27 January 2010 18:46 [Source: ICIS news]
"Looking back on our investment in the ethanol business in 2009, our timing could not have been better. We bought high-quality ethanol plants at a fraction of replacement cost, just before ethanol margins turned higher," Valero chief executive Bill Klesse said in a statement released with the company's fourth-quarter earnings.
On the fourth-quarter balance sheet, Valero showed a retail gross margin of 81 cents/gal for ethanol. Based on that profit level, 2010 margins would eclipse year-earlier levels as all of its plants come online.
The San Antonio-based company added three bankrupt ethanol plants in December to its seven plants acquired in March, making it the second-largest US producer of the biofuel.
Valero executives did not rule out purchasing other ethanol assets, but the company's management said it would not match 2009 spending on ethanol this year.
The company also acknowledged during a conference call with investors that it would be open to buying profitable crude-fed refineries despite halting production at two of its facilities last year.
"We are always interested in improving [our refining] portfolio," Klesse said. "Primarily we look in Europe and look in North America. You will see us continuing to look."
However, Valero took cost-cutting measures last year as poor margins for refined products contributed to the company's $155m (€110m) fourth-quarter operating loss.
"We believe that the industry has to rationalise and consolidate here and in Europe," Klesse said. "We think we are a 1m-2m bbl/day long in refining capacity."
That move followed an idling of Valero's distillate-producing refinery in Aruba earlier in the year.
If Aruba was running presently it would not be profitable, executives said. The divide between cheaper sour crude and pricier sweet crude narrowed the price advantage at Aruba, pinching crack spreads for products such as diesel and jet fuels and heating oil.
Valero executives did not address rumours of an Aruba sale to Chinese buyers during today's call, but said the refinery would not restart until it becomes profitable.
($1 = €0.71)
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