May 3, 2016 / 11:26 AM / 3 years ago

Valero's profit misses estimates as product inventories soar

(Reuters) - U.S. refiner Valero Energy Corp (VLO.N) reported a lower-than-expected profit as margins fell in the first quarter due to a build-up of diesel and gasoline inventories.

A sign is seen at a Valero gas station in Hoboken, New Jersey, U.S., May 2, 2016. REUTERS/Mike Segar

The company’s shares were down 3.8 percent at $57.53 in morning trade on the New York Stock Exchange, amid a broader decline in energy stocks.

In February, at least five U.S. refiners voluntarily reduced output in the most widespread cuts since the global financial crisis.

U.S. refiners ramped up production in 2015, leading to higher inventories and weaker margins this year as demand softened during the mild winter.

Crack spreads, the difference between the prices of crude oil and refined products, have narrowed sharply due to a spike in distillate and gasoline inventories in the United States.

The company’s refining throughput margin fell to $7.96 per barrel in the first quarter, from $12.39 per barrel last year.

After adjustments, Valero reported earnings of 60 cents per share, while analysts, on average, were expecting earning of 66 cents per share, according to Thomson Reuters I/B/E/S.

Valero’s refineries operated at 96 percent throughput capacity utilization in the first quarter, down from 97 percent in the preceding quarter.

Rival Phillips 66 (PSX.N) reported last week a 40 percent drop in profit, while Marathon Petroleum Corp (MPC.N) barely eked out a profit in the first quarter.

Valero’s profit fell 49 percent in the quarter.

Net income attributable to shareholders fell to $495 million, or $1.05 per share, in the first quarter ended March 31, from $964 million, or $1.87 per share, a year earlier.

Operating revenue fell 26.3 percent to $15.71 billion in the quarter.

Up to Monday’s close of $59.82, Valero’s New York-listed shares have fallen 15.4 percent this year, while the S&P 500 oil & gas refining & marketing sub-index .SPLRCENRM has fallen 13.3 percent over the same period.

Reporting by Kanika Sikka and Anet Josline Pinto in Bengaluru; Editing by Savio D'Souza and Shounak Dasgupta

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