You might think fuel wholesaler Global Partners LP of Waltham had a good 2007 because of soaring oil prices.
Chief executive Eric Slifka says that's wrong, because competition in his industry makes profit margins razor-thin — Global Partners earned just $47 million last year, less than 1 percent of its revenue of $6.8 billion.
Instead, last year Global Partners' big bets on building or buying more fuel terminals to dock ships throughout the Northeast started to pay off. "We've done as much as we can in every direction," says Slifka. "We've been charging down the path of expansion."
Global Partners' roots date to 1933, when Slifka's grandfather, Abraham Slifka, started delivering oil from a 275-gallon truck in Dorchester. Last year the company handled 3 billion gallons of fuel, including home heating oil, automotive gasoline, diesel, and — lately — biofuels.
But it's not an easy niche. Global Partners is one of a half-dozen large New England middlemen distributing fuel in the region, nearly all of which arrives by tanker ships from refineries along the Gulf Coast, the Eastern Seaboard, and Canada. The products must be stored at huge tank farms, then trucked to homeowners and gas stations.
Global Partners' scale means that it handles about 20 percent of all the fuel used in New England, including much of the gasoline sold at Sunoco and Citgo gas stations and the Global stations operated by the Slifka family's privately owned Alliance Energy company.
The strategy now is to increase market share, using the proceeds of its 2005 initial public offering, which raised $230 million. Last year it spent $137 million and took on $73 million in debt, on acquisitions and expansions, such as terminals it bought along the Hudson River and on Long Island. Global also just opened a terminal in Rhode Island and plans to open a tank farm in Providence and complementing facilities in Chelsea and Revere, plus New Hampshire and Maine.
"We feel that these assets, steel in the ground, gives you a competitive advantage in these marketplaces," Slifka says.
The company faces significant challenges. Conservation efforts reduce demand, and the high price of home heating oil has led some customers to switch to natural gas, which Global doesn't sell. These challenges haven't been lost on shareholders. At the end of the first quarter, the stock was trading at about half the high of $41.29 it reached in August.
But Slifka says Global Partners' investments in tank farms and terminals will pay off in the long run. "Customers see your name on the terminal and they know you own and supply it," he says.
Ross Kerber can be reached at email@example.com.