Fuel company Viva Energy has reported a strong full-year operating profit, filings with the corporate watchdog show, as its Dutch owner, Vitol investigates a $2 billion-plus float of the business.
The Dutch trading giant bought Shell’s Geelong refinery, fuels marketing and petrol station business in 2014 and renamed it Viva. Viva and its bankers are now testing market interest for a float of the business in which half of it could be sold to investors.
Last year, Viva’s gross profit rose 23 per cent to $1.75bn on the back of a 16 per cent boost in revenue to $9.52bn, according to accounts filed last week with the Australian Securities & Investments Commission.
Viva gave no commentary with the profits but the growth appears to have been made on a mix of strong refining margins and increased sales volumes in the wake of what has been revealed to be a $652 million acquisition of Shell’s Australian aviation business last year.
Viva’s full-year net profit was $289.7m, down from $1.22bn in 2016. In 2016, what would otherwise have been a net loss was bolstered by a $1.38bn gain on the float of the Viva Energy Real Estate Investment Trust.
The new float plan for the remaining business comes after a stabilisation in the nation’s refining sector, which fell from seven refineries to four between 2012 and 2015, and which has returned to profit amid strong Asian refining margins and a lower Australian dollar in recent years.
IBISWorld analysts say that while refining revenues are expected to grow gradually over the next few years, pressure from giant new refineries in Asia remain.
The main appeal for Viva and other fuel businesses is the chance to import refined fuel.
“The fuel import terminals are where the real opportunities are,” IBISWorld senior analyst Jason Aravanis said.
“We are seeing refining, in the long term in Australia, on the way out, so the real appeal in Viva’s proposed IPO is coming from the import terminals.”
Mr Aravanis said the prospects for fuel retailing were mixed. Diesel demand was growing but demographic and demand changes were on the way.
These include increased apartment living, which would reduce car ownership, as well as longer term disruptive threats such as electric and self-driving cars that have spurred Caltex to overhaul its retail business in recent years.
Viva has not confirmed the float plan, which was revealed by The Australian in March.
But on a non-deal roadshow in March, investors were told that about half the business could be sold in an IPO and that growth could occur through acquisitions.
The roadshow said Viva made $650m of earnings before interest, tax, depreciation and amortisation, according to The Australian’s DataRoom column.
Viva’s latest accounts show the company has total non-current assets (which do not include inventories and trade receivables) of $2.439bn. It has $44m of debt and $2.23bn of net assets.
The float, if it goes ahead, is one of the biggest initial public offerings mooted for this year and comes amid a flurry of planned deals and spin-offs in the sector.
In the past couple of years, Viva has spun off its real estate assets (in a move now being considered by its listed rival Caltex); BP has agreed to buy Woolworths’ petrol stations in a $1.8bn deal being contested by the competition watchdog; and Chevron exited its long-held 50 per cent stake in Caltex through a sale of shares to institutions.
Vitol itself, which owns Viva as part of an opaque consortium that includes Middle East sovereign wealth interests, has been flagging selldowns, and for the first time public listings of other fuels businesses it has around the world.
The Geelong refinery appeared set for closure when Viva bought it and Shell’s fuels selling businesses in 2014, surprising the market by keeping Geelong open.
The refinery is now profitable.
The 2017 accounts show it logged a 30 per cent jump in earnings before interest, tax, depreciation and amortisation to $469m. The retail, fuels and marketing unit, which grew through the Shell aviation acquisition, reported a 12 per cent jump in EBITDA to $882m.
Total EBIDTA was $586m because of a $558m of corporate and overhead charges.
The headline price for the Shell Aviation purchase was $US250m when it was announced in late 2016.
But when working capital, plant and equipment, intangibles and deferred tax liabilities are included, the price came to $652m, Viva’s accounts say.
Extracted from The Australian.