The third-quarter 2008 results were positively impacted [image-nocss] by an increase in the 5-3-2 Gulf Coast crack spread compared to the year-ago quarter, a significant decline in wholesale fuel prices in August and September which contributed to higher fuel margins, in addition to continued ethanol blending at the retail and refining segments. For the three months ended Sept. 30, 2008, Delek US realized a $4 million pre-tax gain on the disposition of real estate and an $8.7 million mark-to-market pre-tax gain associated with ethanol swap agreements.
Uzi Yemin, president and CEO of Brentwood, Tenn.-based Delek US, said, "Our third-quarter 2008 contribution margin grew by 25% compared to the year-ago period, supported by a continued downward trend in commodities prices. Our Tyler refinery remained fully operational in the wake of hurricanes Ike and Gustav, allowing us to benefit from elevated Gulf Coast pricing in early September. While hurricane-related fuel shortages impacted retail sales volumes in core regional markets late in the quarter, a general trend of declining wholesale fuel costs contributed to higher fuel margins in August and September, resulting in improved profitability at our retail subsidiary."
The refining segment contribution margin increased 10% to $29.6 million in third-quarter 2008, compared to $26.8 million in third-quarter 2007.
The retail segment contribution margin increased 12% to $23.7 million in third-quarter 2008, compared to $21.2 million in third-quarter 2007. Although hurricane-related supply shortages adversely impacted fuel sales at many retail locations during September, Delek US benefited from higher fuel margins throughout the third quarter which served to more than offset lower sales volumes in the period.
Retail fuel margin increased on a year-over-year basis by 8.7 cents per gallon to 23.9 cents per gallon during third-quarter 2008, serving to partially offset an 8.9% same-store decline in the total number of retail gallons sold in the quarter. The increase in fuel margin is mainly attributable to a favorable spread between wholesale and retail fuel prices in the quarter, in addition to favorable blending economics associated with our ongoing E-10 (ethanol) blended fuel program.
For the three months ended Sept. 30, 2008, Delek US reported a 7.6% same-store merchandise sales decline which was primarily attributable to regional fuel supply shortages during September and a reduction in discretionary consumer spending. The decline in same-store merchandise sales was partially offset by a 50 bps increase in merchandise margin to 32.4%, compared to merchandise margin of 31.9% in the year-ago period.
The marketing segment contribution margin was $7.1 million for third-quarter 2008. On a trailing four-quarter basis through Sept. 30, 2008, the marketing segment has contributed $25.4 million in contribution margin, with approximately $1 million in capital expenditures required to support ongoing operations during the same 12-month period. The marketing segment generated net sales of $224.9 during third-quarter 2008, which included $4.8 million of intercompany fees and sales from the refining segment.
Delek US Holdings is a diversified energy business focused on petroleum refining, marketing and supply of refined products, and retail marketing of fuel and general merchandise. The refining segment operates a high conversion, independent refinery, with a design crude distillation capacity of 60,000 barrels per day, in Tyler, Texas. The marketing and supply segment markets refined products through its terminals in Abilene, Texas, and San Angelo, Texas, as well as other third-party terminals. The retail segment markets gasoline, diesel and other refined petroleum products and convenience merchandise through a network of company-operated retail fuel and convenience stores, operated under the MAPCO Express, MAPCO Mart, East Coast, Discount Food Mart, Fast Food & Fuel and Favorite Markets brand names.
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Separately, Dallas-based Alon USA Energy Inc. has also announced results for the quarter and nine months ended Sept. 30, 2008. Net income for third-quarter 2008 was $37.3 million, or 80 cents per share, compared to net income of $12.6 million, or 27 cents per share, for the same period last year. Net income for the nine months ended Sept. 30, 2008, was $21.9 million, or 47 cents per share, compared to net income of $143.8 million, or $3.08 per share, for the same period last year.
Jeff Morris, Alon's president and CEO, said, "We successfully completed the acquisition of the Krotz Springs, La., refinery this quarter. With the completion of the acquisition, our crude oil refining capacity increased by 50% to approximately 250,000 barrels per day, including four refineries located on the West Coast, West Texas and Gulf Coast. I am also pleased that we have completed work on the Fluid Catalytic Cracking Unit at our Big Spring refinery that was damaged in the Feb. 18, 2008, fire. With the completion of this work, we were able to restart the FCCU and return to our normal operating capabilities."
He added, "At our California refineries, we optimized our refining economics during the third quarter of 2008, lowering throughput rates to balance production with demand for our asphalt products. We also faced challenges during the quarter at our Krotz Springs refinery with hurricanes Gustav and Ike. These hurricanes caused minimal damage to the refinery, but disrupted crude supply receipts into the refinery and product movements from the refinery while power was being restored to the area."
Alon USA is an independent refiner and marketer of petroleum products, operating primarily in the South Central, Southwestern and Western regions of the United States. The company owns four crude oil refineries in Texas, California, Louisiana and Oregon, with an aggregate crude oil throughput capacity of approximately 250,000 bpd. Alon markets gasoline and diesel products under the FINA brand name and is a leading producer of asphalt. Alon also operates more than 300 convenience stores primarily in West Texas and New Mexico substantially under the 7-Eleven and FINA brand names and supplies motor fuels to these stores primarily from its Big Spring refinery. In addition, Alon supplies approximately 800 additional FINA branded stations.(Click here for full release.)
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