Government subsidies have helped lift petrol and diesel supplier Viva Energy to a “very strong” first half, with its sole refinery suffering none of the heavy losses that marked last year.
Shares in Viva gained 5.1 per cent after Viva said its Geelong refinery “operated at or above break-even levels” during the June half, with the additional support of about $40.6 million from the interim government subsidy.
Sales growth in fuels outside the aviation business were “strong”, with supportive margins, said chief executive Scott Wyatt.
The Morrison government offered the country’s remaining refiners an interim subsidy per litre of fuel produced in Australia starting January 1, ahead of a larger subsidy package that kicked in on July 1. Viva secured a bigger subsidy than initially expected after two rival refiners decided to shut their plants instead amid large losses and a weak outlook for the sector.
“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.
“Our recovery program remains on track, and I am very pleased with the performance of the business.”
Viva said gross earnings for the June half would be between $390 million and $410 million, up about 48.5 per cent from $269.3 million in the first half last year. The unaudited figure for earnings before interest, tax, depreciation and amortisation represents an increase of about 34 per cent from two years earlier, before any impacts from the COVID-19 pandemic.
Shares in Viva closed at $2.07, up 10¢, while rival Ampol saw its shares edge up 1.5 per cent.
Viva’s sales volumes of diesel were up 16 per cent from two years ago, and 4 per cent for petrol, but jet fuel sales remain 60 per cent down on the June half of 2019.
Weekly sales through Viva’s service station alliance with Coles were 58.4 million litres, up from 54.1 million litres in the June half last year but still 2 per cent softer than the same half in 2019.
“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 first-half 2019, as a comparison to pre-COVID demand,” Mr Wyatt said.
The refining margin for the Geelong plant, representing the gross profit on converting one barrel of crude oil into one barrel of fuels, was $US6.60 a barrel in the June half. That compares with $US2.90 per barrel in the first half last year, when margins across the global industry were hammered by the impact of COVID-19.
The refinery has been back at full production since late 2020, after being at least partially shut for much of 2020.
The government’s fuel security measures will also support upgrades required at refineries to meet cleaner fuel standards and Viva said it is now carrying out preliminary studies to start the upgrades required at Geelong. It estimated the cost of the upgrades at about $250 million, with the federal government to contribute up to half of that.
Separately, Ampol said it has put in place steps to comply with a federal court order issued in relation to a legal dispute over petrol station branding with former half-owner Chevron.
Under orders issued on Friday by Justice O’Callaghan, which followed a court ruling last month, Ampol must stop using the phrase ‘StarCard accepted here’ on banners at its service stations as of August 2.
Ampol said it would amend banners and non-compliant advertising to fit with the orders, which it noted do not affect the roll-out of its rebranding from Caltex across its network.
Chevron’s bid to restrict Ampol’s use of a red forecourt canopy and claims that Ampol had engaged in misleading conduct were dismissed by the court, it noted.
CEO Matt Halliday described the outcome as “positive” for Ampol and noted the orders will have no impacts on customers, who can still have their StarCards accepted at an Ampol site.
Chevron intends to start using the Caltex name itself next year when it rebrands its Puma petrol stations.
Extracted from AFR