Petrol and diesel supplier Ampol is pushing for urgent changes to the federal government’s assistance package for oil refineries, saying the current settings don’t adequately support its Lytton plant in Brisbane.
Chief executive Matt Halliday said the package does not consider the escalating cost of operating the refinery, which suffered losses in the first-half of the year but was ineligible for support. The policy is under review.
He was speaking after Ampol posted a 23 per cent drop in net profit for the first half and declared a lower interim dividend after profits at Lytton were almost wiped out.
“The intent of the arrangement is that when the market’s very difficult, that it’s there to claim on, and we have lost money over the last 12 months at the refinery,” Halliday told The Australian Financial Review.
“Clearly, one area in focus is that, as costs have escalated, the mechanism hasn’t taken that or doesn’t take that into account,” he said, adding that he expected an outcome from the review during the second half of 2025.
The Fuel Security Services Payment, which began on July 1, 2021, is intended to put a floor under losses from refining to preserve the operations of plants regarded as critical for the country’s manufacturing base. It saved Australia’s last two refineries – Lytton and Viva Energy’s Geelong plant – from closure, although others were shut before the system came into effect.
Ampol and Viva agreed to upgrade their plants to meet stricter standards for sulphur – an investment subsidised by the government – as part of the deal.
The earnings report came on the heels of Ampol’s announcement last Thursday of the $1.1 billion acquisition of EG Group’s Australian business, which will significantly expand its network of service stations and beef up its new U-Go unstaffed forecourts.
The deal triggered a surge in Ampol’s share price on Friday, and the stock gained another 0.9 per cent on Monday despite the drop in first-half profit, which was expected.
Halliday said the “bolt-on” acquisition would beef up Ampol’s convenience retail business, provide strong returns for shareholders and up to $80 million of synergies.
Asked whether the deal represented a doubling-down by Ampol on its traditional fossil fuels business, Halliday said it had been clear for a while that the transition was “going to take time” and it was important for the company to have flexibility to adapt its network over time.
“It’s complex, and different customers are going to transition at different rates,” he said. “Having more control over our branded network, and evolving that network over time, is going to be the way that we handle it.”
Net profit excluding one-time items, the figure most closely watched by the market, dropped to $180.2 million in the six months ending June 30, from $233.7 million a year earlier.
Bottom-line net income, which includes the impact of oil prices on the value of inventories, dived to a loss of $25.3 million, from a profit of $235.2 million a year earlier.
Earnings before interest and tax at Lytton slumped to $1.1 million in the half, from $89.5 million a year earlier.
The result contributed to a 48 per cent dive in EBIT for Ampol’s fuels and infrastructure business, more than offsetting a 4.4 per cent gain in EBIT in convenience retailing and a narrow increase from its New Zealand business.
In total, EBIT for the group declined 20 per cent to $403.8 million, while earnings before interest, tax, depreciation and amortisation sank 12 per cent to $648.9 million.
Ampol declared an interim dividend of 40¢ a share, compared with 60¢ at the same time last year, and just shy of the consensus estimate of 41¢ a share.
Ampol said market conditions had improved in some products since the end of June, while the refining margin at Lytton had lifted.
The rest of the fuels and infrastructure business, convenience retailing and the New Zealand business “are expected to largely continue the trends from the first half”, it said.
Barrenjoey energy analyst Dale Koenders said the numbers were largely in line with guidance Ampol gave last month, but profit beat expectations by about 7 per cent because of lower tax and interest costs.
Ampol is continuing to expand its electric vehicle charging networks in Australia and New Zealand but described the growth of the battery electric vehicle market in New Zealand as “soft” after the scrapping of subsidies in late 2023.
It is also exploring the feasibility of setting up a renewable fuels operation in Australia with IFM and GrainCorp.
Extracted in full from: https://www.afr.com/companies/energy/ampol-profit-drops-as-refining-earnings-almost-wiped-out-20250815-p5mn6t
