Z Energy says work has slowed on its $20 million biodiesel plant but it will be finished in the next nine months.
The company - which announced a 10 per cent increase in full-year operating earnings yesterday - will use animal fat to make biodiesel at Wiri in South Auckland. Chief executive Mike Bennetts said the slower than expected progress meant Z was able to contain costs.
Bennetts said the cost of the plant would be between $20 million and $24 million and its economics were based on customers paying a premium for the fuel. The economics still stacked up in the current depressed oil price environment, he said. "We allowed for them to fall although not as quickly as happened."
Oil prices have rallied in the past month but Bennetts, who predicted the fall in prices to below $2 a litre for 91 unleaded last year, said they could fall again.
"There has been a rally in crude prices over the last four weeks and I'm surprised by it. The underlying fundamentals that led to them falling haven't changed."
Improved margins over the second half of the financial year and a better performance by NZ Refining - which Z has a 17 per cent stake in - had led to what one analyst said was a strong financial performance. The company increased its full-year dividend to 24.2c per share for the 2015 year compared to 22c per share for the prior corresponding period.
On a replacement cost basis - ignoring changes in the value of stock held - Z's net profit after tax for the year to March 31, from both fuel and non-fuel income was the equivalent of 5.2c per litre, up from 4.4c per litre in the previous year. This included the growing contribution from convenience store sales as well as exiting poorly performing commercial fuel supply contracts.
Z's gross fuel margin was 19.3c per litre, up from 18c per litre the previous year. The refining contribution to full year earnings was $31 million, up from $24 million in the prior corresponding period.
Replacement cost earnings before interest, tax, depreciation, amortisation and fair value adjustments (ebitdaf), the company's preferred earnings measure, rose to $241 million from $219 million the previous year. Sales fell 9 per cent to $3.06 billion.
Statutory net profit fell 93 per cent to $7 million, which Z said was "negatively impacted by the 61 per cent drop in the price of crude oil and refined fuels over the financial year".
Forsyth Barr analyst Andrew Harvey said net profit was not a good indicator of performance. "We look at it on a replacement cost basis not an historic cost basis and that's gone up over the year about 20 per cent. It's a very good result and the result was at the upper end of guidance."
The guidance for ebitdaf this year was between $245 million and $265 million. Capital investment of between $70 million and $90 million was forecast.
Bennetts said Z's returns were reasonable and consumers continued to receive fair value from a highly competitive market. Its return on average capital employed for the full year was 15 per cent, comparable with returns generated from other listed retailer companies.
Z Energy's share price closed unchanged at $5 yesterday.
$241m replacement cost ebitdaf, up from $219m
$3.06b of sales, down 9%
24.2c per share full-year dividend, up from 22c