Z Energy's after-tax profits, revenue, rise

Fuel retailer Z Energy has booked a $20million gain in after-tax profits, rising 8% for its year to March to $263million.

The profit boost, including from a 14% increase in refining profit margins, comes hard on the heals of a leaked email this week from competitor BP.

A BP manager outlined regional pricing structures, in the hope competitors would also raise prices, Stuff reported.

The issue prompted Energy Minister Megan Woods to schedule a meeting with BP yesterday to explain the pricing strategy.

Z Energy's result yesterday did not directly address the BP email issue, but suggested the most likely outcome of last year's Fuel Market Study would be a Commerce Commission market review, once the relevant legislation was passed later this year.

The company's view was a market review would likely find a competitive market, working effectively with customers who had a wide range of price choices.

"Most intense discount areas have shifted out of high population trading areas in line with an increase in new sites from regional distributors," the Z Energy report said.

Z Energy, which also operates the Caltex outlets, had revenue surge 18% from $3.86billion to $4.57billion from a year ago and after-tax net profit rise 8% to $263million.

Z Energy's dividend rose 10%, from 19.9c a year ago to 21.9c, the total 2018 dividend being 32.3c.

Replacement cost operating earnings before interest, tax, depreciation and financial adjustments, a measure Z Energy uses to strip out the changing value of inventory, rose 13% to $449million; within January guidance, which was cut by about $20million because of a pipeline failure that increased the cost of crude oil, BusinessDesk reported.

Petrol sales were slightly down on last year but diesel and aviation fuel sales were up and non-fuel revenue also rose.

Craigs Investment Partners broker Peter McIntyre said cost blowouts during the past financial year were offset by the strong fuel margins.

He highlighted Z Energy had taken over a Mobil contract to supply 53 New World and Pak N Save supermarkets, a $150million contract, starting in September this year.

However, Mr McIntyre added a caution, noting 60 new sites had been built by competitors during the past two years, raising concerns for Z Energy over capitalisation during a period of uncertain longer-term demand.

Z Energy expected operating earnings next year in a range of $450million to $485million. Mr McIntyre estimated $480million.

Forsyth Barr broker Damian Foster said the key focus of the full-year result was going to be guidance on the full-year 2019 dividend, which Z Energy delivered within expectations.

Z Energy indicated the 2019 dividend would be in the range of 50c to 55c per share, and Mr Foster expected it to be 55c.

"Overall, a result that was in line with expectations and a full year 2019 outlook that is delivering on the expected dividend increase," Mr Foster said.