Viva Energy’s Shares Crashed On Downgraded Earnings Guidance

  • Nov 19, 2018 AEDT
  • Team Kalkine
Viva Energy’s Shares Crashed On Downgraded Earnings Guidance

Viva Energy’s shares tumbled after the company downgraded its FY2018 earnings guidance in today’s refining business and guidance update.

In an announcement to Australian Securities Exchange, the company announced weaker than expected regional refining margin due to higher crude prices and growing gasoline stocks. As a result, company’s Geelong Refining Margin was US$7.8 per BBL for the month ended October 2018.

Further, the company has reported lost production underpinned by disrupted supply of electricity from the external grid in August 2018 which together with margins decline has impacted the earnings of the company’s refining business over the second half of 2018.

Revised Guidance:

As per the today’s guidance update, Viva Energy now anticipates underlying EBITDA from its refining business to be approximately $150 million in Fiscal year 2018, which is substantially lower than the previous forecast of $216.7 million.

Viva Energy has revised the forecast Geelong Refining Margin (GRM) for FY2018 to US$8.0/Barrel (BBL) compared to the previous forecast of US$9.2/BBL. Forecast refinery intake for Fiscal 2018 has now been revised to 40.1 million barrels (MBBLs), lower than previous forecast of 42.2 MBBLs.

On consolidated basis, the group expects underlying EBITDA for FY2018 to be approximately $543 million and NPAT for the same period to be approximately $280 million, compared to the FY2018 Prospectus forecast for Underlying EBITDA of $605.1 million and NPAT of $324.1 million. Guidance has been made on replacement cost basis.

The company further noted that forecast results for the 12 months ending June 2019 provided initially will be impacted by the revised second half 2018 forecast provided today. Viva Energy will continue to provide monthly refining margin updates, and expects to provide a further update on outlook for 1H2019 when the full year results are released in February 2019.

Segment wise performance:

Ahead of weaker trading conditions due to higher oil prices and a lower Australian dollar, the company has experienced an impact in fuel’s demand. Although total fuel volumes were stable throughout the year, the volume growth expected by the company in its Retail business and, particularly, the Alliance during the second half of 2018 has not materialized. As a result, total fuel volumes for FY2018 are expected to be between 1.0% and 1.5% below the Prospectus forecast of 14,086 million litres.

Notwithstanding the weaker volume performance, Viva Energy expects to exceed the FY2018 Underlying EBITDA forecasts for non-Refining segments by approximately $5 million through continued cost management and outperformance in some segments. FY2018 Underlying EBITDA for Retail is expected to be up to $10 million lower than Prospectus forecast, the Commercial segment largely unchanged, and Supply, Corporate and Overheads approximately $15 million ahead of Prospectus forecast.

Viva Energy’s statutory accounts are prepared on a historical cost basis, and accordingly are subject to inventory gains and losses dependent on market variables that include changes in the crude oil price and foreign exchange rates.

As the company announced downgraded guidance, the share price of the company plunged 12.195% or $0.250 to last trade at $1.800 on 19 November 2018. Over the past three months, the stock of Viva Energy Group Limited (ASX: VEA) has witnessed a negative performance change of 15.29%.


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