As expected, Sunoco Inc. reported miserable quarterly earnings yesterday compared with a year earlier, reflecting the weak economy and a refining industry under siege.
Excluding special items, the Philadelphia refiner had a loss for the fourth quarter of $31 million, or 27 cents a share, compared with income in the fourth quarter of 2008 of $313 million, or $2.68 a share.
"While we entered 2009 expecting a challenging market for petroleum and chemical products, the depth and scale of the global economic downturn and its impact on our industry was even greater than anticipated," said chief executive officer Lynn Elsenhans.
For the year 2009, Sunoco reported a net loss of $329 million compared with net income of $776 million in 2008. Excluding special items, the company reported a loss of $37 million compared with income of $874 million in 2008.
To cut costs and raise capital, Sunoco closed its Eagle Point refinery last year and sold its Tulsa, Okla., refinery and home-heating-oil business.
This week, the company agreed to sell its polypropylene business for $350 million in cash.
Elsenhans said the capital would be redeployed in Sunoco's logistics and coke businesses, whose earnings are more robust, as well as in retail marketing.
"We will also benefit from reducing the dividend and scaling back our pension and health-care benefits," she said.
Sunoco plans to reduce the $320 million underfunded liability of its pension plan by contributing about $200 million to the plan, about equally split between cash and common stock.
Previously, the company had disclosed reductions to its pension and retiree medical liabilities after June 30.
Sunoco is not the only refiner being hammered by a poor business climate.
Tesoro Corp., a Texas refiner that operates in the West, reported poor earnings. Its CEO, Bruce Smith, said Wednesday at an investors conference that he expected more U.S. refineries to close this year.
Three U.S. refineries closed last year, including the Eagle Point refinery in Westville and Valero Energy Corp.'s Delaware City plant.
Nevertheless, the U.S. Energy Information Administration said refinery use was still at 78 percent of national capacity, its lowest level since the mid-1980s.
Elsenhans did not gloss over the gloom.
"We continue to expect a challenging market for petroleum and chemical products due to ongoing economic weakness and excess global supply," she said.
Sunoco also expects results will improve this year after cutting its quarterly dividend in half, to 15 cents, in October.
Brian P. MacDonald, chief financial officer, said the current payout was "sustainable."
Contact staff writer Andrew Maykuth at 215-854-2947 or firstname.lastname@example.org.