How Calumet Specialty Products Partners LP Makes Most of Its Money
While Calumet Specialty Products Partners (NASDAQ: CLMT) is a master limited partnership (MLP), it makes its money quite differently than most companies that use that corporate structure. Instead of primarily operating pipelines, processing plants, and storage facilities that generate rather stable fee-based income, Calumet operates refineries and manufacturing facilities that have direct exposure to volatile commodity prices.
Given its business model, the company's earnings have fluctuated wildly over the years. That volatility finally caught up with Calumet last year, after it had gotten itself deep in debt due to its unpredictable cash flow, as well as some unwise investments -- so deep in debt that it had no choice but to stop paying a distribution. This situation led the company to refocus its attention on how it makes money, with its goal to bolster the areas that have less direct exposure to commodity-price volatility.
In many ways, Calumet Specialty Products Partners is similar to a refining company, since it produces gasoline, jet fuel, and asphalt as well as higher-value specialty products like lubricants and waxes. Overall, it operates three business segments: oilfield services, specialty products, and fuel products. Here's a snapshot of the financial performance of these segments since the start of 2015:
Source: Fool.com