Oils Ain’t Oils at Ampol

Australian fuel giant Ampol has lopped final and annual dividend after revealing a sharp fall in underlying earnings and margins as oil prices and demand for products like petrol and jet fuel were hammered by the pandemic and various lockdowns.

The company (it used to be called Caltex Australia) will pay a fully franked final dividend of 23 cents share, down from 51 cents a year ago and making a total for the year of 88 cents, down from 83 cents in 2019.

The company reported group earnings before interest and taxes on a replacement cost basis (RCOP) of $401 million. This compares to $607 million for the same period in 2019.

Stripping out significant items, Ampol’s benchmark profit – the figure most closely watched by analysts – fell 38% to $212 million.

Total Australian fuels sales volumes were 13.6BL, a 17% drop compared to 2019. However, international volumes grew by 36%, totalling 6.5BL.

Earnings before interest and tax in the company’s fuels and infrastructure business fell 65% to $154 million, but rose 42% in the convenience and retail business to $287 million.

Ampol is still assessing whether to retain its Lytton refinery in Brisbane, convert it into a fuel-import terminal or consider other uses for the site as travel restrictions to arrest the spread of coronavirus hit jet fuel demand hard and pushed the refinery’s losses blowing out to $141 million for the year. A decision on the refinery’s future will come in the second quarter of this year.

The enormous strain has pushed oil refineries across the country to breaking point, with BP announcing the closure of its Kwinana refinery in Perth and ExxonMobil planning to close its Altona refinery in Melbourne’s west.

“Ampol has navigated a tough operating environment, with sustained weakness in refining margins, ongoing government restrictions impacting travel and aviation in particular, and broad economic weakness impacting demand throughout the year,” Ampol chief executive Matt Halliday said on Monday.

“Despite the many challenges and disruptions faced, I am pleased with our progress in executing our strategy and delivering on our promises to shareholders,” Mr Halliday said.

With 2020 behind it, it’s no wonder the company is hesitant about the outlook for the rest of this year and into 2022.

Ampol says the challenging market conditions have persisted during the early weeks of 2021.

Ampol said the impact of COVID-19 on international travel had significantly impacted the demand for jet fuel. As a result, the fourth quarter of 2020 saw a 56% drop in demand compared to the prior corresponding period.

Demand for diesel fuel has remained steady during the challenging business environment, carried along by significant customer bases led by the mining industry.

Early 2020 saw the company escape a takeover approach by Canadian based convenience store giant, Alimentation Couche Tard (Night Owl).

The pandemic saved the company from the bidder and Ampol has gone on to sell off assets, including a near $1 billion interest in the real estate in its convenience chain.

That saw a big share buyback and the company made it clear there could be more of the same this year.

Ampol shares fell 2.7% to $25.77.

 

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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