27 July 2010 18:36 [Source: ICIS news]
Speaking on a conference call for second-quarter earnings, CEO Bill Klesse noted that the 10 ethanol plants it agreed to buy in 2009 were already paying dividends, with second-quarter earnings moving to $35m (€27m) from $22m.
“Acquiring these plants at large discounts to new-build prices and leveraging our overhead structure helped us to earn good returns on investment, even when margins were low,” Klesse said.
The acquisitions began in March 2009 when Valero said it bought seven ethanol plants from bankrupt US producer VeraSun at 30% of those plants’ replacement cost.
Then in December 2009, Valero agreed to acquire three more bankrupt ethanol plants at 41% of their estimated replacement cost, raising the company’s total capacity to 1.1bn gal/year (4.2bn litres/year).
That capacity made Valero the second-largest US producer of ethanol.
“We’ve established a strong position as one of the largest, most competitive producers in the ethanol industry by building a portfolio of world-scale, cost-advantaged plants,” Klesse said.
Overall, the company posted a second-quarter profit of $583m, up from a net loss of $254m in the same three-month period of 2009 due to higher margins and better discounts for low-quality feedstocks.
In particular, the higher margins were seen for diesel and in many of the company’s secondary products, including petrochemicals and lube oils.
The company said that export diesel demand was particularly high for its US Gulf facilities, but that July and August levels were off slightly from a 2010 peak in June.
Valero also noted that demand in Mexico had exceeded supply, which worked in favour of US refiners.
For specific refineries, Valero noted that turnaround work needed to restart its shuttered 235,000 bbl/day Aruba refinery should be complete in September, adding that the company was continuing to look for an ownership partner.
The company also said it was continuing to look at alternatives for its Paulsboro refinery in New Jersey.
Meanwhile, Valero said that its 170,000 bbl/day Benecia refinery in California and its 90,000 bbl/day Ardmore refinery in Oklahoma would each undergo overhauls in the 2011 first quarter.
Valero’s stock was down 20 cents, or 1.1%, at $17.36/share in mid-day trading on the New York Stock Exchange.
The refiner’s second-quarter income was its first profitable quarter since early 2009.
($1 = €0.77)
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