Focus on specialty products
Calumet Specialty Products Partners (CLMT) announced that it completed the sale of its Superior refinery on November 8, 2017. Calumet Specialty intends to focus on its core specialty products business in the future. The margins on specialty products are generally much higher compared to fuel products like gasoline and diesel. Another key objective of the sale was to reduce the leverage.
The above chart gives a sense of the difference between commoditized products margins, like gasoline and diesel, and quality and brand-driven specialty products margins in Calumet Specialty’s portfolio. The sale of the Superior refinery moves Calumet Specialty closer to its objective of focusing on high-margin specialty products.
As the above graph shows, the pro forma gross margin excluding the oilfield services segment has a 69% contribution from specialty products—up from 57% before the transaction.
Calumet Specialty’s specialty products business has lower earnings volatility compared to its fuel products business. As the above graph shows, the average quarterly segment EBITDA (earnings before interest, tax, depreciation, and amortization) for Calumet Specialty’s fuel refining was more volatile than its specialty products segment.
The sale also lowers Calumet’s obligation under the Renewable Fuel Standard. Calumet Specialty’s gross renewable identification number obligation for 2017 is expected to be ~$128 million. It expects the number to fall to ~$85 million for 2018.
In the next part, we’ll discuss how selling the Superior refinery helped Calumet reduce its leverage and expected capital expenditures.