Most oil companies couldn't have been happier when crude prices hovered around $150 a barrel last summer. But now that the reverse is happening, many of those same companies are realizing that they need figure out how to turn a profit without the help of an artificially accelerated crude market.
It's easier said than done, but one company that seems to be on the right track is Sunoco Inc., which posted fourth-quarter net income of $204 million compared with $9 million loss a year before. The IW 50 Best Manufacturer for 2008 actually saw net income for 2008 drop 12.9% to $776 million compared with $891 million for 2007, but even with the sharp decline in oil prices and the subsequent significant increase in working capital requirements, chairman and CEO Lynn Elsenhans said its financial position is strong.
"Despite periods of very challenging market conditions and significant volatility in commodity prices, 2008 highlighted the strength of our diversified business portfolio," Elsenhans said. "While the slowing U.S. economy and declining gasoline demand led to lower refining margins during 2008, a record contribution from our non-refining businesses resulted in year-over-year operating earnings growth."
In fact, Sunoco's non-refining businesses earned a record $427 million, led by a record $201 million in retail marketing and a record $105 million in coke. Even so, as the company enters 2009, Elsenhans expects a challenging market for petroleum and chemical products that reflects continued economic weakness and additional global supply.
At A Glance Sunoco Inc. Philadelphia, Pa. Primary Industry: Petroleum & Coal Products Number of Employees: 14,200 2007 In Review Revenue: $44.7 billion Profit Margin: 1.99% Sales Turnover: 3.60 Inventory Turnover: 35.12 Revenue Growth: 15.53% Return On Assets: 8.11% Return On Equity: 42.94% |
Recently Sunoco said it plans to permanently close a polypropylene manufacturing facility in Bayport, Texas, by April 30. The facility can produce approximately 400 million pounds of polypropylene each year. Sunoco has three other polypropylene facilities, located in La Porte, Texas; Marcus Hook, Pa.; and Neal, W.Va., that will assume a portion of Bayport's production.
"The decision to close the facility was made after an extensive review which demonstrated that the plant is no longer financially viable," said Bruce D. Rubin, vice president of Sunoco Chemicals. "Our goal is to ensure that we make the most competitive and profitable mix of products to meet customer demand."
In corporate news, Sunoco's senior vice president and CFO Thomas Hofmann retired as of Dec. 1, 2008. Hofmann, 57, began his career at Coopers & Lybrand (now PricewaterhouseCoopers) and took on positions of increasing responsibility during his 32 years of service at Sunoco, culminating in his being named CFO in 1998.
Elsenhans stated that over his career Hofmann has significantly contributed to the growth and strategic direction of Sunoco. "His focus on maintaining Sunoco's investment grade credit rating and transparency in financial reporting helped build Sunoco's reputation among investors, industry analysts and business partners," he said.
Assuming the role of interim CFO is Terence Delaney, a 29-year Sunoco veteran who has served as vice president of investor relations and planning since 2003. Delaney will lead Sunoco's financial organization until a permanent successor is found.
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