Valero: Ethanol earnings down, renewable diesel sales up

By Erin Voegele | April 29, 2019

Valero Energy Corp. released first quarter 2019 financial results April 25, reporting significantly reduced income for its ethanol segment. The quarterly report was also the company’s first to address its newly established renewable diesel segment.

Valero reported $3 million of operating income for its ethanol segment during the first quarter, down from $45 million reported for the same period of last year. The reduction was primarily attributed to lower ethanol prices.

Ethanol production volumes averaged 4.2 million gallons per day in the first quarter, up 104,000 gallons per day during the same period of last year. The increase was largely attributed to added production from three ethanol plants the company acquired from Green Plains Inc. in November 2018.

During an investor call, Homer Bhullar, vice president of investor relations at Valero, said the ethanol segment is expected to produce a total of 4.7 million gallons per day during the second quarter of the year, with operating expenses averaging 38 cents per gallon.

Valero reported blending costs were $91 million for the quarter, down $115 million when compared to the same period of 2018. The company attributed the decrease to lower renewable identification number (RIN) prices. Bhullar said Valero currently expects RIN expenses for the year to be between $300 million and $400 million, down approximately $100 million when compared to last year.

The company also discussed the financial performance of its renewable diesel segment created effective Jan. 1 and reflects the operations of Diamond Green Diesel, a consolidated joint venture. “This new segment reflects the growing importance of renewable fuels in the market and the growth of Valero’s investments in renewable fuels production,” the company said in a statement.

The renewable diesel segment reported $49 million in operating income for the first quarter of the year, down from $195 million reported for the same period of 2018. When excluding the adjustment related to the 2017 blender’s tax credit recorded in early 2018, the company said first quarter 2018 adjusted operating income for the segment was $35 million.

Renewable diesel sales volumes averaged 790,000 gallons per day during the first quarter of 2019, an increase of 419,000 gallons per day when compared to the first quarter of last year. Valero primarily attributed the increases in adjusted operating income and sales volumes to the expansion of the Diamond Green Diesel plant in the third quarter of 2018.

Overall, the company reported net income attributable to Valero stockholders of $141 million, or 34 cents per share, down from $496 million, or $1.09 per share, during the same period of 2018.

Valero currently owns 14 ethanol plants with a combined production capacity of approximately 1.73 billion gallons per year. The Diamond Green Diesel facility, which is a joint venture with Darling Ingredients, currently has the capacity to produce 18,000 barrels of renewable diesel per day. An expansion of the plant is currently underway, which will increase renewable diesel production capacity to 44,000 barrels per day, or 675 million gallons per year. In addition, Valero currently owns 15 petroleum refineries with throughput capacity of approximately 3.1 million barrels per day.

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