Valero Energy Corp. (NYSE:VLO)

The "Refining" segment demonstrates considerable volatility in financial performance over the observed period, with notable fluctuations in operating income and revenues. The operating income exhibited a sharp decline from a positive $4,022 million in 2019 to a loss of $1,342 million in 2020, reflecting a significant downturn. This was followed by a recovery trend, with operating income increasing to $1,862 million in 2021 and surging markedly to $15,803 million in 2022 before decreasing to $11,511 million in 2023. Despite the decline in 2023, operating income remained substantially higher than the pre-pandemic levels.

Revenues displayed a similar pattern of volatility but with an overall upward trajectory. Revenues dropped significantly from $103,764 million in 2019 to $60,848 million in 2020, coinciding with the period of operating loss. Subsequently, revenues increased sharply to $106,961 million in 2021 and further escalated to $168,210 million in 2022. A decline occurred in 2023 to $136,488 million, although this figure remained above the 2019 baseline.

The segment profit margin provides insight into profitability relative to revenue and reflects the impact of the aforementioned trends. The margin decreased from a positive 3.88% in 2019 to a negative 2.21% in 2020, indicating a loss-making operation during that year. Recovery was observed with margins rising to 1.74% in 2021 and significantly improving to 9.39% in 2022, denoting a period of strong profitability. The margin slightly contracted to 8.43% in 2023 but remained elevated compared to earlier years.

Operating Income

Exhibited a severe decline in 2020 followed by a robust recovery in subsequent years, peaking in 2022 before softening in 2023.

Revenues

Decreased sharply in 2020 due to external pressures but rebounded strongly in 2021 and 2022, with a moderate decline in 2023 maintaining levels above initial values.

Segment Profit Margin

Mirrored the operating income trend, transitioning from a negative margin in 2020 to strong profitability by 2022 and sustaining relatively high margins in 2023.

Overall, the data suggests that the refining segment experienced a period of disruption in 2020, potentially due to industry-wide challenges, followed by a strong recovery phase. The improvement in profit margins alongside increased revenues indicates enhanced operational efficiency or favorable market conditions post-2020. The decline in 2023, while notable, does not diminish the overall positive trend in profitability and revenue generation compared to the baseline year.

The analysis of the Renewable Diesel segment over the five-year period reveals several notable trends in financial performance and profitability metrics.

Operating Income (Loss)

The operating income shows a generally positive trend, increasing from 732 million USD in 2019 to 852 million USD in 2023. Although there was a dip to 638 million USD in 2020, the figure rebounded in subsequent years, indicating growth and recovery in operational earnings.

Revenues

Revenues demonstrate a strong and sustained upward trend, nearly quintupling from 1,217 million USD in 2019 to 6,991 million USD in 2023. This substantial growth suggests significant expansion in sales volume, pricing power, or both within the segment.

Segment Profit Margin

Despite rising revenues and operating income, the segment profit margin exhibits a clear downward trend, declining sharply from 60.15% in 2019 to 12.19% in 2023. This decline implies increasing cost pressures, lower pricing power, or other operational inefficiencies that have impacted profitability as a percentage of revenue.

In summary, while the renewable diesel segment has expanded considerably in size as reflected by revenue growth, the profitability margin has decreased markedly over the same period. Operating income has increased in absolute terms, but the segment’s efficiency or profitability relative to revenue has declined. This could indicate challenges in cost management or competitive pricing pressures affecting the segment’s overall financial health.

The financial performance of the ethanol segment demonstrates notable fluctuations over the five-year period analyzed. Revenues exhibit variability, initially declining from 3,837 million US dollars in 2019 to 3,243 million in 2020, which could be indicative of challenging market conditions or operational issues during that year. Subsequently, revenues recovered significantly, rising to 5,589 million US dollars in 2021, before experiencing a slight decrease to 5,486 million in 2022 and marginally increasing to 5,559 million in 2023. This pattern suggests a stabilization of revenues at a higher level after the initial decline in 2020.

Operating income presents more pronounced volatility. Initially, the segment barely achieved a positive operating income of 3 million US dollars in 2019 but suffered a considerable loss of 69 million US dollars in 2020. This loss aligns with the decreased revenues that same year. A strong recovery is evident in 2021, with operating income surging to 473 million US dollars, followed by a drop to 110 million in 2022. The income then rises sharply again in 2023 to 553 million US dollars, indicating improved operational efficiency or favorable market dynamics in recent years.

The segment profit margin reflects these operational shifts clearly. From a marginally positive 0.08% in 2019, it turns negative to -2.13% in 2020, consistent with the operating loss. It then improves substantially to 8.46% in 2021, falls back to 2.01% in 2022, and increases again to reach a strong 9.95% in 2023. The significant margins in 2021 and 2023 correspond with the peaks observed in operating income, suggesting periods of enhanced profitability within these years.

Overall, the segment's performance indicates resilience and a capacity to rebound following an adverse period in 2020. While revenues have stabilized at levels above those seen in the early years, operating income and profit margins exhibit more variability, highlighting the impact of market or operational factors on profitability. The strong margins in 2023 suggest that the segment is currently operating with improved efficiency or benefiting from favorable pricing conditions.

Operating Income (Loss)

The operating income for the refining segment experienced significant fluctuations over the five-year period. It started with a strong positive value of 4022 million USD in 2019, then declined sharply to a loss of 1342 million USD in 2020. This was followed by a recovery to 1862 million USD in 2021. The income saw a remarkable increase in 2022, reaching a peak of 15803 million USD, before declining to 11511 million USD in 2023. This indicates a volatile earnings environment with a notable peak in 2022.

Total Assets

Total assets showed a downward trend from 47067 million USD in 2019 to 42939 million USD in 2020. Subsequently, total assets increased steadily each year: 47365 million USD in 2021, 48484 million USD in 2022, and 49031 million USD in 2023. The asset base overall expanded after 2020, reflecting possible investments or asset acquisitions related to the refining operations.

Segment Return on Assets (ROA)

Segment ROA mirrored the trends in operating income, starting at a healthy 8.55% in 2019, plunging into negative territory at -3.13% in 2020. A recovery occurred in 2021 with ROA reaching 3.93%, followed by a sharp increase to 32.59% in 2022, before decreasing to 23.48% in 2023. The ROA indicates profitability relative to assets, showing strong improvement particularly in 2022, and a still robust, though reduced, return in 2023.

The data indicates a progressive increase in operating income (loss) over the five-year period. Operating income rose from 732 million US dollars in 2019 to 852 million US dollars in 2023, reflecting an overall positive trend in profitability within the segment despite some fluctuations.

Total assets demonstrate significant growth during the same timeframe. Beginning at 1,412 million US dollars in 2019, assets more than quadrupled by 2023, reaching 5,790 million US dollars. This substantial increase suggests considerable investment or acquisition activity related to the segment's asset base.

However, the segment Return on Assets (ROA) shows a clear declining trend. Starting from a high of 51.84% in 2019, ROA decreased steadily each year, falling to 14.72% in 2023. This decline indicates that despite increasing total assets and rising operating income, the efficiency with which assets are generating income has diminished significantly over the period.

Operating Income (US$ in millions)

Increased from 732 in 2019 to 852 in 2023, demonstrating improved earnings potential within the segment.

Total Assets (US$ in millions)

Expanded markedly from 1,412 in 2019 to 5,790 in 2023, indicating substantial asset growth likely due to investments or capital expenditures.

Segment Return on Assets (%)

Declined sharply from 51.84% in 2019 to 14.72% in 2023, reflecting reduced asset utilization efficiency despite asset growth.

Overall, the segment exhibits growth in operating income and asset base, but a decreasing trend in asset efficiency suggests the need to evaluate the return generated on expanded investments. This pattern may prompt further analysis on factors impacting the diminishing ROA and strategies for improving asset productivity.

The ethanol segment demonstrated significant volatility in operating income over the five-year period analyzed. Starting with a modest operating income of $3 million at the end of 2019, the segment experienced a considerable loss in 2020, with operating income declining sharply to negative $69 million. This negative performance was reversed in subsequent years, with a substantial recovery and growth in operating income, reaching $473 million in 2021. Although there was a decline in 2022 to $110 million, the segment recovered again by the end of 2023, achieving a notably high operating income of $553 million.

Total assets within the segment showed relative stability, with a gradual increase from $1,615 million at the end of 2019 to a peak of $1,812 million in 2021. However, total assets decreased in the following years, reaching approximately $1,551 million by the end of 2022 and slightly decreasing further to $1,549 million in 2023. This indicates some divestment or asset reduction after the peak in 2021.

Return on assets (ROA) exhibited significant fluctuations, reflecting the changes in operating income relative to asset base. The segment had a very low positive ROA of 0.19% in 2019, followed by a substantial negative ROA of -3.99% in 2020, consistent with the operating loss. ROA recovered dramatically in 2021 to 26.1%, indicating a highly profitable year relative to asset size. Despite a dip to 7.09% in 2022, the ROA again showed robust improvement by 2023, reaching an impressive 35.7%, underlining improved asset utilization and profitability.

Overall, the ethanol segment showed resilience and a strong recovery after the downturn in 2020, achieving considerable gains in both operating income and return on assets by 2023. The reduction in total assets post-2021 suggests a more efficient asset base or strategic adjustments within the segment.

The refining segment's revenues display a marked fluctuation over the analyzed periods. Beginning at US$103,764 million as of the end of 2019, revenues sharply declined in 2020 to US$60,848 million, reflecting a significant contraction likely influenced by adverse macroeconomic conditions during that year. However, a strong recovery is evident in 2021, with revenues rebounding to US$106,961 million. This upward trajectory continued into 2022, reaching a peak of US$168,210 million, before slightly decreasing to US$136,488 million in 2023.

Total assets maintained a relatively stable profile with minor variations. Starting at US$47,067 million in 2019, assets experienced a slight decrease in 2020 to US$42,939 million, followed by gradual increases over the subsequent years, culminating at US$49,031 million by the end of 2023. This suggests measured investments or asset management strategies without aggressive expansion or divestiture during the period.

The segment asset turnover ratio, which measures revenues generated per unit of asset, exhibits significant changes consonant with the revenue trends. The ratio fell from 2.2 in 2019 to 1.42 in 2020, indicating diminished efficiency or asset utilization in the challenging economic environment of that year. Subsequent periods show strong improvements, with an increase to 2.26 in 2021 and a substantial rise to 3.47 in 2022, reflecting enhanced operational efficiency or higher throughput per asset unit. Although the ratio decreased to 2.78 in 2023, it remains noticeably higher than pre-pandemic levels, underscoring a sustained improvement in asset utilization.

Overall, the data indicates a segment that was significantly impacted in 2020, likely due to external disruptions, but which successfully recovered in the following years, achieving higher operational efficiency and revenue generation relative to its asset base by 2022 and 2023. Asset levels remained relatively stable, suggesting a focus on optimizing existing resources rather than large-scale asset expansion.

Revenue Trends

The renewable diesel segment exhibited a consistent upward trend in revenues over the five-year period. Starting at $1,217 million in 2019, revenues experienced a modest increase to $1,267 million in 2020. A significant acceleration is observed from 2021 onward, with revenues rising substantially to $2,342 million in 2021, more than doubling compared to the previous year. This growth continued sharply through 2022 and 2023, reaching $5,501 million and $6,991 million respectively, indicating strong momentum and expanding market presence.

Total Assets

Total assets allocated to the segment grew steadily across the periods examined. Beginning at $1,412 million in 2019, assets expanded to $1,659 million in 2020 and then almost doubled to $3,437 million in 2021. Asset growth continued, albeit at a slower pace, reaching $5,217 million in 2022 and $5,790 million in 2023. This upward trajectory suggests ongoing investment to support the segment’s expanding operations and revenue growth.

Segment Asset Turnover

The segment asset turnover ratio, defined as revenues divided by segment assets, declined from 0.86 in 2019 to 0.68 in 2021, highlighting an initial period where asset growth outpaced revenue growth, potentially reflecting capacity expansion or asset build-out phases. However, from 2021 onwards, the ratio improved markedly to 1.05 in 2022 and further to 1.21 in 2023. This reversal indicates enhanced efficiency in utilizing assets to generate revenue, suggesting that the segment has successfully translated its investments into higher revenue generation capacity.

Overall Insights

The segment has demonstrated robust expansion in both revenues and asset base since 2019, with a particularly rapid acceleration from 2021 through 2023. Initial investment phases appear to have influenced asset turnover ratios, which improved substantially in the latter years, pointing to increased operational efficiency. The data imply a maturing segment with effective utilization of its asset base leading to strong financial performance.

Revenues

The revenues experienced a decline from 2019 to 2020, dropping from 3837 million US dollars to 3243 million US dollars. Subsequently, there was a significant increase in 2021 to 5589 million US dollars. Following this peak, revenues slightly decreased in 2022 to 5486 million US dollars, and then showed a marginal recovery in 2023 to 5559 million US dollars.

Total Assets

Total assets increased steadily from 1615 million US dollars in 2019 to a peak of 1812 million US dollars in 2021. After 2021, assets declined to 1551 million US dollars in 2022 and remained relatively stable in 2023, with a slight decrease to 1549 million US dollars.

Segment Asset Turnover

The segment asset turnover ratio decreased notably from 2.38 in 2019 to 1.88 in 2020, indicating reduced efficiency in utilizing assets to generate revenues during that period. Thereafter, it showed a consistent upward trend, improving sharply to 3.08 in 2021, then increasing further to 3.54 in 2022, and slightly rising again to 3.59 in 2023. This trend reflects improved asset utilization efficiency over the recent years.

Total expenditures for long-lived assets

There is a clear downward trend in total expenditures for long-lived assets over the analyzed period. Starting at $2,581 million in 2019, expenditures decreased significantly to $1,838 million in 2020, followed by a further decline to $1,374 million in 2021. A slight recovery occurred in 2022 with expenditures rising to $1,763 million, but this was not sustained as the figure fell again to $1,488 million in 2023. Overall, the capital spending in this category has diminished by approximately 42% from 2019 to 2023.

Depreciation and amortization expense

The depreciation and amortization expense exhibits a consistent upward trend throughout the period. Beginning at $2,062 million in 2019, the expense increased gradually each year, reaching $2,138 million in 2020 and $2,169 million in 2021. This upward movement continued with $2,247 million in 2022 and peaked at $2,351 million in 2023. The total increase over the five-year span amounts to around 14%.

Segment capital expenditures to depreciation ratio

This ratio demonstrates a declining pattern overall. The value started at 1.25 in 2019, indicating capital expenditures exceeded depreciation considerably. It then dropped sharply to 0.86 in 2020 and continued descending to 0.63 by 2021. Although there was a minor rebound to 0.78 in 2022, the ratio fell back to 0.63 in 2023, maintaining the lower level established in 2021. This trend suggests that capital expenditures have been consistently falling short compared to the depreciation expense, potentially indicating a period of reduced reinvestment in long-lived assets relative to their consumption or aging.

The analysis of the "Renewable Diesel" segment reveals notable fluctuations in the capital investment and expense patterns over the five-year period.

Total expenditures for long-lived assets

There was a substantial increase from 160 million US dollars in 2019 to a peak of 1,049 million in 2021, indicating a significant capital investment phase during this period. However, expenditures declined sharply afterward, falling to 879 million in 2022 and further to 294 million in 2023, suggesting a tapering of investment activity.

Depreciation and amortization expense

This expense remained relatively stable in the initial years, fluctuating between 44 million and 58 million from 2019 through 2021. Starting in 2022, there was a marked increase to 122 million, nearly doubling, and then it surged again to 231 million in 2023. The sharp rise in these expenses aligns with the increased capital base from prior investments.

Segment capital expenditures to depreciation ratio

The ratio demonstrated a high level of variability, increasing substantially from 3.2 in 2019 to a peak of 18.09 in 2021, reflecting heavy capital expenditure relative to depreciation during the buildup phase. Subsequently, the ratio declined markedly to 7.2 in 2022 and further down to 1.27 in 2023, indicating a slowdown in capital expenditure relative to the depreciation of the existing asset base.

Overall, the segment appears to have undergone an investment cycle characterized by significant capital expenditures peaking in 2021, followed by reduced spending in subsequent years. The corresponding increase in depreciation and amortization reflects the growing asset base, while the diminishing capital expenditure to depreciation ratio points to a transition from the investment phase to a more mature stage of asset utilization.

Total expenditures for long-lived assets

The total expenditures for long-lived assets show fluctuation over the observed period. The value decreased significantly from 47 million USD at the end of 2019 to 23 million USD in 2020, followed by a further decline to 18 million USD in 2021. In 2022, there was a modest increase to 22 million USD, and a more substantial rise to 43 million USD was observed by the end of 2023.

Depreciation and amortization expense

The depreciation and amortization expense experienced a general decline after an initial increase. Starting at 90 million USD in 2019, it rose to 121 million USD in 2020 and further to 131 million USD in 2021. However, in 2022, there was a sharp decrease to 59 million USD, followed by a moderate increase to 80 million USD in 2023.

Segment capital expenditures to depreciation ratio

This ratio indicates variations in the relationship between capital expenditures and depreciation. It began with a moderate level of 0.52 in 2019, declining sharply to 0.19 in 2020, and further down to 0.14 in 2021. The ratio then increased to 0.37 in 2022, and climbed back to 0.54 in 2023, slightly surpassing the initial 2019 level.

Summary insights

Overall, the data indicate a cyclical trend in expenditures and depreciation. Capital spending experienced a notable drop through 2021, followed by recovery in 2022 and 2023, nearly returning to the 2019 level. Meanwhile, depreciation and amortization peaked in 2021 before declining significantly and partially recovering. The capital expenditure to depreciation ratio mirrored this pattern, showing contraction during 2020-2021 and expansion thereafter. These patterns could reflect changes in asset acquisition and usage intensity over time within the ethanol segment.