$49m loss clouds Viva’s Geelong refinery future
The future of one of Australia’s four remaining fuel refineries is under review after a $49m half-year loss.
Viva Energy has warned losses at its troubled Geelong refinery are unsustainable after the facility plunged to a $49m loss in the first half of 2020, with the future of the plant now under review.
Underlying earnings for Viva’s refining business plummeted to a $49m loss from a $18.4m profit a year earlier amid margin pressure after crude premiums increased from the move to low sulphur marine fuels and global demand for oil cratered due to the pandemic.
Viva boss Scott Wyatt said the company was in talks with the Morrison government over its plans to consider support for refiners and start a strategic fuel reserve, but conceded conditions were tough.
Viva “believes there is the potential to improve the long-term sustainability of the refining business, however we acknowledge that these operating losses are unsustainable and we are continually assessing both the short term and long term viability of this part of our business,” My Wyatt said.
“We are closely monitoring the situation and will continue to provide regular updates of refining performance.”
Several of Australia’s four remaining refinery operators and fuel suppliers are weighing the future of their plants amid soft margins, high costs and plunging demand due to COVID-19 lockdowns.
Ampol, Viva, ExxonMobil, United Petroleum and BP have all been involved in discussions over using or expanding their existing storage facilities to create the local reserve.
Viva saw its first half underlying net profit fall by a third to $34.3m from $50.9m in the first half of 2019 which was at the midpoint of earlier guidance of $20m-50m released to the market.
Still, there was a brighter note for shareholders with a $530m special dividend to be paid out following the sale of its stake in a property spin-off.
The fuels retailer, which runs 1290 Coles Express petrol stations, said profit from its non-refining business rose 14.2 per cent to $318.7m.
Sales from its Coles alliance network recovered to 53m litres at the end of June after hitting a low of 40m litres during nationwide lockdowns in April.
Viva’s assets including 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 although Viva said the shutdown of air travel meant sales of jet fuel fell by up to 75 per cent in the first half.
Viva is looking to import LNG at Geelong in Victoria as part of efforts to transform the site into a major energy hub and said it expects to commit to a front end engineering and design study before the end of 2020.
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