Ampol profit tumbles as refining margins sour

The fuel giant’s interim earnings show the boom times that delivered so-called ‘extreme margins’ are coming to an end.

Ampol chief executive Matt Halliday says “margins have come off”. Picture: Ryan Osland

Ampol has reported a 26 per cent fall in half-year profits as earnings from its dominant refining business fell, indicating a boom that has fuelled the company’s recent rise may have come to an end.

Net operating profit excluding one-off events, of most importance to investors, fell 26 per cent to total $329.6m in the six months ended June 30. Ampol reported earnings of $444.7m during the same period one-year earlier.

Ampol said revenues totalled $798m, down 9 per cent on the $876.8m reported in the prior corresponding period.

Statutory profit tumbled 88 per cent to $79.1m, driven by a loss on the value of stockpiles, Ampol said.

The fall in profit came as Ampol said earnings from its refining business fell 77 per cent to $100.3m, from the $443.9m previously.

Ampol will pay an interim dividend of 95c per share, down from $1.20 a share it issued in the first half of 2022.

Ampol chief executive Matt Halliday said the results show the company is making good progress in transitioning its business from a pure refiner to a broad company with a larger retail presence.

Still, margins remain a dominant source of revenues for Ampol and Mr Halliday said it was hard to gauge how the refining business will play out in the coming months.

“Margins have come off from the more extreme periods we saw last year,” said Mr Halliday.

“More capacity is coming into the market but overtime we expect to see more tightness. What China does with exports will be a key factor, and that is hard to read.”

Soaring refinery margins have underpinned Ampol and smaller rival Viva Energy in the past few years, capping a remarkable turnaround for Australia’s domestic players.

The refining boom suffered a blow, however, when Ampol said its Lytton refinery had suffered a technical fault that required repairs. The plant returned to normal production at the end of May but it had a material impact on Ampol‘s earnings.

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 the futures of refining in Australia as both businesses have come under sustained pressure from larger Asian refineries and Covid-19 lockdowns.

Australia’s refining capacity has been falling for more than a decade.

The pandemic worsened the situation, severely reducing the demand for jet fuel, cutting the use of petrol and diesel, and driving down refining margins.

Before the government intervened, Ampol was struggling with mounting losses that led the company to 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 companies in the short term before a rapid turnaround in the market made them ineligible.