Viva Energy (ASX:VEA) forecast upbeat 1H earnings

Company News

by Melissa Darmawan

Shell petrol station owner Viva Energy Group (ASX:VEA) reports strong figures for the first half of the year performance ending 30 June 2021 with an implied 34 per cent boost to its profit forecast against FY 2019 numbers.

The energy supplier expects first half earnings of $390 million to $410 million, an increase of 34 per cent over the pre-pandemic levels of FY 2019 thanks to strong sales growth in its non-aviation businesses, supportive margins, and an improved refining performance since returning to full production in late 2020.

The earnings guidance came despite the mixed volume growth across its different business units when comparing to H1 FY19 levels. The $3.1 billion company said it expects petrol volumes to grow by 4 per cent to 1,634 ML, diesel volumes to jump 16 per cent to 3,799 ML while jet volumes are expected to tumble 60 per cent to 666 ML with other volumes to edge lower by 8 per cent set to 551 ML.

“While retail fuel sales continue to be impacted by periodic lockdowns, and aviation by ongoing border closures, overall growth across all retail and commercial channels has been very encouraging with total Petrol and Diesel sales volumes up 4 per cent and 16 per cent respectively on (first half of 2019), as a comparison to pre-COVID demand,” said chief executive officer and managing director, Scott Wyatt.

The fuel company reported that underlying earnings for the first half of 2020 dipped to $269.3 million with the refining backdrop continuing to remain a challenge, but supported by strong production levels, receipt of the short-term production payment grant, and the long-term fuel security package that started this month to help minimise the downside volatility of refining margins.

As a result of the fuel security package, the company is now proceeding with major maintenance activity, such as the Hydrofluoric Acid Alkylation plant, that was deferred from 2020 with an expected investment of $25-35 million (in-line with prior guidance).

The major maintenance activity is expected to negatively impact refining intake by approximately 0.9 MBBLs in the next quarter ending 30 September 2021.

In addition, Viva is undertaking preliminary studies to commence the necessary capital upgrades to the Refinery to manufacture low sulphur gasoline. The capital costs associated with this project and other associated projects, are expected to be up to approximately $250 million, with the Federal Government to contribute up to a maximum of $125 million or 50 per cent of the capital costs.

Shares in Viva Energy (ASX:VEA) are trading 5.1 per cent higher at $2.07.

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