Viva Energy Group Limited (VEA)
BUY

In line result, ACCC decision September

 22 Aug 2023
Sector: Energy

RESULTS

Need To Know

  • In line earnings result, dividend ahead. Top end of payout range.
  • No capital management, balance sheet is now net debt. 
  • No change FY23 capex guidance $405-455m
  • Retail performance soft, Commercial performance strong. 

FY23 Results Overview (vs consensus)

EBITDA $362m vs $371m

NPAT $174m vs $175m 

DPS 8.5cps vs 8cps, 100% franked. 75% payout of NPAT (top end of 50-70% payout range)

CAPEX guidance of $405-455m reaffirmed. 

Strong operating cash flow performance. Balance sheet moved from $290m net cash to $274m net debt – Coles Express acquisition, working capital drag following refinery outage.

Outlook: VEA expects a continuation of soft retail fuel volumes in 2H. Convenience and Coles Express should show further growth. Commercial results are unlikely to deliver the same level of growth in 2H. Refining operations to resume full run rate from Sep 2023. Expect minimal changes to consensus earnings estimates for FY24. 

Retail earnings were softer than expected despite delivering 40% EBITDA growth on 1H22. 4% fuel volume growth reflects softer economic conditions, and a small loss of market share in petrol all weighed.  

Australian total fuel sales look to have stalled at -7% vs FY19 levels. Total convenience sales -0.9%, given changes to tobacco sales tax but grew +8.7% ex-tobacco, implying market share gains for VEA.  

Commercial earnings highlight, +41% EBITDA pcp, driven by a +15% lift in fuel volumes and new contract wins.

VEA low-sulphur upgrade for the Geelong (VIC) refinery has been delayed, given the lack of critical components. VEA will need a compliance waiver from the Federal Government.

ACCC: acquisition ruling  On The Run (OTR)  from ACCC due 21 Sep 2023.

Investment Implications

Overall, an inline result is unlikely to alter investors' views on VEA. Higher refining margins over July/August have helped sentiment towards the stock post-balance date.

The key near-term catalyst remains the ACCC decision on the OTR acquisition due in mid-September. On balance, the ACCC is likely to approve the transaction in our view, with a small level of asset sales in South Australia. 

VEA plans to hold investor day with an updated capital management framework in Nov 2023. 

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Stock Overview

Share Price

Company Overview

VEA is an energy company that supplies about one quarter of Australia's liquid fuel requirements. It owns and operates the Geelong Refinery in Victoria and operates a bulk fuels, aviation, marine, chemicals and lubricants business.

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