Retail and convenience drive Ampol earnings but markets fret about fuel business

Ampol’s retail and convenience divisions helped drive an almost 200 per cent increase in full-year net profit, but investors continue to fret over the outlook for its traditional fuel business.

Ampol’s retail and convenience divisions helped drive an almost 200 per cent increase in full-year net profit, but investors continue to fret over the outlook for its traditional fuel business.

Ampol has moved aggressively to become more than just a fuel company, and chief executive Matt Halliday said the significant outlays were now bearing fruit.

Net profit after tax totalled $235.2m for the six months ended June 30, up from $79.1m recorded a year earlier.

The result was fuelled by gains in foreign exchange and growth in Ampol’s roadside convenience offering, which offset the impact of a 13 per cent fall in underlying earnings. The company declared a fully franked interim dividend of 60c a share, down from 95c a year earlier.

The fall in earnings and dividends had been flagged by Ampol. Retail and convenience were the stars as the business unit produced earnings growth of 4.7 per cent to $235.2m, which Mr Halliday hailed when considering the economic headwinds experienced in Australia and New Zealand – the company’s two domestic markets.

“I think that’s a really strong result in those businesses given the economic environment is more difficult than it was 12 months ago,” Mr Halliday told The Australian.

“I think it is a vindication of the strategy. A lot of work’s been done to bring the Ampol brand back, which has performed really well, to optimise the network and that footprint where we can really drive returns.

“I think the team has executed really, really well. Store sales have grown 2.1 per cent minus tobacco, which is in significant decline.”

Ampol has tried to expand beyond its traditional roots, a strategy it looked to accelerate with its 2021 acquisition of New Zealand’s Z Energy for $NZ1.97bn.

Ampol insists retail will protect its earnings from cyclical commodity patterns and future-proof its Australian fuel business, which is in a state of flux.

The rapid rise of EVs will reshape Australia’s traditional fuel market, but Mr Halliday said the company had seen a slower-than-expected uptake in demand for electric vehicles.

Recharging an EV can take more than 30 minutes even with fast chargers, and Ampol will need to offer consumers attractive 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.

While shareholders have backed the strategy, they focused on the outlook for its traditional businesses – refining and fuel markets, both of which underwhelmed investors.

Shares fell 4.8 per cent to $30.54 amid signs of continued weaker refining margins – which have in recent years been a major earnings driver for the business.

In May 2021, the Morrison government said it would pay Ampol and Viva Energy to keep producing in a bid to protect Australia’s energy security.

The policy safeguarded refining in Australia, which has come under sustained pressure from larger Asian refineries and Covid-19 lockdowns.

Australia’s refining capacity has been falling for more than a decade, but the closure of global refineries provided a boost to Ampol. The company said refining margins had fallen in recent weeks, and UBS energy analyst Tom Allen said weakness was expected to linger for some time.

“The heavier capital demands on the business over (the second half) and into 2025 plus a weak outcome expected at the refinery over third quarter 2024 should temper expectations of additional capital management at the full year,” he said.

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Originally published as Retail and convenience drive Ampol earnings but markets fret about fuel business