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Valero Energy’s quarterly profit gets boost from ethanol arm

Valero Energy Corp, the largest independent US refiner, reported a higher quarterly profit as lower corn and stronger ethanol prices boosted the company's ethanol unit results.

Net income attributable to shareholders rose to $367 million (€339m), or 81 cents per share, in the fourth quarter ended Dec. 31, from $298 million, or 62 cents per share, a year earlier.

Operating revenue rose to $20.71 billion from $18.78 billion.

Refining business

The refining segment reported $715 million of operating income for the fourth quarter of 2016, compared to $876 million for the fourth quarter of 2015. Excluding adjustments shown in the accompanying earnings release tables, adjusted operating income for the fourth quarter of 2015 was $1.5 billion.

The decline in operating income in the fourth quarter of 2016 when compared to the fourth quarter 2015 adjusted amount was due primarily to narrower discounts for most sweet and sour crude oils relative to the Brent benchmark and weaker gasoline margins in some regions.

Another factor contributing to the decrease was higher costs to meet our biofuel blending obligations (primarily from the purchase of RINs).

Biofuel blending costs were $217 million in the fourth quarter of 2016, which was $60 million higher than the fourth quarter of 2015, and $749 million for 2016, which was $309 million higher than 2015. The higher costs were due primarily to higher RINs prices.

Ethanol arm

The ethanol segment reported $126m of operating income for the fourth quarter of 2016, compared to a loss of $13m the same period a year earlier.

The increase in operating income in the fourth quarter of 2016 when compared to the fourth quarter 2015 adjusted amount was due primarily to lower corn prices and stronger ethanol prices. Ethanol production volumes averaged 4 million gallons per day in the fourth quarter of 2016, which was 104,000 gallons per day higher than the fourth quarter of 2015.

Corn prices

Valero expects export demand for ethanol to remain strong and domestic demand to improve with three seasonal increases in gasoline consumption. High domestic corn production is also expected to keep corn prices low in the near term.

“Domestic refined product demand remained strong and we exported 359,000 barrels per day of gasoline and diesel combined during the fourth quarter,” said Joe Gorder, Valero chairman, president and CEO. “Looking ahead, we expect an improving economy and relatively low crude oil and refined product prices to support consumer demand growth.”

This story was written by Liz Gyekye, editor of Biofuels International.





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