Ampol underwhelms market with forecast for fall in half-year earnings

Ampol expects half-year earnings before interest and tax to fall from last year’s levels as stagnant returns from its retail business and lower refinery margins weigh on performance.

Ampol expects half-year earnings before interest and tax to fall from last year as stagnant returns from its retail business and lower refinery margins weigh on its performance.

The news underwhelmed investors, with shares falling more than 1 per cent after the announcement, though analysts said the company is still well positioned to see continued growth.

Ampol said it expects first half earnings this year to total between $500m and $510m, down from the $576m the company posted one year earlier.

The company said the result was driven by sluggish sales of fuel and a 16 per cent fall in returns from its international trading division, though Ampol said its convenience division is on course for annual growth.

Refinery production during the half-year also fell. Production from its Lytton refinery totalled 2.8bn litres, down nearly 6 per cent from the 2.9bn litres produced in the same six-month period in 2023.

Refining margins, which have soared globally amid a shutdown of oil refineries in Asia and have bolstered Ampol’s financials, were largely steady – the company said.

Adam Martin, executive director of energy at E&P Financial, said margins are showing signs of improving and any continued improvement will aid Ampol’s share price.

“It’s too early to conclusively call refining margins higher, but at least Ampol’s stock is priced for more conservative refining margins and there is government support should things take another turn lower,” Mr Martin said.

In May 2021, the Morrison government said it would pay Ampol and Viva Energy to keep producing amid heightened fears about Australia’s energy security as they struggled against larger Asian refineries and Covid-19 lockdowns.

Australia’s refining capacity has been falling for more than a decade and the pandemic worsened the situation. It severely reduced the demand for jet fuel, cut the use of petrol and diesel, and drove down refining margins.

Before the federal government intervened, Ampol was struggling with mounting losses that saw the company launch a review into the future of its Lytton oil refinery in Brisbane.

The government scheme pays Ampol and Viva Energy when refining margins are weak, and the subsidies aided both in the short term before a rapid turnaround in the market made them ineligible.

Ampol is increasingly looking to expand beyond its traditional roots. The company is broadening its retail offering, looking to lure customers to shop while refuelling.

The onus on convenience is set to grow as a growing number of Australians embrace EVs, which will uproot the traditional petrol market. Recharging an EV can take in excess of 30 minutes even with fast chargers, and Ampol will need to lure consumers with options while they wait.

Ampol hopes that with a broad retail offering, complete with takeaway coffee and restaurants, it will persuade customers to shop or eat while they recharge.

Ampol will need to refit its petrol stations to adjust for the rise of EVs, but there remains significant uncertainty about how fast Australians will embrace zero emission cars.

The Albanese government has moved to incentivise the purchase of EVs but a cost of living crisis means the cars remain prohibitively expensive for many.

Ampol shares closed down 1.8 per cent at $32.50.

Originally published as Ampol underwhelms market with forecast for fall in half-year earnings