Fuel retailer Z Energy is expected to post a strong full-year result this week, underpinned by improved fuel profit margins, but is expected to also book some unfavourable one-off costs.
Forsyth Barr broker Suzanne Kinnaird expected Z Energy, for its year to March, to book an 18% decline in revenue, from $3.06billion to $2.51 billion, but with earnings before interest and tax up 23% to $265 million and after-tax profit up 7%, to $132 million.
"Fuel margins are the key driver and have trended upwards from unsustainably low levels over the past five years.
"We do not expect margins to increase materially from current levels,'' she said.
She said blended importer margins were up from 28.6c per litre a year ago to 31.1c and the gross refining margin had been strong throughout the year, which favoured users of the Marsden Point refinery, as opposed to importing product.
However, Mrs Kinnaird said there would be several one-off items "running through the 2016 result''.
An excise tax payment issue had been resolved during the year, but was expected to reduce reported earnings before interest, tax, depreciation and amortisation by $15 million.
There would be adjustments for unrealised foreign exchange gains or losses.
"These adjustments mean it is not possible to get a clear picture on the market consensus, however, it appears we are toward the upper end of the analyst range,'' she said.
Z Energy shares hit a record high of $8.18 last week, before 10% shareholder the New Zealand Superannuation Fund rejected reports it was planning to sell the stake. Z's shares are up 70% on a year ago.
Mrs Kinnaird also expected the recent Chevron New Zealand acquisition costs would affect the full year result.
Last month, Z Energy finally received Commerce Commission clearance to buy 100% of Caltex New Zealand and its 127 stations for $785 million, as long as it met some conditions: divesting itself of 19 stations so its market share in New Zealand sat at 49%.
Z Energy, which at present has 213 branded service stations, will sell 19 retail service station businesses and one truck stop. Several independent operators have already expressed interest and the station sale proceeds are expected to offset the purchase of the Chevron-Caltex assets.
Mrs Kinnaird said she expected Z Energy could extract "significant synergies'' from the Chevron acquisition, but she expected little more information in this week's result, noting the settlement date was June 1.
The Chevron purchase is being funded from $670million debt and $115 millon cash.
