American oil refiner Sunoco to slash 20 per cent of its workforce
14 Mar 2009
US oil refiner Sunoco Inc said on Friday it would cut 750 jobs, about 20 per cent of its workforce, to reduce costs in the face of shrinking demand for gasoline and diesel fuel.
"While the company has enjoyed several years of strong financial performance, we are now facing a different - and more difficult - economic reality," Lynn Elsenhans, the company's chairman and CEO, said in a statement.
The Philadelphia-based company is pushing to cut annual costs by more than $300 million by year's end. That will be achieved through energy costs and cutbacks on materials and contractors as well as the job cuts. In addition to this workforce reduction, significant savings are also expected in energy costs, and the use of materials, equipment and contractor services.
In connection with the first phase of the initiative, the company expects to establish a pretax accrual ranging from $60-$70 million ($35-$40 million after tax) in the first quarter of 2009. As a result of the workforce reduction, the company may also incur non-cash settlement losses in its defined benefit pension plans during 2009.
Sunoco, which has some 13,500 employees, was hurt last year like many refiners by roller-coaster crude prices, first by struggling to pass on higher costs to consumers at the pump. Margins, though, remained low as oil tumbled when gasoline usage fell. Margins have improved so far this year, as witnessed by the rise in pump prices despite crude remaining relatively stable.
Earlier Friday, the International Energy Agency said refineries around the globe will cut the amount of oil they process by 1.8 million barrels per day (bpd) in the second quarter from last year to 72.3 million bpd due to sagging demand. Still, that would be a more modest drop than the 2.7 million bpd decline likely for the first quarter, the IEA said.
Sunoco operates about 910,000 bpd of refining capacity in the United States, mostly at its Philadelphia and Marcus Hook, Pennsylvania refineries. The company also owns 4,700 retails sites and 6,000 miles of pipelines.
Shares in Sunoco, which have lost one-third of their value so far this year, were unchanged in pre-market trade at $29.11 per share.