LPH earnings are 100% real. LPH published a SAIC/SAT tax filing reconciliation versus SEC filings convering 3 years from Juy 2009 to March 31 2012, and their auditor personally verified the Chinese reported data on PRC computers in the state tax filings office and signed off on the audit. There were no material differences - numbers agreed to within 1 percent.
In China, power companies, coal plants, and gas station chains do not buy directly from refiners because there is a distribution network associated with the oil storage depots. LPH makes a smaller margin from "pass through" sales of a very tiny percent of their business which is allowed to go directly to customers by rail, but which does not get offloaded at their tanks. The vast majority of their business is sales through their oil storage facilities which are not pass-through, and for which margins range in the mid-teens percentage, depending on crude prices and retail ceiling prices and the status of arbitrage prepayments by LPH.
The poster who tried to compare State-Owned refiners to private wholesale distributors is spouting nonsense and comparing apples to oranges. The oil industry dynamics for China allow state-owned refiners to get cheap loans from PRC banks for operations; private industry does not, generally speaking. SOE Refiners get government support even if they lose money, so that oil production continues to supply the country. Higher ups in SOEs are not worried about shutting down or losing their jobs if they don't make a profit, and the government can tell them what they can charge.
Wholesalers can and do go through profit margin squeezes if they fail to arbitrage enough oil to last through these events when retail prices are dropping and crude prices are rising. In the US, this is accomplished through trading of derivatives. In China, arbitrage is accomplished with cold hard cash - prepayments to suppliers for a locked-in advance price, and having cash on-hand to raise inventory levels quite a bit higher when crude prices are in a cyclic low. China's 22-day lookback period allows a buffer timeframe for arbitrage to work, effectively. But even so, LPH margins are considerably lower at high points in the crude price cycle. You can't count on LPH raising cash levels as quickly for future needs during periods when crude prices have been high for several months. However, if you average the business across 12 to 18 months, they do quite well. One of the reasons for this is because LPH has zero debt and tries to maintain enough cash to adjust inventories and advances to suppliers to make more profit while the conditions are optimum. The CEO Cai Yongjun is a career oilman, he is not a suitcase CEO of multiple companies, and has been with LPH for 17 years, so he knows how to manage the business.
LPH does very well during 1/2 of the business cycle....decent during 1/4 of the cycle...and combined with ramp-up periods from expansion and economic growth, that makes up for pullbacks in retail oil price celings set by the NRDC when crude heads lower. Their margins are not unrealistic relative to comparable oil stocks. Go back to commiserating with your PUDA friends, or better yet, get long in LPH and start making back some of those losses. GLTA