Calumet Specialty Products Partners LP: Profit Falls on Oil Price Hike

Company doesn't expect major losses from Shreveport refinery explosion.

Higher oil prices contributed to a 56% fourth-quarter profit drop for Calumet Specialty Products Partners LP, the company said Feb. 17.

The specialty chemicals manufacturer reported net income for the three months was $8.2 million, down from $18.5 million in the year-earlier period. Revenue for the quarter fell slightly to $495.9 million, down from $498.7 million in the year-ago period. Historically, the fourth quarter is the company's weakest from a demand standpoint, said Executive Vice President Jennifer Straumins in a conference call with investors.

Specialty products sales volume for the quarter was 25,939 barrels per day (bpd) compared with 21,848 bpd in the year-earlier period. The increase was driven primarily by rising lubricating oils sales volume resulting from increased production rates at the company's Shreveport, La., refinery.

Fuel products sales for the three months totaled 30,517 bpd compared with 26,325 bpd during the same period last year. For the year, profit rose nearly 40% to $61.8 million, but revenue fell to $1.8 billion from $2.5 billion in 2008.

"We finished 2009 with our fourth-consecutive quarter of solid adjusted EBITDA (earnings before interest expense, taxes, depreciation and amortization). The continued economic weakness and lower fuel products crack spreads continue to weigh on our results," said Bill Grube, Calumet's CEO and president. "We were pleased to finalize our specialty products agreements with LyondellBasell during the fourth quarter and expect these agreements will have a positive impact on our 2010 results."

Calumet Specialty Products Partners LP
At A Glance

Calumet Specialty Products Partners LP
Indianapolis, Ind.
Primary Industry: Petroleum & Coal Products
Number of Employees: 640
2008 In Review
Revenue: $2.49 billion
Profit Margin: 1.79%
Sales Turnover: 2.30
Inventory Turnover: 19.76
Revenue Growth: 51.97%
Return On Assets: 6.55%
Return On Equity: 11.12%
In October, Calumet and Houston Refining LP, a wholly owned subsidiary of LyondellBasell, entered into multiyear agreements to form a long-term exclusive specialty products affiliation.

Under the agreement Calumet will be the exclusive marketer of LyondellBasell's naphthenic base oil production out of its refinery in Houston. Calumet expects the deal will add approximately 3,000 bpd of naphthenic lubricating oil sales to its current production at its Princeton, La., refinery, which has crude oil capacity of approximately 10,000 bpd.

The agreement also calls for LyondellBasell to process approximately 800 bpd of white mineral oil at its Houston refinery for Calumet.

Meanwhile, Calumet expects production to be back to full capacity at its Shreveport refinery by Feb. 19 after an explosion in its environmental unit Feb. 5. The company expects repair costs to be between $1 million and $2 million, Straumins said. The blast impacted the amount of sulfur the plant could release.

"We did have quite a bit of inventory at the time of the event and have continued to sell out of inventory during the past several weeks," she said.

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