Shares in Z Energy dropped by 8.7 per cent in the opening minutes of trade after the fuel company cut its earnings guidance by $60 million, citing "unprecedented" discounting and weaker than expected margins at the Marsden Point refinery.
By 10.10 am the stock was trading at $5.75, down 55c from Wednesday's close.
The firm says its earnings before interest, tax, depreciation, amortisation and changes in financial instruments for the year ending March 31 will be $390-$430 million, down from the $450-$490m previously estimated.
It also lowered its expected dividend range to 48-50 cents, from 48-54 cents.
New Zealand's biggest fuel retailer says most of the impact – about $50m - is from retail discounting, and largely related to the exit of the firm's Caltex business from the AA Smartfuels discount programme.
The change resulted in a "significant" increase in competitive intensity in July and August, the firm said in a statement through NZX.
"This intensity has shown up as unprecedented levels of discounting, increased frequency and level of discount days, in addition to increased promotional activity from competitors on price boards and through their respective loyalty programmes."
The company said margins at both the Z and Caltex businesses fell in July and August, while volume through Caltex was also reduced as customers determined their preferred loyalty programme.
Z relaunched its Pumped discount scheme across both brands on August 1.
The same day, it told investors it would use the strength of its two brands and its increasing data capability to better target different customer segments and counter the threat from new outlets being built by smaller discount competitors like Gull and Waitomo.
In August, Z Energy shares weakened after the Commerce Commission report said a lack of competition may be costing consumers $400m annually.
Today, Z noted that about half the $50m retail impact has already been seen in its year-to-date performance.
Z also owns about 15 per cent of Refining NZ, operator of the Marsden Point oil refinery.
Earlier this month the refinery reported a widening of its first-half loss to $3.5m, with a weaker New Zealand dollar helping offset lower than expected margins and higher costs for gas and power.
Z says margins were below its forecasts, and although they rose materially in August, it does not expect that to be maintained. It is forecasting lower margins until the end of the calendar year, with a "moderate" uplift then expected due to changes in global requirements for cleaner marine fuels.
It says most of the $10m impact from lower margins has already been booked in its year-to-date performance.