Viva Energy says it has motored back to profitability in the first half of 2021 after a grim year in 2020, with the company saying it is likely to book a lift in underlying profits for the financial year.
Viva tumbled to a $35.9m after-tax loss in 2020 after fuel sales crashed as a result of the Covid-19 pandemic lockdowns across the country.
The company released selected preliminary – and unaudited – figures from the first half of 2021 on Friday, saying it expected underlying earnings before interest, tax, depreciation and amortisation to fall in the range of $390m to $410m.
That would be a 34 per cent lift on the first half of 2019 – which Viva says is a better comparison than last year’s Covid-affected results.
Viva shares surged on the news, closing up 5.1 per cent at $2.07.
Petrol volumes lifted 4 per cent for the half compared to 2019, with diesel sales up 16 per cent as sections of Australia’s industrial economy roared back as the pandemic threat receded.
Refining margins at Viva’s Geelong refinery, which slumped to a $95m loss in 2020, were also up compared to the first half of 2019, at $US6.60 a barrel compared to $US5.10 before the pandemic. Refining margins were only $US2.90 in the first half of 2019.
It also benefited from about $40.6m worth of federal government cash through the temporary 1c a litre subsidy put in place last year. The government’s permanent package to assist Australia’s remaining refineries took effect from July 1 – although the federal government is still preparing the guidelines and rules for the package, passed by parliament on June 29.
International and interstate border lockdowns still had a major impact on the results, according to managing director Scott Wyatt, with aviation fuel volumes off 60 per cent compared to 2019 at 666 million litres, and lower than the first half of last year when Viva shifted a billion litres of jet fuel.
“While retail fuel sales continue to be impacted by periodic lockdowns, and aviation by ongoing border closures, overall growth across all retail and commercial channels has been very encouraging with total petrol and diesel sales volumes up 4 per cent and 16 per cent respectively on 1H2019, as a comparison to pre-Covid demand,” he said.
“Refining remains challenging, but supported by strong production levels, receipt of the short-term production payment grant, and the long-term fuel security package commencing July 1, 2021 that minimises the downside volatility of refining margins.”
Mr Wyatt said Viva’s retail margins at its Shell-branded fuel stations had been hit “at times” by sharp increases in the oil price in the period, but he said the market had absorbed the price increases easily and returns across the period had been solid.
Viva says its underlying EBITDA is calculated “on the basis of theoretical new purchases of inventory instead of historical cost of inventory. This removes the effect of timing differences and the impact of movements in the oil price”.
The company did not release details of its likely statutory results for the half year. It’s full set of half-year accounts are due to be released to the market on August 24.
Extracted from The Australian