Sustained demand for fuel and higher gasoline prices have generated a lot of good news for refineries. First-quarter results this year have just confirmed that. Crude oil refiner Western Refinery
El Paso-based Western, an independent crude oil refiner and marketer of refined products, turned a $30.7 million net loss in its fiscal first quarter last year into a $12.2 million net profit this year. I believe the company's turnaround should be attributed to more than just improved market conditions. Fools should pay attention.
The real McCoy
In a previous article, I mentioned the astute business moves management had undertaken to reduce costs. This is exactly what is now being reflected in the first-quarter results. While net sales dropped marginally -- by about 4% compared to the first quarter last year -- the company managed to pull down its operating costs and expenses by 9%. This reflects well on management. Excess capacity is a bane for refiners as it drags down earnings because of costs incurred in maintaining operations in refineries while demand for gasoline becomes sluggish. Western smartly cut costs by suspending refining operations at Bloomfield and converting it to a products terminal.
From an investor's point of view, what interests me are earnings strictly from operations. Adjusted EBITDA shot up to $96 million from $26 million from the year-ago quarter. That's amazing -- and I will duly give credit to management.
A Foolish bottom line
Being in the refining industry is not easy these days, as gas prices threaten to cross the $4 mark. Western will have to work hard in order to maintain this kind of success and I am confident that it will. Companies, like ConocoPhillips
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Fool contributor Isac Simon does not own shares of any of the companies mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.