Profit from the historic cost of Ampol 1H 325.5 million Australian dollars
Corrections and amplifications
This headline has been corrected to 2249 GMT to reflect that first half replacement cost profit is up 70% year on year. The original title incorrectly said it had more than doubled in a year.
By David Winning
SYDNEY – Ampol Ltd. returned to half-year profit, helped by government support and improved refining margins, and separately made an offer to purchase New Zealand-based Z Energy Ltd.
Ampol reported net profit of A $ 325.5 million ($ 232.3 million) in the six months to June, down from a loss of A $ 626.2 million a year earlier. The company reports on a historical cost basis.
Based on replacement cost of sales —- which eliminates the impact of oil price fluctuations by reformulating cost of sales using replacement cost of goods sold – Ampol’s profit was 70% higher to AU $ 204.5 million.
Half-year revenue was AU $ 9.82 billion, compared to AU $ 8.05 billion a year earlier. The company said it would pay an interim dividend of 52 Australian cents per security, more than double a payment of 25 cents a year ago.
Ampol’s profits are on a more solid footing after the federal government confirmed a fuel support program to protect producers when refining margins decline. Australia’s refining sector had been under pressure as operators relied on sluggish fuel demand and growing competition from newer and more efficient fuel manufacturing facilities in Asia and the Middle East. The pandemic had also sapped demand, especially for jet fuel.
In May, Ampol said the program provided a variable support payment of up to A $ 108 million per year for its Lytton refinery in Queensland state during times of low refining margins. As a result, management has said it will keep Lytton operational until at least mid-2027.
Last month, Ampol said Lytton broke even in the first quarter and likely returned to modest earnings before interest and taxes on a replacement cost basis over the next three months. It also provided for a one-time subsidy of around A $ 40 million from the government for its first-half production before the ongoing fuel support program began.
Some analysts had predicted that Ampol would launch a share buyback alongside its half-year result. Morgan Stanley had planned share buybacks worth around A $ 300 million, which would be a positive catalyst for shares in Ampol. In the run-up to Ampol’s half-year result, Ampol shares had fallen to their lowest level in three months, with lockdowns to tackle the Covid-19 epidemic in major Australian cities hampering people’s mobility.
However, Ampol said it made a takeover offer for Z Energy which values its equity at nearly NZ $ 2 billion ($ 1.37 billion).
Z Energy said on Monday it had agreed to a four-week due diligence and exclusivity period with Ampol, which operates Gull gas stations in New Zealand.
The offer of NZD 3.78 per share represents a 22% premium over Z Energy’s closing price on August 12, the date before the company received Ampol’s offer. Z Energy said Ampol had made previous offers at NZ $ 3.35, NZ $ 3.50 and NZ $ 3.60 per share, which it rejected because it did not price enough.
Write to David Winning at [email protected]
-Stephen Wright in New Zealand contributed to this article