Valero Corp. Earnings Jump Five-Fold

Business

Valero Corp. earnings jump five-fold
By Matthew Bunk

BENICIA -- Valero Energy Corp. made almost five times more money this quarter than it did a year ago, mostly because demand for gas and prices at the pump went up, company officials said.

San Antonio-based Valero reported a net income of $632.7 million, or $4.56 a share, compared to $128.4 million, or $1.08 a share, a year ago. The company said its Benicia refinery was one the top earners during the past three months.

Wall Street analysts had anticipated Valero would report higher earnings than last year, but the company beat the street's average estimate by 26 cents. Share prices rose $1.58, or 2.15 percent, to $75.12 Thursday on the New York Stock Exchange.

Revenue rose 56 percent to $13.81 billion from $8.84 million during the same period last year.

The company expects to outperform analysts' projections for the second half of the year because it doesn't see an end to the rising demand for gas or the limited inventory being produced at U.S. refineries, said Bill Greehey, Valero chief executive officer and chairman of the board. The company is the largest independent refiner in the U.S.

Continued strong margins should lead to third-quarter earnings of "well over" $3 a share, officials said. For 2004 the company expects to "substantially" exceed estimates of $9.38 a share by analysts surveyed by Thomson First Call.

"With respect to refined product fundamentals, gasoline demand year-to-date is up about 2 percent over last year despite higher pump prices this summer," Greehey said. "Looking toward the second half of the year, we expect gasoline margins to remain at high levels, particularly due to the fact that gasoline inventories are at relatively low levels as we enter the peak demand period of the summer."

Valero's refining business earned three times more than it did a year ago, $1.1 billion compared to $279 million. It was the first time the company's 15 refineries surpassed $1 billion in profit, in large part because of four sites, Greehey said.

"We were particularly pleased with the financial contribution of our Corpus Christi, Texas City, Quebec and Benicia refineries, which contributed over half of the total operating income," he said.

Reach Matthew Bunk at 425-4646 Ext. 267 or mbunk@dailyrepublic.net.