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The Delek Israel fuel company has reported a downswing in results for the third quarter of 2008, as the rising costs of oil cut into its margins. Profits fell sharply, even though revenues climbed.

The gasoline retailer, which is controlled by Yitzhak Tshuva's Delek Group, reported a steep slide of nearly 80% in net profit to NIS 31 million, compared with NIS 148 million in the same three months of 2007. However, profit in the parallel quarter had been inflated by Delek Israel selling its stake in Amisragas.

Notwithstanding this and other nonrecurring elements, profit still fell to NIS 35 million in the third quarter of 2008, compared with NIS 51 million in the the corresponding quarter of 2007. Revenues rose by 42% year over year to NIS 1.8 billion, Delek Israel reported yesterday. But the increase was not in terms of volume: It was a function of the rising price of fuel, and was offset by the mushrooming cost of the fuel and its transportation.

Ultimately, the company's gross profit increased by just 1.7% year over year, to NIS 203 million. But gross margin shrank badly, to just under 11% of turnover, from 15% in the parallel quarter. Revenues from Delek Dragon gas stations and convenience stores (the Menta brand) grew by 49% against the parallel quarter to a billion shekels, compared with NIS 680 million in the same period of 2007. Cost of sales and operating gas stations increased by 7.5% year over year to NIS 95.8 million, partly because Delek Israel operated more gas stations this year than in the same three months of 2007.

Burdensome costs reduced operating income by 23% year over year to NIS 84.5 million, Delek Israel said, even though its finance costs dropped by NIS 18 million to NIS 55.2 million. The company had cut back is liabilities linked to the consumer price index by NIS 150 million, it explained.

By the end of the quarter, Delek Israel's debt to the banks and others had risen to a billion shekels, from NIS 300 million at the end of 2007. It owes NIS 436 million to parent company Delek Group, which is down from NIS 628 million at the end of last year. Delek Israel's cash and equivalents grew from NIS 27 million nine months previously to NIS 233 million.