Speedway Sees Large Increase in Q1 Net Profit

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Speedway Sees Large Increase in Q1 Net Profit


FINDLAY, Ohio -- Speedway LLC's fiscal 2012 first-quarter earnings rose 50 percent compared to the same time period in 2011. The convenience store chain's net income reached $50 million vs. $33 million in its 2011 first quarter.

Gary Heminger, president and CEO of Marathon Petroleum Corp., parent of Speedway, said during an earnings call this morning that the $17-million net income increase was primarily due to higher merchandise gross margins. Speedway's same-store sales increased 2 percent in its latest quarter.

"We continue to expand our retail operations," Heminger noted. "One example is the 88 stores we purchased from GasAmerica [Services Inc.]. We expect that deal [first announced on Feb. 9] to close by the end of the second quarter."

Heminger added that Marathon Petroleum is constantly looking into new acquisition opportunities for Speedway. This includes expanding beyond the Midwestern United States, where the company's c-stores are primarily located. As of March 31, Speedway had 1,370 locations.

The CEO also relayed that gas sales are improving at Speedway sites. Although the first three months of 2012 showed some weakness in the fuels category due to the hefty price of oil, Heminger said April gas sales were up 3.7 percent compared to March, and he expects to see improvement in the segment throughout the rest of the year.

As for Speedway's parent company, Marathon Petroleum earned a net profit of $596 million in its 2012 fiscal first quarter, compared to $529 million for the same timeframe in 2011.

Marathon Petroleum also made news by announcing it is evaluating the possibility of spinning off its midstream assets into a master limited partnership (MLP). If Marathon Petroleum's board of directors agrees to proceed with this plan, Heminger said during the earnings call that the spinoff would become a wholly-owned subsidiary called MPLX LP.

"If we go ahead with that plan, we would sell a minority stake of the business as an IPO [initial public offering]," he explained, adding that there is no assurance there will be an MLP. He also offered no timeframe for when a decision would be made.

CSNews Online first reported the possibility of a Marathon Petroleum MLP on Feb. 1. To become an MLP, a company must generate at least 90 percent of its income from what the Internal Revenue Service calls "qualifying" assets. The production, processing or transportation of oil are three things deemed as qualifying assets.