SUN - Earnings call transcript Q1 2021

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Operator

Greetings and welcome to Sunoco LP's Q1 2021 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. I would now like turn the conference over to your host, Mr. Investor Treasurer. President, Vice Grischow, Relations and Scott Thank you.

may begin. You

Scott Grischow

good everyone. you, Thank morning and

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

today's financial of and will measures, discuss results. as LP including certain financial the website the reconciliation I turn call, to over each discuss call to the non-GAAP for adjusted. first Sunoco measure. EBITDA cash flow a distributable also now adjusted we Dylan During refer Please to will quarter

Dylan Bramhall

Thanks, Scott. results first solid in quarter a We delivered challenging commodity environment.

approximately elaborate X-XX year payment $XX.XX on were total our margin roughly approximately penny and his totaled million a CPG of of quarter X% For of Karl per volume normal $XXX in partnership fuel first Adjusted the with million. $XXX $XX.X Year-over-year the income billion was gallon. of Fuel XXXX, X%. gallons quarter. EBITDA approximately will the this sequential million, XXXX. quarter. net seasonal X.X declines margin this fourth XX.X remarks. exhibited a of to further in the contributed million first was recorded Volumes from quarter $XXX makeup The compared the decline pattern, of the

expenses. to on Moving

were of cost $XXX $XX from expenses quarter, are our of operating reflection initiatives. increase slightly are total from the in reduction the million X%. $XXX first quarter down XX% approximately first up expenses million of a Our an largely in XXXX, and million These XXXX, in the QX, approximately

As and incremental some additional expense we the to volumes improve, year progresses expect business. related this

distribution distributable an a quarter same was as trailing quarter ratio First cash adjusted April at quarter, million, year continue of the $XXX On last $XX.XX we secure the a as flow unit unitholders. our X.X ratio our a quarter X.X per was progresses. X.XX and coverage we times [ph] X.XX distribution, decline we yielding times. declared end Leverage as of expect and as stable XX-month for XX, the target current which of to coverage maintain toward to times,

we EBITDA originally what unchanged full-year XXXX from in is XXXX. December, guidance Our provided

we year $XXX full expect to EBITDA $XXX the XXXX, of million. For adjusted between continue million and

fuel $X.XX and between gallon. annual expect We margins $X.XX per

X.XX million annual reiterate also We million between and million. of capital and for of total our maintenance gallons, $XXX expenses volumes operating in to range billion X.XX a $XXX $XX fuel billion guidance

on minutes few growth a spend to capital. want I Next

on of And with million, Our of was $XX original precise are capital. $XXX to today, approximately guidance least full-year million XXXX number $XXX year full terminal. million at be for guidance we announced a more providing spent Brownsville growth the

Brownsville into first Brownsville, exciting our of Let with the here milestone detail Texas. project. an a today, Sunoco little and go organic terminal for me take announced step a the we more project Earlier back stand-alone on in construction

how we in first, for on meets additional the strategic for three from this capital But develop up our framed project importance within a framework. strategic a this project. capital let all insight our some criteria see of with all organic area build fitting allocation you partnership. Karl In very pillar case, versus We me will allocation our give capital buy this wrap investment have perspective. an to we that were process historically able project our

First, pillar distribution upon our of is immediately of completion, this stable project supporting one cash expected ratio secure and and a target maintaining coverage distributable to X.X accretive be to times. flow,

for improve pillar capital right we no and the our additional debt At capital leverage this pay is coming which ratio Second, leverage cash target debt project end to retained to number the EBITDA. direct to two. from to need in this expect have this we down, X.X will year flow around level, of

additional growth strong disciplined so, I around a third, fuel base this that, financial Sunoco returns fits terminal, the Karl final is now in with walk turn remains with our opportunities. on over this project, business solid And investment and thoughts With pursue the the footing gross some which to strong to on through expenses. Brownsville and exciting will profit growth the call to opportunities. pillar,

Karl Fails

morning. business. want everyone. gives by about start we this that Thanks. additional I to today flexibility The our our Grande an We're opportunity and about Dylan. excited region this Valley that very important Good morning, the announced sharing Rio Brownsville project project of us. some thoughts is

have a distribution will Mexico. have Dylan to and XXX,XXX and and of us Valley over enable us capacity storage terminal new day. distribution We construction fuels As the project business, throughput highlights flexibility barrels supply This export terminal XX,XXX we a between our large and for of our into about, begun on barrels market existing a grow provide participate provide currently talked already terminals that synergies to in the fuel domestic our platform per fuel growing have that domestic businesses. in strengthen our footprint will will the sales,

project this mentioned, also Dylan strategy. fits allocation capital our well into As

to project our on build million single digits. to multiple be mid cost high our expect $XX in EBITDA the We

of overall stability project addition, and cash In enhances our the the flows. business

to less XX Finally, we the now. terminal expect be operation than months from in

last shared benchmark is to seen COVID use year, than thoughts which plan levels. as from XXXX from a our XXXX were on comparing in last fuel from all as some on to the about isn't we're our so basis, continuing our share quarter, more we off quarter even meaningful, first XXXX go second quarter quarter. Dylan as better I'll in volumes With we the volumes Next, better to results. that noise off X.X% year. year. We've a On through than little the performance volume XXXX relative X% were around little we the volumes, the that down of beginning X% last as

some better our performance network. average. to areas across far entire geographies, Florida, general as tourism the is seen bit even linked and of improvement are our travel, As than our promising we have various A that a sign like throughout doing

that the year will to half we better of second of the second the than the volume For rest and quarter, performance first. be expect the improved continue

Now, turning margins. to

quarter items. margins. An being last the the to was saw margins months RBOB month reasonable a of quarter. First prices a a XXXX. $X consistent of range post-COVID cited I to in months challenging time quarter, RBOB environments peak the of fourth breakeven last one-time will a fourth of higher an during the quarter. beginning per to that floor, what in two mid-March. $X.XXX continuation $X.XX gallon was our with over of excluding five nearly prices, increase with moved be in that of the in $X.XX quarter shared Last climb This XX% the [ph] incredibly over two these I world due followed per the The of from period a types we the higher gallon in last floor a per four gallon early in gallon to increase

which margins. that near higher So, range, bottom margins breakeven exclude base reinforces the and X-XX portfolio of our were the if end the the we catch-up of our resilience of payment, continuation

look volatility gallon the feel expect that environment. recovered to full As return to the forward, fuel commodity since and is We've confident that we the traditional lows. seen I year $X.XX to QX appropriate $X.XX off still margin happened mid-March more for margins as we have XXXX, per

Joe, and expenses. to continue the Before that business, control, I core on by what that, gross delivering our focus growth wrap optimization, to With up stating I'll to of turn over Joe. we I'll our can call just it we on profit turn over

Joe Kim

saw solid morning, Thanks, quarter. first our continue We seasonally improve. Karl. adjusted We a to volume fuel Good everyone. trends delivered

to within our side, industry the higher fuel The costs of optimize and margin attractive a have commodity have On proven we with and upside also the downside, the control capture us after continue profit margins even to challenging our combination we ability durability Quarter the gross when breakeven allows to of environment. quarter, allows it. the business. minimize commodity us to market supports

rise. Looking off second the start. prices a is to continue good forward, RBOB to quarter

the more normalized opposed volatility with to first quarter. as However,

On the volume in we seasonality, on volume along activity. increase with to based to expect increase fuel an economic continue side,

on adjusted we our and quarter With readings EBITDA early books guidance. in to the to expect first XXXX full-year deliver the second quarter, the

both terminal geography we terminal provides opportunities in growth midstream, growth, on attractive. export and Mexico. and It strategically we Starting The network, financially the synergies. product finished Brownsville financial where a fuel Moving us into attractive distribution is with a within capability the also midstream. see fuel thus to creating both material distribution to project have is

our a Brownsville location Mexico financial finally a terminal meets finished the be continue great and is to We criteria. it and to expect of importer major importantly, in to products And capitalize.

continue fuel to the our business. side, we organically distribution On grow

to acquisition We to majority growth. both fuel the opportunities organic have for vast self-fund in in put our a midstream. look and continue We’ll position ourselves of distribution

our also protecting our balance discipline, protecting financial line while Operator, of sheet. concludes may questions. with this prepared remarks, do you will We the the open security for that our distribution,

Operator

question. At Our [Operator with Barclays. question your Theresa question-and-answer the comes Chen Please first this from conducting Instructions] we'll be with time, of session. a proceed line

Theresa Chen

morning. Good questions. for my Thank you taking

a we the what parameters for to any of EBITDA risk can that? single-digit you around Will In about why terms terms it high the in mid talk be its development, little project, commitments, part by just example? third-party as about And now? of the underpinned Brownsville are bit in the multiple, more execution think of history

Karl Fails

it. felt been it's project for time morning, while do And like right kind of was Good on business. pieces Theresa. now really Hi, the a project of to Karl. based our and contemplating is We've three the this

We for one the path. this buy. versus flexibility. supply Rio there’s is our Mexico the opportunity that where supply And clearly, think lot of distribution Valley both excited Mexico. at And then, acquiring obviously the of about were of just build economics and additional mentioned, the in build the lot those product of has in to our domestic participating we sales distribution maybe about that and the of is there provides versus looked that for for of today. a base both Dylan and that then, the a to market, fuel border of a we volume that some economics from kind base from footprint. in the And is a of that first options fuel think And opportunities really estimate, looked we're at business trucks I a other on underpins own much flexibility we But, assets sell and I go in in based crossing you X,XXX our in a the we're of not the stronger and as a to going at having product terminal. growth, market as are By mentioned, think for adding on building the can about day current incremental added X-XX this into There foundation us into direct Grande our ourselves, fuel So, our the terminal, footprint. market, Dylan bring kind water, that terminals customers already of really we all.

that's to direct opportunity partners, into work export as well as sell So with an market we think that

Theresa Chen

is effort it. own their what permit market, enterprises? And terms that view foreign of fuel favor reforms, to your specific Mexico's competitors strengthening in their passed in given recently curtail on of private state-owned Got

Karl Fails

with US that's the a us partner have border, a think potential we've still build support already, watching customers is as bit a as the US out strong to business as a for and we of And go business, we've and, obviously, us, a something that's good supported into underneath, been market. companies themselves, well talked to PEMEX into try number PMI, them by Mexican approach that Yes, to we going on best having the Mexican for quite of to way then Mexico. asset and

Joe Kim

Theresa, this is Joe.

kind is one versus into evolving of we that on on of think us kind goes, border fact wanted the and Brownsville, way to think consideration, the that thing anybody asset border. we is, opportunity add right I the the gives the other who direction, the it [indiscernible] hard whichever we're in Mexico took about to regulations going tracking other I privatization that strong Mexican to right

the with we if for the can we it where direction more on do in that. or to take border a direction rail goes partner becomes regulation anybody easily that goes increasingly or legislation from whatever can PEMEX So Mexico, our a in If up trucks or then pick where us. into can them difficult, the else we

So we like that optionality.

Theresa Chen

just to how RINs is of most volumes? And a for with sense. Are currently recently, [ph]; business? this reviewing just product rising blender record XXXX prices portion can first you. going the Thank quarter with lastly, has of lot Makes elevated of remind your do us the to you Court think your in of the Supreme lot you what impact of RVO? a light clearly PRE-case And you the do for And terms of and in the RINs a happen the of cost. likely

Dylan Bramhall

we overall on movement they six are I seen last still they’re having seen other more we've call or are that, as the that In in that exactly we've part and in RINs to reiterate, than margins months so but prices crystal look last, $X.XX not the that into volatility impact have for watchers today, a first. going way years. that over large year, of we over are or baked whether any prices see like better on the I really take results, I'll RVO past number $X.XX market feel what will that be wholesale we've I for at ball we and it, said this whether margin. know our that's RIN don't Yes, is a than our the RINs But

Theresa Chen

Thank you.

Operator

question Our question. comes next John your Instructions] line Morgan. with [Operator from of with JP the Please Royall proceed

John Royall

my morning. question. Thanks taking Hey, good for

were the payment, had volume but makeup year only contracts, I just XXXX. payment won't million last on and about end that if So, know COVID the high-level, $XX on get you March specifics at the the really X-XX of hitting into

of COVID-related translating have and only we it's now year $XX.X a the So, million on full volume loss payment.

at I demand to isn’t out figure this much it the So, larger I'm least just magnitude guess, just loss the year. double number of year, in last what being in trying that so given why was

Dylan Bramhall

think quarters that X-XX last see were I them way everybody's were stated would in think clearly were we off. But Sure, The as off them as we John. to that volume that X-XX off. much about off, to The is that volumes that volumes rest supply the volumes with I didn't of I supplied consistent few we the our customers.

from comparing So million much them million maybe rest under we volume off to to supply the I think $XX.X not what you're of the little I’d the year. as That's that, the was last into as read that $XX business. our is

John Royall

the rebound those did volume on either overall direction? And I Nolan you. the you're the then, Thank on with are J.C. how I in prices, as pipe, in have the wanted an understood. see developing to to assume starting see Okay, effect how that of come trends much back volumes declines

Dylan Bramhall

and you're couple we've can the months as seen as track of you right, well. this, Yes, last over

rise some see they've there. and our but business been view count prices, there they've people and steady coming now, rig where that's steady at call have the there, still crude and business expect I And staying seen It's of while our think other most continue more it combined and our I longer been we'd steady while slow the progress. a like they to for with are where You increase least looking some I'd with a think for of that out diesel them that in we is portfolio, entire out off than average up,

John Royall

Thank you.

Operator

And in to call there queue. the no to the like over would Scott remarks. I back turn And questions further the left closing Mr. for are Grischow that, with

Scott Grischow

Thanks morning. again us for this joining on call the

to always, great questions, reach me. have any free call. to additional This you Have As a concludes if please today's out day. feel

Operator

today's concludes This teleconference.

a your and participation You your lines you wonderful for disconnect may this time. day. have Thank now at

Sunoco (SUN) 6 May 212021 Q1 Earnings call transcript