Oil refiner and retailer Viva Energy has been bitten by rising global oil prices - not only have earnings taken a $35 million because of the sharp rise in oil prices so far this year but that it expects more pain to come.
Viva Energy's Sep Q update revealed refiner margins ahead of forecasts but retail margins remaining soft. This comes out as a net positive, with UBS suggesting 9% upside to consensus forecasts on better refiner margins with some offset from weak retail.
Viva's update confirmed refinery earnings are even worse than the broker had feared, but there are signs of strength in Fuels & Marketing relative to the weak update provided by Caltex ((CTX)) last week. The broker doesn't believe refining margins can get much worse, and retail margins are showing signs of improvement.
Refining is behind the company's downgrade to estimates, although Deutsche Bank suggests this should be largely cyclical. The drag from declining Coles volumes is small in comparison but remains more important in the long-term.