Summary
Valero Energy Corporation (VLO) reported a decrease in net income attributable to stockholders for the second quarter and first six months of 2016 compared to the prior year. The decline was largely driven by lower refining margins and higher feedstock costs, impacting both operating and adjusted operating income. Notably, the company benefited from a significant non-cash gain of $454 million ($747 million for the six months) due to a favorable change in the lower of cost or market inventory valuation. However, this was partially offset by an asset impairment loss of $56 million related to the Aruba Terminal. Despite the year-over-year decrease in earnings, Valero maintained a strong liquidity position, generating substantial cash flow from operations. The company continued its capital allocation strategy, repurchasing shares and paying dividends. Management expects continued volatility in energy markets but anticipates slight improvements in ethanol margins due to lower corn prices. Investors should monitor refining margins, crude oil differentials, and regulatory developments impacting biofuel credit costs.
Financial Highlights
47 data points| Gross Profit | $1.46B |
| Operating Expenses | $18.35B |
| Operating Income | $1.23B |
| Interest Expense | $111.00M |
| Net Income | $814.00M |
| EPS (Basic) | $1.74 |
| EPS (Diluted) | $1.73 |
| Shares Outstanding (Basic) | 467.00M |
| Shares Outstanding (Diluted) | 470.00M |
Key Highlights
- 1Net income attributable to Valero stockholders decreased by $537 million for Q2 2016 and $1.0 billion for the first six months of 2016 compared to the prior year periods.
- 2Adjusted net income (excluding inventory adjustments and asset impairment) also saw significant declines, down $848 million for Q2 and $1.5 billion for the six months year-over-year.
- 3The company recorded a substantial non-cash benefit of $454 million in Q2 2016 ($747 million for the first six months) from a reversal of the lower of cost or market inventory valuation reserve.
- 4A non-cash asset impairment loss of $56 million was recognized in Q2 2016 related to the Aruba Terminal.
- 5Refining segment adjusted operating income decreased significantly ($1.2 billion in Q2 and $2.2 billion in the first six months) primarily due to lower product margins and wider light sweet crude oil discounts.
- 6Ethanol segment adjusted operating income also declined, impacted by lower ethanol margins stemming from higher corn prices and lower co-product prices.
- 7Valero generated $3.0 billion in cash flow from operating activities for the first six months of 2016, demonstrating strong operational cash generation.