Z Energy lifted first-half earnings by 7% as it gave up volume for stronger margins, and affirmed its guidance for the full year. UPDATED: interview with Mike Bennetts
UPDATED: Z Energy [NZX: ZEL] chief executive Mike Bennetts says he's wary of a new type of customer happy to hunt for the biggest discount at the pump, and that the service station has no plans to chase them.
The Wellington-based company boosted earnings before interest, tax, depreciation, amortisation and fair value adjustments 7 percent to $107 million in the six months ended Sept. 30, fattening its margins in the face of a 6.6 percent drop in sales to $1.39 billion. Net profit more than doubled to $55.5 million, or 13.9 cents per share.
Bennetts told a briefing in Wellington the industry had created a type of customer he called 'switchers' who chase the biggest discounts service station chains are willing to offer.
"It's a place we don't want to be," Bennetts said. "That's why we're able to deliver higher-value margins and dollar margins, because we're not participating as strong for switchers as our competitors are."
By not getting drawn into that competition, Z Energy was able to protect its margins, while potentially selling smaller volumes of petrol, he said.
After Z Energy's earnings announcement, the Automobile Association touted the success of its petrol discount card, which provides cheaper petrol at BP and Caltex stations, saying its 760,000 cardholders have reaped nearly $100 million in savings over the past two years.
The petrol station chain joined the NZX in August when Infratil and the NZ Super Fund sold down their stakes in an initial public offering, raising $840 million. The shares fell 1 percent to $3.82 in trading today and are about 9.7 percent above their $3.50 IPO price.
The board declared an interim dividend of 7.7 cents per share, payable on Dec. 4 with a record date of Nov. 22.
Bennetts affirmed the annual forecast EBITDAF of between $205 million and $215 million provided in the IPO prospectus, and said the board expects the final dividend to be in line with its policy of paying 80 percent of replacement cost net profit. Annual net profit is forecast to be $115 million.
Z Energy's board and management have been developing the company's strategy for the next three- to five-year period, which Bennetts said will be "reflected in guidance for the next full financial year."
The company plans to build another five retail service stations in the next six months, with a further five planned in the 2014 financial year and seven or eight more in the three years after that.
"These new sites will be strategically placed to deliver growth in earnings through increased fuel volume and store sales," Bennetts said.
Z Energy had an operating cash outflow of $133.9 million in the six-month period due to its lower revenue, and its build-up of inventory ahead of the planned shutdown of the refinery in October.
EARLIER: Z Energy [NZX: ZEL], the service station chain floated by Infratil and the New Zealand Super Fund in August, lifted first-half earnings by 7 percent as it gave up volume for stronger margins, and affirmed its guidance for the full year.
Earnings before interest, tax, depreciation, amortisation and fair value adjustments rose to $107 million in the six months ended Sept. 30 from $100 million a year earlier, the Wellington-based company said in a statement. Revenue fell 6.6 percent to $1.39 billion as the volume of petrol sold fell 6 percent to 414 million litres, though the service station chain widened its gross margins. Net profit more than doubled to $55.5 million, or 13.9 cents per share.
"We have always said Z will target an optimal mix between volume and margin and that market share is not a target in itself," chief executive Mike Bennetts said. "This result demonstrated why this approach is so fundamental to Z's consistency and quality of performance - market share only matters at the right margin."
The petrol station chain joined the NZX in August when Infratil and the NZ Super Fund sold down their stakes in an initial public offering, raising $840 million. The shares fell 0.8 percent to $3.86 in trading yesterday and are about 10 percent above their $3.50 IPO price.
The board declared an interim dividend of 7.7 cents per share, payable on Dec. 4 with a record date of Nov. 22.
Bennetts affirmed the annual forecast EBITDAF of between $205 million and $215 million provided in the IPO prospectus, and said the board expects the final dividend to be in line with its policy of paying 80 percent of replacement cost net profit. Annual net profit is forecast to be $115 million.
Z Energy's board and management have been developing the company's strategy for the next three- to five-year period, which Bennetts said will be "reflected in guidance for the next full financial year."
The company plans to build another five retail service stations in the next six months, with a further five planned in the 2014 financial year and seven or eight more in the three years after that.
"These new sites will be strategically placed to deliver growth in earnings through increased fuel volume and store sales," Bennetts said.
Z Energy had an operating cash outflow of $133.9 million in the six-month period due to its lower revenue, and its build-up of inventory ahead of the planned shutdown of the refinery in October.
(BusinessDesk)
