Western Refining, Northern Tier May Combine Retail Ops

EL PASO, Texas and RIDGEFIELD, Conn. – Western Refining Inc. (WNR) and Northern Tier Energy LP (NTI) will “look into” a future merger of their convenience store divisions, but this will not be completed in the short term, Western Refining President and CEO Jeff Stevens said today during the companies' first joint earnings call.

The two organizations decided to hold a joint call on account of the 100-percent general partner interest that WNR took in Northern Tier in November. WNR now owns a 38-percent stake in NTI, a master limited partnership.

Despite the investment, both retail divisions continue to operate separately at this time. If a retail merger were to be completed, the joint entity would be comprised of 164 SuperAmerica stores owned by Ridgefield, Conn.-based NTI and 228 locations operated under El Paso, Texas-based WNR’s Mustang, Sundial, Howdy and GIANT banners.

As for retail earnings, SuperAmerica had a record year in 2013 and the company will continue to grow its retail operations, noted Chet Kuchta, NTI’s chief operating officer. SuperAmerica earned a net profit of $15.2 million, almost doubling the $8.7 million the upper Midwest retailer earned in 2012.

Fourth-quarter numbers were not as strong, however. SuperAmerica earned $2.2 million vs. $3.5 million during the same quarter in 2012. Fuel gallons dropped slightly to $80.4 million; fuel margins dropped 1 cent per gallon to 19 cents; and merchandise margins declined 0.3 percent to 24.9 percent. On the plus side, merchandise sales increased by $3 million to $85 million.

Meanwhile at Western Refining, fourth-quarter net profit for its retail division was $893,000 for the three months ended Dec. 31, down from $2.97 million during the same quarter in 2012. Reasons for the decline were not discussed on today’s call, but a drop in fuel sales and margins are two likely reasons.

Merchandise sales at WNR’s Southwest c-stores improved slightly to $61.74 million for the quarter.

“Retail is a very important business for us,” Stevens commented, adding that Western Refining opened seven new locations in Yuma, Ariz., in the past quarter.

Companywide, WNR earned $57 million in its latest quarter, compared to $155 million the year prior. NTI had an overall net profit of $20 million for Q4 vs. $84 million in the year-ago period.

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