Crude oil price drops have “positively impacted” the retail and commercial trading performance of Z Energy, increasing the company’s earnings guidance by more than $15 million.
New Zealand’s largest fuel retailer has revised its FY19 earnings guidance between $420m to $450m.
It’s good news for investors after Z had cut its guidance between $400 to $435 in November which saw a sharp drop in its share price.
Dividend guidance is also up based on higher third quarter earnings and a “more stable crude outlook”. Total FY19 dividends are expected to range between 38 and 47 cents inclusive of 12.5c paid in December.
Total industry fuel volume increased 5.2% to 2510 million litres for the December 2018 quarter compared to the previous year’s period.
This was driven by volume growth in the commercial fuel markets. However, Z lost market share in diesel and jet fuel markets.
Brent crude prices fell 40% to US$51 per barrel in late December after an October high of US$86/bbl.
With a decline in crude price, Z’s earnings from commercial sales of diesel, jet fuel and bitumen are advantaged through price leads.
Some major customers that purchase crude on a monthly basis were sold fuel in December based on November crude prices. This saw a reversal of a $10m commercial price lag turn into an $8m price lead for Z.
The crude markets “remain volatile” for now with prices rising 24% from December to January. A crude price guidance between US$60 to $US70 per barrel is based on a stable outlook for the remainder of the financial year.
