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Monday, January 1, 2018VOLUME 14 ISSUE 1
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Calumet Reports Improved 3Q 2017 Results

Calumet Specialty Products Partners, L.P. last Thursday reported financial results for the third quarter ended September 30, 2017. Calumet was scheduled to report its third quarter financial results on November 10, but announced that it will file a notification of late filing with the Securities and Exchange Commission ("SEC") with respect to the filing of its quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2017.

For the three months ended September 30, 2017, sales were $1,097.4 million compared to $966.6 million during the same period in 2016. On November 9, Calumet stated "Sales for the third quarter 2017 are estimated above $1,000 million compared to $966.6 million in last year's third quarter".

Net loss was $23.6 million, an improvement from the net loss of $33.4 million during the same period in 2016. Adjusted EBITDA was $95.7 million compared to $53.9 million during the same period in 2016.

Specialty products segment (lubricants, packaged and synthetic specialty products, solvents and waxes) gross profit for the quarter was $69.7 million compared to $81.0 million during the same period in 2016.

Specialty products segment Adjusted EBITDA was $43.0 million compared to $43.4 million during the same period in 2016.

The specialty segment Adjusted EBITDA of $43.0 million was relatively flat to the prior year period, but lower than the record quarterly performance seen in the second quarter of this year. Despite these negative impacts, the segment EBITDA results were commensurate with historical third quarter performance for the business. Segment results benefited from a $6.1 million favorable LCM inventory adjustment.

Lubricating oils production volume for the third quarter was 14,220 barrels per day compared to 13,847 bpd in the same period in 2016, and 15,095 bpd during the first 9 months of 2017.

Packaged and synthetic specialty products (includes production at the Royal Purple, Bel-Ray, Calumet Packaging and Missouri facilities) production volume for the third quarter was 2,121 bpd compared to 1,972 bpd during the similar 2016 quarter, and was 2,495 bpd for the first nine months of this year.

"I am pleased to report today that Calumet has delivered another solid quarter of results and a fourth consecutive quarter of improved overall performance," said Tim Go, Chief Executive Officer of Calumet. "I also want to express my disappointment over the delays required in filing our quarterly financial results and apologize to our stakeholders, all of whom have been patient with us as we implemented our new ERP system. Heading into the fourth quarter and beyond, we expect to file our quarterly results without delays. The Partnership has seen significant year-over-year improvements in our financial performance, driven by improved market conditions and our internal self-help initiatives. Our results are a testament to the hard work of our employees as we continue to execute against our long-term strategic goals."

"Despite significant supply chain disruptions in the Gulf Coast region due to Hurricane Harvey and the implementation of our new ERP system, our core specialty products segment Adjusted EBITDA contribution of $43.0 million is flat to the prior year period. While the first two months of the quarter marked healthy growth for our core business, the month of September was adversely affected by these disruptions, which caused us to delay and backlog some shipments in our highest margin specialties and branded products divisions out of the third quarter. The ability to deliver these results despite the negative impact of these events is indicative of the strength of our underlying business and reflects the improvements we have put in place over the course of the last year. We see continued strength in our core specialty markets, and shipping has returned to normal levels through the final quarter of the year."

Go continued, "Our strong fuel products segment Adjusted EBITDA performance of $46.3 million showed marked improvement to both year-over-year and sequential comparisons, and represented the highest segment performance in the last nine quarters. Our refineries operated efficiently with higher than average production through the quarter, especially through the period of time affected by Hurricane Harvey. As a result, we were able to supply areas of Texas and Louisiana with fuel products during a period when many other suppliers were shut down. Our Adjusted EBITDA gains were somewhat offset by hedging losses in the quarter as crude continued to move higher. However, during the third quarter we locked in healthy prices for our fuel products, which we expect to provide a benefit to our performance through the seasonally weaker winter time frame. Additionally, our oilfield services segment saw a second consecutive quarter of profitability as the market continues to display strength in concert with our continuous improvement efforts, helping drive the strongest quarterly performance for the segment since 2014."

Go concluded, "The third quarter saw Calumet make significant strides related to our long-term goals. Over the last four quarters we have made dramatic improvements to our balance sheet leverage, which currently sits at 6.6x Net debt/Adjusted EBITDA compared to 21.8x at this point last year. We continue to remain vigilant in our efforts to maintain cost discipline and drive further operational efficiencies, as evidenced by the $44 million in profit contribution from our self-help program year to date. In November we closed the sale of our Superior, WI refinery, as well as the divestiture of Anchor Drilling Fluids USA, LLC for a total announced consideration of approximately $576 million. We expect that net of final closing cost adjustments and after transaction expenses we will actually realize approximately $600 million from these divestitures. All of these efforts will allow Calumet to deleverage its balance sheet, lower volatility, and ultimately allow the Partnership to focus more meaningful attention and capital on our core specialty business. Our continued improvements combined with strategic divestitures will help support our efforts to drive meaningful long-term value creation for Calumet unitholders."

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