Viva Energy profit falls short of forecast outlined in prospectus ahead of float

Viva Energy’s annual net profit fell well short of its IPO forecasts amid lower-than-expected returns at its Geelong refinery.

Viva Geelong refinery. Picture: Alison Wynd

Viva Energy’s annual net profit missed its prospectus forecasts by nearly 10 per cent as weaker than expected Asian refining margins hit returns at its Geelong refinery.

Underlying profit after tax was $293 million, falling 9.6 per cent short of its $324m estimate outlined in the prospectus issued prior to its $2.65 billion initial public offering last year.

Group underlying earnings before interest, tax, depreciation and amortisation also came in lower than prospectus forecasts by 12 per cent at $528.9m compared with its $605.1m estimate.

Lower prices from excess gasoline supply hit its refining unit with underlying EBITDA slumping 55 per cent year-on-year to $124.5m.

“From a financial perspective, 2018 was a challenging year with the group’s expected financial performance negatively impacted by significantly weaker than expected regional refining margins and a number of external events affecting Geelong refinery production,” Viva chief executive Scott Wyatt said.

Viva (VEA) shares fell 3.5 per cent to $2.31 in early trading but by 11.30am (AEDT) were down 2.1 per cent at $2.35.

The company also agreed to take a full stake in Liberty Oil’s wholesale business for $42m in what it says will be a significant step in its regional growth strategy. Viva will acquire the remaining 50 per cent stake it does not own, and establish a new retail joint venture to grow the existing Liberty Oil retail business, of which it will own 50 per cent.

It follows a move by the supplier and retailer earlier this month to rework a decade-long deal with supermarket giant Coles giving it control over setting fuel prices.

Viva hopes the move will allow it to resurrect the underperforming petrol unit which has suffered from high pump prices trimming sales and eroding its market share.

Viva’s assets include the Geelong refinery, one of only four in Australia, and a network of more than 20 fuel-import terminals through which it supplies a quarter of the nation’s refined fuel needs. It supplies fuel to 50 airports around Australia and also operates 1100 petrol stations throughout the country.