Valero: Ethanol earnings down, renewable diesel earnings up in Q2

By Erin Voegele | July 25, 2019

Valero Energy Corp. released second quarter financial results on July 25, reporting mixed results for its biofuel segments. Income from the ethanol segment was down, but income from renewable diesel was up. Production volumes of both fuels increased.

The ethanol segment reported $7 million of operating income for the second quarter, down from $43 million in the second quarter of 2018. Valero primarily attributed the decrease in operating income to higher corn prices. Ethanol production volumes averaged 4.5 million gallons per day during the quarter, up 531,000 gallons per day when compared to the same period of last year. The increase was largely attributed to added production from the three ethanol plants Valero purchased from Green Plains Inc. in November 2018.

Moving into the third quarter, Homer Bhullar, vice president of investor relations at Valero, said the company’s ethanol segment is expected to produce 4.3 million gallons per day in the third quarter. Operating expenses should average 40 cents per gallon.

Valero’s renewable diesel segment reported $77 million of operating income for the second quarter, up from $30 million during the same quarter of last year. Renewable diesel sales volumes averaged 769,000 gallons per day during the quarter, up 387,000 gallons per day when compared to the second quarter of 2018. The increase in operating income and sales was primarily attributed to the expansion of the Diamond Green Diesel plant in the third quarter of last year.

According to Bhullar, sales volumes for renewable diesel are expected to average 750,000 gallons per day in 2019. Operating expenses should be 45 cents per gallon.

During an investor call, Margin Parrish, senior vice president of alternative fuels at Valero, indicated that despite the current downturn for ethanol, the company is still bullish about the fuel. “Long term, it’s a great octane component,” he said. “It’s part of the fuel mix to stay.” Parrish noted Valero has a great fleet of ethanol plants, and said “long-term, when you’re relying on a crop, these things will happen…We’ve had five years now our yields have been above trend and its due for one below it. So, we’ll get through this.”

Joseph Gorder, president and CEO of Valero, added that this the ethanol industry is overproducing, and as a result is working to ramp up exports. “Valero has been very aggressive at exporting ethanol,” he said, noting the company will continue to be aggressive going forward. While the industry sees E15 as a solution to overproduction, Gorder said he thinks moving to a higher octane fuel that would help meet CAFE standards would be more helpful. “It would require more ethanol to be blended into the fuel mix,” he said.

Valero currently owns 14 ethanol plants with a combined capacity of 1.73 billion gallons per year, one renewable diesel plant that is expanding capacity to 675 MMgy, and 15 petroleum refineries with a combined throughput capacity of 3.1 million barrels per day.

Overall, the company reported net income attributable to Valero stockholders of $612 million, or $1.47 per share, for the second quarter of 2019, compared to $845 million, or $1.95 per share, for the second quarter of 2019.