Giant Humbled

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Giant Humbled

SCOTTSDALE, Ariz. -- Poor margins on gas and diesel produced a second-quarter net loss of $4.3 million for Giant Industries Inc. Earnings dipped to $7.7 million for the quarter down from last year's $12.

For the first half of 2002, Giant reported a net loss of $4.2 million versus net earnings of $12.9 million for the first six months of 2001.

In addition to weak margins, Giant's second-quarter operating results were hurt by costs associated with additional acquisition costs of BP plc's Yorktown, Va., refinery, which Giant acquired in May for approximately $165 million. The deal doubled Giant's refining capacity.

Big Oil companies nationwide reported poor earnings due to weak margins and a fuel-supply glut. Fred Holliger, Giant's chairman and CEO, said he expects oil companies to overcome these barriers and see margins to pick up in the third quarter. "I believe that these conditions are short-term in nature and are to be expected from time to time in our cyclical industry, and, as a result, my outlook for the company and our industry remains optimistic," he said.

With regard to Giant's retail operations, Holliger said, "overall profitability in our retail operations continued to be dampened by the performance of our convenience stores located in the Phoenix and Tucson markets. Excluding the Phoenix and Tucson operations, we are continuing to experience nice growth in our retail fuel and merchandise sales.

"With the strengthening of industry refining margins relative to the second quarter, like the rest of the industry we anticipate improved refining margins in the third quarter. Gasoline margins have already started to improve and we expect them to get better as the year progresses," added Holliger.

In an effort to strengthen earnings from its retail units, Giant signed a letter of intent to sell nine of its Phoenix stores to an unnamed buyer. The transaction is expected to close before the end of the third quarter.

Giant is also involved in a deal to sell its remaining 26 stores in the Phoenix and Tucson markets to a second unnamed buyer, Holliger said. He expects that deal to close sometime in the fourth quarter. The deals combined are valued at $30 million.

Giant currently operates 145 stores under the Giant and Mustang brands in four states and three refineries.