It was a rough old ride for fuel retailer, distributor and oil group Ampol, despite the company confidently predicting that it was on the way to a record profit of more than $1 billion when the books are ruled off on December 31.
Ampol shares rose strongly, then were dumped by investors who looked more closely at the report and found concerns with a smaller profit on a jump in sales volumes in the quarter, a sign of shrinking margins.
The shares jumped more than 12% at the open then closed down 12.5% at $27.35 in what was a volatile session of trading.
The gyrations seen in the share price reflected the early optimism and then quite a few second thoughts, especially how the refining margin at the Lytton refinery in Brisbane more than halved in the three months to September from the record levels set in June.
In releasing its September quarter report Ampol revealed a dramatic recovery in earnings at its Lytton refinery in Brisbane that early last year looked headed for closure.
So dire was the outlook for Lytton that Ampol had the begging bowl out to the federal government (as did Viva in Geelong) and got their hands on a long-term support package which has not been mentioned now for months as both companies’ refineries have staged a huge return to profitability.
Higher prices and recovering demand for petrol diesel and especially jet fuel has helped both companies and especially Ampol.
Ampol said it was on track to deliver “record full year earnings with year-to-date 30 September 2022 Group RCOP (replacement cost) EBIT (earnings before interest and tax) of over $1.0 billion, including third quarter replacement cost EBIT of $272.3 million.
Ampol reported a replacement cost EBIT of $734 million for the six months to June, so there has been a slowing in earnings growth since the refinery margin halved in the September quarter as world prices slid.
Ampol said its third quarter Lytton Refiner Margin (LRM) remained above historical averages at $US15.46/ a barrel (bbl), more than twice the $US6.76/bbl margin for the September, 2021 quarter. The third quarter margin however was more than half the huge $US3296 a barrel margin in the June quarter but higher than the $US10.59 a barrel margin in the three months to March
Lytton’s total production for the quarter was 1,546 million litres, slightly down on the June quarter’s 1.564 million litres but ahead of the 1.413 million in the March quarter.
Ampol also said that it saw strong third quarter financial performance from its Convenience Retail chain in Australia and Z Energy in NZ as demand recovered and fuel prices eased
Its Australian quarterly sales volume grew by 20% compared to the prior corresponding period to 3,661 million litres, the highest level since the start of the pandemic as growth was seen across all channels, including more than 22% growth in Australian wholesale. Total Group sales volume for the quarter were 5,615 million litres
Ampol CEO Matt Halliday said in the statement that: “Since the end of June we have seen crude oil and product prices ease, and fuel demand in Australia and New Zealand continued to recover quarter on quarter. Volatility has continued to be a feature of global markets as the competing forces of fears of a weaker economic outlook, increasing mobility and geopolitical tensions continue to swing market sentiment.
“In this environment Ampol has delivered another quarter of strong volume, financial and operational performance, reinforcing the resilience of our integrated value chain and business model. We continue to execute on our strategic priorities, making good progress on plans to build the leading EV charging network in Australia and to grow our non-fuel earnings.”
“Year to date Convenience Retail RCOP EBIT grew to $235.8 million, up 29 per cent on the same time last year. This includes third quarter RCOP EBIT of $108.5 million, the strongest quarterly result since the pandemic began. This compares to $32.9 million in the third quarter last year when New South Wales and Victoria were in lockdown for most of the period. Both fuel and shop performed well in the quarter with Total Fuel and Shop margin up more than 50 per cent versus the third quarter last year.”
“Fuel volumes for the third quarter were up 14 per cent to 980 million litres, and 16 per cent on a like for like basis after adjusting for network rationalisation to 654 sites compared with 691 company operated sites at 30 September 2021. As market product prices eased through the quarter, reducing input costs from the peaks seen in May and June, average retail margins recovered.”
