Original write-up –The company owns gas stations with convenience stores.
Companies with high break-even gasoline margins have not been able to operate profitably in a prolonged 10-cent gasoline margin environment. ABC’s break-even gasoline margin is only 4.5 cents/gallon (cash flow break-even after maintenance capex and debt payments), which allows it to operate during a low gasoline margin environment. Gasoline margins have historically never dropped below ABC’s break-even level, which is reduced by a fuel terminal acquired during 2000 that has allowed ABC more flexibility on sourcing options and has reduced the cost of fuel delivered.
The company operates on the lower price range of gas retailers, with emphasis on upscale C-store operations to drive higher overall margins.
Revision based on suggestions:
ABC operates in the lower price range of gas retailers and emphasizes upscale C- store operations to drive higher overall margins.
Gas sales: ABC break-even gasoline margin is 4.5 cents/gal. (cash flow break-even after maintenance capex and debt payments), which allows operational flexibility in low gasoline margin periods. Gasoline margins have not dropped below ABC’s break-even levels. ABC acquired a fuel terminal in 2000 that has allowed ABC more sourcing options and reduced the cost of fuel delivered.
Competitors with higher break-even gas margins cannot operate profitably even in a prolonged 10-cent margin period.