2024-03-20 08:42:48 ET
Summary
- Petroleum refining industry revenues have been declining for the last five years and are expected to continue declining. In contrast, renewable fuel revenues will be growing at a high rate.
- Only 20% of America’s 128 operating refineries can economically switch to become renewable fuel refineries. The ones that can and do will enjoy margin and multiple expansion.
- Calumet Specialty Products has recently converted one of their petroleum refineries into a renewable fuels refinery. The value of this one refinery will soon eclipse Calumet’s current enterprise value.
A Familiar Story: When Growth Returns
In 2010, the US automaking industry saw a 26-year low in car sales. Despite the near three decades of dismal growth, hybrid and electric vehicles offered a silver lining, the hope of growth in an ex-growth industry. The company that captured the zeitgeist of this hope IPO’d in 2010, Tesla (TSLA). Just over a decade later, TSLA enjoyed a richer valuation than the top-ten global automakers combined despite having a mere fraction of their deliveries.
This example demonstrates that when a low to negative growth industry begins to see a pocket of growth once more, the company that centers itself around that growth can enjoy significant margin and multiple expansion....
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Calumet Specialty Products: A First Mover Among The Fuels Of The Future