Z profit of $212 million close to expectations

Petrol retailer Z Energy provided a good first-up result as a listed company, continuing to demonstrate its ability to deliver on its promises, Forsyth Barr broker Suzanne Kinnaird said yesterday.

Overall, there was little surprise in the Z result.

At the operational level, it was in line with Forsyth Barr forecasts with operating profit for the year ended March of $212 million compared with the forecast of $213 million.

Reported profit was $101 million compared with forecasts of $100 million.

Z reported an operating profit of $219 million but Forsyth Barr adjusted it down by $7 million to strip out an unrealised foreign exchange gain.

''We view this as a good result - coming in ahead of prospectus and well within Z's $205 million to $215 million guidance range.''

Ms Kinnaird said the key driver of the result had been the continued lift in margins. The gross margin of 17.1c per litre was up from 15.3c in the previous year. The pro forma net margin was 4.2c.

The final dividend of 14.3c per share was in line with the prospectus and took the total dividend to 22cps.

''Given the result and outlook guidance is very much in line with expectations, we do not expect material changes following further analysis. We view Z as fairly valued,'' she said.

Z chief executive Mike Bennetts said the result highlighted the company's ability to manage volatility in different parts of the business and deliver quality earnings.

''We've deliberately and consistently focused our fuel volume and margin strategy on delivering value for the loyal customer Z seeks.

''This strategy has continued to allow Z to increase its share of profit from the market and also to manage unexpected impacts such as bottom-of-cycle refining margins for extended periods.''

Z was willing to trade some volume for the sake of better unit margins, but it still closed the year with market-leading positions across petrol and diesel sales.

Its total market share was down slightly from April 2010, when the company was bought from Shell, Mr Bennetts said.

Z's guidance for the 2015 financial year was for an operating profit of between $220 million and $240 million.

Mr Bennetts said the guidance factored in the costs associated with the prolonged shutdown at Refining New Zealand in April this year.


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