Retail a Bright Spot in Alon USA Q2

DALLAS -- In its second quarter 2010 earnings, Alon USA reported a net loss of $29.3 million, compared to a net loss of $15.3 million a year ago. Despite this, the company's retail segment, Alon Brands, posted a positive quarter thanks to increased fuel sales.

Excluding special items, Alon recorded a net loss of $29.5 million for the second quarter of 2010, vs. a net loss of $12.4 million for the same period last year.

In the company's convenience store retail and branded marketing segment, retail fuel sales gallons increased 17.2 percent, from 30.2 million gallons in the second quarter '09 to 35.4 million gallons in the comparable quarter of 2010. Branded fuel sales increased 7.2 percent, to 74.9 million gallons in the just-ended quarter. Operating income for this segment was $7.7 million in the second quarter of 2010, compared to $2.4 million for the same period in 2009.

Jeff Morris, Alon's CEO, said in a statement: "We are pleased our consolidated results have improved on an adjusted EBITDA basis from a negative $38.6 million in the first quarter of 2010 to near break-even in the second quarter, which included only one month of operations of the Krotz Springs refinery. This improvement is the result of significantly improved margins at our Big Spring and California refineries, good results from Alon Brands, in addition to the start up of the Krotz Springs refinery."

Impacting Alon USA's second quarter earnings was the acquisition of the Bakersfield refinery and the restart of its Krotz Springs refinery.

"We are planning to integrate the Bakersfield refinery with our other California refineries and expect to complete the integration during the first half of 2011," Morris said. "Once the Bakersfield refinery has been fully integrated, we will have completed our long term plan to have three complex refineries in Texas, California and Louisiana plus our asphalt business and retail operations."

Special items for the second quarter 2010 included an after-tax gain of $0.3 million from the disposition of assets. Special items for the second quarter a year ago included accumulated dividends of ($2.0) million on the preferred shares of Alon Refining Krotz Springs, prior to their conversion to common stock Dec. 31, 2009, and an after-tax loss on the disposition of assets of $1.0 million.

For the six months ended June 30, 2010, net loss was $82.2 million, compared to net income of $2.0 million for the comparable period of 2009. Excluding special items, Alon recorded net loss of $78.6 million for the first half of 2010, vs. net income of $7.0 million for the same period last year.

Alon also announced in its earnings statement that its board of directors has instructed the company to pursue a Rights Offering of convertible preferred shares, from which it expects net proceeds of $40 million or more, Morris said. "We have received an indication of interest from our shareholder, Alon Israel, to exercise its rights and to invest in the Rights Offering up to $30 million," he said.