Sunoco 2007 Annual Report Download - page 4

2
facility operated by SunCoke Energy and its
fi rst outside the United States, making it the
latest and most advanced prototype for what
we expect will be additional domestic and
international opportunities. We also announced
an agreement to build a second coke plant at
our Haverhill, Ohio location. That plant and
an associated cogeneration power plant are
currently under construction and are targeted
to be operational in the second half of 2008.
We continued to return cash to our
shareholders through both increases in our
dividend and additional share repurchases. In
2007, we increased our dividend by 10 percent
and recently announced another nine percent
increase, the sixth consecutive year to do
so. We also spent $300 million to repurchase
approximately four million, or three percent,
of our outstanding shares.
As we look ahead, we expect refi ning margins
to remain volatile and profi table, albeit at
somewhat lower levels than the prior three
years. Refi ning capacity continues to be
adequate but tight worldwide. However,
planned expansion will likely begin to ease
the tight supply/demand balance. Rising costs,
particularly for crude oil, have raised and
will continue to raise the refi ners’ breakeven
margin and pressure income and product
prices. While the demand response to higher
prices has been modest to date, continuing
higher prices in the current economic
environment will likely impact demand where
the price increases are allowed to be passed
through, which could affect the markets in the
United States and other developed countries.
Our strategy is to add to income in Refi ning
and Supply through projects like our 2007
expansions from which we expect to see the
full-year benefi t in 2008. We are continuing
to develop other capital projects to improve
income but we will remain disciplined in
our capital spending. In addition, we expect
improved earnings from our non-refi ning
businesses, primarily driven by the continued
development of SunCoke Energy which
builds, owns and operates coke plants, using
our proprietary technology that supplies
economically priced coke to the steel industry.
While we are striving to grow earnings from
Retail Marketing, Chemicals and Logistics,
SunCoke Energy may offer the greatest
impact over the next three to fi ve years. Our
non-refi ning businesses offer Sunoco a real
opportunity to add to earnings if the refi ning
market remains strong or sustain earnings if
refi ning weakens.
During 2008, we will also evaluate strategic
alternatives that could further add value to
Sunoco shares. We have committed to look
at a possible joint venture for our Chemicals
business as a way to participate in the industry
consolidation that is underway. SunCoke
Energy is a steady income business, similar
to SXL, our successful Logistics MLP. We
expect SunCoke Energy income to increase
substantially in 2008 and hope to announce
new plants that would contribute additional
growth. We are investigating whether another
capital structure for SunCoke Energy would
add value for Sunoco shareholders.
As we enter 2008, we will retain our focus
on Health, Environment and Safety as the
cornerstone of all that we do and on the
preparation of our workforce to meet the
challenges of the future. Our employee
incentive plans incorporate aggressive
expectations for top quartile safety at our
manufacturing facilities and continued
improvement in environmental performance.
In such a volatile marketplace, achieving our
goals will depend upon all of us at Sunoco
continuing to pursue the level of excellence
that we have come to expect. Whatever the
challenges, I have confi dence that we are
prepared to meet them.
JOHN G. DROSDICK
Chairman, Chief Executive
Offi cer and President