CST Brands Q1 Profit Falls - Update

(RTTNews) - CST Brands, Inc. (CST), a retailer of transportation fuels and convenience goods, Tuesday said its first-quarter profit more than halved from last year, hurt mainly by new costs as well as interest expense associated with its spin-off from Valero Energy Corp. (VLO). Operating revenues also decreased from last year.

The company, which includes Corner Store and Dépanneur du Coin, was spun-off from Valero Energy's retail business in May 2013.

For the first quarter, the company's net income fell to $11 million or $0.14 per share from $23 million or $0.30 per share in the previous year.

On average, seven analysts polled by Thomson Reuters expected the company to report earnings of $0.19 per share for the quarter. Analysts' estimates typically exclude special items.

CST Brands said it experienced increases in motor fuel and merchandise gross margins in the U.S, but saw margin declines in Canada.

In the prior-year quarter, U.S. motor fuel gross margin was negatively impacted by rapidly rising wholesale motor fuel prices, while wholesale motor fuel prices were more stable during the first quarter of 2014.

The decline in its motor fuel and merchandise gross margins in Canada were mainly due to a decrease in value of the Canadian dollar relative to the U.S. Dollar.

In addition, net income for the recent quarter was impacted by increases in general and administrative expenses and interest expense of $10 million and $10 million, respectively.

The increase in general and administrative expenses was due to new costs associated with being an independent, stand-alone, public company, including additional corporate personnel and associated benefits and stock-based compensation.

The increase in interest expense was related to debt issued in connection with the spin-off.

Operating revenues for the quarter declined 6 percent to $3.00 billion from $3.19 billion in the prior year. Wall Street expected revenues of $3.07 billion for the quarter.

The U.S. Segment operating revenues declined to $1.80 billion from $1.93 billion a year earlier. Canada segment reported operating revenues of $1.20 billion, down from $1.26 billion last year.

Total operating expenses advanced to $220 million from $204 million a year ago. Interest expense totaled $16 million.

CST closed Monday's trading at $33.28 on the NYSE.