Husky Energy’s expansion of its ethanol plant in western Manitoba nearly doubled the company’s ethanol output during 2008, just as values for the finished product dropped substantially.
The Calgary oil and gas company on Wednesday posted overall full-year profit of $3.75 billion on $24.7 billion in revenues, up from $3.21 billion on $15.52 billion in fiscal 2007.
And Husky’s profit for its fourth quarter (Q4) ending Dec. 31 was $232 million on $4.7 billion in revenues, down from $1.07 billion on $4.76 billion in the year-earlier period.
Net earnings for Husky’s Canadian refined products sector, which includes its ethanol production as well as its 492 fuel outlets, dropped to $106 million in 2008 from $192 million in 2007. Fourth-quarter profits for the sector at the end of 2008 were just $16 million, down from $52 million in the year-earlier period.
That’s despite Husky’s full-year ethanol production rising to 627,200 litres per day from 324,600 in fiscal 2007, largely due to the start-up of its expansion at Minnedosa, Man., about 50 km north of Brandon, at the end of 2007. The plant’s current production capacity is 130 million litres per year.
Husky in its Q4 alone posted ethanol production of 661,300 litres per day, up from 347,200 in the year-earlier period, making for a Q4 ethanol production increase of 90 per cent, and a full-year production boost of 93 per cent.
Despite those production increases, however, “earnings from total ethanol sales for both plants were lower than 2007, due to much lower sales values, higher feedstock costs, and natural gas costs,” the company wrote.
Husky in 2008 posted $19 million in capital expenditures toward the upgrades at its ethanol plants at Minnedosa and at Lloydminster, Alta.
Also offsetting lower profits in the Canadian refined products sector was an income tax recovery of $24 million, due to lower corporate income tax rates announced in December 2007.
Overall, Husky reported, its Q4 financial performance was “significantly affected by the economic environment and the decline in global commodity prices.”
But Husky noted its results are also affected by the exchange rate between the Canadian and U.S. dollar. A lower Canadian dollar relative to the U.S. dollar boost revenues received from the sale of oil and gas commodities, offsetting the effect of lower oil and natural gas prices.