Refiner Valero Energy posted an 86 per cent 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.
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Energy majors like Exxon Mobil, BP and Shell 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 per cent rise in sales volumes for renewable diesel.
Additionally, the Texas-based refiner showed a higher payout ratio for the quarter, coming in at 84 per cent against 68 per cent in the same quarter last year, while its interest expense fell nearly 88 per cent.
Its total throughput volumes, or amount of crude processed, averaged 2.9 million barrels per day (bpd) in a heavy maintenance season, compared with three million bpd and a 95 per cent refinery utilization a year earlier.
(Reporting by Seher Dareen in Bengaluru; Editing by Maju Samuel)
