Viva Energy has reported a strong 10 percent increase in its half-year net profits, driven largely by a significant boost in its refinery operations. Just a few years ago, this business segment seemed destined for closure, but it has now fueled a surge in earnings, counterbalancing weaker performance in the company’s retail and traditional petrol station sectors.
This better-than-expected result has slightly lifted Viva’s share price, highlighting the critical role of the refinery business in the company’s overall performance.
For the first half of the year, Viva posted a net profit of $192.1 million, up from $174.1 million in the same period last year. The refinery segment was the standout performer, with an impressive 390 percent revenue growth, bringing in $112.4 million compared to $22.9 million a year earlier.
Despite this, Viva experienced a 0.9 percent decline in petrol sales and a 1.4 percent drop in its convenience business. In response, the company announced a dividend of 6.7 cents per share, a 21 percent decrease from the previous year. This dividend is at the higher end of Viva’s payout range, representing a 70 percent payout from its petrol station business and 56 percent from its commercial and industrial operations.
Chief Executive Scott Wyatt expressed satisfaction with the results, especially in light of the ongoing cost-of-living pressures. He noted that while these pressures, along with the illegal tobacco trade, are affecting consumer demand in their convenience stores, the company has shown resilience. The diverse nature of Viva’s business has helped buffer these challenges, with strong performances in the commercial sector and at the Geelong refinery driving earnings growth.
These results come on the heels of strong financial gains reported by rival Ampol, although Ampol faced setbacks due to unplanned outages in its refinery business. Both Viva and Ampol are navigating the rapidly evolving petrol market, aiming to enhance their retail and convenience offerings.
Viva is particularly focused on expanding its retail presence, hoping to entice customers with a variety of options, including takeaway coffee and restaurants, as they recharge their electric vehicles. Last year, Viva completed a $1.215 billion acquisition of OTR Group, a strategic move aimed at preparing for the energy transition that threatens to disrupt Australia’s traditional fuel market. OTR generates over 70 percent of its earnings from non-fuel retailing, attracting customers with offerings like barista-made coffee and dog-wash facilities.
Wyatt stated that the company is moving forward with plans to rebrand its Coles Express stores under the On the Run banner, introducing premium convenience offerings to attract consumers. This transformation is expected to cost more than $50 million annually, but Wyatt believes the OTR acquisition will yield significant cost-saving synergies starting in 2025.
While Viva is diversifying its appeal, it remains committed to fossil fuels and sees potential profit from an impending gas shortage on Australia’s east coast. The company is advancing plans to develop an LNG import terminal at Geelong, though these plans have faced delays due to additional environmental studies requested by the Victorian government.
Viva has started submitting revised environmental assessments and, if it secures government approval, the company could play a crucial role in addressing the looming gas shortfall on the eastern seaboard. The traditional gas supply from the Longford facility may be depleted by 2028, putting Victoria, the state most reliant on gas, at risk of a severe economic and social crisis.
Viva has proposed extending a pier at its Geelong refinery to accommodate a vessel capable of receiving LNG exports, which could then be used to supply Victorian homes and businesses during peak demand periods.
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