Z Energy's second full-year of operation since its sale to local investors by Shell has produced a 13.1 per cent lift in operating earnings, although sales have fallen as the transport fuels distributor cut out loss-making contracts and faced severe competition on forecourts.
Earnings before interest, tax, depreciation and amortisation and changes in the value of financial instruments came in at $195 million in the year to March 31.
That was up from $172 million the previous year, despite a 5 per cent slide in the total volume of sales to 2.524 million litres of petrol, diesel, aviation fuel and other products.
Z's disclosure documents do not include a total revenue figure for the year, but show retail petrol sales were down 9 per cent to $867 million and commercial diesel sales were off 14 per cent to $562 million.
The fall in diesel sales reflected a "conscious decision" either tore-price or remove uneconomic commercial accounts.
Z is preparing for a possible sharemarket listing this year and appointed lead advisers for a float this week, as its joint owners, the New Zealand Superannuation Fund and Infratil, seek to reduce their exposure to the business and, in Infratil's case, to accumulate funds for other investments and debt restructuring.
The operating result falls squarely within the guidance range Z had already announced.
Capital expenditure of $71 million was at the low end of the announced $70 million to $90 million range, but some $20 million of unexpended capex is to be carried forward on incomplete projects.
Chief executive Mike Bennetts said forward guidance for the year ahead would come from Infratil rather than Z, because of the potential share offer, which restricted the company's usual ability to make forward-looking statements.
On a tax-paid basis, profit for the year was down 50 per cent at $35 million, but the figure is heavily affected by fuel holdings and other factors at balance date and is not regarded as an accurate indicator of underlying performance.
The company says operating costs were higher in the past year because of an $11 million increase in retailer commissions and $4.5 million of Christchurch earthquake-related repairs.
Rebranded Z outlets showed a 9 per cent increase in store sales, compared with a decline in those outlets still operating under a format unchanged since Shell's ownership.
A sale and leaseback programme for its retail sites realised a net $82 million during the year to give a yield of approximately 7.6 per cent.
The profit presentation papers also showed a $12 million impairment had been booked against the company's 17 per cent shareholding in the Marsden Pt oil refinery, with a projected US$7 a barrel refining margin, down from US$7.40 in the year just ended.
However, Bennetts signalled improving margins from Z's crude and refined product supply chain.
"We expect new international procurement contracts for refined fuel and crude oil negotiated by Z over the last 12 months to deliver substantial savings for the company.
"With moves by Port of Tauranga to dredge to enable larger vessels, Z is positioning itself to use larger and most-effective import vessels to deliver Z's finished fuel products, which should also represent significant cost savings," with Z also reorienting to North Asian refineries.
The company is also advancing investment in 40 million litres of new storage capacity at Tauranga and the Port of Lyttelton.
Z is budgeting a $20 million dividend payment to its two shareholders and faces emissions trading scheme costs of $40 million.