Sunoco LP Q4 FY2024 earnings call

Management Statement and Operational Highlights

• The fourth quarter capped a record year for Sunoco, with adjusted EBITDA of $446 million in Q4, excluding ~$7 million in one-time transaction expenses. Full-year 2024 adjusted EBITDA excluding transaction-related expenses was $1.56 billion, a 62% increase from 2023.
• The NuStar acquisition closed in early May, leading to upward revision of 2024 adjusted EBITDA guidance to $1.51 billion to $1.57 billion, including ~$50 million in synergies. Leverage at year-end was 4.1 times, flat to prior quarter.
• Declared an $0.8865 per unit distribution, a 1.25% increase from the prior quarter, with a target of at least 5% distribution growth in 2025.
• Credit profile continues to improve with multiple credit rating upgrades since 2022, and DCF per common unit has grown for eight consecutive years.

Segment Performance

• Fuel Distribution: Fourth quarter adjusted EBITDA was $192 million, down from $253 million last quarter and $209 million in Q4 2023. Distributed 2.2 billion gallons, up 1% vs last quarter, down 2% vs Q4 2023. Reported margin was 10.6 cents per gallon, compared to 12.8 cents last quarter and 11.8 cents in Q4 2023.
• Pipeline Systems: Fourth quarter adjusted EBITDA was $193 million (excluding $5 million transaction expenses), up from $147 million in Q3. Throughput was 1.4 million barrels per day, driven by increased volumes across major pipeline systems.
• Terminal: Fourth quarter adjusted EBITDA was $61 million (excluding $2 million transaction expenses), down from $70 million in Q3. Throughput was around 600,000 barrels per day with seasonal decreases.

Guidance

• Confident in 2025 adjusted EBITDA guidance range of $1.9 to $1.95 billion.
• Target distribution growth of at least 5% in 2025, with expectations to announce future increases quarterly.
• The addition of NuStar assets provides income diversification across three strong segments, positioning for continued growth.

Risks

• Volatility in commodity prices, as seen with recent tariff-related market fluctuations.
• Uncertainty in policy directions, such as potential elimination of EV subsidies or rolling back of CAFE standards, which could impact refined product demand and pricing.

Question and Answer

Q: Justin Jenkins asked about fuel distribution in Q4 and early outlook for 2025, and thoughts on tariffs.

A: Austin Harkness noted the divestiture of West Texas business and Transmix move impacted margins, but underlying fundamentals remain strong. Joe Kim mentioned higher tariffs lead to higher prices, and Sunoco has a track record of performing well in volatile environments.

Q: Spiro Dounis inquired about distribution growth and 7-Eleven makeup payment.

A: Joe Kim stated confidence in distribution growth with at least 5% target, and Austin Harkness said the 7-Eleven makeup payment is trending higher than last year, approaching ~$30 million.

Q: Noah Katz asked about future accretive M&A and opportunities in Europe and Caribbean.

A: Karl Fails mentioned using similar criteria as in the US for M&A, looking for stable cash flows, synergy opportunities, growth potential, and favorable valuations. Both Europe and Caribbean are areas of interest with potential for growth and synergies.