in refining and supply was attributed to lower realized margins and production volumes, and the decline in retail marketing was strongly influenced by lower average retail gasoline and distillate margins. In both cases, losses were partially offset by lower expenses.

"We continue to expect a challenging market for petroleum and chemical products due to ongoing economic weakness and excess global supply," said Elsenhans.

Elsenhans expects a lower cost structure will prove beneficial for Sunoco in 2012. She points to reduced pension and health care benefits for employees, which will take effect June 30, as well as the closing of the company's refinery in Eagle Point, New Jersey. For additional information, see December 2, 2009, article - Economic Recession Forces Older Refineries to Permanently Shut Down. Sunoco also plans to sell its polypropylene business for $350 million in cash.

Sunoco's capital spending in 2010 is expected to be about $840 million. Industrial Info is currently tracking more than 30 active Sunoco projects in the U.S. worth more than $1.3 billion in total investment value, including a $570 million addition to a metallurgical coke plant in Granite City, Illinois. After more than three years of construction, the coke plant is scheduled for completion this summer. The facility, located at a mill belonging to U.S. Steel Corporation (NYSE:X) (Pittsburgh, Pennsylvania), will have a production capacity of 650,000 tons per year of metallurgical coke. For more information, visit Industrial Info's North American Industrial Database.

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