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FRANKLIN, Tenn. -- Delek US Holdings Inc., the parent company of Mapco convenience stores, said net income soared in the first quarter thanks in large part to last year's purchases of a Texas oil refinery and 21 convenience stores from BP as well as higher gasoline prices.
Delek said today it earned $12.9 million, or 33 cents per share, in the period, compared with a profit of $165,000, and no earnings per share, in the first quarter of 2005
The company said net sales increased 188 percent in the quarter to $659.8 million from $229.1 million a year ago.
Delek said net sales at the refinery it purchased in April 2005 totaled $362 million, reflecting sales of 4.9 million barrels of refined petroleum products at an average price of $73.36 a barrel.
Delek reported that the refinery operations contributed $25.4 million in "segment contribution margin."
Net sales at its convenience stores increased 30 percent in the first quarter to $297.6 million from $229 million the year before primarily due to the purchased of the BP stores and a 1.7 percent increase in same-store gallons of gasoline sold. The company also reported a 22 percent increase in the average retail price of gasoline per gallon in the first quarter from the same period a year earlier.
In addition, merchandise sales grew 10.2 percent for the first quarter of 2006 to $72.8 million, due both to the growth in stores in operation to 349 at the end of the quarter from 329 at the same time in 2005 and to a 5.2 percent increase in same-store merchandise sales. Segment contribution margin for the retail business was $10.4 million for the first quarter of 2006, up 7.5 percent from $9.7 million for the first quarter of 2005.
Delek's first-quarter growth in same-store merchandise sales reflects an improving economic environment, according to the company, as well as its focus on marketing and sales of food, coffee and fountain drinks, especially the introduction of its proprietary GrilleMarx branded food offerings. The sales growth in these higher-margin items, combined with the double-digit growth in total gallons sold, enabled Delek to offset the impact of higher fuel prices and increased credit expense.
During the first quarter, Delek completed the reimaging of the majority of the 21 BP stores acquired in December and launched its next-generation store concept, Mapco Mart, which is designed to add quality fresh-food offerings in a modern, upscale facility. Delek expects this new concept to produce higher margins and expand its potential customer base, by attracting core convenience store shoppers, as well as customers seeking freshly prepared meals. Delek opened two of these new concept stores via its "raze and rebuild" strategy during the first quarter and has already opened two additional stores thus far in the second quarter.
Uzi Yemin, president and CEO of Delek US, said, "We are pleased with Delek's operating and financial performance for the first quarter of 2006. Our strong profitable growth primarily resulted from the acquisition of our refining operations in Tyler, Texas, on April 29, 2005. In addition, we have continued to expand our retail segment, through both the addition of new stores and increased same- store sales. With the completion of our initial public offering in May 2006, which provided net proceeds to Delek of approximately $172.0 million, we believe we are well positioned to implement our growth strategies for each of our businesses."
Yemin added, "On a longer-term basis, we are focused on significant growth opportunities for both our refining and retail businesses. We have a demonstrated record of successfully completing and integrating acquisitions, and, with our strong financial position, particularly after completing the IPO, we expect to leverage our expertise in an industry environment that has produced attractive acquisition opportunities for both refining and retail assets.
"Our strategies are also designed to produce profitable organic growth. In refining, both the industry dynamics and our strong Tyler-area market position are compelling, and we are engaged in an array of initiatives to modernize and improve the profitability of our refining operations through operational changes and capital investments expected to improve efficiency, processing capacity and utilization. In retail, we are continuously focused on improving our store economics through branding initiatives and targeted merchandising strategies, renewal of our physical retail assets and investment in our proprietary technology infrastructure. In a highly fragmented industry, we expect these investments and our scale advantages to enable us to increase our market share within our existing geographic footprint and by expanding to contiguous states."