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Z Energy says full-year earnings fall 1% on its adjusted measure, sales decline 18%

Thursday 12th May 2016

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Z Energy, whose shares jumped to a record last week when it got approval to buy Chevron's Caltex and Challenge! petrol station chains, said full-year earnings fell 1 percent.

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 said 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 CNZ in which Z has incurred expenses of $25 million relating to preparing for cutover." It said 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 said the outlook for the Z business for 2017 was an RC operating ebitdaf of $260 million to $290 million and capital expenditure of $60 million. The company would 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," Bennetts said in a statement.

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

Fuel volumes for the year fell 3 percent to 2.25 billion litres, as petrol sales fell 3 percent to 802 million litres and diesel declined 5 percent to 820 million litres. Jet fuel was little changed, rising 1 percent to 375 million litres. Its fuels margin rose by $9 million, or 2 percent, 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 percent 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 percent in the past 12 months. The stock is rated a 'buy' based on the consensus of five analysts surveyed by Reuters.

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