Ampol recently announced a substantial 65% increase in its third-quarter operational earnings, attributed to skyrocketing refining margins and an uptick in mobility, extending the company’s financial prosperity.
This positive outcome stands in contrast to fears that rising interest rates and a looming cost-of-living crisis might suppress demand for products like petrol and aviation fuels.
According to Ampol, earnings before interest and tax, calculated on a replacement cost basis to omit inventory and foreign exchange fluctuations, reached $438.2 million – a significant 65% climb compared to the same period last year.
Following the announcement, Ampol’s stock value experienced up to a 6% surge, although the initial excitement subsided slightly by the afternoon, stabilising at a 3.5% increase.
The leading fuel retailer in Australia credited this financial success to the substantial refining margins and robust demand for petrol and aviation fuels post-COVID-19 lockdowns. Notably, during the quarter, refining margins at Queensland’s Lytton refinery soared to $US19.69 ($30.84) per barrel, a considerable increase from the previous record of $15.46 the preceding year. The margin growth was primarily fueled by petrol and diesel product cracks.
However, Ampol noted a mild decline in margins following September 30, with a reduction in gasoline cracks and a slight drop in middle distillates like diesel and jet fuel, although they continue to exceed historical averages.
Despite predictions of a decline following recent reports, these results suggest that both Ampol and its competitor Viva could continue reaping the benefits of these high margins, a critical factor in the resurgence of Australia’s domestic energy players.
In May 2021, the then Morrison government implemented measures to financially support Ampol and Viva Energy to maintain production levels, a strategy aimed at bolstering Australia’s energy security. This move was crucial for preserving Australia’s refining operations, as both companies faced intense competition from larger Asian refineries and challenges due to COVID-19 lockdowns.
Australia’s refining capabilities have been diminishing for over ten years, a situation exacerbated by the pandemic, which slashed jet fuel demand, decreased petrol and diesel usage and negatively impacted refining margins.
Prior to government support, Ampol grappled with escalating losses, prompting a comprehensive assessment of the future of its Lytton oil refinery in Brisbane. The government’s financial assistance provided a lifeline for Ampol and Viva Energy during tougher times, although the subsequent market recovery rendered them ineligible for further aid due to improved circumstances.
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