Crown profits jumped in third quarter Gasoline demand pumps up earnings

Energy

October 31, 1997|By Sean Somerville | Sean Somerville,SUN STAFF

Crown Central Petroleum Corp. said yesterday that strong gasoline demand and declining inventories resulted in the Baltimore-based company's strongest third-quarter performance since 1988.

For the three months ended Sept. 30, Crown reported a net profit of $11.3 million, or $1.16 a share, up from a net loss in the year-ago period of $3.6 million, or 37 cents a share.

Sales were $413 million, up about 4 percent from the year-ago period.

"A lot of things came together and we had a very fortunate quarter for the company," said Joseph M. Coale, Crown's director of corporate communications. It had been quite a dry spell for us."

Crown's B shares closed at $18.25, up $1.062.

The company, which operates two Texas refineries and 339 gas stations, was boosted by its refinery operations. Operating profit from refining operations was $28.9 million, almost 14 times the year-ago quarter's $2.1 million.

Coale said gasoline demand remained strong, because of a favorable driving climate and the popularity of gas-guzzling sports utility vehicles. At the same time, supplies started to fall as refiners switched over to making winter products such as home heating oil. Finally, U.S. refineries were operating at full capacity.

"When you tighten your inventories, the price is bound to go up," Coale said. "When you put on top of that increased demand, it's a real upward pressure."

Crown said that with conditions changing, the fourth quarter is likely to be more competitive for Crown's refining operations.

The retail side of Crown's business had mixed results, with same store-sales increasing 7 percent and the gasoline sold down 3 percent. The retail gasoline gross margin was down 35 percent. Retail operating profit was $1.8 million, down 71 percent from the year-ago quarter.

The company said high refining margins frequently result in lower margins at the pump. Plus, the company was not as aggressive in cutting its prices at the pump as in the past, Coale said.

William D. Hyler, an industry analyst with Oppenheimer & Co., said Crown is keeping pace with an industry benefiting from high margins.

He said the fourth quarter will likely prove more difficult, as

margins tighten. Crown's shares are still relatively cheap compared to its competitors, but the company needs to put together a few good quarters to prove itself, he said.

Pub Date: 10/31/97

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