Ampol flags Lytton earnings hit

The fuel giant will stop operating a unit at the Lytton refinery until early May to fix an issue, impacting earnings by up to $50m.

Ampol CEO Matthew Halliday remains bullish on earnings as demand for fuel and prices soar. Picture: Toby Zerna

Fuel giant Ampol will stop operating one of its units at the Lytton refinery until early May to fix an issue, which will impact earnings before interest and taxes by $30m-$50m.

Ampol on Monday said it will undertake maintenance work on its Fluidised Catalytic Cracking Unit after an issue with a valve.

“During this time the refinery will continue to operate, producing diesel and jet, with the impact largely limited to the production of gasoline,” Ampol told investors on Monday.

“Ampol does not anticipate any disruption in supply to customers, with replacement finished product currently being secured through its trading and shipping capability.”

The EBIT impact includes the cost of the repair and lost opportunity cost from sale of gasoline at higher product cracks.

But the overall impact may be less with Ampol said market conditions have continued to be favourable since its last update on February 20, “providing a strong start to the year for Ampol’s integrated business”.

The fuel retailer delivered record annual earnings and a bumper dividend payout to shareholders last month with the momentum to continue in 2023 with refining margins above historic highs and consumers filling up their tanks despite economic pressures.

Shares in the $7bn giant last traded at $30.23.

In a note, RBC Capital Markets analyst Gordon Ramsay said “this incident is unfortunate”. “Singapore refining margins have demonstrated a recovery in gasoline margins year to date, but this has been offset by weaker diesel margins,” he said.

A $50m impact on Ampol’s 2023 earnings before interest and taxes would cut RBC’s earnings estimate by 5 per cent, its valuation slightly. RBC has an outperform rating and a price target of $38 per share on Ampol.

“However, we think the impact may be limited, as Ampol has stated market conditions have provided a strong start to the year, implying the numbers may be better than current market consensus forecasts,” Mr Ramsay said.

“Also, the feedstock into the FCCU can be sold as fuel oil which is attracting good premiums right now. Ampol can also blend the FCCU feedstock with naptha for future sales.”