Baltimore-based Crown Central Petroleum Corp. posted its first profit in nearly two years during the second quarter, but sees a challenging environment ahead, the company said yesterday.
Crown said it earned $9.2 million, or 93 cents a share, in the quarter, which ended June 30. That compares with a net loss of $11 million, or $1.12 per share, posted for the second quarter of 1999. Sales totaled $481 million, a 71 percent jump from the $281.4 million notched during second-quarter 1999.
Crown last turned a profit in the third quarter of 1998, when it earned $3 million. Its last profitable year was 1997, when it earned $19.2 million. Through the first half of 2000, Crown had a profit of $5.6 million.
"The whole industry did well," said Alvin D. Silber, an industry analyst with Herzog Heine Geduld in New York. "The refining business obviously has been very, very strong." Crown, which owns two Texas oil refineries and 327 gasoline station and convenience stores, said its retail segment performed well. Its stores boosted both sales and profit margins.
But high refining margins - helped by low gasoline supplies and robust demand for fuel ignited by the strong U.S. economy - were the key to Crown's second-quarter financial turnabout, the company said. Those refining margins were more than double the average of the past several years. In fact, if the lower margins of 1997-1999 had extended into this year, Crown would have notched a net loss of $24.7 million through the end of May, company executives estimated.
And now those fat margins of the second quarter have subsequently dropped below the prevailing average for 1997-1999 - and are projected to stay there for the rest of the year, the company said.
"While we have had a market well above the norm ... that was the exception, not the rule," said J. Steven Wise, Crown's manager of corporate and government affairs.
Still set for Aug. 24 is a special meeting at which shareholders will vote on a merger proposal that would transform Crown into a private company. Rosemore Inc., a holding company headed by Henry A. Rosenberg Jr., Crown's chairman and chief executive officer, has offered $9.50 a share to buy the Crown shares it doesn't already own. Crown's board has already accepted Rosemore's offer, which awaits the shareholder vote. Meanwhile, St. Louis-based Apex Oil Co. is offering $10.50 a share.
Through Rosemore, the Rosenberg family controls 11 percent of Crown's Class B stock and 49 percent of its Class A stock, which has 10 times the voting power of the B shares.
Yesterday, the AFL-CIO, and a dissident group calling itself "Crown Shareholders for Fair Value," issued a letter urging shareholders to vote against the Rosemore acquisition offer.
"What we're looking at is a sweetheart deal among insiders that enriches management at shareholders' expense," said Bill Patterson, director of the AFL-CIO union's Office of Investment.