Fuels supplier Viva Energy is targeting nearly a 150 per cent jump in earnings from its convenience and fuels retailing business in five years, after paving the way for a huge expansion in convenience retailing that will also make it one of the country’s biggest employers.
The transformation under way in Viva’s retail arm, which will be further enhanced by the acquisition of the On The Run business awaiting competition approval, is already set to grow the group’s share of earnings from non-fuel products to about 36 per cent, from 15 per cent.
Under the strategy outlined to investors on Thursday by chief executive Scott Wyatt, head count will surge to about 14,000 from about 1700 once the On The Run acquisition completes. That potentially rises to about 18,000, as the On The Run model is rolled out across the network, making Viva one of the country’s top-20 employers outside the government sector.
More than 7000 employees have been added since Viva’s buyout of Coles Express, a $300 million deal that completed on May 1.
“If in five years’ time we are having a discussion about whether we should drop ‘Energy’ from our name … then I think we’ll have been very successful and it would be a nice problem to have,” Mr Wyatt said of the change under way at the company.
“We’ll still be an important energy supplier … and a big contributor to energy security,” he added, with a nod to the slower transition to lower-carbon fuels in some major industries.
Shares in Viva, now owned 30 per cent by Dutch oil trading giant Vitol since a sell-down in September, rose 2.4 per cent at $2.96.
Earnings before interest, tax, depreciation and amortisation in the convenience and mobility division, which averaged $224 million in the last three years, are expected to reach about $550 million within five years, said Jevan Bouzo, CEO of the convenience segment.
Up to $150 million of the increase is related to the $1.15 billion On The Run acquisition, which was expected to close this year but is now more likely to settle in the June half of 2024. Viva has offered to sell 23 retail sites in South Australia, where On The Run is based, to secure the competition watchdog’s approval.
Mr Bouzo said the plan was to roll out the On The Run offering across Viva’s network, which loses the use of the Coles Express branding over the next few years. By the end of 2028, 80 per cent of Viva’s network is expected to be branded On The Run, with the other 20 per cent trading as Reddy Express, a brand the company launched in September.
Meanwhile, Viva is continuing to advance plans to transition its Geelong oil refinery site to a lower-carbon energy hub, although plans for an LNG import terminal are facing delays in approvals.
Mr Wyatt said Viva still regarded the LNG import terminal as “very needed” to help fill the gas shortfall looming in Victoria.
A hydrogen refuelling project at Geelong should be in production by the end of 2024, while an ultra-low-sulfur gasoline unit is under construction and due online by mid-2025. A new diesel storage plant is due to be operational by mid-2024, while Viva is also investing in the recycling of bio-waste and plastics ahead of a targeted investment in sustainable aviation fuel and renewable diesel around the end of the decade.
Extracted in full from: https://www.afr.com/companies/energy/viva-targets-150pc-retail-earnings-growth-20231108-p5eil9