Valero Energy Corporation (“Valero,” NYSE: VLO) today reported net income attributable to Valero stockholders of $674 million, or $1.21 per share, for the third quarter of 2012 compared to net income attributable to Valero stockholders of $1.2 billion, or $2.11 per share, for the third quarter of 2011. Included in the third quarter 2012 results was a non-cash asset impairment loss of $341 million after taxes, or $0.62 per share, and severance expense of $41 million after taxes, or $0.07 per share, primarily related to the Aruba refinery. Excluding these items, Valero reported net income attributable to Valero stockholders of $1.1 billion, or $1.90 per share.
Third quarter 2012 operating income was $1.3 billion versus $2.0 billion of operating income in the third quarter of 2011. Excluding the items noted above, third quarter 2012 operating income was $1.7 billion. The decrease in operating income was primarily due to lower refining throughput margins in the U.S. Gulf Coast, Mid-Continent, and West Coast, which were partially offset by significantly higher refining throughput margins in the North Atlantic region. In addition, throughput volumes at the St. Charles, Meraux, and Memphis refineries were negatively impacted by the effects of Hurricane Isaac and unplanned maintenance on the Meraux crude unit. A decline in retail and ethanol margins also contributed to the decrease in operating income.
“Even with lower margins than last year, we reported solid financial results,” said Valero Chairman and CEO Bill Klesse. “During the third quarter, we elected to reorganize the Aruba refinery into a crude oil and refined products terminal, did major-reliability work at the Meraux refinery, and continued to pursue the separation of our retail business. The new Port Arthur hydrocracker is expected to be operational in December, and the new St. Charles hydrocracker remains on schedule to be operational in the second quarter of 2013.”
Klesse continued, “Looking at the fourth quarter, gasoline margins have narrowed significantly, but distillate margins and sour crude discounts remain wide. U.S. demand for refined products continues to be weak, reflecting high unemployment and high prices, but exports remain strong. As we approach winter, U.S. inventories of refined products look favorable.”
Valero’s retail segment reported $41 million of operating income in the third quarter of 2012 versus $97 million of operating income in the third quarter of 2011. The decrease in operating income was mainly due to lower fuel margins and volumes in the U.S. and Canada plus a non-cash asset impairment of $12 million.
“We are making progress on our plan to separate our retail business and unlock value for our shareholders,” said Klesse. “In October, we submitted our request to the Internal Revenue Service for a private letter ruling on a tax-efficient distribution of our retail business to shareholders. Later this quarter, we expect to file a registration statement with the Securities and Exchange Commission. Given the typical timing of this process, we expect to complete the retail separation late in the first quarter or early in the second quarter of 2013.”
Valero’s ethanol segment reported an operating loss of $73 million in the third quarter of 2012 versus $107 million of operating income in the third quarter of 2011. The decrease in ethanol operating income was due to significantly lower gross margins caused by a combination of high corn prices and high industry ethanol inventories attributable to lower ethanol and gasoline demand. Due to poor margins, Valero reduced production rates at several of its plants.
Regarding cash flows in the third quarter of 2012, capital spending was $784 million, of which $75 million was for turnaround and catalyst expenditures. Valero returned $97 million of cash to shareholders through dividends on its common stock and ended the third quarter with $2.5 billion in cash and temporary cash investments.
For the full-year 2012, Valero has reduced its estimate for total capital spending, including turnaround and catalyst expenditures, to $3.5 billion versus prior guidance of approximately $3.6 billion. Valero expects total capital spending for 2013 to be approximately $2.5 billion, including approximately $200 million for the retail segment and some carryover from 2012.
Valero’s senior management will hold a conference call at 11 a.m. ET (10 a.m. CT) today to discuss this earnings release and provide an update on company operations. A live broadcast of the conference call will be available on the company’s web site at www.valero.com.
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Valero Energy Corporation, through its subsidiaries, is an international manufacturer and marketer of transportation fuels, other petrochemical products and power. Valero subsidiaries employ approximately 22,000 people, and assets include 16 petroleum refineries with a combined throughput capacity of approximately 3 million barrels per day, 10 ethanol plants with a combined production capacity of 1.2 billion gallons per year, and a 50-megawatt wind farm. Approximately 6,800 retail and branded wholesale outlets carry the Valero, Diamond Shamrock, Shamrock and Beacon brands in the United States and the Caribbean; Ultramar in Canada; and Texaco in the United Kingdom and Ireland. Valero is a Fortune 500 company based in San Antonio. Please visit www.valero.com for more information.
Statements contained in this release that state the company’s or management’s expectations or predictions of the future are forward-looking statements intended to be covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words “believe,” “expect,” “should,” “estimates,” and other similar expressions identify forward-looking statements. It is important to note that actual results could differ materially from those projected in such forward-looking statements. For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see Valero’s annual reports on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission and on Valero’s website at www.valero.com.