Operating income in fourth-quarter 2010 was $378 million, versus [image-nocss] an operating loss of $135 million in fourth-quarter 2009. The improvement in operating income was mainly due to an increase in refining throughput margins to $7.30 per barrel, a 49% increase over fourth-quarter 2009. The increase in throughput margins was primarily due to higher margins for diesel and gasoline combined with better discounts for heavy-sour feedstocks. The increase in operating income was also due to a 10% increase in throughput volumes versus fourth-quarter 2009, which also improved refinery operating expenses from $3.90 per barrel in fourth-quarter 2009 to $3.64 per barrel in fourth-quarter 2010.
"What a difference a year makes," said Valero chairman and CEO Bill Klesse. "The global economic recovery is underway with very strong growth in developing countries contributing to a surge in global demand for oil and refined products. Refining margins and crude oil discounts have improved substantially over the past year, and this market momentum has carried into 2011. Combined with additional capacity closures in Europe and elsewhere, global demand growth should continue to support refining margins and encourage exports from competitive refiners like Valero. We are seeing modest growth for fuels in the U.S., but unemployment rates will have to fall before demand really picks up."
He added, "While the market has changed for the better in 2010, so did Valero. We have improved our portfolio through the sale of underperforming and non-core assets, advanced key economic growth projects, built our financial strength and made significant progress on our cost savings. In fact, we achieved $225 million in pre-tax cost savings during 2010, which was more than double our initial goal of $100 million. These actions position Valero with more earnings power for the future."
Valero's retail and ethanol segments reported another good quarter and an impressive year overall. The retail segment earned $61 million in operating income during fourth-quarter 2010, and $346 million for the full-year 2010, nearly matching the record results in 2008. The ethanol segment also continued to perform well with $70 million in operating income generated during fourth-quarter 2010, and set a record high with $209 million in operating income for the full-year 2010.
Meanwhile, Manhattan College, Riverdale, N.Y., presented Klesse with the De La Salle Medal at the College's annual fundraising dinner on January 19. The medal is conferred annually by the school's board of trustees to honor executives who exemplify the principles of excellence and corporate leadership.
A board member of the nonprofit San Antonio Food Bank since 2002, Klesse serves as Valero's chief proponent for volunteerism and regularly challenges his employees to return the blessings they enjoy by helping those in need. He works alongside Valero Volunteers on Habitat for Humanity projects, and he is an annual participant and top fundraiser in the Bike MS: Valero Alamo Ride to the River charity ride, which raises money to fight multiple sclerosis. Klesse served as chairman of the United Way of San Antonio and Bexar County for the 2009-2010 campaign season, as well as lead efforts to preserve and restore the landmark churches of San Antonio's Old Spanish Missions. As chairman of the Las Misiones Campaign, Klesse is helping lead the movement to preserve a critical piece of San Antonio's living history.
San Antonio, Texas-based Valero is an international manufacturer and marketer of transportation fuels, other petrochemical products and power. Its assets include 14 petroleum refineries with a combined throughput capacity of approximately 2.6 million barrels per day, 10 ethanol plants with a combined production capacity of 1.1 billion gallons per year and a 50-megawatt wind farm. Valero is also one of the largest retail operators, with approximately 5,800 retail and branded wholesale outlets in the United States, Canada and the Caribbean under the Valero, Diamond Shamrock, Shamrock, Ultramar and Beacon brands.
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