Alon USA Troubled by Economic Headwinds

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Alon USA Troubled by Economic Headwinds

By Angela Hanson, Convenience Store News - 10/31/2016

DALLAS — Alon USA Energy Inc. had a rocky third quarter of 2016, which company officials attributed primarily to the refining environment.  

"Our third-quarter results reflect a continuation of the difficult refining environment experienced in the first two quarters of 2016. The average Gulf Coast 3-2-1 benchmark crack spread for the third quarter of 2016 was approximately $6.50 per barrel lower than the average for the same period last year. Additionally, high RIN costs continue to weigh on our profitability," President and CEO Paul Eisman stated during Alon's Oct. 28 earnings call.

"We continue to focus on operational excellence and controlling expenditures across the organization in this environment," he continued. "We were pleased with the contributions in the third quarter from our asphalt marketing business and our renewable fuels project in California."

The company saw a net loss of $64.7 million during Q3 2016, down from a net gain of $105.3 million during the same quarter one year ago.

"Our retail business continues to be negatively impacted by economic headwinds in the Permian Basin," Eisman reported. "Despite this, our operating income in the third quarter of 2016 increased modestly relative to the second quarter of 2016."

Retail fuel margins decreased to 19.9 cents per gallon during Q3 2016 from 21.7 cents per gallon one year ago, but retail fuel sales volume increased to 54.1 million gallons compared to 51.4 million gallons last year.

Merchandise margins rose to 31.7 percent during the quarter, up from 31.4 percent one year ago. However, merchandise sales fell to $84 million during Q3 2016, from $86.6 million during Q3 2015.

Officials did not comment on Delek US Holdings Inc.'s proposed acquisition of the remaining portion of Alon USA Energy Inc. it does not already own.

Alon finished the quarter with 307 c-stores, 297 of which sell fuel. This is down a single store from the 308 locations it had at the end of Q3 2015.