Ampol profit fall underlines refinery pressures
Ampol reports a big fall in third-quarter profit after heavy refinery losses, as it reviews the future of its Lytton facility.
Fuel operator Ampol has suffered a big fall in third-quarter profit after heavy refinery losses offset a boost from its convenience retail business.
Net profit after tax on a replacement cost basis slumped 74 per cent to $24m for the nine months to September 30 this year from $94m for the same period in 2019 after its Lytton refinery in Brisbane fell to an $82m loss, already flagged to the market earlier in October.
The unaudited result underlines growing pressure among Australia’s four remaining refinery operators and fuel suppliers over the future of their plants amid soft margins, high costs and plunging demand due to pandemic lockdowns.
Ampol launched a formal review of the future of its Lytton facility on October 8, flagging its potential closure in a signal the federal government’s industry assistance package may not be enough to keep local refineries operating.
Ampol said on Monday that earnings for its fuels and infrastructure division including Lytton tumbled to a $19m loss from a $121m profit a year earlier, while taking out the refinery result saw earnings fall 29 per cent to $63m.
Ampol shares closed up 1.3 per cent at $25.42.
Australian petrol volumes fell 14 per cent “given ongoing demand impacts including the implementation of stage 4 travel restrictions in Victoria” while jet fuel volumes declined 64 per cent due to international and domestic travel restrictions. Australian diesel volumes fell 10 per cent.
The refining result took the shine off a rebound in its convenience retail unit, with earnings before interest and tax more than doubling to $87m in the third quarter of 2020 from $41m a year ago.
“The resilient performance of our integrated business in the third quarter, particularly in convenience retail, was pleasing considering weak economic conditions and the continued impacts of COVID-19 on hydrocarbon demand. Our focus remains on optimising value across our integrated supply chain against prevailing market conditions to maximise value for shareholders,” Ampol chief executive Matt Halliday said.
While retail volumes eased 13 per cent from the third quarter of 2019 after it sold some stores, it represented a 15 per cent jump on the second quarter when activity was hit by COVID-19 lockdowns.
“The strong convenience retail result was reflective of favourable industry retail fuel margins, strong shop performance and solid management of controllable costs, which more than offset the impact of COVID-19 restrictions in Victoria and residual volume weakness,” Ampol said.
Like-for-like shop sales rose 11 per cent on a year earlier due to strategy execution.
Ampol had flagged an ongoing review of Lytton’s future at its financial results announcement in August, but announced the start of a formal six-month process that will consider its potential closure and conversion to an import terminal.
Ampol’s decision will add to fears the nation’s refining sector could disappear entirely in the face of falling demand brought on by the coronavirus crisis and competition from far larger refineries in Singapore, South Korea, Japan and elsewhere in Asia.
Viva Energy is also reviewing the future of its Geelong refinery in Victoria, and energy giant ExxonMobil said in September its Altona was trading at a loss and facing “unprecedented pressure” from Victoria’s tough lockdown measures.
Three Australian refineries have shut since 2012 and the rest now produce less than half of the country’s fuel needs, with most imported from overseas.
Ampol, previously known as Caltex, rebranded after using the name under licence from US giant Chevron, which has re-entered the market through its Puma Energy acquisition.
The first Ampol sites have started to emerge in Sydney and Melbourne with a national rollout to follow in 2021. Chevron will gain control of the Caltex name and use the brand for its own service stations in Australia.