BRENTWOOD, Tenn. -- Delek US Holdings Inc. has reported total revenue of $1.45 billion for the second quarter ended June 30, 2008, an increase of 31.4% when compared to second-quarter 2007. Net income declined to $4 million, or seven cents per fully diluted share, from net income of $67.2 million, or $1.29 per fully diluted share, for the prior-year period.
The Brentwood, Tenn.-based company's quarterly results were positively impacted by a strong distillate crack spread and continued fuel margin benefit from the company's ethanol blending program, which resulted in higher fuel margins [image-nocss] at the retail segment and lower cost of goods sold at the refinery. It also realized a $2.9 million pre-tax gain on the sale of a third-party operated site during the second quarter.
Uzi Yemin, president and CEO of Delek US, said, "Although higher crude oil costs and weaker consumer demand impacted our second quarter results, each of our business segments reported positive contribution margin in the period, resulting in a return to profitability. We believe that ongoing efforts to further optimize our crude slate, grow our ethanol blending program, enhance retail margins and improve our operating efficiency should position us to remain increasingly competitive in a challenging operating environment."
The refining segment contribution margin was $20.5 million for second-quarter 2008, compared to $95.1 million for second-quarter 2007.
The retail segment contribution margin was $17.3 million for second-quarter 2008, compared to $18.4 million for second-quarter 2007. Second-quarter retail contribution margin was affected by high retail fuel prices, increased credit-card expenses and a reduction in discretionary consumer spending.
Retail fuel margin increased on a year-over-year basis by 1.8 cents per gallon to 17.6 cents per gallon during second-quarter 2008, serving to partially offset a 4% same-store decline in the total number of retail gallons sold in the quarter. The increase in fuel margin is mainly attributable to favorable blending economics associated with our ongoing E-10 (ethanol) blended fuel program. As of June 30, 2008, blended fuel was sold at 83.0% of Delek's 497 convenience store locations.
For the three months ended June 30, 2008, the company reported a 3.1% same-store merchandise sales decline. The decline in same-store merchandise sales was partially offset by an increase in merchandise margin of 31.9%, compared to 31.6% in the year-ago period. The increase in merchandise margin was largely attributable to favorable pricing on select merchandise categories which served to counteract lower store traffic volumes.
The marketing segment contribution margin was $6.1 million for second-quarter 2008. On a trailing four quarter basis through June 30, 2008, the marketing segment has contributed $26 million in contribution margin, with less than $1 million in capital expenditures required to support ongoing operations during the same 12-month period. Net sales for second-quarter 2008 included $3.6 million of inter-company fees and sales from the refining segment.
Delek US, a subsidiary of Israel-based The Delek Group, 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 refinery 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 c-stores, operated under the MAPCO Express and Favorite Markets brands.
Separately, Dallas-based Alon USA Energy Inc. has reported results for the second quarter ended June 30, 2008. Net income for second-quarter 2008 was $18.2 million, or 39 cents per share, compared to net income of $95.6 million, or $2.05 per share, for the same period last year.
Net loss for the first half of 2008, was ($15.4) million, or (33) cents per share, compared to net income of $131.2 million, or $2.81 per share, for the same period last year.
"We successfully completed the acquisition of the Krotz Springs, La., refinery on July 3, 2008. With the completion of the Krotz Springs refinery 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," said Jeff Morris, Alon's president and CEO.
"The second quarter of 2008 has seen us continue to work through the challenges related to the major fire at the Big Spring, Texas, refinery on Feb. 18, 2008 and higher crude oil costs. The higher crude oil costs have reduced refinery margins industry-wide, which has continued to limit production at our California refineries. I am very pleased with our progress to return the Big Spring refinery to its full operating capacity," he added.
"We are proceeding with an initial public offering relating to our retail and branded marketing businesses, which we will seek to complete by year end," concluded Morris.
Refinery operating margin at the Big Spring refinery was negative ($7.97) for second-quarter 2008 compared to $23.42 for the same period in 2007. Refinery operating margin at the California refineries was negative ($6.23) for second-quarter 2008 compared to $8.23 for the same period in 2007. Year to date, refinery operating margin at the Big Spring refinery was negative ($1.08) for first-half 2008, compared to $18.98 for the same period in 2007. Refinery operating margin at the California refineries was negative ($4.03) for first-half 2008 compared to $7.49 for the same period in 2007.
Alon USA, a subsidiary of ALON Israel Oil Co. Ltd., is an independent refiner and marketer of petroleum products, operating primarily in the South Central, Southwestern and Western regions of the United States. It owns four crude oil refineries in Texas, California, Louisiana and Oregon. It markets gasoline and diesel products under the FINA brand name. Alon USA also operates more than 300 c-stores primarily in West Texas and New Mexico mainly 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.
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