As Ampol’s Matt Halliday mulls closing his Lytton oil refinery, potential bidder Couche-Tard’s Brian Hannasch has lobbed a surprise $26bn bid for French retailer Carrefour.
The bid is some three times more than the $8.8bn Hannasch offered for Ampol last year and raises doubts over his intention to bid again.
It is in early stages and by no means assured of success, but the combined company would be valued at some $69bn and would rank as the third-largest retailer in the world behind Walmart and the German Schwarz group, which runs Lidl.
The French bid surprised because Carrefour is a mainstream supermarket business while Couche-Tard specialises in convenience store retailing.
It comes as US giant Walmart sells its majority stake in UK retailer Asda.
Convenience stores are a faster-growing sector of the market as online sales boom in the wake of COVID.
Ampol’s Halliday said on Thursday his Lytton refinery lost $145m last year, which was better than expected. but suggests the company will look hard at the asset before deciding whether to maintain the refinery.
The 2020 loss compares with a 2019 profit of $70m and the $328m in earnings in 2017.
It all comes down to the so-called refining margin, which is the difference between the local manufacturing cost and the cost of imports.
The margin quoted for the fourth quarter was $US5.13 a barrel, which given the company lost $4m in the quarter suggests that the figure is close to production costs.
A year ago the margin was nearly double at $US9.08 a barrel, but overseas prices have slumped due to the COVID-inspired collapse in demand.
It seems Halliday has also cut costs over the period.
The volatility in earnings, which is driven in large part by the global oil price, makes it a tough call for Ampol on whether to shut the refinery, because if prices skyrocket then the earnings climb accordingly and what is today a basket case looks like making money for jam.
Halliday has said he will make the decision by mid-year, which also meant he opted out of the federal government’s refinery subsidy scheme.
The scheme, aimed to help keep refiners in Australia, was contingent on not closing the plant in the next six months. As Ampol has said it will decide its stance this half it thought it best to sit out the subsidy scheme.
By contrast Viva is taking the subsidy, while still reviewing its plans for its refinery in Geelong.
The different stances were taken as indicating Viva was more likely to keep its refinery going.
Certainly Wyatt has shown himself to be more willing to play by the rules set by Energy Minister Angus Taylor.
Taylor is keen to maintain some refining capacity in Australia, seeing it as the best form of defence in terms of maintaining some domestic reserves in the country.
Last year BP said it would cut its Kwinana refinery due to global pressures, with the combined national refining capacity now smaller than any single Asian refinery.
Taylor defends his subsidies as a way of achieving national goals in the face of increased global pressure by the handful of international oil giants.
Former Ampol refining boss Louise Warner starts shortly at Couche-Tard where she will be in charge of its energy operations.
Her hiring late last year was seen at the time as indicating the Canadians may have another crack at Ampol, because it is perceived to be short of energy operations expertise.
But Couche-Tard’s bid for Carrefour changes the equation, because it is doubtful the group can bid for both companies at once.
The situation is fluid because Carrefour has not accepted the Canadian offer.
Meanwhile, Ampol said refining margins of $5.13 were well down on $9.08 a year ago, highlighting the challenges for the business.
The margin is the difference between import costs and local production, so the higher the margin the better it is for Ampol.
Global prices have plummeted due to lower demand in the wake of the COVID pandemic.
Ampol’s stock price was essentially flat on Thursday at $28.62 a share, down from $35.18 a year ago and with a market value of $7.1bn.
Lithium hopes
Vulcan Energy’s Francis Wedin clearly has some issues to clear with the ASX, which is holding up his return to the bourse to clear a proposed feasibility study for the zero-carbon lithium producer.
The stock, which was trading at 20c a year ago has shot up to $5.68 and eased down to $4.99 on Wednesday, with a market value of $399m, when it went into suspension pending clearance of the study.
The company controls a lithium mine in the Rhine Valley in Germany next to a geothermal well complete with brine to convert the lithium into lithium oxide.
This renewable power in the centre of the German car industry is a potential winner, given traditional hard lithium rock needs to be roasted to turn into hydroxide ready for use in batteries.
This is normally a carbon-intensive process.
At a time when zero-carbon supply chains are all the rage Wedin and his team are naturally enough keen to present their ESG credentials and have signed up with Damian Hajda’s Socialsuite.
The software as a service company has designed a way for companies to survey against the World Economic Forum ESG indicators covering governance, the planet, people and prosperity.
The survey techniques make it easier for companies to present and benchmark credentials, which is easier done at the big end of the market but harder for smaller companies.
With the rise of so-called impact investing where good ESG credentials are desirable, clear benchmarks boost the recipient’s market value.
The Melbourne-based Socialsuite has raised $4.1m in venture capital to grow its business with customers like Vulcan, Whitehawk, Euro Manganese and Elixir joining the Salvation Army among others.
Banks bounce back
MST’s Hasan Tevfik says the market is looking for a V-shaped recovery in corporate earnings for the year ahead, with financial stocks like banks expected to see earnings per share up by 30 per cent, offsetting the 2020 falls.
Resources stocks led by the iron ore oligopoly of FMG, BHP and Rio will post good earnings and retailers are expected also to post strong numbers.
AMP’s Shane Oliver says at 20 times forecast earnings, even with record low interest rates, the market is on the expensive side, which makes the earnings commentary all the more important to offset what is widely seen as an imminent slowdown in US market returns.
The US market, too, will be helped by strong earnings.
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