Viva pursues Geelong hub after profit rebound

Fuel supplier Viva Energy has firmed up a date of the June half of 2022 to press the button on construction of an LNG import terminal after announcing a four-fold surge in first-half profit and a capital return for shareholders.

Chief executive Scott Wyatt said the recovery in profits was helped by the federal government’s production subsidy for domestic refiners and other fuel security measures. They provide a “solid foundation” on which to pursue investments at the company’s Geelong refinery, as well as at the site itself to convert it into a low-carbon energy hub.

“It’s not the only thing, but it’s a very important outcome that has really created a huge set of opportunities for the future,” Mr Wyatt told The Australian Financial Review.

The LNG import project, the most advanced of the energy hub investments at Geelong, is progressing well and is well placed “to meet an imminent need for gas for the state given the declining production in southern states,” Mr Wyatt said, Viva is targeting initial gas imports in early 2024 to help head off shortages that authorities are warning could hit the state as early as next year.

He said the Geelong venture is now the leading import project in Victoria after AGL Energy abandoned its Crib Point venture after failing to secure planning approval. Viva should not face the same difficulties with approvals given the location of the industrial site and the “closed” loop system that avoids the release of cold water into Port Phillip Bay.

Viva is also making strides towards commercialising hydrogen as a transport fuel for heavy buses and trucks, in partnership with Hyzon Motors and has other low-carbon energy projects at a less advanced stage at Geelong.

The comments came as Viva’s net profit on a replacement cost basis, the figure most closely watched by the market, jumped 87.5 per cent to $111.9 million from $24.4 million in the June half of 2020.

Just $3.3 million of the total came from the refining business and $108.6 million from retail, fuels and marketing.

Viva declared an interim dividend of 4.1¢ after resuming dividend payments. It will also make a 6.2¢ per share capital return to shareholders and carry out an on-market buyback of shares of up to $40 million to return the rest of the proceeds from its sale of a real estate investment trust last year.

Shares in Viva dipped 1¢ to $1.955.

Mr Wyatt said the strong result was driven by an improvement in operations and the strength of Viva’s retail business, as well as cost management and improved conditions for its refinery at Geelong in Victoria, which was supported by the subsidy package.

Underlying earnings before interest, tax, depreciation and amortisation jumped almost $125 million to $256.3 million

Mr Wyatt was cautious about the outlook given extended lockdowns in Victoria and NSW but voiced optimism of a recovery as restrictions lift.

“Overall, I am very pleased with the company performance in the first half, and while we expect the next few months to be impacted from periodic lockdowns in capital cities, I remain confident that sales will quickly recover as restrictions are relaxed and look forward to a return to more stable conditions in 2022,” he said.

Viva advised in July that gross earnings for the June half would be better than the same time last year.

Historical cost profit for the petrol and diesel supplier surged to $130.1 million from $11.1 million in the first half of 2020.

Extracted from AFR

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