Tailwinds during its second-half trading year are expected to propel Z Energy towards a 27% increase in after-tax profit.
New Zealand Refining (NZR), in which Z Energy has a 17.14% stake, initially dragged down Z Energy during its first-half trading, but an improved second half was expected to see Z Energy deliver a strong full-year result, ahead of guidance, Forsyth Barr broker Suzanne Kinnaird said.
''This will be a great result, with strong margins in the second half and NZR-related tailwinds being the most significant contributing factors,'' Ms Kinnaird said.
Z Energy, which has about a 30% share in the sector, is scheduled to report its full-year trading to March tomorrow.
While revenue was expected to be down 8%, from $3.37 billion to $3.11 billion, Ms Kinnaird said the gross margin for the year would be up 17%, with earnings before interest and tax up 29%, from $171 million to $220 million, and after-tax profit up 27%, from $100 million to $127 million.
''Z Energy is developing an enviable track record of delivering on what it said it would do and consistent profit growth,'' Ms Kinnaird said.
NZR's half-year report, released in August last year, noted it had weathered ''a difficult start to the year'' caused by weakening refiners' margins and the strong New Zealand dollar.
NZR made an interim net loss after tax of $6.9 million for the six months ended June 30, 2014, compared with a net profit of $5.2 million during the previous six months.
The lower oil price outlook would reduce working capital requirements for Z Energy, and could aid a potentially higher dividend scenario.
''It has scope to pay a materially higher dividend than our full-year 2015 forecast of 25.7c per share. We suspect one of its cornerstone shareholders, Infratil, would be keen to see a high dividend,'' Ms Kinnaird said.
The outlook for Z Energy's full-year 2016 ''remains for solid growth'' and elevated profit margins.
Craigs Investment Partners broker Peter McIntyre said Z Energy had indicated in full-year 2014 its average petrol discount to the headlines prices was 1c per litre, but that had since risen to 3c per litre, during the third quarter of 2015, bringing its prices in line with competitors.
''This pricing has brought an end to the petrol volume declines,'' he said.
Craigs was forecasting earnings before interest, tax, depreciation and amortisation of $241 million, which was ''just ahead'' of the overall guidance range set by Z Energy, of $220 million to $240 million.
