Murphy USA Profits Fall 64% As Up-And-Down Fuel Prices Cut Retail Margins

Murphy USA Inc.’s second quarter earnings fell well short of expectations as volatile crude oil and gasoline prices cut into retail margins and overall sales, company officials announced after the close of market on Wednesday.

“While the Q2 fuel environment was challenging, it was not unexpected as our guidance anticipated this scenario,” said President and CEO Andrew Clyde. “Spot gasoline prices rose over 77 cents (per gallon) since January lows, recouping much of last year`s fall-off and setting up Q3 2015 nicely as crude prices tumbled again in late June.”

Clyde added: “Volatility continues to be front and center and our business model both demonstrated its resilience and strengthened its core as same store merchandise sales and margin dollars grew, while per store operating expenses were further reduced.”

For the period ended June 30, Murphy USA reported net income of $26.2 million, or 59 cents per share, down 64% compared to year ago net income of $73.2 million, or 1.57 cents per share. Second quarter revenues also fell well short of year ago sales, declining nearly 32% to $2.8 billion from $4.1 billion in 2014.

Analysts surveyed by Thomson Reuters had expected the Arkansas gasoline retailer to report second quarter earnings of 79 cents per share on revenue of $3.84 billion.

During the second quarter of 2015, Murphy USA opened nine retail locations. Through early August 2015, the El Dorado-based spinoff of Murphy Oil Corp. opened an additional five sites. With the addition of all these stores, Murphy USA has 1,282 total locations in operation that include 1,069 Murphy USA sites and 213 Murphy Express sites. There are also 39 sites currently under construction that will be added to its network in the near future, company officials said.

Overall, the El Dorado retail marketer’s retail fuel sales for the quarter increased 1.9% to 1.01 billion gallons sold in 2015 compared to 993.1 million gallons sold in 2014. Quarterly merchandise revenues rose $23.9 million to $572 million from $548 million in the 2014 period.

Station and other operating expenses declined $2.7 million to $130.5 million for the current quarter, compared to $133.2 million for the same period in 2014. The company`s ethanol plant in Hereford, Texas, generated operating income of $1.4 million for 2015 compared to net earnings of $8.8 million in Q2 2014.

Capital expenditures for the quarter ended June 30, 2015, increased $29.6 million to $58.9 million from $29.3 million in 2014. Current period capital expenditures include $48.2 million for retail growth and $7.3 million spent on retail maintenance items.

“Looking ahead, we remain focused on our strategic allocation of capital,” Clyde said. “Our non-core Hereford and (pipeline) assets have been significantly improved and are now more attractive to prospective future buyers. We delivered on our $250 million share repurchase program with over $191 million completed since its inception. We continue to invest in new stores and have refreshed 140 older stores year to date. This long-term focus is what makes Murphy USA a strong competitor over the long run.”

In Wednesday’s trading session, Murphy shares rose 99 cents, or 1.88% at $53.78. The Arkansas gasoline retailer shares have traded in the range of $42.57 and $73.97 over the past year.