Fuel supplier Viva Energy's retail and refining challenges continue to hurt
Rewrites throughout with further update on details and background, adds shares
Oct 22 (Reuters) -Australian fuel retailer Viva Energy VEA.AX said on Tuesday that softening market conditions, lower tobacco sales and rising business costs could impact earnings at its commercial and industrial operations, sending shares to a more than one-and-a-half year low.
The group expects a bottom line of A$230 million ($153.04 million) on a replacement cost basis for its commercial and industrial business for the fiscal year.
Shares in the energy infrastructure firm dragged as much as 4.6% to A$2.720, hitting their lowest since Jan. 12, 2023. The stock was set for its weakest trading session since Sept. 9.
The company said its On the Run ("OTR") Group, which was acquired in a A$1.15 billion deal, was more affected than its Express business due to the effects of illicit tobacco on the South Australian market as well as rising overhead costs.
Viva's downbeat update comes a few days after bigger rival Ampol ALD.AX, the only other domestic fuel supplier in the country, warned of similar challenges facing the refining sector and flagged a hit of A$100 million in its earnings.
The firm said a challenging refining environment and softer retail conditions will impact its fiscal 2024 performance.
"While the refining environment is expected to remain challenging for the rest of FY2024, refining runcuts and maintenance may help to rebalance global refining capacity and provide some support for margin improvement," Viva Energy said.
The Australian fuel supply market has faced some considerable issues in the recent past due to rising security concerns and continuous refinery closures, prompting the government to allocate up to A$2.3 billion in the 2021 budget.
Viva's Geelong refinery recorded a quarterly margin of $6.4 per barrel of crude oil, down 25% from last year.
Analysts at Jefferies had expected Viva's commercial business to deliver "solid" third-quarter results.
($1 = 1.5029 Australian dollars)
Reporting by Echha Jain and Rishav Chatterjee in Bengaluru; Editing by Alan Barona
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
