Z Energy's full-year earnings fall 1%, sales decline

Z Energy’s [NZX: ZEL], full-year earnings fell 1 % after one-off expenses relating to the Chevron purchase.

The company’s shares jumped to a record last week when it got approval to buy Chevron's Caltex and Challenge! petrol station chains.

The company's preferred earnings measure is replacement cost operating earnings before interest, tax, depreciation, amortisation and fair value adjustments, which was $238 million in the 12 months ended March 31, down from $241 million a year earlier.

It gave a second adjusted measure to exclude $25 million of costs associated with the Chevron purchase, which was $263 million. Sales fell to $2.5 billion from $3.06 billion.

The Wellington-based company says the year could be summarised as "a strong operational performance across both marketing and refining activities, impacted by one-off expenditure relating to the acquisition and transition of Chevron in which Z has incurred expenses of $25 million relating to preparing for cutover."

It says earnings had been further impacted by the settlement of its dispute with Customs of $13 million, including $1 million in penalties that had been expensed and $12 million recognised in its fuels margin.

Chief executive Mike Bennetts says the outlook for the Z business in 2017 was an RC operating ebitdaf of $260-290 million and capital expenditure of $60 million.

The company will update its guidance once the Chevron assets had been brought into the Z operations in June and modelling of its plans and performance assumptions has been completed.

"We remain committed to delivering the synergies of $25-$30 million, to preserving dual brands and to building a well-considered strategy to drive value from the combined operation," Mr Bennetts says.

Z will pay a final dividend of 18.1c a share, making 26.6c for the year, up 10% from a year earlier. Its non-fuels margin rose 5%. Operating expenses declined 3% to $302 million.

Fuel volumes for the year fell 3% to 2.25 billion litres, as petrol sales fell 3% to 802 million litres and diesel dropped 5% to 820 million litres. Jet fuel was little changed, rising 1% to 375 million litres. Its fuels margin rose by $9 million, or 2%, in the year, inclusive of the $412 million of Customs duties.

Z was last month cleared by the Commerce Commission to buy the Caltex and Challenge! petrol station chains on the condition it sells 19 retail sites and one truck-stop. It was a split decision for the regulator that acknowledged possible retail price coordination between fuel retailers occurs in some regions.

The competition watchdog's delayed decision on the $785 million deal giving Z about 49% of the retail transport fuels market allows NZX-listed Z to buy the 'downstream' assets of American oil giant Chevron, which is exiting all but its exploration activities in New Zealand.

Z shares last traded at $8.10 and have surged 60% in the past 12 months. The stock is rated a 'buy' based on the consensus of five analysts surveyed by Reuters.

(BusinessDesk)