Ultramar Diamond Shamrock reports 1996 results

Highlighting special charges mostly related to its recent merger, Ultramar Diamond Shamrock Corporation reported a net loss for the year ended December 31, 1996 of $ 35.9 mm. The results for the quarter and the year included a pre-tax accrual of $ 77.4 mm for transaction and integration costs associated with the merger of Diamond Shamrock, Inc., into Ultramar Diamond Shamrock Corporation (formerly Ultramar Corporation) on December 3, 1996.
Earnings for the fourth quarter and year ended December 31, 1996, before the special charges noted above were $ 4.9 mm and $ 88 mm respectively, compared to $ 29.2 mm and $ 95 mm for the fourth quarter and year ended December 31, 1995, respectively. Ultramar Diamond Shamrock Chairman and CEO Roger Hemminghaus commented, "Results were negatively impacted by industry-wide weak refining margins. Retail marketing margins in the Southwest were particularly poor during the fourth quarter due to intense competitive pricing." The company's four, modern and efficient refineries operated well, with throughputs totalling 487,700 bpd for the quarter and 470,800 bpd for the year. This was an increase of 20.5 % for the quarter and 11.8 % for the year versus comparable prior periods.
Retail sales volumes averaged 187,600 bpd during the quarter in the company's Southwest and Northeast marketing areas. Merchandise sales through the company's convenience stores averaged $ 2.3 mm per day.Hemminghaus expressed confidence in the future. "With the merger complete, our focus is to provide an attractive total shareholder return through operating excellence and strategic expansion. Growth is essential to the success of the company." He emphasised that a top priority will be to achieve the $ 75 mm of annual synergy's that had been projected for the merger. "The transition since the merger has been extremely smooth. I am confident we will achieve at least $ 25 mm in 1997 and exceed $ 75 mm in 1998. In fact, we have already exceeded projected savings in such areas as insurance and interest expense reductions. "We will continue to strengthen our core refining and marketing systems. In the Southwest, we expect to increase sales of both wholesale and retail petroleum products," said Hemminghaus. "In our key Arizona markets, Ultramar Diamond Shamrock has a unique strategic advantage in being able to supply high-quality petroleum products from either its California or Texas refineries." He added that Ultramar Diamond Shamrock currently has 17 Diamond Shamrock branded Corner Stores in Arizona, with four others under construction. The company plans to build 22 additional Corner Stores during 1997 in the Southwest, 18 of which will be located in Arizona. The others will be built in Colorado and New Mexico. Hemminghaus also cited the completion of a 99-mile, 10-inch refined products pipeline from Colorado Springs to Denver during the fourth quarter and explained that the pipeline enhances the company's ability to supply growing requirements for high-quality motor fuels along Colorado's Front Range.
Construction continues on a benzene, toluene and xylene (BTX) extraction unit at the Three Rivers refinery, with the unit scheduled to come on-stream during the second quarter of 1997. The unit will upgrade refinery streams for sale to the petrochemicals industry, according to Hemminghaus.
"In Eastern Canada, we continue to strengthen our market position as we convert more gasoline outlets to company-operated stores, which market a wide variety of convenience store merchandise and services," said Hemminghaus. "Our objective is to grow smartly, applying technology, and developing high-return, timely projects. Ultramar Diamond Shamrock will continue to leverage its resources and expertise to profit from related businesses, such as the merchandising of goods and services in our stores, petrochemicals, and our growing home heating oil business in the Northeast." He added that home heating oil volumes in the Northeast improved 13.6 % over the previous year, with the acquisition of four companiesin New England during 1996. "We will continue to grow this business through high-return acquisitions," said Hemminghaus.
Ultramar Diamond Shamrock Corporation with approximately $ 10.2 bn in annual revenues, is one of the largest independent refining and marketing companies in North America. The corporation owns four modern refineries in the United States and Canada with a total throughput capacity of 485,000 barrels per day and has approximately 4,400 branded retail gasoline outlets, the majority of which are branded Diamond Shamrock, Ultramar, or Beacon. The corporation also has growing petrochemicals, home heating oil, and convenience store merchandising businesses.