By Sourasis Bose
(Reuters) -Refiner Valero Energy reported lower second-quarter profit on Thursday, but managed to beat earnings estimates as strong processing volumes offset a slump in margins.
The company's total throughput volumes, or amount of crude processed, averaged 3.01 million barrels per day, compared with 2.97 million bpd a year earlier.
Wall Street had expected its throughput to average 2.96 million bpd, according to LSEG data.
"We see continued strength in our U.S. wholesale system with sales exceeding one million barrels per day in the second quarter," CEO Lane Riggs said.
Refiners had ramped up their processing capacity to 93.5% in the second quarter, compared with 91% in the prior-year period, on hopes of an uptick in demand. However, the demand did not fully materialize, hurting margins, according to the Energy Information Administration.
Demand for distillate fuels, which include diesel and heating oil, took a sharp hit this year, pressured by sluggish manufacturing activity, a milder-than-expected winter and booming renewable fuel supply.
Valero said its refining margins were $3.05 billion in the second quarter, nearly 28% lower than last year.
"VLO earnings beat consensus slightly, less impressive than recent large beats," said TD Cowen analyst Jason Gabelman in a note.
Refining missed consensus, with strength in North Atlantic operations offset by weaker West Coast results, he added.
Energy majors BP and Exxon Mobil had earlier said weak fuel prices would have a negative impact on their results in the reported quarter.
The San Antonio, Texas-based refiner reported a net income of $2.71 per share, lower than last year's $5.40 per share. It beat an average profit estimate of $2.60, according to LSEG data.
Production volumes in the company's ethanol segment rose by 31,000 gallons per day, to 4.5 million gallons a day, compared to last year.
(Reporting by Sourasis Bose in Bengaluru; Editing by Pooja Desai)
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