Viva accelerates cost cutting as 2025 outlook spooks market and send shares down more 20 per cent

Viva’s disappointing results comes amid the upheaval of the oil market, stoking concern about the company’s push into retail.

Viva Energy CEO Scott Wyatt at their Geelong refinery. Picture: Aaron Francis

Viva Energy will seek to cut costs by as much as $80m this year after it warned it expects to face a challenging year, sending shares in the oil refiner and petrol station operator down more than 20 per cent.

While Viva reported a 20 per cent decline in annual profits, which matched analysts expectations, the market seized on the company’s outlook for a soft first six months of 2025.

Annual profit after tax on a so-called replacement cost basis dropped 20 per cent to $254.2m for the six months to December 31 from a year earlier. However, underlying earnings rose 5 per cent to $748.6m.

The outlook fuelled concerns Viva has overreached in its strategy of moving aggressively to expand beyond its traditional roots as a fuel business to become a retail brand which lures people to shop while they refuel and/or charge their electric vehicles.

But, Viva chief executive Scott Wyatt said the rationale behind its recent $1.215bn acquisition of OTR Group, the centrepiece of its strategy to prepare for the energy transition, was still sound.

“Consumers are demonstrating more discretion and being careful where they buy. It is really more important than ever to have the best offer you can out there. We bought the OTR business because we thought the Express offer was tired and we needed to rejuvenate it. Tough economic times underscores the need to get on with that as quickly as we can,” Mr Wyatt told The Australian.

“I think it is a year of two halves. We are really carrying a lot of extra costs because we have bought rather big businesses and we are bringing them together, and until we get them together in a single operating unit it is hard to get the operational efficiencies.

“That will start to come in the first half and a material way in the second half when I think sales in the convenience business will lift,”

Viva said it expects combined earnings from its retail and refining businesses to total between $270m and $330m, which Barrenjoey energy analyst Dale Koenders said implies “very soft” retail revenues.

Viva will push ahead with plans to refit its Coles Express stores to run under the On the Run brand with higher-end convenience ­offerings designed to lure consumers to spend more time and money at the stores — much needed amid a shift to electric vehicles in which customers will be required to charge their cars for 30 minutes.

Once the OTR brand is integrated Viva said it will then accelerate synergy savings of $30m in addition to the $50m in cost cuttings the company plans.

The improvement in the convenience business in the second half of the year will, Viva expects, coincide with ongoing strengthening of global refining margins.

Viva has benefited from strong margins as a wave of refiners shutter globally, but the results showed margins falling to a two-year low.

Refining margins hit a two-year low of $US8.7 per barrel — though the company said sales volumes rose 4 per cent — sheltering some of the impact.

Originally published as Viva accelerates cost cutting as 2025 outlook spooks market and send shares down more 20 per cent