Valero, Casper, Valero Energy discussed on The Drill Down

The Drill Down


And that Salesforce out there is seen as really going to help exact sciences. Cory, what is your next drill down? Let's look at Valero Energy. Valero trades in her vl O, shares rose today and they've gained 42% over the past 12 months. What's new with Valero? Big news out of a layer of layer, of course, not only has some gas stations that they manage and but they also very importantly, our giant refiner. And they've got some big operations on the Gulf Coast. They have begun restarting their St. Charles and Moreau refineries along the mississip river. That were shut down after hurricane item made landfall last month. Now you're thinking big dirty oil and gasoline. But really importantly, they're plant in Norco Louisiana that there's a joint venture with darling ingredients is one that interestingly, the St. Charles plant makes clean diesel, or makes renewable diesel. I should say, diesel made out of animal fats. On the leftover cooking oil and so on. And they do this stuff at great size. So what's interesting to me though is that they had to shut this thing down the last we heard from this company was in August before the storms hit. And what they had to say at that point was that they were rushing ahead to build yet another plant. Their diamond green renewable plant, they were going to build diamond green due to and diamond green three and yes, they were able to restart this plant, which the company announced yesterday in a press release. But they didn't say anything about how far they long and if it slowed down their development to develop more of this renewable diesel business that they were saying was really benefiting from the timing of it. They had gone out and bought steel before steel prices rose so much. They had room to build in shops because the room wasn't being used for anything else. The labor cost because they had an early mover advantage their labor costs were low in the gulf. Well, none of that stuff is true anymore. So I think this is one to keep an eye on. Let's listen to what their last earnings conference call. The senior vice president for alternative energy and project development spoke on that call, here's Martin parish talking about how they had these advantages in their favor in terms of timing with their diamond green or dgd green diesel plants two and three, which were soon to come online. One thing you have to remember now is EGD three is pretty much a carbon copy of DG D two. So that helps us. I mean, all the major equipment we changed a little bit, but just tweaks. So we had a lot of the engineering done sooner than you typically would have. Now obviously, we knew that when we funded it, but just getting out and the market while steel prices and everything were up. We kind of beat all that to the market. So we had placed orders before that happened. The delivery is good. I mean, the shop space is there and the labor situations really good on the Gulf Coast where we're building. So all those things and then just having experience we moved over experienced contractors from BG D two that had just built one of these units. So, you know, all the work, the structural work, concrete work, you know, structural steel is already going up. So we just got a really quick start out of the gates and we expect to be able to maintain that. So in a nutshell, that's it an experienced construction team and getting out in front of these price increases and shop space has been really good for us. Or it was really good for them. We'll see if it remains good for them. Again, one to keep an eye on because obviously the timing that was in their favor in late June may be isn't in their favor. Here going forward. Cory, what's your next drill down? I want to look at a struggling company that was once a high flyer in Casper sleep. Casper sleep yeah, the Casper was a hot topic. Just a few years ago, trades under CSP are shares fell today, and they've dropped over 42% in a year. So what's going on over a Casper? Yeah, this was a $1 billion company. A unicorn. They did an IPO that didn't go great or respect. I should say is the way they finally placed the IPO. CEO, Philip krim has not been entirely focused on his company as it's been struggling. I don't say that to be mean, but I'm being very accurate. He has not been entirely focused because he continues to launch spacs and other industries. One today with a risk analytics firm called complex, which of course you spell with a queue because why wouldn't you spell complex with a queue? It's a complex spelling. But complex, complex, I don't know. They were talking about they were going to do a spac, they pulled us back back. They're launching other specs. And all of this back activity else finance activity has led to it comes while Casper is struggling in particular with cost. Now there are some reports out there unconfirmed by the company of big layoffs of C suite layoffs, TechCrunch reporting a bunch of C suite layouts, personally, I think that my guess is the TechCrunch reporting is wrong because the company hasn't verified these things yet. And the importance been out there for a day. Nonetheless, it's unequivocally true that Casper sleep has been facing some problems not just with its share price, but with its gross margins. So part of the Casper model is not to manufacture the Casper mattresses, but to have just in time inventory, I'm the raw equipment raw materials when you need them, also just heard from our last story, we're all material prices were low. Now they're high. We were here in inflation for months and months. These guys are buying the principal ingredient for Casper mattresses as plastics and steel. So what you're dealing with in terms of expenses are oil prices, oil prices are extraordinarily high plastic prices are extraordinarily high. And so the gross margins for Casper have been much worse than their competitors on their last conference call. The analysts asks over and over again, what's up with your gross margins? They look one of the analysts that they look a lot worse than all of your competitors. What is it about Casper that you're not getting right and again, you wonder about the CEO's focus if he's out there launching back after his back after spec, here is what CEO Phil crim had to say. Now about his other activities, what about the multiple factors pressuring their margins and their business model? Good morning. I think you're just seeing the margins, again, it's multiple factors driving pressure on the margin in Q two. It was rapid expansion of the retail partnership channel, putting margin pressure on it as well as cost of goods inflation. I think we perhaps some vertically integrated players see the price increases show up faster given the adjustment time nature of our inventory position so some of the cost increases from our vendors might hit faster than it would if we had a stock supply of the raw materials that we need to make it. So I do think there is a timing difference of how some of the raw material price increases hit our business versus a vertically integrated peer. But overall we're buying the same chemicals that's impacting our business the way that it would even if you were vertically integrated. But there definitely could be some timing differences given the third party implications. It also means that as raw materials drop, it's going to show up in our P and L faster. Again, it's all.

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