Z Energy FY earnings fall 13% on refinery outage, crude price hike
By Gavin Evans
May 2 (BusinessDesk) - Z Energy reported a 13 percent decline in full-year net profit after an extended outage at the Marsden Point refinery raised its costs and record pump prices reduced sales volumes industry-wide.
The country’s biggest fuel retailer said net profit, measured on a replacement cost basis, fell to $178 million in the year ended March 31, from $205 million a year earlier.
Earnings before interest, tax, depreciation, amortisation and changes in financial instruments, also measured on a replacement cost basis, fell 3 percent to $434 million and were in the middle of the $420-$450 million range the firm indicated in January.
The Wellington-based company will pay a final dividend of 30.5 cents on May 29, up from 21.9 cents a year earlier. That takes the total dividend for the year to 43 cents a share, up from 32.3 cents last year and also in the middle of the 38-47 cent range the firm signalled in January.
Z Energy, which also operates the Caltex brand, cut its guidance twice last year and accelerated its work on new services and cost-saving initiatives after being caught out by a jump in crude oil prices and a weak New Zealand dollar during the first half.
Brent crude then dropped to US$51 a barrel in late December but has since been rising steadily. Brent for August delivery was recently at US$71.42.
Chief executive Mike Bennetts said the high pump prices late last year saw annual industry fuel volumes fall 1.5 percent as customers altered their driving behaviour.
“It’s a cliché, but it really was a year of two halves,” he said. “The first half had some of the most difficult trading conditions in Z’s history. The prolonged refinery shutdown, being a distressed purchaser of finished product and high pump prices, all adversely affected our margins.”
While Z’s petrol volumes for the year fell about 3 percent to 1.3 billion litres, diesel volumes were up 2 percent at 1.67 billion. Other fuel sales were also 4 percent higher at almost 1.2 billion, driven by increased marine fuel sales and new roading activity increasing demand for bitumen.
Z Energy reports on a replacement cost basis to avoid the swings in inventory valuations that result from changes in product and crude prices and foreign exchange movements from period to period.
On a conventional historic cost basis, full-year net profit fell to $186 million, 29 percent less than the year before when crude prices increased 27 percent during that period.
Bennetts says the firm is on-track to deliver $30-$35 million of earnings improvement by the end of the 2020 financial year, having achieved about $19 million of gains two years into the firm's three-year programme.
After allowing for changes to accounting rules for leases, the company is forecasting ebitdaf of $450-$490 million for the current financial year. That assumes an average exchange rate of 68 US cents and Brent crude price of US$70 a barrel.
Ordinary dividends for the year are likely to be between 48 and 54 cents a share.