SUN - Earnings call transcript Q2 2020

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Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sunoco LP’s Second Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. the of to Investor turn Grischow, host, now President Vice Relations. will conference your over Scott I Thank you.

You may begin.

Scott Grischow

Thank you, and good morning, everyone.

operations the with and and are various These Karl today’s results well and events. call filings with call Sunoco subject the expectations subsequent management and for these to the me contain assumptions including as our reminder undertakes and assumptions a of the are of include update Partnership’s morning related impact statements factors. as on On financial that A Joe other performance, LP’s materially Please future members President uncertainties. Partnership to Chief refer forward-looking Chief COVID-XX risks Fails, could the Officer; to will SEC these regarding based the pandemic. and the of and to team. Executive expectations obligation Actual our Operations no Officer; this Kim, statements statements that list release, differ earnings

by call, the Despite plan. this to During call financial today’s reduction financial results refer on are performed cost including cash Please adjusted. we of financial I’d website each efforts volume a to flow measure. as reconciliation and quarter, measures, like the well certain we adjusted the business for begin for of operating EBITDA our second and reduced reviewing XXXX. non-GAAP quarter Sunoco distributable saw today’s LP and the also discuss our will

as on we to environment. challenging solid continue We’re financial navigate footing this

EBITDA of X.X year Fuel benefit non-cash ago. second a income included Partnership million compared XXXX, quarter $XXX of down from million, inventory was of billion XXXX. of quarter to million, $XX the XX% the second $XXX a the totaled net $XXX in million volumes gallons, the adjustment. Adjusted For which recorded

income year. The the margin quarter’s $X.XXX period sequentially $X.XXX year-over-year. both last gallon on volumes essentially was Fuel for per the $XX reflect same business. million up of was impact flat, gallon, second Lease full and COVID-XX our of per from quarter

$XX Our million, quarter. million gross from decline was the profit $XX a represented sales which from non-motor previous fuel

reminder, million the Total legal $XXX a a first provide $XXX the operating $XX from in an will million year favorable As ago. $XX and his quarter the in detail quarter decreased expenses million million additional quarter on Karl settlement. first to for remarks. included expenses

on projects and million on Moving million second growth capital spent maintenance in We to capital. on $XX quarter. the $X

approximately capital we As and spend approximately $XX March, the growth capital. for expect announced in in $XX full-year we to maintenance in million million

adjusted the strong as million, X.XX On coverage and times we XX-month very basis. per $X.XXXX XX, on X.XX unit of distribution. a flow cash $XXX was distributable trailing yielding July quarter an ratios for Second current declared quarter times

our sheet, under million long-term decreased to debt billion. balance the just by On $X.X $XXX

no under billion with from reading a our down XXXX. the maturities remaining with quarter. X.XX prior times Our liquidity credit strong, facility remains leverage the ended in of times, first We to debt $X.X and revolving the quarter X.XX

will would him of health wish Tom the now to like his many his thank in happiness to over the September X. LP’s Miller, Financial effective behalf the LP retiring many June On you as leadership saw team, release, our next contributions the call Partnership life. and Finally, Chief personally from Karl. to for in and Sunoco Officer, we chapter press of entire Tom is Sunoco I Sunoco, of turn

Karl Fails

Thanks, and good morning, everyone. Scott,

model, highlight face our COVID. in of resiliency in the Our impact business the even of of quarter second strong the results the continued

to compared As were volumes down our year. Scott last quarter mentioned, XX% second

XX%, cases volumes several In off at weeks in closely in about were volumes more recovery with some fuel declines around over about followed in showed coronavirus of year-over-year the there. in May, continued improvement trends, June. demand meaningful the Looking mid-April of the by but has XX% flattened monthly for a XX%, bottomed geographies. our pace last decline rise of The from with

volumes last seen the similar about of averaged in results and have XX% in we of month early July, August. For year’s the mid-teens

seasonal to rise in have even these flattened a peak context the August beginning that to of month the to relative basis, on quarter. as daily volumes each have Our volumes end I’d around increases means normal in the third trends. so volume the we year is in volume absolute from average at pattern seen of far This some for a like the summer. provide

benefited diversity geographic of from distribution fuel the our clearly have network. We

Southern impacted it up the pandemic, onset strongly more a reopenings in during reopenings this the which been with of country basis see in recent progress. Mid-Atlantic held weeks and demand states Contrast relative continued are Northeast While as as more improvement on has the the scaled of states, than to other in areas back.

the fuel from single gross increased offset for volume favorable the and distribution. of scale. to operators have with environments price operators for the a channel July declines primarily country While can provided the consistent much strong the market and market in the in favorable have during in that for break-even quarter of have course resulting macro even over the and site many since the a for second the few last as was throughout look, Taking consumer, declines be gasoline Fuel volumes to were impact margins increased second weak months. margin the environment notably margins face attributed each done fuel commodity margin margins XXXX. quarter, into the to quarter, volume also the increases across The showed impacted the prices. companies These August. broader average in margins strength profit the retail work industry lowest the of forces These participants strong continued of costs increasing occurred

be forces While provide rest through optimization profit these expense our gross of market landscape done favorable a must the for the work strategies, reductions.

than and strongly of been or in demand skilled areas, well these thus, most. have weather able are both as and We positioned to declines better

optimization well before shock. markets knowledge operate demand organizational to recent the of deep and a gross committed management where had and have expense we this We profit resources

As expenses for million total of plan Scott for we the the our $XXX commentary $XXX full-year a of million and be consisted $XX Consistent total lowest the are last that XXXX. to second between mentioned, volume-related we deliver expenses million with quarter, on would year. of expect quarter, expense second items, quarter since the quarter that of reductions portion expense would and our our of the

but recovered, than that the we volumes higher expenses of have we within run back-half range have well the being communicated. As anticipate second in the quarterly our rate, quarter year

second-half shape curve. As we the the of look XXXX, the forward volume is of recovery uncertainty around to still there

strategy market margins annual fuel and expect we to profit remaining our historical in above forces However, our result range. optimization gross

management directly to bottom expense commitment to Our line. delivers results the

As capital market our to remain optimize second expense as within well focus quarter on the performance key. current as will management our and demonstrates our ability environment

beyond. our of We’re throughout strength and the results year closing operational turn the to Joe? financial will that confident some it and in financial thoughts. demonstrated solid share over Joe rest will now yield discipline to I continue to

Joseph Kim

Thanks, Karl. Good everyone. morning,

have thanking uncertainty on guidance, suspended clarity me employees for keeping given Sunoco better their and off partners level of the Let quarter of by at these call, our for stable earnings times. distribution our continued Last strong we XXXX far we during the unprecedented fuel our EBITDA time. our start Today, and heightened rest the that dedication and year.

the last EBITDA which is XXXX we be result, guidance our $XXX greater December. original million, will than above we a As that provided believe

been revised key a Our few has outlook shaped by items.

is The first obvious. item

We that in books. already have the strong two really delivered quarters are

margin Second, we the attractive. fuel believe remain environment will

to events margin be whether the environment a we still recent is new of be margins. above too the is established determine It have to demand exact expect long-term determined, early Although for shape the recovery baseline historic average. curve to

margin However, margins the the in good to is operators to meaning, gone has for good mean, But remain drop fuel also this require that us. less more remain attractive. given a year, reverse to previous March. for historic rapidly and the greater recovers scenario, in the prices industry for for we year is environment of break-even various profit difficult where I will the volume. profitable. margin And be believe operators, very believe it’ll will this Overall, crude us for In for first-half point volume second-half different the certain up of match gross this the occurred margin fuel

outlook exactly how not revised that to now Karl ability earlier. on or on deliver year expense envisioned path strong our guidance The the it our was we’re exceptional we noted back reflects to December. Finally, described have an in

facing nation, However, obvious we despite our strong year. expect another the yet challenges deliver to

financial for growth. Our positioned has stability us

remain fuel business. distribution We capital sets opportunities opportunity organic and The year-after-year. to to continue we robust, remain expected grow to our deploy

Midstream we for our On resources synergistic overall highly portfolio. look that enhance to acquisitions side, rededicated the further have

the throughout prepared future have ensure resilient remain over current me the as Let long-term Sunoco. well business very model. as that stable by remarks. built Operator, a challenges last we future We’ll our proactive concludes close that years, challenge, for to a saying any few

the open line may You questions. for

Operator

this At we with you. a is Our session. question-and-answer UBS. be [Operator Thank time, first conducting Shneur Gershuni question from Instructions] will

Shneur Gershuni

maybe your to an benefits but stops Hi. of Good back just wondering you would and remarks, It’s not to market right historically, competitors in optimization come hear aggressively. of off, to about opportunity at be concluding higher the than benefit you’re been came everyone? your plan overall, volumes everybody Maybe about sort everyone. start talk current there’s morning, marketplace to levels, all you Shneur. scenario in where and is margins optimization trying a Good actually I’m net Joe, well. there for if if a to actually, now? would these can how down talked But be share be for there the behavior they’ve

Joseph Kim

Hey, good morning, Shneur.

less in volume in but more cut decline and to amount was brought Whenever the to try So April, the especially to and I that, me the more let expense tried cuts quarter, volume then that to break-even second achieve. made to in affected. were people expenses on obviously, color offset dramatically, than People have made. is comment give volume difficult the match inside Karl of some sales

As have had, went everybody of – to players. or on offset break-evens for their a order still for investment. wants result, losses, if if their when they’re offsetting to reasonable margin people get lot of goes of losses up a lot a return in break-even up and rate they the And the a players,

scenario, market So recalibrated the a down, went when volume of higher margin. in with kind that

starts are demand to revert definitely there’s levels, to But a If the then recovering, break-evens where third skyrocketing So mean, going there sluggish a margin back there’s back the a because is demand break-even – the down. scenario. is previous on scenario the going to up remain. could is also

you’re $X.XX recovering, a roughly Obviously, perspective, Sunoco very volume. of be we scenario, that’s the position. we’re a That a highlight above to new third that, think, we’re is scenarios. three us margin think, is scenario. But in at of the what highlighted, good established guided baseline is From regardless previously margins, for that that trying a side. I on volume would potential The starts I a higher good kind scenarios a rebalancing three in higher of a of margins great I any all those

Shneur Gershuni

bit total little Okay. maybe, just sense That here. And to a to makes pivot me.

a You’re kind after of scenario. into of type distribution cash headed flow positive free even

that absent be You considering of finding well. a are you that target? for maybe mean, what units, Just acquisition reasonable those some your kind opportunities, your did you’re around the But options finding would opportunities. for acquisition buying targets, trading what Do plan back the wondering general some you extremely consider you’re partner? mention your from looking bonds cash? the leverage I is absent

Scott Grischow

first at long-term. say, or times Yes. and of coverage to foremost, the I’d Shneur, communicated that this ratio the is maintaining we’ve that X.X over at we’re December Scott. above operating – and and distribution in committed

of also X.X think, to comfortable X.XX. I leverage with range our we’re targeted

for business our past and proven about quarters current that demand of leverage I support ability our of talked resiliency on the reading this I the environment the our think, to the think, we’ve debt call, levels. unprecedented amidst few destruction it’s model

identify so opportunity gives does what and opportunities. It on the And give execute growth us that us? to high-return

we’re and So acquisition-based. organic

give we’ve I foresee sheet, us to the opportunities. a for buyback in that strong don’t take ratios positioned program opportunity us. healthy going to to able that the of card growth balance are to advantage leverage unit be say, and coverage the I think, somewhat all

flow I think towards more cash our focus the acquisition organic growth opportunities. is to and free deploy

Shneur Gershuni

implying cutting distribution that. just to how were given I you exactly Well, I opposite, as wasn’t completely has been. clear, everything make understand strong And considering just the the it that

Scott Grischow

Yes.

Shneur Gershuni

say doing near-term, maintain the I primary opportunity – But kind if to I the in so acquisition that guess that materialize an of in focus keep you buybacks just be point? interested not your cash? at read Is when guess, you’re doesn’t at the zero facility there would and this

Joseph Kim

and there saying highlighted my probably opportunities way remarks back a I over little for adding we’ve from that since you and internal prepared us, the robust growing and think they’re that think is on look year-after-year. the good for we sector in over we see developed highlighted transaction, saw these distribution Then us. I And EBITDA. we’ve organic capabilities fuel and X-Eleven bit distribution I Shneur, paying ample strategy to Sunoco – looking trace that of fuel organic we another bit projects. if We of an is that, flipped path the switching opportunities we been acquisition because a – little kind We off strategy, an at pipeline. by started acquisitions a Midstream over

in distribution sector. the I what and So Midstream we think both have with the fuel sector like we

flow, that opportunities financial to we – cash we we criterias obviously, be like we a ways that from all right other and ourselves. at or for to front pivot future, had of free the up But set don’t the like the for value. has fit the we point as far price standpoint. dries certain and acquisitions the more And capital as of creating have if to foreseeable at that, opportunistic in are us obviously, So

Shneur Gershuni

All appreciate I guys. my color have questions Well, safe of and for Thanks the taking right. today, all a day. really

Scott Grischow

Thanks, Shneur. too. You,

Operator

Our is next with Theresa Barclays. question from Chen

Theresa Chen

questions. for Thanks there. Hi, taking my

the primary years think going And of margins outsized just long-term forward? margin, last you could been of even you I above wondering, First, we’ve quarter, it the really what of range. and it’s economies do outperformance distribution that was drivers here? it seen us, this diversification on – again, think are CPG channels? results just the four And you your outside Is sustainable remind scale, is do how quarter

Karl Fails

This is good Theresa, morning. Hi, Karl.

Here’s look at margins. how we

distribution remarks, of last have had you have as upside prices quarter we this with movement would definitely quarters, of heard his conditions like first have characteristic the on market of has really we the think we prepared of kind number channels fell the that to put so portfolio say, would over quite hypothesis I mentioned fuel that, some range. Joe favorability of this us quarter that March, I capture a good a then out where of we – that $X.XXX favorable where margins. put up perspective, in but a the gasoline from tough $X.XXX we inside have large we up bit a lower, market on that margins, And amount the guidance a would in solid

really So average range. above look I asymmetry think that that when it’s that you basis, we’ve that, averaged on an

are this of at quarter. talked geographic respond out So our portfolio it time, that That that and has together the a we’ve play for profit the definitely factors gross that about We’ve diversity couple to and really in a crafted margin the that we proven years have. look that. to long into ability optimization, volume

that things of think guys and kind you going at the I about should look forward. are those So we think

Theresa Chen

with is that terms that distribution your below you’ve not at recent where into contracting And and And the us network of long-term what recently. implications transaction comes have recently your a with remind to announced a but what long-term can printing fuel any wholesale ago, your did buyer. in customer? you certainly guidance, below was renewal transaction with only customer the believe is the rate when fuel entered have supply Speedway. for largest we saw now Does acquisition I channel, into your up? far arrangement be entered been And agreement of of so supply a the and Years X-Eleven believe similar I very you. something long-term you Thank they

Karl Fails

Sure. Yes.

X-Eleven very with solid. agreement. original we The that was signed relationship a XX-year contract is Our

contract. So just XXXX, of finished at we the quarter our end the that second of first on year

So it XX years left. has a less little than

X-Eleven. relationship good what we we’ve be what we great just that they’ve about is stable partner of great Here’s the their the feel details They’re deals. strengthens grow good read a X-Eleven about press comment continuing to the think them. transaction, And think stated think – I’d company. going been don’t Speedway/X-Eleven we is, for about We we’ve I But should relationship a with the forward. And from on say and the in had other our goal well-run partner. a

Theresa Chen

lines, to those also you stated that? Do been for the with along seller customer achieved that within publicly have their And it’s with option grow the Okay. grow targeted to similar as stores they anything U.S. you arrangement? has your Can X-Eleven, the

Karl Fails

Yes. a that our X-Eleven built our growth four that into I’ll the of first contract was relationship the some was baked structurally. that couple deal into of you – it years if original actually years, over go with back

the addition sense. with that, to In opportunity our it them to we where and obviously based work relationship made have on

as we the have upside. say, as I’d contractual So additional well both growth,

Theresa Chen

you. Thank

Karl Fails

Thanks, Theresa.

Operator

Our next Credit question Suisse. is with from Spiro Dounis

Spiro Dounis

Hey, good morning, guys.

last Just that refinery I more the renewable want but some some you’re on into your about sides supply changes how diesel chain? question, about facilities. closures on of side, guess, idling, maybe on to value follow-up ask happening thinking indefinite both broadly returning and seeing

the side, retail. some ongoing demand consolidation seeing On in

Just to what your doing curious margins time? thinking how on And over that business? over you’re the that impact long-term, means to about overall, adapt for that? you’re What

Karl Fails

is Karl. this Spiro, Hey, Yes.

the then product of United States I’d while side, strategy foundations we’ve the into is in was stores our long say, and environment customer of a one talked supplying a On that buying that felt that was value overall, in spot. our the, in that, our being chain about supply we and our good for either long the spot

we’ve think I to the some demand is see. even long this will I industry balances in in in of right? that. that business refining the we off the demand, myself unprecedented a spent the these that demand level with and fall time the market for whatever So that I rebalancing the So be longer, seen think, appropriate make just refining

that’ll be really the So and on that U.S. I’ll turned comment has continue whatever the But into true. on let Joe think, definitely future holds, I export the strengthens side. our market retail margins. to the an ability

Joseph Kim

Yes.

returns. side, the and reinforce X-Eleven I transaction, about probably was On retail about And made think the I’ll reported the reasonable comment break-evens earlier I billion. $XX

I think, of reasonable one. $XX billion spends acquisition, whenever expect you rate they a – return that on on somebody

will – I a this depends think I it’s margins would X-Eleven margins going I note I don’t going calculate the constructive And see towards I it to forward. about So is be thing want it where you actually think the other this. could that, to transaction scenario negative think forward. the on of how valuation be

downstream I quality we highlight investors and remind does think have Sunoco. value of assets, it the and

all have there’s kind and of We compelling these of our factor downstream there’s of quality of a the I the together, When performance assets, all business. reinforces think, some argument we consistent undervaluation that Sunoco. our

Spiro Dounis

Fair Yes. enough.

on follow-up second of a around maybe seeing to Just some prepared regionally. your just question, what remarks you’re

breakdown pretty us different quarter impact, bottoms regions. sounded like You it some gave are resilient. a helpful around actually And the shut-in despite last pretty some of

Western across it a but that And You issues, more sounds primary then your give fair? what like detail you regions little a COVID in regions? demand I mentioned different states stronger. little some on us is increased seeing seeing are the you’re rebounding guess, could are

Karl Fails

Sure.

mentioned variability But little some think add color I prepared bit to I that. my more can in I remarks. a

decline a a we more rapid end we continued that states on saw, of have of of the the amount change. I’d – And business. at quarter. say, trajectory without Northeast of recovery saw, where decent the about think lot you If first a we their They’ve we

states, where and Southern kind amount more decent in business where I it’s our seen have a mean, interesting. we COVID backyard. of come you’ve Texas, up, it’s cases really On the of

And the Texas also definitely, look you recovery pace have is and component has our probably I’d last of a on flattened relative – cases we continued operate. that you that know have recovery based a spectrum different slowed So is with I’d a the operations of Then where even of obviously, to volume has strengthen not our volume-wise better the state down, said and or the end volume network. the decent whole I’d of course we is for But Hawaii. reported where has Hawaii, And with mid-teens of year been say, below tourism. current year, well. to amount relative average pretty of Texas maybe a as our like weeks. large several business the the a has their over in say, economy to volume quick. last volume one states COVID there, has is, the we we’ve of below the that recovery say, last then national at Florida,

on really even in they it by government that, the the on consumer So varies do. of markets state and of it and top But kind really depends what does. those what

the of geographies this – I my this minutes remaining and and the I deal, based prepared out. a foundation on and X-Eleven the that our we think And ago profit talked that well, think gross our mentioned diversity then remarks of that’s that’s diversity, value played fuel really about and I variability fuel distribution business. highlights in few and geographic as our channels,

even, have some in volume performance, areas So other lower we higher volume might where have with performance offset. we

Spiro Dounis

helpful. guys. Very Thanks,

Karl Fails

Yes.

Operator

is from John Our question with JPMorgan. Royall next

John Royall

guys. question. Hey, taking for good my morning, Thanks

high-level retail was is it of driven And can margin with how and how help between monic business? that strength us strength was much margins? just on by get how much $X.XXX to So in results, to much driven wholesalers for just I’m the shared a kind exposure terms larger retailers? adjusted, the your wholesale margin of kind of you of trying of sense your a by

Karl Fails

say, the the lot good our don’t distribution. around of disclose sense all margins that, in were detail of can Yes, margins higher give channels a by But channel. John, that’s a of question. I you I’d general We

we markets. as New mentioned where really have retail well retail I obviously, Jersey the there. assets to that And like we’ve those in Hawaii as Turnpike, keep some we elected So, exposure, good margin the earlier, are

chain well. those and from seen our areas those the dealer also areas. margins so distributor some value And business, benefited retail as we’ve down into higher in But going strong margins we’ve of in definitely

the So but I your all in to think cost them. wrap It’s the of wholesale we’ve side, head also seen of some easier Joe in margins true of kind the is that channels mentioned, break-even and it’s retail really stronger true. in around

Spiro Dounis

different you. then given It’s And with at said question period, well you’re helpful. where trough just angle, slightly and performing leverage Shneur’s a you looking Thank through from a quite demand doing into $XXX there Was of and the this this some year’s this EBITDA leaning conservatism instead of sort million-plus in any period of year. removing thoughts CapEx of around pulling back?

Joseph Kim

Hey, obviously, that’s quarter, I point. and to a John, now made the I customer as what to up flexibility was a the the far we time, a lot at for would think, we more go the as I of good CapEx prepared we that say And our us mentioned when quarter. exactly the we have level revision demand heightened and But of deliver in new we also uncertainty have end on remarks the first there at definitely to signing that the flexibility, have same there. is said – that because second clarity. the the

that the And I where can some a growth we’re we like definitely cash flow to, have, have have we capital. excess position to So we we think in if deploy guided upside. and free cash

I a you say, will position not now, to on in a down ready a position But actually we’re to market as go do good We’re said. went in right the we’re CapEx. we and But say, that. what CapEx, to of go up whipsaw on do

Spiro Dounis

much. you very Thank Great.

Joseph Kim

Sure.

Operator

from Lui is with next question Instructions] Fargo. Sharon [Operator Our Wells

Sharon Lui

Hi, good morning.

Scott Grischow

Good Sharon. morning,

Sharon Lui

can experienced provide of collections? And I I’m some color base potential of of in just in smaller guess, faring there how credit margins, is some and your any change risk or wondering on these closures customer any strong environment? given sites? this have you the you they’re

Karl Fails

Sharon. our in about I’d that, to customers is very say Hi, general. have resilient, What proven they be

been I in work base was customer our we and I’d say of things. think with obviously, liquidity majority the on that has generally, help last cases, mentioned some temporary customers or different call that vast resilient. So we

small, way history companies. which found find of back you of them look these that the get thought struggle. out a through, industry, difficulty, that’s store where think the it And majority our work. panning They on of other at the to business way lot if They’re a year. people a to family-based operators businesses are and If to you and convenience look make periods of going they customers, represents this I a good privately-held, were

Sharon Lui

if I you maybe And then on demand? Okay. you and for provide an what guys are Nolan update JC seeing could guess, diesel

Karl Fails

Sure. with related Nolan on we’ve the some in West Obviously, JC drilling lower seen the project. activity, the impact diesel to Texas business

have the continue pipeline. You seen black We’ve well. look double price was capacity they Saudi most in say, before full and projections to slowed our than side. impact performing the perform has well. for of actually in swan was the sites market diesel on performing generally the drilling XX% the I this pipeline beginning year very at the also retail Arabia/Russia the will second the XXX-plus on quarter, of below back the and of we better were war declines, the demand then we COVID-related of the It project. and Since

still crude we started floor like a look as up in the production $XX. we And region. see to around favorite found activity generally prices we’ve a third the actually back have pick Permian forward, seem As quarter some to as

results I we the on business Nolan But our quarter. of ensured So And that part as that’s our still has deliver our each example second to expect forward, approach solid we distribution fuel performance earnings. for another drag this look portfolio the in quarter was JC that we a think business where in strengthen.

Sharon Lui

Okay, great. Thank you.

Karl Fails

you. Thank

Operator

Our with Moreen next from Gabe question Mizuho. is

Gabe Moreen

everyone. morning, good Hey,

necessarily in last of a expectations the It side. or fixed mentioned costs being sort bug fixed variable component. Joe, like think, I about quarter the even – lot Just of a cost you’d maybe tracking, of on savings on you’re part and the the seems nature not

then So think could I that should will but non-variable about, guess, you of the also, increase, of I component? speak the we costs appreciate variable back-half the And component year? that in how costs on volumes to as things, rise

Karl Fails

the on costs. Hi, Gabe, I’ll Karl. comment this is

our in that. come you think how buckets with savings quarter, lower my we as related quarter, I back hit costs we at in clearly, And the we’ve have mentioned the costs, the cost of I as remarks, volumes to two some in. reductions. more look of had really second Volume-related cost on third gone those into the

side, through even and to the we fixed were out that’s all to of second-half take of into the business. the continue through and costs we year our look XXXX. And some going cost the able did fixed of On structure

say in QX, QX that and you million did but well of still higher the our QX million for So, tracking than I $XXX we’re be they expect very should year. costs guidance $XXX will were that to our inside in

Gabe Moreen

as Then ask M&A And I a just are a people sort the of thoughts around willing higher kind out change whether wholesale Karl. multiples plateau on still there, at those that’s indeed if of the if – given margins, uncertainty we on maybe businesses which you’re Thanks, question seeing the could out to are Overall, are will to transact well? also there? on landscape. degree

Joseph Kim

a couple have far you of that. questions embedded as in Gabe, Yes. as

insight the margins. much a going we’ll definitely, of see direction case, recovery the going and historically revert signs. scenario for it for for And margins be to there’s raised for historic goes I but well, wholesale either business, to it’s don’t as obviously, that’s conducive was where averages. baseline a any what kind the the mean would of I not think I As there’s to standpoint, of call it’s think, type And but on, to better not actually if that From of If are out, other get coming as for – or non-open far there. to better as below direction, there’s curve we’re much. – is, I that’s it our plays But shape there say assets. that seeing some if the an some a a encouraging back valuation higher. multiples not as like new I’m we’re – seeing into going revised not new open downstream just M&A processes

going but XX%, of to to XX%, buyer your I still makes even a calibrate up both information trying a margins that people seller XX%. sort three still through down when you’re interpret how and sense, it means what think XX%, are last are trying because forward, from the months People are to perspective.

our – strategy arm so quarters on strategy. go mentioned over go why us. to last probably four for on to strategy valuations develop kind business relying have of that we three I an organic hard a that’s versus us, And still to we’ve organic develop more a that If we switched fuel the versus distribution. capability or up, for work this over acquisition For acquisition

Gabe Moreen

Joe. Thanks,

Operator

would end gentlemen, turn the like call reached for remarks. Grischow and closing to Scott question-and-answer of Ladies I to we session. have back the the

Scott Grischow

us Well, on thanks, today. everyone, joining the call for

As out always, We’ll soon. everyone please feel questions. to talk free to me any follow-up to reach with

Operator

your you participation. Thank today’s conference. concludes This for

this your may time. You lines disconnect at

Sunoco (SUN) 6 Aug 202020 Q2 Earnings call transcript