Vertex Earnings Dipped in 2020, Q4

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Vertex Earnings Dipped in 2020, Q4
Vertex Energy's Heartland rerefinery in Columbus, Ohio, has 1,500 barrels per day of API Group II base oil production capacity. Photo courtesy Vertex Energy

Vertex Energy’s black oil segment, which includes its rerefineries and used oil collection business, reported a drop in gross profit and a decline in revenues for the quarter ending Dec. 31, compared to the same quarter last year. For the full year, the segment also reported decreases in gross profit and revenues.

In a filing with the United States Securities and Exchange Commission, the Houston-based company said that its black oil segment posted a $4.1 million gross profit for the quarter, down 60% from the fourth quarter of 2019. Gross profit decreased year-on-year in the fourth quarter, Vertex explained, “as a result of lower volumes of processed products at our refineries, and other facilities, as well as an overall decrease in margins throughout the business as a result of lower commodity pricing, offset by decreased operating expenses throughout our various facilities, along with decreased street collection and pricing as a result of our continued efforts to cut costs.”

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Segment revenues for the quarter slid 42% to $21.2 million.

For the full year, the black oil business reported that gross profit fell 28% to $15.6 million, compared to $21.8 million in 2019. The company said the decreased gross profit for the year was a result of lower volumes of processed products at its refineries and other facilities, “as well as an overall decrease in margins throughout the business as a result of lower commodity pricing, offset by decreased operating expenses through our various facilities, along with diligent management of our street collections and pricing.”

The segment’s 2020 revenue dropped 41% from $139.3 million to $82.2 million.

The black oil segment’s revenue comes primarily from the products of Vertex’s rerefineries and sales of used motor oil purchased from generators such as oil change shops and garages and a network of collectors.

For the full year, the company reported base oil revenues of $27.2 million, a 21% decline from $34.6 million. Revenue from oil collection services increased 37% to $7.8 million, up from $5.7 million.

The black oil segment’s volume decreased approximately 23% during the fourth quarter, compared to the same period in 2019. For the full year, segment volume declined 19%. The company attributed both decreases largely to the overall economic impact of the “stay-at-home” orders that were imposed as a result of the COVID-19 pandemic.

“While our full-year 2020 performance was below our initial expectations due to the pandemic, we are excited by the opportunities for growth entering 2021, supported by an ongoing recovery in refined product margins, improved asset utilization and contributions from new business lines,” Vertex President and CEO Benjamin Cowart stated in its earnings news release. 

Vertex’s recovery division includes the business operations of Vertex Recovery Management.

Total direct used motor oil collections increased 9% to 10.2 million gallons in the fourth quarter, up from 9.4 million gallons in 2019’s fourth quarter. The increase was driven by growth in new customer accounts. “As we grow our collections fleet and expand market share in the regions we serve, we continue to realize improved economies of scale, spreading operating costs across a larger volume of collected gallons,” Cowart said.

“Total [used motor oil] collections costs declined during the fourth quarter due a combination of improved route effiency and economies of scale, as more gallons were collected on a per truck basis, contributing to improved gross margin contribution,” the company said. “Further, U.S. vehicle miles traveled continued to recover during the fourth quarter, improving from second quarter 2020 multi-year pandemic-related lows.”

Vertex operates a rerefinery in Columbus, Ohio, that can produce 1,500 barrels per day of API Group II base stocks and a Marrero, Louisiana, refinery that produces vacuum gas oil. At its Heartland refinery, base oil refined product margins are currently near record levels, Cowart added.

The company said the Heartland rerefinery operated at peak capacity during the fourth quarter, as total throughputs increased 6% on a year-over-year basis. Capacity utilization reached 109% in the fourth quarter, up from 103% in the year-earlier period. For the full year, capacity utilization was at 97%, down from 102% in 2019.