Interest Dogs Petro Profits
El Paso, TX-based truckstop chain Petro Stopping Centers said that interest expense on various loans and lines of credit ate up much of the company’s profits for the first nine months of this year, even as fuel sales surged to record highs.
For the third quarter, Petro said net income fell by $629,000 to $3.5 million, while revenues increased $66.5 million to $338.2 million, compared to the same period in 2003. The company lost $396,000 through the first nine months of this year even though profits rose 5.9% to $35.2 million on 18.3% higher revenues of $940.1 million compared to the first nine moths of 2003 -- largely due to refinancing transactions made in February this year, along with and increased interest expense, Petro said.
COO Jim Cardwell told Fleet Owner during the company’s earnings conference call that the Petro Lube truck maintenance and repair network continues to do well, selling its services to both fleets and owner-operators.
“Owner-operators may be stretching out their maintenance intervals more since high fuel costs leave them with less discretionary money to spend on non-fuel items,” he said. “But more fleets are looking to outsource maintenance and our network provides a good opportunity for them to get their trucks serviced on the road so they can stay up and running.”
Edward Escudero, Petro’s CFO, added that maintenance and general merchandise sales at the chain’s 37 company-operated and 24 franchised locations were up 4.5% through the first nine months of this year, with gross profits up 5.1%.
Cardwell added that the outlook for freight demand remains strong, though continued high fuel prices could hurt Petro’s non-fuel sales.
“Underlying demand still remains strong. According to the ATA’s tonnage index, freight volumes are up 7% through September this year: and tonnage is staying strong while mileage is staying flat,” he said. “Yet sustained high fuel prices could impact non-fuel sales. We have a strong owner-operator base and if they are paying more for fuel, they’ll have less income to spend on other things.”
