Valero: Operating income of ethanol business up in second quarter

By Ann Bailey | July 26, 2016

Valero’s ethanol division reported $69 million of operating income in the second quarter of 2016, $39 million less than the second quarter of 2015. Last year the second quarter operating income was $108 million.

However, the second quarter operating income of Valero’s ethanol sector in 2016 was $60 million more than 2016 first quarter income. Production volumes in the second quarter of 2016 were 3.8 million gallons per day, similar to the second quarter of 2015, Valero said.

The gross margin per gallon of ethanol production was 48 cents in second quarter 2016, 16 cents lower than the second quarter of 2015, Valero said.  In the first quarter of 2016 the gross margin per gallon of ethanol production was 42 cents.

Other highlights of the second quarter Valero report included:

- Reported net income attributable to Valero stock holders was $814 million or $1.73 per share.

- Reported adjusted net income attributable to Valero shareholders was $503 million or $1.07 per share.

- $683 million in cash was returned to stockholders through dividends and stock breaks

- Costs of $173 million were incurred to meet Valero’s biofuel blending obligations—primarily for the purchase of renewable identification numbers (RINs) in the United States.

- Completed and started up a new 90,000 barrel per day crude unit at the Houston refinery.

- Exported a second quarter record 396,000 barrels per day of diesel and gasoline combined.

Despite a challenging earnings environment, Valero’s operations generated $2.3 billion of cash in the second quarter, said Joe Gorder, Valero chairman, president and CEO. “Our advantaged refining portfolio in the U.S. Gulf Coast and our team’s focus on safe, reliable, low-cost operations allowed us to continue delivering solid performance, despite lower margins.”

Demand for refined products domestically and in the exports were again strong in the second quarter, Gorder said. “We are also encouraged by ample supplies of medium and heavy sour crude oils in the market, which should help to expand their discounts relative to Brent crude oil, and by a positive demand outlook.”

Ethanol demand will remain strong, given gasoline demand in the United States and attractive economies for corn-based ethanol exports, Valero believes.