SUN ADDS STEPS TO STRATEGY FOR INCREASED INCOME

Sun Co. Inc. has spelled out a new strategic program designed to boost operating income by about $150 million/year starting next year.

At the same time, the company reported a third quarter 1992 loss of $320 million due to writedowns associated with implementation of the new strategy and other activities. Operating income for the quarter was $22 million, compared with breakeven in the 1991 third quarter.

The key to Sun's new strategy is hinged to growth in its value added business lines: chemicals, lubricants, and transportation, along with branded gasoline marketing in the U.S. Northeast.

"To focus on these businesses we decided to first exit other areas," said Robert H. Campbell, Sun chairman and chief executive officer.

"We started last year with the announcement that we would begin an orderly disposition of Radnor Corp.'s real estate holdings. We continued this year with our decision to seek buyers for our coal business and our decision to withdraw from branded gasoline marketing in Oklahoma, Missouri, and Iowa and to reconfigure our Tulsa refinery to produce mainly lubricants."

MORE STRATEGIC MOVES

These added withdrawals, restructurings, and income improvement programs will be part of Sun's new strategy:

• Orderly withdrawal from all oil and gas exploration outside of Canada. However, existing exploration commitments will be honored, and production and development in Colombia and the U.K. North Sea will continue.

• Conversion from the current bucketwheel method of mining Canadian oilsands to a truck and shovel method, substantially reducing production costs at Suncor, Sun's Canadian subsidiary, and reduction of Sun's ownership in Suncor from the current 68% to 55% when warranted by market conditions.

• Reconfiguration of the company's 85,000 b/d Yabucoa, P.R., refinery to produce predominantly lubricants, much the same as is being done at the 85,000 b/d Tulsa refinery.

• Possible reconfiguration or joint venture operation of the 125,000 b/d Toledo, Ohio, refinery, which supplies the Upper Midwest.

"These actions will provide improved income and cash for investment in the areas we have identified for growth-namely, our Sunoco and Atlantic brands in the northeastern United States, our worldwide lubricants business, our chemicals business, and our pipeline and terminaling businesses," Campbell said. "We have a strong competitive position in each of these profitable businesses, and we believe they provide excellent opportunities for growth."

Campbell said the new strategy is expected to bolster Sun's earnings, improve return on equity, and increase shareholder value.

"We project that, even with no improvement in marketplace fundamentals, our new strategy will increase operating income in 1993 by approximately $150 million over what it otherwise would be," he said.

The largest part of the planned income improvement, an estimated $70 million after tax, is to come from lower expenses stemming from withdrawal from oil and gas exploration outside of Canada. The remainder is to come mainly from operational improvements at Suncor, lubricants emphasis at the Tulsa and Puerto Rico refineries, improvements in branded marketing and at the Toledo refinery, and savings in purchasing activities and expenses.

THIRD QUARTER CHARGE

Campbell said most of a $459 million in third quarter 1992 after tax special charge was a required step before the company could implement its new strategy. The charge breaks out as:

• A $200 million after tax loss provision related to the company's decision to withdraw from oil and gas exploration outside of Canada and dispose of certain marginal oil producing leases.

• $148 million related to restructuring efforts at Suncor.

• $61 million stemming from a program to downsize and reconfigure its Tulsa refining and marketing operations.

• $50 million in miscellaneous writedowns and accruals.

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