Alon USA Energy Inc.: New Refinery Fuels Restructuring

Sept. 11, 2008
Company looks to rebound with acquisition after refinery blaze and crude costs drop second-quarter profit.

When Alon USA Energy Inc. reported that second-quarter net income dropped 81% over the year-earlier period, CEO and President Jeff Morris offered words of optimism as the company had recently finalized the purchase of the Krotz Springs refinery in Louisiana from Valero Energy Corp.

He noted that the acquisition would boost refining capacity by 50% to an estimated 250,000 barrels per day. Alon purchased the Krotz Springs refinery in July for $473 million. The 2008 IW 50 Best Manufacturer also went through organizational restructuring in August to facilitate management of its expanded operations. Alon's board of directors approved the promotion of Joseph Israel to COO after he had served as vice president of mergers and acquisitions. Former general manager of commercial transactions Michael Oster filled Israel's previous role. Joe Concienne, previously senior vice president of refining and transportation, was named senior vice president of refining and supply.

The moves come amid challenging times for Alon. Higher crude oil prices have cut into profits, and refinery shutdowns have hurt production. The Krotz Springs refinery already hit a snag when Hurricane Gustav blew into the Gulf of Mexico, forcing a weeklong shutdown. And a February fire ceased operations for a month and a half at the company's Big Spring, Texas, refinery, which did not reach full capacity again until the end of August.

Alon Energy USA Inc.
At A Glance

Alon Energy USA Inc.
Dallas, Texas
Primary Industry: Petroleum & Coal Products
Number of Employees: 2,697
2007 In Review
Revenue: $4.5 billion
Profit Margin: 2.28%
Sales Turnover: 2.87
Inventory Turnover: 13.72
Revenue Growth: 42.07%
Return On Assets: 7.38%
Return On Equity: 35.80%

The impact of the fire and rising raw materials prices was evident in the second quarter with profit falling to $18.2 million, or 39 cents per share, from $95.6 million, or $2.05 per share, during the same period last year. For the first six months, Alon posted a net loss of $15.4 million, or 33 cents per share, compared with a profit of $131.2 million, or $2.81 per share, during the year-earlier period.

While Alon continues to battle cost pressures and unforeseen production delays, the company plans to move forward with several previously announced initiatives, including the initial public offering of its retail and branded marketing businesses by the end of 2008, says Morris. Alon also expects to complete engineering of a hydrocracker project at its California refineries, which is slated for completion in 2010.

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