Valero Energy quarterly profit plunges on weak refining margins

(Reuters) -Refiner Valero Energy (NYSE:VLO ) posted an 86% slump in third-quarter profit on Thursday on falling refining margins, but it managed to beat Wall Street expectations.

Globally, refiners have seen a drop in their profitability on soft consumer and industrial demand, especially in China.

U.S. refinery margins, measured by the 3-2-1 crack spread, dipped to $14.28 in mid-September, the lowest since early 2021, on lackluster fuel demand.

Energy majors like Exxon Mobil (NYSE:XOM ), BP (NYSE:BP ) and Shell (LON:SHEL ) had said earlier this month that they expected weaker refining margins to weigh on their earnings in the third quarter.

Valero's net income attributable to stockholders plunged to $364 million, or $1.14 per share, in the quarter from $2.6 billion, or $7.49 per share, a year earlier.

However, data compiled by LSEG showed analysts had expected a profit of 98 cents.

Valero, which is the second-largest U.S. refiner by capacity, saw refining margins falling to $2.41 billion from $5.41 billion last year in the same quarter.

Valero's refining segment reported operating income of $565 million for the third quarter, compared with $3.4 billion a year earlier.

However, analysts at Tudor, Pickering & Holt said relative to their profit estimates, all three segments of the company -refining, renewable diesel and ethanol - posted results "a touch higher."

Revenue came in at $32.87 billion, compared with estimates of $31.13 billion per data from LSEG, partially on an 18.4% rise in sales volumes for renewable diesel.



Additionally, the Texas-based refiner showed a higher payout ratio for the quarter, coming in at 84% against 68% in the same quarter last year, while its interest expense fell nearly 88%.

Its total throughput volumes, or amount of crude processed, averaged 2.9 million barrels per day (bpd) in a heavy maintenance season, compared with 3 million bpd and a 95% refinery utilization a year earlier.

Source: Investing.com