SUN - Earnings call 3 2023

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Operator

Greetings, and welcome to Sunoco LP's Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Scott Grischow, Senior Vice President of Finance and Investor Relations. Thank you.

You may begin.

Scott Grischow

morning, good and you, everyone. Thank

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

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

acquisitions. increase compared all attributable Sunoco's partnership up million $XXX year. performance of ago. was sold $XXX for third on the per continuation financial ago. $X.XXX Fuel gallons, was were throughout quarter the $XXX Peerless of from quarter the third expenses $X.XX million of Zenith year from year. strong Fuel EBITDA $XX volumes margin quarter The of X.X gallon year-over-year per to million, XXXX. last compared a Total gallon This a adjusted operating gallons quarter increase year third billion to were an period a brought X% million The and last to generated same the

capital. in capital we and the of million million quarter, growth third During maintenance spent $XX $XX

and consistent ratio $XXX quarter On distribution October the last million XXXX, quarter Third X.Xx. yielding declared $X.XXX XX-month we a of Xx with quarter ratio third was coverage million to an compared $XXX cash a coverage in distributable as XX, unit flow of per current of trailing adjusted quarter.

and we the X% distribution next will the we increase XXXX, quarter our determine in distribution next first recall, of may you by year our increased in As quarter. first

improved the allowed $XXX difference on our the interest the million At used it repay completed offering leaving of a of but to offering X% of borrowing Turning We This between on the outstanding to at had approximately of of the balance X.Xx. outstanding September, sheet. facility. borrowings on end was Leverage credit liquidity. revolving achieve we quarter In the only quarter, our current notes expense end third the an facility us given we our the of the the cost senior in fixed savings position, the also portion the notes due notes. from revolving the $XXX offering credit $XXX net proceeds a and of rate revolving million to liquidity facility not million credit new XXXX. on

of opportunities. further result maintain any our protect consistent X outlook the flow the end as operations our growth; of pursue above performance are with on to million range first, in annual full $XX focus revised continue generation represents Finally, a remainder the year to the a guidance million. ability demonstrating disciplined EBITDA top sheet; growth second, This increase of our cash $XXX reliability of us distribution and the to a issued be for allows free to strategy in cash The year-after-year environment. strong flow to secure to XXXX year-to-date our allocation we and investment remain grow our and in for our to pillars: capital balance increasing to third, and guidance in we May, our our year,

our walk strong performance. continue that, call will thoughts to I now will framework third Karl returns this to on that confident turn over to the some unitholders. With are to We quarter deliver our additional through

Karl Fails

you Thanks, quarter-after-quarter. morning, operations to and We and at growth, volume acquisitions. strong are sound. by strength expense When margins, quarter, The supported back fundamentals Scott. accretive continues discipline, business, in efficient perform it delivered Good step everyone. another continued look our

a of financial We put strategies the in we position, and ourselves opportunities. take to market have solid have advantage

volumes about versus our contribution organic last continued Our comes the of to in demand well in geographies. year. third and up growth deployed, quarter as this The as from quarter were both acquisitions, the growth years relative some through volume from X% prior capital

and sign U.S. volume $X on second above highest were quarter history to the is consecutive various are compare we we is as This our grow new up sector in this quarter picking delivering in quarter enter is volumes growth and and that that gallon When outpacing tangible demand, clear geographies where you the existing all our occurring it another marks the the our This reports market share, billion markets. our mark. results.

There decline continued end the respect to quarter. the with quarter a As will profit of seasonal the volume year, we to fourth volatility, market margins. strong first years for sequentially, story breakeven our over and in increased delivered quarter. strong margins of the in share prices relative our last remain strategies no of as margins even margin margins the the some this we we of The third optimization but see higher continued the look position normal expect rising The quarter of gross would strong. With market few to $X.XX that is per in performance gallon. half combination extraordinary delivered

in we expect remain same to the fourth to the forward Looking fundamental factors place. quarter,

some island as to wildfires the However, deliver our of volume, you and strong over look period, just a want full our when the at said briefly Even have we to continue results. I August. quarter-to-quarter, experienced lower are growing times, often many like business Maui on when on the year to margins with we compared with quarter. touch seasonally third in variability devastating

the not our reduced Though by We business have to clearly, and island. to sites additional it result as the been travel is were there that a X results. some fires, has impacted overall, impact of material

that are many them employees are dramatic homes we of though and safe, our to importantly, experienced families. impacts all their very More grateful

have Hawaii worrying proud of We Thank able extremely contribute neighbors livelihoods our to you find their pivot and response. about and all to are own been to they help their the of team community from the on how to them. lives and ways impacts and in

to in range in that expect Consistent quarter. for to discipline shared the that expenses second Turning basically of third the our flat core expenses. in they managing in results full EBITDA we our our demonstrate year, and were with the guidance to be our the remains Even increase our May. expenses strengths, firmly we one quarter as

of and our with billion also guidance revised growth, since If our remain in and in Both we working deployed May. profile, these $X.X of at we maintenance growth Moving we on to approximately line of have capital overall the XXXX XXXX. beginning growth provided acquisition capital. look

and Our fuel assets. growth strategy on has distribution midstream adding been focused

businesses we our fuel side, invest able to identify same. I can strategy appear supply business margin. unlock is fit sheet to in how balance execute volume, businesses fuel the add at step expenses We optimize have with our discipline and and we acquisitions, value at results. might out to value. We the our On supply expand our costs our been chain, talked to look and grow capital growing where utilize be the we acquisition those reduce that on find into where the ways already that We or core, volume. businesses fuel acquired the midstream the a Puerto are like distribution strategy transmix about that assets, even in Rico integrating or

will United fuel in largest of also come operational any product now are represent Simply the while acquisitions our to These continue for transmix operator. in operators growing assets value one scenario, refined put, portfolio. States that decades the for energy infrastructure and transition themselves. distribution our results subsequent terminal supporting have speak the largest We and also to high-quality

growth continue the are Before turning deliver to to of us Ultimately, strong about this. company. profit stability over on tools grow. Sunoco end I those discipline I base a our enable all the business expense will that and our the in Joe, lot current optimization. to market foundation, results and gross a talk time our business, both remains

will investing appreciation Joe? stakeholders and our will in continued high-return results attractive for immediate multiples, and do accretive deliver acquisitions organic on at price. in We ultimately drive projects our making that unit through transaction focusing which

Joseph Kim

third Good We a Karl. everyone. morning, delivered strong quarter. very Thanks,

as Although quite earnings expenses. over, this not whole. On highly remained what XXXX profit a year companies want has level, volatility Sunoco select optimize higher for gross distribution supported is Obviously, combination sector. manage a strong margins macro has does I fuel the this that The breakeven to energy some and commodity perspective is and of within well. can on provide attractive

and in the terminal providing growth has portfolio, our stability overall addition, enhanced In our growth opportunities. further business

we're result, year. another a for on pace record As

EBITDA guidance our increased year As the Scott we XXXX. mentioned, for full

and we new more will our few expect preview outlook. I'd This investor presentation, in key We XXXX a same a XXXX. the December, guidance like themes. provide business which to of include will formal

to expect XXXX. have another strong and We in year grow

we environments. in expect increase next various ample distribution and to and again cash set a We flow, on both inflation opportunity expect outlook And our to industry we finally, risk increasing stable of of fuel expect continuation recession the Regardless through our track acquisition, in our position the business results we're With we macro to our uncertainty, in strong deliver attractive. and various grow supportive, and optimizing proven remain of record to one's portfolio remains our organically fundamentals expect environments. geopolitical demand, year.

coverage All of our strong maintaining while and prepared leverage this that remarks. concludes ratios. Operator,

open for questions. the may line You

Operator

first Theresa Chen Our Instructions] question from comes [Operator Barclays. with

Theresa Chen

gaining been in go markets. primarily organically these company. remaining talk to about you wanted back Sunoco you about acquisitions? able being the comments tumultuous comments growth by have a is share about this if to the to market volatile market and grow how Or driven Karl, your share? Can to I

Karl Fails

Theresa, you you market on think the contributions think I the question. of biggest. if And kind the components share and about to the thanks hit growth, X for our

volume quarter quarter But made last additional in capital So addition, spend through then the say that's advantage last generically with quarter in our end demand, growth biggest consolidating there And third to clearly, -- of is coupling market that's growing at we've of Peerless long-term we growth whether acquisition business. in our channels agreements and finding and third and this capital, acquisition customers are new working standpoint, from that of and versus branding capital. our the selling think I'd year growth wholesale difference supply where year. to that various opportunities signing in investments in through both year this take an that I

the acquisitions, So capital. it's combination would of the probably growth we've say little not a of towards working had in I growth from coming more but discount that the capital both investments really a I'd those. and

Theresa Chen

interested you're you're to changing? in? How can of M&A valuation invest on about where it landscape, outside as infrastructure coming there wholesale assets with far market talk Got your you evolution side, the midstream are it. And to sense what of along that makes that parent? assets particularly is distribution the seeing And opportunities to as on

Joseph Kim

Theresa, this is Joe.

the same pretty much robust. I for know last Assessing probably M&A it I've X landscape, looks years, or said opportunities that put this probably X out the for way. there would I -- the the thing

probably maybe same or expect forward, Looking and to next be I it to would year, the year even to better. this exactly

situation that a table. to is we're think with people now the sheet, like we in balance bring strong So I synergies Sunoco right the

well separate both sectors. trying and very we come to between up. like think fuel situated midstream, we're And whenever I distribution opportunities out

it's we've actually actually one of other, the some done the And is acquisitions both. not or

both. So in we're equally interested

there's or advantage really good if Transfer, comes that up, we'll opportunity And position of of it. opportunity in right a when we're take alone think that. take up Energy advantage I to an the pops with Sunoco

Operator

Citi. Our next question from with Dounis comes Spiro

Spiro Dounis

around back distribution comment Joe, to the increase. let's come your

You year. sound as head once pretty constructive into we next again

And right factors the so determine increase will could just you that size of and wondering some remind the be us looking distribution if of that you could at be? you when Board the what

Scott Grischow

are up when that this evaluate company. long-term can ensure to increases play capital and We we those moving protect Scott. to staying is And if surety strategy, there's leverage a be primarily of distribution the position the come one And target. and really But balance Joe continued the factors want to Spiro, We distribution allocation and forward. the to take our to necessary. think in really grow our maybe I'll that continue true operate want sheet into X follow forward. want below we at right? to moving or I

and primary distribution to distribution, can X want continue year, the subsequent opportunities So I growth then to we those that, think where ongoing to are think increases. factors. future evaluate ensure right? sizing opportunities growth we it in And So to I each the

something As this distribution or as talk in And announcement I to that sit should expect Joe above -- said, we're today, in increase. a another you with X% year. we here to think position we earlier our about the XXXX announced at

Spiro Dounis

just Second on maybe question, Peerless.

update Just curious any that coming if you us out potential guys can of asset. opportunities on

I for almost about excited year to pretty think you're there and out be new you've owned a able like sort your of sounds it string what now, it of ownership. you'd under

as it how CapEx update should and be we thinking So think that? EBITDA the magnitude, And there? size contribution, whether one, we any or be about about

Karl Fails

the spending Spiro, island. the EBITDA it. We've increase been when capital. is working supply, XX deploying roughly some the That we've introduced that Karl. we it, really Yes. this And through was, in Sunoco call purchased to capital, teen asset able low to our already somewhere optimizing brand to

of the it's team there strategy our how that ability think material, more foundation live and acquisition we make to to has down super continued kind with the happy we that balance growth going that even a what that base going growth. we're at sheet go an overall business very with use into results there as deploy From down geographies just So as a an standpoint, isn't the new example company we're done and not to but we've we're capital. our achieved we're looking we that doubling further for our and and of with

to profile growth to know So grow or with that deploying the clearly, you going But I look continue a that acquisitions to change can materially we're I Caribbean. deploy going for -- whether have our don't and opportunities, that's share plan growth to continuing be we in capital.

Operator

[Operator Our Royall comes question with next Instructions] John from JPMorgan.

John Royall

in on the you year So when with between time the now and my $X.XX relationship down put But first fuel a margin was question and volume. out and XQ. bit much ticking little view $X.XX you're at is a understandably commentary the your started maybe tracking closer margin. you guidance to about the

you'd If volume. clearly, you higher margin, good on a on were amount And be lower probably higher both. you're on

level. think should you to we it such how expect just example? maybe in question the And high do environment think better-than-expected much is my What closer forward, sort $X.XX is a led sustainable for of So do that to has level margin? going you of

Karl Fails

highlighting and for John, It's the think results. is thanks on Yes, we our about question. I definitely that something worth think

conditions. and component certain think to did Joe our gross to do, put So said, advantage go curve. about you to fast down the think link last being And said, remarks relationship together to going prepared fat level, and are today, we back take a year, then of is continues. that, we able that kind market margin think where it we to when in let's select insightful of I said it's as his we you But if part -- forward guidance of each that comment the companies I as a look adds together, hey, made volume the we said, individual we we of hey, really this at profit. And for

below the really right? to true of we've that's If other phenomenon, breakeven you this or volumes slightly right, market So demand margin last demand. where over is things inflation higher even and recently, whether years of the provide some most breakeven it's margins EIA year. supply between for data, declining, contribute maybe year more are to if problems few at year, That's last is higher remained margin. volume flat Overall, this and a that flat to look market-related it's then sources support to seen like things the going or chain or relationship

we're With And higher our scale, our support So growth. advantage that take margin. to the is original on, what able breakeven year last of continued of on that we've our margin delivered then that excess the thing was probably side. provides in guide

growth to volume the where growing And where that market. and prepared areas. some breakeven does I so both of -- we're advantage and Theresa's It's and I talked added that do to come about really take us able And and due that's margin in really in outdeliver remarks, to in capital then our we isn't from my from? how coming really share so about higher tailwind market was think deploying question

John Royall

without I And asked, over. question getting answered second turn Karl, so my it even you will

Operator

Our Akyol question Stifel. next Selman with comes from

Selman Akyol

do appropriate you or is I to have Scott, just to I Number with? I terms think outlined you was the you run you when of Spiro's Board follow wanted consider, guess curious, just a the ratio up the questions or this on in capital. of of return you A goal is, coverage -- guys what of business there. one couple sort questions things

Scott Grischow

talked to Yes. of ratio. part X.Xx be at coverage we've strategy as on allocation our above the Selman, capital or

So think where see term and that's and increases. area the the general targeting about kind of the distribution long we'd for like we're coverage to that we how any

Selman Akyol

And talk Got when it. you of also with then the within Board, consideration repurchases? is any there guys there,

Scott Grischow

a return obviously discussion. been have capital part a of of Buybacks

see view we and to future. buybacks lot we contemplated in providing a but in haven't the think is options unitholder the flexibility unitholders of confidence our ensuring to increases doesn't value, It I past. create distribution mean

transaction as know, As do XXXX. the part in you did of X-Eleven proceeds one back we

we growth and providing the So as the return, ability. discussion, distribution see in they I entered have biggest the our increases most think but confidence

Joseph Kim

think we with that the at too and value significant reasonable look see from standpoint. organic a between Selman, synergies. opportunities, balance from maintaining Joe. that our is said a and approach both just we at a secure to like growing and one do we and sheet. is this that is acquisition as we we And is important add other I'll also, growth other strong capital really potential. this landscape Obviously, growth an distributions Scott as can thing But what balanced

for can value stakeholders think that area. on our we create particular we So

Selman Akyol

Got ask 'XX. your than over let back to 'XX, the And model even back me look like to if you it. less this million and mean, go I then balance and go sheet, -- $XXX I back just back as over cash I and had I guys consistently,

back look ended cash with I in you quarters, over the As that, $X.XX last running and several this quarter cash. billion you're above well

all Is the on on up something are to the cash? you more as Or there is to the on nicely just changing thoughts in want well. guys there receivables hang Is by any cash business? Your something balance sheet? there

Scott Grischow

Yes, saw of the that Scott. end That and This around the quarter, were end third Selman, think second you They at is $XXX the were that. cash Those was not bank million. cash balances. the of I'll balance also take I at cash. quarter booked

timing down there. obviously So revolving reinvesting in on the obviously possible, facility pay to acquisitions. that obviously credit element a cash business and towards manage there We and debt lowest level is the redeploying our

to So that long growth. term. or trapped cash balance for the is not held the It's sheet being back being put to or

Operator

Our Fargo. final with question Wells Baramov comes from Ned

Ned Baramov

volumes your resilience well-documented Given the base margins, to forward thought longer-term typical the that of to forecast December? is and/or and your a opposed on provide update there as growth distribution business interplay a X-year EBITDA provide and in between you

Joseph Kim

Good it's question. Yes, Joe.

We try have to but be prepared few presentation. me that remarks, themes the clearer to investor in to highlight December -- a out -- put we're one. let I a tried this even going on of And the

our sheet last and X get years, for you seen look our year-over-year you've better. If balance the look you at business

we've a coverage but fundamentals in term even XXXX, industry and has perspective. we ourselves position to guidance done grow, could even done do our plan been on a longer is our seen growth. in really in thrive every and about in And formal What far those we to further fundamentals Sunoco talk talk seen our December about and how a go grow. confidence you've time haven't December You've what EBITDA

So bit the we'll if little and around you some December -- thought of XXXX a about where patience good give right with is corner, insightful beyond.

Ned Baramov

looking I'm great. the in December. update to forward That's

Operator

the session. comments. back over to reached like I'd call to now turn of question-and-answer for Scott We've end Grischow the the closing

Scott Grischow

and great us for joining any day. with Please on call to everyone, to out the thanks, follow-up free everyone morning. questions, soon. we'll a reach talk Have feel this Well,

Operator

This concludes conference. today's

this participation. You we at may time, disconnect you your lines for and your thank

Sunoco (SUN) 1 Nov 232023 Q3 Earnings call transcript