Viva Energy (ASX: VEA) has announced some guidance for the half year ending 30 June.
What is Viva Energy?
Viva Energy is one of Australia’s leading energy companies and supplies approximately a quarter of the country’s liquid fuel requirements. It is the exclusive supplier of Shell fuels and lubricants in the country across 1,200 service stations. It also owns and operates the Geelong refinery in Victoria, as well as bulk fuel, aviation, bitumen, marine, chemicals and lubricant businesses supported by more than 20 terminals and 50 airports and airfields.
What did Viva Energy say?
In the guidance the energy company said that total sales volume for the June half is expected to be between 6,100 million litres to 6,200 million litures.
Weekly sales in the retail Alliance channel were 45.1 million litres per week in May 2020, which as up 16.4% on April 2020. The company said sales continue to improve as COVID-19 restrictions are relaxed.
The decline in retail sales have been offset by cost reductions and improvements in retail fuel margins compared to 2019.
Excluding aviation, commercial sales have been resilient and have been mostly unaffected by COVID-19 restrictions. Impacts to commercial earnings were largely lower because of the lower aviations sales.
Overall costs were thankfully lower because of lower supply costs, the deferral of projects, savings initiatives and one-off items that didn’t recur.
The company is going to go ahead with its major maintenance of its residual catalytlic cracking unit for a reduced cost and an extended timeframe. The cost will be $85 million to $100 million (down from $110 million to $140 million).
HY20 guidance
Underlying EBITDA (click here to learn what EBITDA is) is expected to be between $257.5 million and $287.5 million. Underlying net profit is expected to be between $20 million to $50 million. The previously announced share buyback is to commence in June 2020.
I’m generally not a fan of resource-related businesses because they have little control on the commodity price. I’d rather buy shares of companies like Bubs (ASX: BUB).
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Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.
