Oil refiner Sunoco Inc. (SUN), said Thursday its profit for the fourth quarter plunged 87% from last year, hurt by higher cost of products sold and operating expenses, as well as weak demand and rising feedstock costs. On an adjusted basis, the company posted a wider-than-expected net loss for the quarter, due to weak performance of most of its segments. The company indicated taking steps to strengthen its balance sheet and liquidity in early 2010. In addition, the company also lowered its quarterly dividend.
Net income attributable to Sunoco shareholders was $26 million or $0.22 per share for the fourth quarter, much lower than $204 million or $1.74 per share in the prior year quarter.
Result for the quarter included a $21 million after-tax favorable adjustment to the gain related to the divestment of the discontinued Tulsa operations, and a $55 million after-tax gain from the liquidation of LIFO inventories in connection with the shutdown of the Eagle Point refinery.
The Philadelphia, Pennsylvania-based company's year-ago result mainly included an $85 million after-tax provision to write-down to estimated fair value its Tulsa refinery, and a $35 million after-tax provision to write down to estimated fair value its Bayport, TX polypropylene plant.
Excluding special items, Sunoco posted a loss of $31 million or $0.27 per share, compared to income of $313 million or $2.68 per share in the year-ago quarter. On average, 14 analysts polled by Thomson Reuters expected the company to report a loss of $0.26 per share for the fourth quarter. Analysts' estimates typically exclude special items.
Fourth quarter revenues increased to $9.0 billion from $8.6 billion in the same quarter last year. Three analysts had a consensus revenue estimate of $8.31 billion for the fourth quarter.
Refining and Supply posted a loss from continuing operations of $135 million in the fourth quarter, compared to income of $146 million a year ago. Results were affected by lower realized margins and production volumes. Discontinued Tulsa refining operations, which were divested on June 1, 2009, had income of $36 million in the fourth quarter of 2008.
Total throughputs decreased to 684.8 thousand barrels daily from 803.9 thousand barrels daily a year earlier.
Total production available for sale dropped to 681.7 thousand barrels daily from 798.6 thousand barrels daily last year.
Retail Marketing segment earned $21 million in the fourth quarter, much lower than $103 million in the prior year quarter, due to lower average retail gasoline and distillate margins.
Chemicals reported income of $6 million, compared to a loss of $4 million in the year-ago quarter, due to lower expenses and the absence of a $12 million after-tax unfavorable lower of cost or market adjustment to Chemicals' polypropylene inventory that was recorded in the fourth quarter of 2008.
Logistics earned $22 million in the fourth quarter, down from $29 million in the fourth quarter of 2008, due primarily to lower results from lease crude marketing activities.
Coke segment fetched earnings of $78 million, up from $28 million in the previous year quarter, due to the recognition of a one-time $41 million investment tax credit associated with the start up of the Granite City facility and $6 million of after-tax dividend income from the Brazilian cokemaking operations.
Total costs and expenses for the fourth quarter increased to $9.0 billion from $8.2 billion in the prior year quarter, due to higher cost of products sold and operating expenses.
Further, Sunoco said it is taking several actions to strengthen its balance sheet and liquidity in early 2010.
The company has modified the Incentive Distribution Rights that entitle Sunoco to receive cash in excess of its general partner's interest from Sunoco Logistics Partners L.P.
Sunoco strengthened its liquidity position through the sale of 2.2 million of its Limited Partnership units in Sunoco Logistics Partners L.P. for net cash proceeds of about $145 million.
The company also plans to bolster the funded status of its pension plan with a contribution of about $200 million, about equally split between cash and Sunoco common stock.
The pension contributions will generate a cash tax benefit for the company in the first half of 2010, which are expected to eliminate the need for any legally required minimum pension contributions until 2012.
In addition, Sunoco said that its board declared a cash dividend of $0.15 per share for the first quarter of 2010, down from $0.30 per share. The dividend is payable on March 10 to shareholders of record at the close of business on February 17.
For the full year 2009, Sunoco reported a net loss attributable to shareholders of $329 million or $2.81 per share, compared to net income of $776 million or $6.63 per share in the previous year.
Excluding special items, net loss was $37 million or $0.32 per share, compared to income of $874 million or $7.46 per share in the prior year.
Annual revenues declined to $31.3 billion from $51.1 billion in the year-ago.
Analysts expected the company to report a loss of $0.35 per share on revenue of $30.35 billion for the year.
Among others in the industry, Tesoro Corp. (TSO) reported a fourth quarter net loss of $179 million, or $1.30 per share, compared to net earnings of $97 million or $0.70 per share for the fourth quarter of 2008. Adjusted net loss was $136 million or $0.99 per share for the quarter. Revenues for the quarter rose to $4.67 billion from $4.24 billion in the year ago quarter.
Valero Energy Corp. (VLO), reported a narrower fourth quarter loss, helped by cost reduction initiatives and improved revenues, even as refining industry continued to be pressurized by weak demand, narrow margins, and low discounts. Valero also intends targeting another $100 million of pre-tax cost reductions in 2010, and plans exploring additional ways to improve profitability.
Sunoco closed Thursday's regular trading session at $25.67, down 82 cents or 3.10% on a volume of 3.97 million shares. In after-hours, the shares further lost 52 cents or 2.03%.
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