Ampol chief Matt Halliday seeks unity in Covid recovery

Fuels retailer Ampol has vented frustration over Australia’s haphazard response to COVID-19 outbreaks.

Ampol CEO Matthew Halliday outside the first rebranded Ampol service station in Sydney. Picture: Toby Zerna

Fuels retailer Ampol has vented frustration over Australia’s haphazard response to COVID-19 outbreaks, as it weighs whether to keep its Lytton refinery open amid a steep fall in annual profits.

The Sydney-based company has been among the worst hit by the airline industry crisis, with sales of jet fuel plummeting, heaping further pressure on the business as Lytton suffered a $145m loss for the 2020 financial year.

Ampol now thinks international travel may not resume in 2021 and domestic travel could remain patchy, sparking frustration that governments are not doing more to push ahead with reopening borders and boosting the economy.

“The most important thing we need now is to see a co-ordinated response across the country that is risk-based and doesn’t continue to impact the economy and confidence levels in terms of rapid lockdowns and an inconsistent approach to further outbreaks,” Ampol chief executive Matt Halliday said.

“We need to adjust our mindset as a nation to understand that our experience has developed in managing the virus, it has improved and we need to learn to live with it ultimately.

“As vaccines are rolled out, we need to ensure we are adjusting our approach and moving to a different phase. That’s going to be critically important to see the recovery we should expect from the economy.”

The loss at Lytton cut annual earnings at its fuels and infrastructure unit by two-thirds to $154m after fuel demand was smashed by COVID-19. Jet fuel volumes fell 56 per cent in the fourth quarter of 2020 on the same period a year earlier, reflecting that three-quarters of Ampol’s jet fuel sales were underpinned by international flights.

Ampol’s annual net profit on a replacement cost basis declined by 38 per cent to $212m, beating a consensus estimate from analysts of $207m.

Earnings before interest and tax using the same replacement cost metric fell by a third to $401m, just shy of a $405m consensus figure. The result was buoyed by a strong performance from its convenience retail business where earnings rose 42 per cent to $287m. A final dividend of 23c a share will be paid, just higher than 22c consensus.

Ampol defended not taking up the Morrison government’s interim fuel subsidy, presumably concerned accepting the payment would lock into keeping Lytton open before it had concluded its own internal review due in the June quarter. Canberra offered refiners a minimum payment of 1c per litre for production of petrol, diesel and jet fuel from January 1 under an accelerated subsidy designed to bridge the gap until a long-term package kicks in by July 1.

Ampol declined to take up the offer but said it remains locked in talks with the Morrison government over how a long-term deal might work for the industry.

“We felt it wouldn’t be appropriate to take the short-term support until we have concluded our review in the second quarter,” Mr Halliday said.

“To the extent that our decision was to continue operating the refinery. we’d absolutely be in discussions with government around short and long-term support. But what we have said is until we complete our review, we don’t think it’s appropriate to take that money.”

Ampol rival Viva Energy has previously forecast the refinery production payment will contribute $30m to its underlying earnings for the six months from January 1, 2021, through June 30.

Two other refineries, BP’s Kwinana plant and Exxon’s Altona facility, will shut this year, with Ampol weighing up how those closures will change the domestic industry and level of fuel imports into Australia.

“BP moving to import in Brisbane reduces the size of our market position in Queensland and we need to work through what the arrangements are with Exxon,” Mr Halliday said.

The result was in line with forecasts, according to RBC, but a tough outlook remains.

“Ampol continues to face structural headwinds to its business. While Australian national fuel sales volumes are posting recoveries and we remain positive on Australian retail fuel margins, they have also fallen from unusually high levels experienced in early 2020 and jet fuel sales will likely remain subdued,” RBC analyst Gordon Ramsay said.

Ampol shares fell by 2.7 per cent on Monday to $25.77.