Viva Energy’s board has been grilled by shareholders over expensive fuel prices at Shell-branded petrol stations as it struggles to restore a reputation for price competitiveness after the restructuring of its alliance with Coles.
Several small shareholders used the fuel refiner and retailer’s annual meeting on Thursday to voice dissatisfaction with the prices they are paying at local Shell stations in comparison with rivals such as Caltex.
One shareholder said Shell-Coles sites seemed to be “the first to increase prices and the last to drop prices” and the differential could be as much as 20¢ a litre.
But chairman Robert Hill, presiding over Viva’s first annual shareholder meeting since its $2.65 billion initial public offer in mid-2018, told shareholders “you shouldn’t be at a price disadvantage today”.
He said a major driver for the renegotiation of the alliance with Coles, which was finally settled in February, was to turn around the decline in volumes at the sites and to regain competitiveness. “It’s in our interest to rebuild our volumes,” he said.
High crude oil prices
Viva, which owns the former Shell Geelong refinery and its network of sites, has retained use of the energy giant’s famous yellow-and-red scallop logo.
Speaking later to The Australian Financial Review, Mr Hill said it would “take some time” to restore price competitiveness across the whole network but said Viva was confident it would get there.
“We want them to be competitive because we want to rebuild volume,” he said.
“Our volume was getting to levels that were not in our best interest and that’s why we’ve taken over responsibility of the retailing of the product.”
Mr Hill said Viva had beefed up its retail team and was looking at incentive programs to help win back “cranky” customers who had turned their backs on the Shell brand.
The sharp rise in crude oil prices this year has also played against Viva as it has squeezed retail margins, causing the company to issue a profit warning last month.
Geelong upgrade
The advice was the third in five months to alert shareholders of a risk to meeting forecasts given in the IPO prospectus, after a slump in refining margins late last year also eroded profits at the Geelong plant.
But Mr Hill gave the strongest signal yet from Viva that the company was prepared to make the investment of perhaps $150 million to $200 million that would be required to upgrade the Geelong plant to meet stricter standards for sulphur in petrol, due to be introduced in Australia in 2027.
The huge investment required at each of Australia’s four relatively old and small refineries has caused some experts to question whether any of the plants will continue operating past 2027.
But Mr Hill said that although no decision had been made, Viva is considering carrying out the upgrade in about 2024 to coincide with the next major maintenance shutdown at the catalytic cracking unit, which would save costs.
“We think if we can do both of these major projects at the same time we can get some economies,” he said.
“If we want to stay in the business – and we certainly want to stay in the business – we’ve got to meet those standards.”
Shares gain
While the upgrade was “a big investment”, Viva had spent more than $300 million on the refinery since its purchase in 2014 so had a big vested interest in the continued operation of the plant, he noted.
Shares in Viva, which were sold at $2.50 apiece in the IPO, edged up 1.1 per cent to $2.215 at 1:35pm AEST on Thursday.
Mr Hill said Viva had to focus on getting the business “humming in terms of profit and growth” and the share price would look after itself.
All resolutions put to the meeting were passed easily by shareholders, including the remuneration report, despite criticism of some elements of pay by the Australian Shareholders’ Association.
Extracted from AFR