October 27, 2009 / 1:19 PM / in 8 years

UPDATE 4-Valero posts Q3 loss, misses Street view

 * Q3 loss 39 cents/shr ex-items; Street view loss 33 cents
 * Revenue falls 46 percent
 * Shares tumble more than 4 percent
 * Sees similar loss in Q4
 (Recasts first sentence, adds comment from conference call,
updates share price)
 By Anna Driver
 HOUSTON, Oct 27 (Reuters) - Valero Energy Corp VLO.N
reported a deeper-than-expected quarterly loss on Tuesday as
weak fuel demand in the slow economy weighed on results and the
largest U.S. refiner anticipates a similar loss in the current
quarter.
 Valero's shares tumbled more than 4 percent in afternoon
trading on the New York Stock Exchange.
 Refiners have seen their margins hit hard as the global
recession hurts demand for products like diesel and stockpiles
have swelled. Additionally, lower-grade, or sour crude oil
which some of the refineries process has lost much of the cost
advantage over higher-grade crude.
 "As we strive to lower costs and become even more
competitive, we expect the improving world economy will drive
demand growth for our products and support a recovery in
refining margins and sour crude discounts," Bill Klesse,
Valero's chief executive, said in a statement.
 He said demand should improve in 2010.
 "We are finally close enough to next year for people to be
able to say, 'hey, we see some minor signs of improvement,"
said Roger Read, an analyst at Natixis Bleichroeder.
 Refiners will see improvement in demand for fuels such as
diesel when the economy recovers and rail and truck traffic
pick up again, Read said.
 The San Antonio company posted a net loss of $489 million,
or 87 cents per share, compared with a profit of $1.2 billion,
or $2.18 per share, a year ago.
 Excluding one-time items that included a $417 million asset
impairment, Valero posted a loss of 39 cents per share,
exceeding analysts' average forecast for a loss of 33 cents per
share, according to Reuters I/B/E/S.
 Citing continue pressure on margins, Valero said it expects
a fourth-quarter loss that is at least as large as that
reported in the third quarter. Analysts had expected a
fourth-quarter loss of 19 cents per share.
 The larger-than-expected loss was due in part to higher
interest expense, research firm Simmons & Co International said
in a note to clients, adding that "poor third-quarter earnings
are a given in the sector."
 If the slow market persists, Valero said on the call that
it will evaluate a reduction in its quarterly dividend. In
October, the company had a payout of 15 cents per share.
 Revenue fell 46 percent to $19.5 billion.
 To control costs, Valero closed its refinery in Aruba and
streamlined operations at its Delaware City refinery. The
company said it recently began to focus on cutting expenses at
its Paulsboro refinery.
 Valero, which operates 16 refineries in the United States,
Canada and the Caribbean that have a combined capacity of about
3 million barrels per day, processed 2.379 million barrels per
day, down 7 percent from a year ago.
 Valero shares were down 4.4 percent, or 91 cents, at $19.36
in afternoon trading on the New York Stock Exchange. That
compares with a 3 percent decline in the Standard & Poor's
index of refining companies .15GSPENRM.
 (Additional reporting by Matt Daily in New York; editing by
Dave Zimmerman, Maureen Bavdek and Matthew Lewis)
 (Reporting by Anna Driver in Houston)








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