Viva Energy suffers Covid hit
Refiner Viva Energy has suffered a near-$200m turnaround in its fortunes.
Refiner Viva Energy has suffered a near-$200m turnaround in its fortunes as COVID-19 kept cars away from its petrol stations and airlines off the runway, to heavily constrict retail and commercial fuel sales and send the company to an expected loss of $17m-$47m for the 2020 calendar year.
Viva, which operates the Geelong refinery in Victoria and supplies more than 10 per cent of Australia’s fuel (and more than 50 per cent of Victoria’s fuel needs), is wearing the battle scars of a bitter time for the fuel refinery industry that only this week was saved by an $83.5m interim rescue package from the federal government.
However, fuel volumes had started to step up as the country came out of lockdown, especially in Victoria.
Viva has calculated it will receive as much as $30m in earnings support from the government package that will help keep the Geelong refinery, only one of four refineries left in Australia, operating, but its balance sheet will remain drenched in red ink.
The company behind the former Shell petrol business and which supplies fuel to more than 1250 petrol stations through the Shell Coles Express service stations said on Friday it was expecting an underlying loss as high as $47m for the full year to December 31, against a profit of $135.8m in 2019.
Sales volumes for 2020 will be down 16.3 per cent, while earnings for its retail arm will be 17.8 per cent higher at $660m-$670m as fuel sales rebounded quickly as restrictions were eased and fatter fuel margins mitigated the sliding volume. Commercial earnings are forecast to be down 19.7 per cent to as low as $235.5m, driven by a 56 per cent drop in aviation sales, although the marine business remained strong.
Refining earnings are expected to be a loss of $89m-$99m, against a profit of $117m in 2019.
Viva had witnessed a steady improvement in fuel sales since October as COVID-19 restrictions were eased.
“Through the year as we have seen states come out of lockdown we have seen retail fuel demand recover very quickly and certainly that has been the case in Victoria,” Viva chief executive Scott Wyatt said.
Mr Wyatt said sales through its alliance channels, the Coles Express network, for the second half of last year averaged 65 million litres a week and in November it reported an average 61.7 million litres a week.
He said while Geelong refining margins had improved with the increase in production, the refining outlook remained challenging given the longer-term impact to global oil demand from the pandemic. But the government support package would ensure the refinery would remain open into the new year.
Capital management would remain a key focus for Viva, with $591.6m returned to shareholders through a mix of capital return, dividends and on-market buybacks in 2020. Viva is committed to returning the remaining $100mn from the divestment of the stake in Viva Energy REIT next year.
Viva shares fell 2 per cent to $1.97 on Friday.