Ampol has announced its financial results for the 12 months ending 31 December 2020.
According to Managing Director and CEO Matt Halliday, Ampol has navigated a “tough operating environment”, with “sustained weakness” in refining margins, ongoing government restrictions impacting travel and aviation, and broad economic weakness impacting demand throughout the year.
“Despite the many challenges and disruptions faced, I am pleased with our progress in executing our strategy and delivering on our promises to shareholders,” he says.
“In 2020 we released significant capital through our convenience retail property transaction, announced the return of capital to shareholders through our recently completed off-market buyback, and delivered a subordinated notes issuance.
“We also commenced our rebrand to Ampol and we are well positioned to deliver on our targeted $195 million EBIT uplift by 2024.
“Heading into 2021, we remain focused on cost and capital efficiency and will continue to make decisions to improve returns and deliver growth to shareholders. Our refining review is ongoing, with an outcome to be communicated to stakeholders in 2Q 2021. I would like to thank all our employees for their contribution to our strategic success and efforts to deliver for customers in a tough market.”
Fuels & Infrastructure (F&I)
F&I delivered RCOP EBIT of $154 million in 2020, which was below the $450 million RCOP EBIT in 2019. This, says Ampol, is “largely” due to lower earnings from Lytton and loss of scale in F&I Australia from Covid-19 related demand destruction.
The F&I ex-Lytton RCOP EBIT result, according to Ampol, was impacted by the “significant decline” in Australian fuel volumes and associated efficiencies, and effects from managing rapidly changing supply chains. Earnings in the period, says the retailer, were supported by increased imports during the extended Lytton Turnaround & Inspection (T&I), continued growth in International RCOP EBIT, strong cost discipline and $30 million of foreign exchange gains.
Ampol says the reduction in Lytton RCOP EBIT by $215 million compared to 2019 was reflective of the “extremely weak” external refiner margin environment, impacted by sustained weakness in global hydrocarbon demand from Covid-19. Action was taken to mitigate impacts by bringing forward and extending the refinery T&I, and a renewed focus on costs and efficiency.
Total Australian fuels sales volumes were 13.6BL in 2020. This is 17% lower than the 16.3BL in 2019, which Ampol says is reflective of the “adverse” weather impacts at the start of the year and demand destruction, including the “significant” impact of government restrictions implemented in response to the Covid-19 pandemic.
Convenience Retail (CR)
CR delivered RCOP EBIT of $287 million in 2020, compared to $201 million RCOP EBIT in 2019.
According to Ampol, retail fuel earnings were supported by higher margins, including the benefits from oil price timing lags, offsetting volume weakness.
The result, says the retailer, also reflects continued improvement in shop performance, partially offset by the impact of one-off items and higher depreciation.
The higher depreciation reflects inclusion of $26 million non-cash depreciation from site remediation and dismantling asset, partially offset by $17 million lower D&A due to the benefit from the impairment of Convenience Retail sites recognised at 30 June 2020.
Total CR fuels sales volumes were 4.1BL in 2020. This was 14% lower than the 4.8BL fuels sales volumes in 2019, which Ampol says was due to the impacts on industry demand from bushfires and floods in 1Q, followed by Covid-19 restrictions since late March.
“Our disciplined approach to optimising our network saw the closure of 33 marginal sites, in addition to the divestment of 25 Higher and Better Use (HBU) sites which Ampol will remediate as part of sale conditions,” says Ampol.
“Combined with the transfer of ~20 sites to alternate operators, these changes drove a ~9% reduction of the controlled network size during the period.”
Ampol adds that shop performed “strongly” during the period as its focused on the “disciplined execution” of its retail strategy, with a 7% increase in like-for-like shop sales and a clear focus on cost management.
