Z Energy expected to 'deliver' in report

Analysts are picking Z Energy's first full-year financial report will comfortably come in above its prospectus guidance range, with after-tax profit up on the previous year.

Z Energy rebranded from Shell after being sold, Its most recent guidance was for earnings before interest, tax, depreciation and amortisation (Ebitda) to be in a range of $205 million to $215 million, with Craigs Investment Partners picking $209 million and broker Forsyth Barr predicting $213 million.

Z Energy is scheduled to deliver its full-year report tomorrow.

Craigs broker Peter McIntyre said he was expecting ''better than prospectus'' earnings from the fuel retailer, despite the decline in its gross refining margin (its share from the Marsden Pt refinery), and capital expenditure would keep earnings momentum over the short term.

Mr McIntyre expects an Ebitda boost from the gross refining margin, from New Zealand Refining, from $23 million in 2014 to $41 million in 2017.

Forsyth Barr broker Andrew Rooney said he ''fully expected Z Energy to deliver on its promise'' and be ''comfortably ahead''and at the top end of its prospectus guidance.

''We're not expecting Z Energy to deviate from its prospectus guidance when it comes to the dividend, which should be 14.3c per share and fully imputed,'' Mr Rooney said.

Mr McIntyre noted Z Energy planned to spend $30 million-$40 million, for each of the next four years, to boost Ebitda by $40 million-$50 million, and it was positive that growth opportunities had been identified.

''But we remain concerned that the capital expenditure initiatives mostly just compensate for a declining organic profit expectation,'' he said.

Mr Rooney said Z Energy's statistics showed fuel volumes had declined during the second half, down 3%, or by 2.43 billion litres.

However, he expected Z Energy to have continued to lift its profit margins and its full-year profit margin for 2014 would be 17c per litre, up 11% on 2013.

''While there is a limit to how far Z Energy can play this game, we believe there is a little more to go in 2015, before the company starts to use its market position to slowly gain market share,'' he said.

simon.hartley@odt.co.nz

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