10-QPeriod: Q3 FY2018

VALERO ENERGY CORP/TX Quarterly Report for Q3 Ended Sep 30, 2018

Filed November 6, 2018For Securities:VLO

Summary

Valero Energy Corporation (VLO) reported solid financial results for the third quarter and the first nine months of 2018. For the third quarter, net income attributable to stockholders was $856 million ($2.01 per share), a slight increase from $841 million ($1.91 per share) in the prior year period. The nine-month period showed a more significant increase in net income to $2.17 billion ($5.05 per share) from $1.69 billion ($3.80 per share) in the same period of 2017. These improved results were driven by strong performance in the refining segment, which benefited from higher distillate margins, favorable crude oil discounts, and increased throughput volumes. While gasoline and other product margins softened, these were offset by positive factors. The ethanol segment experienced a decline in operating income due to lower ethanol prices, despite some support from co-product prices and lower corn prices. VLP (Valero Logistics Partnership) showed growth in operating income due to incremental revenues from recent acquisitions. The company also highlighted its strategic initiatives, including an agreement to acquire three ethanol plants and the pending merger with Valero Energy Partners LP (VLP). Valero maintains a strong liquidity position with significant available borrowing capacity and cash on hand, enabling continued investments in capital projects, acquisitions, dividends, and share repurchases.

Financial Highlights

49 data points
Beta

Revenue

$30.85B

4.7% Gross Margin

Net Income

$856.00M

2.8% Net Margin

EPS (Diluted)

$2.01

Total Assets

$51.89B

Cash & Equivalents

$3.55B

Free Cash Flow

$68.00M

Financial Statements
Beta
Revenue$30.85B
Cost of Revenue$29.40B
Gross Profit$1.45B
Operating Income$1.22B
Interest Expense$111.00M
Net Income$856.00M
EPS (Basic)$2.01
EPS (Diluted)$2.01
Shares Outstanding (Basic)425.00M
Shares Outstanding (Diluted)427.00M

Key Highlights

  • 1Net income attributable to Valero stockholders for the third quarter of 2018 was $856 million ($2.01 per share), up from $841 million ($1.91 per share) in Q3 2017.
  • 2For the first nine months of 2018, net income attributable to Valero stockholders was $2.17 billion ($5.05 per share), a significant increase from $1.69 billion ($3.80 per share) in the same period of 2017.
  • 3The refining segment showed improved performance, driven by higher distillate margins and favorable crude oil discounts, partially offset by lower gasoline and other product margins.
  • 4Valero announced an agreement to acquire three ethanol plants for $300 million, expected to close in Q4 2018.
  • 5The company entered into an agreement to acquire all outstanding publicly held common units of Valero Energy Partners LP (VLP) for approximately $950 million.
  • 6Total assets increased to $51.89 billion as of September 30, 2018, from $50.16 billion at the end of 2017, with a notable increase in Property, plant, and equipment, net.
  • 7Valero reported strong liquidity, with total available borrowing capacity of $4.3 billion and $3.3 billion in cash and cash equivalents as of September 30, 2018.

Frequently Asked Questions

Valero reported a slight increase in net income attributable to stockholders for the third quarter of 2018, reaching $856 million ($2.01 per share), compared to $841 million ($1.91 per share) in the third quarter of 2017. While operating income saw a decrease, a lower income tax expense due to the reduced U.S. statutory rate largely offset this, leading to a marginal increase in net income.

The first nine months of 2018 saw a significant increase in net income attributable to stockholders to $2.17 billion ($5.05 per share) from $1.69 billion ($3.80 per share) in the prior year. This improvement was primarily driven by a substantial increase in operating income, led by the refining segment's performance due to better distillate margins, crude oil discounts, and higher throughput, along with lower biofuel credit costs. The company also benefited from the lower U.S. statutory tax rate.

Valero has two significant upcoming transactions. Firstly, they have agreed to acquire three ethanol plants for $300 million, expected to close in the fourth quarter of 2018. Secondly, they have entered into an agreement to acquire all outstanding publicly held common units of Valero Energy Partners LP (VLP) for approximately $950 million, which will make VLP a wholly owned subsidiary.

Total assets increased to $51.89 billion as of September 30, 2018, primarily due to an increase in property, plant, and equipment. Cash and cash equivalents decreased to $3.55 billion from $5.85 billion at the end of 2017. However, the company maintains a strong liquidity position with $4.3 billion in available borrowing capacity from committed facilities, in addition to its cash reserves.