Viva’s Geelong refining margin (GRM) was just $US3.3 a barrel in December, bringing the average margin for the last two months of the year to $US5.2 a barrel. That compares with Viva’s revised estimate in November of $US8 a barrel for November and December. Lower fuel volumes sold through Viva’s retail partner Coles were also a factor in November’s profit downgrade.The weakness in margins also signals that the prospectus estimate for margins for the first half will also be too optimistic. The prospectus assumed a refining margin for the first half of 2019 of $US9.7 a barrel, almost three times the average margin for December.
“Refining margins have continued to perform below the prospectus forecast in the month of January 2019 to date and if these conditions were to persist the prospectus forecast for 1H 2019 GRM of $US9.5/bbl would not be achieved,” it advised.
Each $US1 a barrel shift in the refining margin shifts Ebitda by $29 million and net profit by $20.3 million, before taking into account foreign exchange.
Extracted from AFR