Viva Energy has delivered a sharp increase in first-half earnings, thanks to a surge in refining margins helping the company absorb the disruption caused by a fire at its Geelong refinery.
The company on Tuesday reported underlying EBITDA of $774m for the six months to June, up 154 per cent on the previous corresponding period, while underlying net profit rose to $371m. The result was driven by a sharp increase in refining margins, which more than doubled to US$21.10 a barrel as disruption to oil supplies from the Middle East and reduced regional refining capacity pushed margins higher.
The result marked a significant turnaround for Viva, which reported underlying EBITDA of $305m in the first half of the previous financial year. The stronger earnings has flowed through to shareholders as the company declared a fully franked interim dividend of 7.73c a share, compared with 2.83c a year earlier.
Viva also strengthened its balance sheet, with net debt falling by $355m to $1.7bn. The company said strong earnings conversion into cash had supported the reduction in debt while allowing it to maintain investment across its operations.
The strong result came despite the disruption at Geelong following the April fire in the refinery’s Mogas Alkylation complex. The incident was contained to the alkylation unit, which produces alkylate used in high-octane fuels.
Viva said preliminary findings indicated the fire was caused by a failure of a section of piping, although a full investigation was continuing. Production was initially reduced following the incident but the refinery was able to restart its residue catalytic cracking unit after inspections and repairs to equipment adjacent to the fire zone.
The refinery is expected to maintain production above 90 per cent of normal operating capacity until the alkylation unit is repaired or replaced, with that work expected to extend beyond 2027.
Viva said refining margins were expected to stay elevated through the remainder of the financial year. The July refining margin reached US$20.70 a barrel.
The company is continuing discussions with the federal government over fuel security reforms, including strategic fuel reserves, minimum stockholding obligations and refining retention arrangements.
Viva reaffirmed its full-year capital expenditure guidance of $350m-$400m, as it seeks to reduce spending after a period of heavy investment in its refining business.
The result gives Viva greater financial strength as it works through the Geelong repairs and engages with Canberra over the policy settings that will support domestic fuel supply.
Extracted in full from: https://www.themercury.com.au/business/viva-energy-profit-surges-by-154-per-cent-fuelling-bumper-dividend-payout/news-story/cc4e2ac270a71acfffc413325a788bee
