UPDATE 3-Valero profit tumbles; margins weak

(Adds details from conference call, updates share price)

NEW YORK, April 29 (Reuters) - Valero Energy Corp (VLO.N: Quote, Profile, Research), the largest U.S. oil refiner, said on Tuesday its first-quarter earnings tumbled 77 percent due to weak profits from gasoline production and unplanned outages at its refineries.

Companies that refine oil to produce gasoline and other fuels had a very difficult quarter as they struggled to pass through to their customers crude oil price increases of nearly 70 percent over the past year.

Valero, whose shares were down 2 percent, said quarterly net income fell to $261 million, or 48 cents a share, from $1.14 billion, or $1.86 a share, a year earlier.

Profit in the latest period included a pre-tax benefit of $101 million, or 12 cents per share, from a business interruption recovery related to a fire at the company's McKee refinery.

In late March, Valero said it expected earnings of 10 cents to 35 cents a share. After the warning, analysts' average forecast fell to 26 cents a share from 98 cents.

Valero said benchmark margins on the U.S. Gulf Coast shrank by 59 percent from a year earlier as a jump in crude oil prices of $40 a barrel outpaced the rise in its selling price of gasoline.

The sharp drop in gasoline profit was slightly offset by better profit margins for diesel and jet fuel, it said.

It said average throughput rates for its Gulf Coast plants should increase by about 100,000 barrels per day in the second quarter as repairs at its Port Arthur and Aruba refineries are likely to be completed in May.