Z Energy more than halfway through service station divestments

Thursday 29th September 2016

Z Energy has signed contracts to sell 12 of the 20 sites it has to quit as part of its acquisition of Chevron New Zealand and is negotiating contracts for the rest.

The Wellington-based service station operator this month signed or was still negotiating contracts for all 20 sites, it said in a statement. The cost of divesting the assets will be about $11 million, though $5.5 million of that is because Z decided to buy three other service stations to then divest so it could avoid having to sell "other more valuable Z or Caltex sites".

Z will disclose the net proceeds of the divestment programme once it's completed and will detail the impact on cash proceeds and future earnings at the company's Oct. 19 investor day, it said.

The transport fuel company bought Chevron's Caltex and Challenge! brands for $785 million, making it the country's biggest petrol retailer. As part of the deal, Z had to divest 19 service stations and one truck stop to get Commerce Commission approval.

Z maintained guidance of between $25 million and $30 million in annual cost savings from the Chevron acquisition by 2018, and said it was in the middle of that range.

A crude oil procurement review will save it $5 million per year while an agreement with New Zealand Refining about the combined crude oil volumes will save about $7 million annually from 2018, with $1 million in savings apparent in the 2017 financial year.

Z cut 14 jobs as it combines the two organisations and will merge its Mount Eden office into the Caltex Greenlane office in the new financial year, saving $400,000 per year, it said. The company has had to pay $1.1 million more than expected as it found an "unexpected anomaly" in the way Caltex staff had their annual leave calculated and paid.

The total transition and acquisition costs remain at $33 million, it said, excluding the cost of the divestments.

The shares last traded at $8.24, and are up 22 percent this year.

BusinessDesk.co.nz

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