Ampol’s counter to the crippling illegal tobacco trade is a network of super-efficient self-service stations with no cigarettes, no snacks and no cashiers.
Illegal tobacco’s disruptive force has undermined supermarkets, independent grocers, grab-and-go corner shops and even Ampol’s convenience network is not immune, with tobacco revenue dropping 32 per cent last year. It was the single largest drag on its shop sales and a key contributor to the 3.9 per cent decline in total retail revenue.
The erosion reflects the rapid expansion of the black market, where untaxed cigarettes and vapes are sold at a fraction of the price of regulated packs. As excise increases pushed the price of a legal pack above $40, organised crime supply chains moved in.
Enter Ampol’s U-Go, a rollout that reached 46 sites by the end of 2025. The low-cost, unstaffed format is designed to deliver faster payback and stronger site returns, reducing its reliance on traditional shop economics.
The earnings impact of tobacco is less noticeable as a high-revenue but structurally low-margin category. Ampol has replaced lost revenue with more profitable categories such as food-to-go, beverages and general merchandise, lifting overall shop gross margin to 40 per cent. Retail earnings still rose 4.8 per cent to $374m.
Strategically, the tobacco slump reinforces Ampol’s broader shift away from reliance on fuel and legacy categories toward a diversified convenience offer. Retail fuel volumes themselves face gradual structural pressure from improving engine efficiency and the rise of electric vehicles.
The $2bn acquisition of Z Energy in 2022 marked the first major step, handing Ampol control of a vertically integrated New Zealand fuel and retail network with a strong loyalty platform and established food-to-go offering.
Next, Ampol agreed to acquire EG Australia from UK-based EG Group in a $1.1bn deal that is before the competition regulator. The transaction would add hundreds of large-format retail sites and materially expand Ampol’s food service footprint, accelerating its push into higher-margin convenience categories.
Ampol has said the deal is strategically important in scaling formats such as U-Go.
U-Go competes directly with discounters in the market like United and have been converted from less profitable petrol stations. With EG’s properties, Ampol chief executive Matt Halliday said he expects the portfolio to grow to 125 U-Go petrol stations.
Higher fuel prices boosts profit growth
Ampol’s underlying profit after tax soared 83 per cent to $429m for the year ended December 31, thanks to higher fuel prices. But statutory profit slipped to $82m, hurt by inventory losses and significant items.
Replacement cost operating profit rose to $947m in 2025 from $715m a year earlier, as stronger refining margins at the Lytton refinery drove a decisive turnaround.
Mr Halliday said the company’s strong profit underscored the rationale behind Ampol’s efforts to diversify.
“The financial performance in 2025 is a high-quality and broadbased result that reflects the steps taken in recent years to strengthen our delivery and increase our exposure to more stable and growing business segments,” he said.
Mr Halliday said the volatility in refining margins highlights the need to complete talks with the Albanese government to update the agreement with the federal government over the fuel security services payment, which was designed to ensure the viability of oil refining in Australia.
Ampol and rival Viva Energy are seeking adjustments to a mechanism introduced five years ago under a markedly different margin environment. It is precisely that refining volatility Ampol is seeking to offset through retail. Ampol shares fell 2 per cent to $28.39.
The Brisbane refinery delivered $163m in earnings, compared with a $42m loss in 2024, as the Lytton Refiner Margin averaged $US10.34 a barrel, up from $US7.08. Improved plant reliability and stronger second-half crack spreads amplified the result.
However, analysts quickly focused on January margins, which were about 21 per cent below the full-year average. The moderation has fuelled concerns about how long the refining upswing can last. Refining earnings are inherently cyclical and exposed to swings in global crack spreads. With high fixed costs, even modest movements in benchmark margins can drive sharp movements in profitability.
Extracted in full from: https://www.theaustralian.com.au/business/mining-energy/ampol-bets-on-unstaffed-stores-to-counter-slump-in-legal-tobacco-sales/news-story/cdfe5647db7deb62fb17026db5f82454
