Sunoco 2009 Annual Report Download - page 47

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During the 2007-2009 period, Sunoco generated $207 million of divestment proceeds related to the sale of
261 sites under a Retail Portfolio Management (“RPM”) program to selectively reduce the Company’s invested
capital in Company-owned or leased sites. Most of the sites were converted to contract dealers or distributors
thereby retaining most of the gasoline sales volume attributable to the divested sites within the Sunoco branded
business. During 2009, 2008 and 2007, net after-tax gains totaling $14, $3 and $21 million, respectively, were
recognized in connection with the RPM program. There are currently approximately 90 sites in the program, of
which approximately 25 are company-operated locations. These sites are expected to be divested or converted to
contract dealers or distributors primarily over the next two years, generating an estimated $80 million of
divestment proceeds.
Chemicals
The Chemicals business manufactures phenol and related products at chemical plants in Philadelphia, PA
and Haverhill, OH; and polypropylene at facilities in LaPorte, TX, Neal, WV and Marcus Hook, PA. The
Chemicals business also distributes and markets these products.
On February 1, 2010, Sunoco entered into an agreement to sell its polypropylene business to Braskem S.A.
for approximately $350 million in cash. The sale will include assets and inventory attributable to the
polypropylene business, subject to a market-based working capital adjustment at the time of closing. The
transaction is subject to regulatory approval and customary closing conditions, and is expected to be completed
on or about March 31, 2010. Included in the sale are Sunoco’s polypropylene manufacturing facilities in LaPorte,
TX, Neal, WV and Marcus Hook, PA which have the combined capacity to produce 2.15 billion pounds of
polypropylene annually. Sunoco expects to record a pretax loss on the sale in the first quarter of 2010 of
approximately $185-$195 million. Sunoco will retain its phenol and derivatives business.
2009 2008 2007
Income (millions of dollars) .......................................... $1 $36 $26
Margin* (cents per pound):
All products** ................................................... 8.7¢ 10.7¢ 9.8¢
Phenol and related products ....................................... 8.0¢ 9.6¢ 8.5¢
Polypropylene** ................................................. 9.5¢ 12.1¢ 11.6¢
Sales (millions of pounds):
Phenol and related products ....................................... 1,774 2,274 2,508
Polypropylene ................................................... 1,925 2,204 2,297
Other .......................................................... 21 65 80
3,720 4,543 4,885
*Wholesale sales revenue less the cost of feedstocks, product purchases and related terminalling and transportation divided by sales
volumes.
**The polypropylene and all products margins include the impact of a long-term supply contract with Equistar Chemicals, L.P. which is
priced on a cost-based formula that includes a fixed discount. These margins exclude an unfavorable lower of cost or market inventory
adjustment totaling $20 million ($12 million after tax) in 2008 and the reversal of this adjustment in 2009.
Chemicals segment income decreased $35 million in 2009 primarily due to lower margins ($60 million) and
sales volumes ($47 million), partially offset by lower expenses ($46 million) and the reversal of a $12 million
after-tax unfavorable lower of cost or market adjustment to its polypropylene inventory that had been previously
recorded in 2008 ($24 million). The lower expenses were largely the result of lower costs for purchased fuel oil
and utilities attributable to price declines and lower production volumes.
Chemicals segment income increased $10 million in 2008 due primarily to higher margins ($31 million) and
lower expenses ($17 million), partially offset by lower sales volumes ($24 million) and the provision to write
down polypropylene inventory to market value ($12 million). The lower expenses were largely due to the transfer
of cumene and propylene splitter assets to Refining and Supply, effective January 1, 2008.
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