Ampol has seen its third-quarter profit slump by almost 75 per cent, dragged down by a heavy loss in refining, but a significant improvement in returns from convenience retailing has provided some encouragement for the market.
Benchmark net profit excluding one-off items was $24 million in the third quarter, down from $94 million in the year-earlier period as the Lytton refinery in Brisbane slumped into the red by $82 million.
Ampol, the former Caltex Australia, already advised earlier this month of the loss at the Lytton refinery, which is under review for a potential shutdown despite the federal government’s $2.5 billion fuel security package, which would provide a direct subsidy for local production of fuels. Rival Viva Energy also has its unprofitable Geelong refinery under review for possible closure.
The unaudited numbers released on Monday for Ampol add further evidence of the urgency of support measures needed to prop up the domestic refining sector if further closures are to be avoided among the four remaining plants. Several analysts have predicted that more shutdowns are inevitable, cautioning that the government measures may only provide a temporary delay.
Still, some of the gloom around the refining performance was offset by a sharp improvement in earnings from Ampol’s convenience retailing division in the September quarter.
Earnings before interest and tax from convenience retailing for the three months surged to $87 million, more than double the figure from a year earlier and almost four times as much as in the June quarter.
Ampol cited “favourable” retail fuel margins, strong performance at shops and “solid” management of costs. Volumes in convenience retailing were down 13 per cent because of the sale of some service stations, but like-for-like shop sales were up 11 per cent.
The loss at Lytton still dragged the whole fuels and infrastructure business into the red, posting an EBIT loss of $19 million in the quarter, down from a $121 million profit a year earlier.
RBC Capital Markets analyst Gordon Ramsay said that on balance, the third-quarter result was a little stronger than he expected, noting the relatively strong performance of the business excluding refining despite the “challenging” environment.
Mr Ramsay said he saw the stronger retail fuel margins as positive but forecast they would taper off as fuel demand volumes return to more normal levels across the industry.
Shares in Ampol, which was the subject of a $8.8 billion takeover proposal earlier this year, rose 1.3 per cent to $25.42.
Chief executive Matt Halliday said the “resilient” performance of the integrated business, particularly in convenience retailing, was pleasing given the weak economy and the impact of COVID-19 on demand for fuels.
“Our focus remains on optimising value across our integrated supply chain against prevailing market conditions to maximise value for shareholders,” Mr Halliday said.
Ampol is due to consider several options for Lytton in its comprehensive review of the plant, to be completed by June 30, 2021.
Refining analyst Sri Paravaikkarasu at FACTS Global Energy said she expected the site would be converted into an import terminal.
“To fill the void Lytton refinery leaves, the market needs to import products,” she noted.
Ampol noted that Australian diesel volumes slid 10 per cent in the third quarter from a year earlier, while petrol volumes were down 14 per cent, due to stage four travel restrictions in Victoria. Jet fuel volumes slumped 64 per cent.
Bottom line net profit, which is less closely watched by the market as it includes the impact of changing oil prices on the value of stockpiles, rose to $129 million in the September quarter, from $40 million a year earlier.
Extracted from AFR