Sunoco, Inc. (SUN), Tuesday said it would idle all process units at its Eagle Point refinery located in Westville, New Jersey aimed at reducing losses in its refining business, following a drop in demand for its refined products, and an increase in margin pressure in the refining industry. The company also said it would cut quarterly dividend, followed by some executive changes.
Philadelphia, Pennsylvania-based Sunoco said it would shift its current Eagle Point production to its two nearby refineries in Marcus Hook and Philadelphia, Pennsylvania, which will operate at higher capacity utilization, with anticipated production that would be equal to the current production.
Sunoco also said its Board of Directors authorized a plan to trim the quarterly dividend paid to shareholders to $0.15 from $0.30 per outstanding share of its common stock, effective the first quarter of 2010. The reduction in dividend is in view of achieving flexibility and yielding in line with peers, Sunoco stated.
From the idling of Eagle Point, the company hopes to minimize disruption to the rest of its operations. At Eagle Point, refined product storage and handling operations would continue and the products rack at Eagle Point owned by Sunoco Logistics Partners L.P. would remain open.
Sunoco stated that Eagle Point is not directly linked to its retail network, contrary to Marcus Hook and Philadelphia that serves as distribution hubs and feed refined products directly into Sunoco's branded retail network
The company said nearly 400 employees will be furloughed during the idling of the facility, however, will be given an option to resume work in the event production resumes. The company would continue to pay its contribution to medical benefits for employees and dependents covered at the time of the idling for the duration of the furlough and the affected employees would be offered a voluntary severance program, which includes job placement assistance and retraining.
Sunoco also expects to reduce its pretax expense base by approximately $250 million per year from the idling of Eagle Point, while anticipating pretax charges, the majority of which are non-cash, of approximately $475-$550 million related primarily to asset impairment as well as idling costs. The majority of these charges are expected in the first quarter of 2009, while anticipating annualized cash savings.
Sunoco also indicated changes in its senior leadership team, with Anne-Marie Ainsworth to rejoin the company as Senior Vice President, Refining, effective November 2, 2009. Ainsworth has nearly 31 years experience in operations, business and engineering. Ainsworth previously spent 19 years at Sunoco and was involved in Motiva Enterprises LLC.
Vincent Kelley, currently Senior Vice President, Refining and Engineering Services, will assume the new role of Senior Vice President, Engineering and Technology, with responsibility to manage technology strategy, as well as capital projects across all of its business units.
SUN closed Tuesday's trading at $27.89, down $0.18 or 0.64%, on a volume of 2.302 million shares on the NYSE. In after hours, the stock dropped $0.78 or 02.80%, to trade at $27.11
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