Sunoco Weathers Challenges in 2017’s First Quarter
DALLAS — The first quarter of 2017 had some challenging aspects for Sunoco LP, Bob Owens, president and CEO, said during the company's first-quarter earnings call Thursday.
According to Owens, the challenging aspects included "a less-than-ideal commodity backdrop, lackluster gasoline demand across the industry, the lapping of tough comparisons, and the impact of winter storms in late January and late March." Owens also pointed out that 2016 was a leap year with one extra day.
On the plus side, "Sunoco saw much-improved operating trends in its oil-producing store base, with particular strength in March that has continued into the second quarter," he reported.
Net income for the quarter was $1 million, compared to $62 million in the first quarter of 2016, largely driven by increased expenses from a higher debt profile and increased costs on Sunoco's floating-rate debt, according to the chief executive.
Total adjusted EBITDA decreased by $4 million to $155 million. This reflects decreased wholesale motor fuel gross profit contribution and increased total operating expenses.
"As a reminder, the first and fourth quarters are seasonably the weakest quarters of the year for our business, year in and year out," Owens said.
Looking at retail specifically, net loss for the retail segment was $41 million, compared to a net loss of $25 million a year ago. Adjusted EBITDA was $60 million vs. $56 million in the first quarter of 2016.
Total retail gallons sold decreased by 2.1 percent to 595 million gallons as a result of the decreased demand across Sunoco's operating geography, particularly along the East Coast.
Total merchandise sales increased by 3.1 percent from a year ago to $540 million, reflecting the contribution from third-party acquisitions and new-to-industry locations opened during the last 12 months, according to the company.
Merchandise sales contributed $170 million of gross profit with a retail merchandise margin of 31.6 percent, a decrease of 0.1 percentage points from the first quarter of 2016.
Dallas-based Sunoco LP is a master-limited partnership that operates convenience stores and retail fuel sites and distributes motor fuel to convenience stores, independent dealers, commercial customers and distributors located in 30 states. Its parent company, Energy Transfer Equity LP owns Sunoco's general partner and incentive distribution rights. As of March 31, Sunoco operated 1,355 convenience stores and retail fuel outlets along the East Coast, in the Southwest, and in Hawaii. Third-party wholesale customers totaled 7,825.