Ampol shares rally on better than expected first half

Shares in Ampol rallied on Wednesday following a better than expected first half driven by stronger wholesale fuel sales.

Ampol has reported improved wholesale and retail sales volumes across its network. Picture: NewsWire / Sarah Marshall

Shares in fuels retailer and refiner Ampol rallied on Wednesday following a better than expected first half result driven by stronger fuel sales and improved margins.

While retail sales were only slightly ahead of the first half result in 2022, wholesale volumes were up 17 per cent and international volumes were 8.1 per cent higher.

Ampol’s unaudited first half results, released on Wednesday, show Group RCOP (replacement cost operating profit) EBIT coming in at $575 million in the six months to June, down 22 per cent on the first half of 2022.

The improved sales volumes, which were 24 per cent higher across the group at 14.3 billion litres, only partially offset the slump in earnings at Ampol’s Lytton refinery in Brisbane, where lower refining margins, higher electricity costs, a one-off outage and a $25 million increase in storage and export costs resulted in a deep decline in the facility’s RCOP EBIT.

With Lytton’s refining margin dipping to $US10.29 per barrel for the six months to June, less than half the $US22.35 in the previous corresponding period, RCOP EBIT fell from $444 million to just $100 million over the same period.

In a note to clients, analysts at RBC Capital Markets said that despite the fall in earnings, Ampol’s first half result highlighted the strength of the company’s non-refining divisions.

“Overall, a good result with Group EBITDA and EBIT above our forecast,” the note says.

“We expected a weak 2Q Lytton refiner margin from a combination of substantially lower Singapore margins and Lytton refinery downtime, and it was even lower than our forecast.

“However, this was more than offset by a strong 1H 2023 contribution from Fuels and Infrastructure (ex Lytton) with impressive growth from Australian wholesale fuel sales, a full six-month contribution from Z Energy fuel sales volume, and international fuel sales.”

Ampol completed its $1.9 billion acquisition of New Zealand fuel distributor and service station operator Z Energy in May last year.

And the company could be gearing up for another acquisition closer to home, given it’s widely considered a favourite in the race to secure the 7-Eleven network, which is up for sale through Azure Capital.

Meanwhile at its Lytton refinery, Ampol said operations had returned to normal following repairs to a cracking unit that required about a month of downtime. Despite the outage, production was only slightly lower in the first half.

Refining margins had also recovered to $US12.69 per barrel in June, in a second quarter when the average margin was just $US5.66.

Ampol said its first half result reflected “strong earnings growth from the non-refining divisions”.

“Fuels and Infrastructure (ex-Lytton) delivered double-digit growth in RCOP EBIT compared to the first half last year reflecting improved margins, increased volumes as well as incremental margin in managing the supply imbalances as a result of the refinery outage,” it said.

“Convenience Retail earnings grew through continued strong shop performance and improved fuel margins.

“Group earnings also benefited from a full six months contribution from Z Energy, with the underlying business performing strongly, despite the extreme weather events experienced in the first quarter.”

Ampol shares were trading $1.23, or 4.1 per cent, higher on Wednesday afternoon at $31.07.

The company will release its audited first half results on August 21.