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PHILADELPHIA -- Refiner and marketer Sunoco Inc. reported a net loss for the third quarter 2009 of $312 million, down from the $549 million in net income earned a year ago. When excluding special items, Sunoco saw a net loss of $34 million during the third quarter of this year, compared to adjusted third quarter 2008 net income of $559 million.
"During the third quarter, refining and chemicals results continued to be impacted by weak demand, but our other businesses continued to generate steady earnings," Lynn L. Elsenhans, Sunoco chairman and CEO, said in a statement.
The earnings contribution from the company's non-refining businesses improved to $102 million in the third quarter, from $78 million in the second quarter, said Elsenhans, adding its retail marketing segment benefited from stable wholesale prices, earning $49 million, while logistics earned $19 million and the coke business earned $35 million.
Sunoco's retail marketing business earned $49 million in the current quarter, down from the $72 million generated in the third quarter of 2008. The decline was primarily due to lower average retail gasoline margins, but was partially offset by lower expenses, according to the company. In addition, sales volumes were relatively flat compared to the year-ago quarter, and third quarter 2008 retail gasoline margins benefited from the rapid decrease in wholesale prices at that time.
The company's refining and supply business saw a loss from continuing operations totaling $118 million in the third quarter 2009, vs. income of $398 million in the year-ago period. The company attributed the decrease to lower realized margins and lower production volumes, which were partially offset by lower expenses. In addition, its realized margins and crude utilization rate were negatively impacted by market weakness in the third quarter.
Looking forward, Elsenhans said: "We continue to expect a challenging market for petroleum and chemical products due to ongoing economic weakness and additional global supply. However, the company has taken steps to improve our competitive cost position and optimize our portfolio and operational performance."
On Oct. 6, Sunoco indefinitely idled the Eagle Point refinery in an effort to reduce losses in it refining business, "at a time when weak demand and increased global refining capacity have created margin pressure on the entire refining industry," Elsenhans said.
He added: "We also continued to make progress on cost reductions through our business improvement initiative and took steps to further optimize our portfolio through the divestiture of our retail heating oil and propane distribution business."
To reduce its employee-related costs and future cash needs, Sunoco made changes to its defined benefit pension plan and postretirement medical coverage. "These initiatives, coupled with our spending discipline and our previously announced dividend reduction in 2010, will allow us to maintain our financial flexibility as we manage through this refining down cycle," Elsenhans said.
The changes, effective June 30, 2010, include a freeze to pension benefits for most employees under the company's defined benefit pension plans, as well as a phasing out of the post-retirement medical benefits for the majority of future retirees after July 1, 2010.
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