Z Energy earnings up 15pc - market share slips

Z will end up with a 49 per cent share of the fuel market if the $785 million sale, which requires the competition regulator's approval, goes ahead. Photo / NZME.

Z Energy, the petrol station chain seeking to take over rival Chevron New Zealand, lifted first-half earnings 15 percent as it fattened its margins in a tightly contested market, ceding market share in the process.

Replacement cost operating earnings before interest, tax, depreciation, amortisation and fair value adjustments, the company's preferred earnings measure, rose to $105 million in the six months ended September 30 from $92 million a year earlier, the Wellington-based company said in a statement.

Revenue dropped 20 percent to $1.31 billion as the service station chain's volume of petrol sales fell 2 percent against an industry increase of 2 percent, while diesel sales declined 6 percent in a flat market.

"The level of competition across the retail and commercial markets continues to be very strong," chief executive Mike Bennetts said. "In the retail markets Z continues with its tactical commitment to match price board discounting and in the commercial markets is continuing to be judicious around the business it retains and the acquisition of new customers."

Z widened its gross margin on fuels 8 percent to $225 million in the half, by trimming out marginal business, while its non-fuels margin increased 7 percent to $31 million and its refining margin more than doubled to $24 million, earned through its shareholding in the country's only oil refinery, which reflected a weaker kiwi dollar and strong regional conditions supporting refineries.

The company reported a trebling in net profit to $67 million, bouncing back from a year earlier when it was dragged down by falling prices for oil and refined fuels.
The board declared an interim dividend of 8.5 cents per share, payable on Dec. 2 with a Nov. 20 record date.

The shares last traded at $6.75 and have gained 45 percent this year.

Z is seeking regulatory approval to buy Chevron's Caltex and Challenge! brands, which would give it 49 percent of the nation's retail market. In September, it raised its estimated savings from the merger to between $25 million and $30 million from an earlier range of $15 million to $25 million.

The company affirmed guidance for annual earnings to be within $245 million and $265 million, which included a one-off $24 million charge from additional Customs duties and penalties and the timing of the Chevron cut-over date.

Read the full Z Energy release here: