Sharechat Logo

Z Energy raises earnings, dividend forecast on crude oil slump

Wednesday 23rd January 2019

Text too small?

Z Energy has increased its full-year earnings guidance by more than $15 million due to improved margins following the sharp drop in oil prices late last year.

The country’s biggest fuel retailer said falling crude prices and resulting reduction in pressure on margins will enable it to deliver operating earnings of between $420 million and $450 million for the year ending March 31.

In November the firm had cut its guidance to $400-to-$435 million, citing pricing pressures.

The firm today also increased its dividend forecast, citing increased December quarter earnings and a more stable outlook for crude oil prices. It is expecting to pay total dividends of between 38 and 47 cents for the year, up from the 32-to-41 cents signalled in November.

Z shares have risen strongly this month and last traded at $5.81. They are down almost 23 percent during the past year.

Brent crude oil prices dropped more than 40 percent late last year, from about US$86 a barrel in early October to US$51 in late December. March Brent was recently at US$61.36.

Wellington-based Z Energy said its retail and commercial fuel trading improves in a falling crude market.

Lower prices encourage retail customers to buy more fuel, with average fill volumes recently rising to the more typical 28 litres, from a low of 26 litres in the September quarter.

A one-month pricing lag on some commercial fuel sales also advantages the firm when product prices are falling.

The $10 million negative impact of rising crude prices on fuel margins that Z disclosed in its first-half earnings "has more than fully reversed" to be a positive $8 million "price lead" in the December accounts, the company said in a statement on NZX.

Z Energy said total industry fuel volumes of 2.51 billion litres in the December quarter were 5.2 percent higher than a year earlier. That growth was primarily driven by commercial markets.

Z group sales, excluding exports and other sales to industry, increased 0.7 percent.

Industry retail segment volumes fell 3.1 percent in the quarter, but Z Energy said its volumes were unchanged.

The company said its commercial volumes grew in the quarter, but it lost market share in diesel and jet fuel sales.

“The decline in commercial diesel was from high-volume, low-margin account losses which have been replaced towards the end of the quarter by volume that has improved the portfolio mix.”

(BusinessDesk)

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond


  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar mixed after RBA says its ready to cut rate if necessary
OMV granted marine discharge consent for Great South Basin
More detail needed on migrant worker policy, big employer says
Briscoe Group says outlook uncertain
FMA, RBNZ disappointed by life insurers' response; $1.4m of issues found
Steep rate cut may have spooked households - Westpac
Veteran media exec Joan Withers joins Sky TV board
Contact hires Refining NZ CEO to replace Barnes
17th September 2019 Morning Report
NZ dollar weaker after Trump authorises use of emergency crude stockpile

IRG See IRG research reports