Company Reports

No-moat refined fuel retailer Viva Energy reported a robust 10% increase in first-half 2024 underlying net profit after tax to AUD 192 million, albeit about 7% below our expectations. Higher-than-expected interest expense accounts for our profit overcall. Underlying group EBITDA of AUD 452 million was within the recent AUD 445 million-AUD 455 million guidance, and slightly ahead of our AUD 448 million estimate.

Viva Energy Group, along with Ampol, BP, and Mobil, is in a rare breed of vertically integrated Australian refined fuel supplier. The Australian downstream petroleum industry runs from sourcing, transporting and storing crude oil, refining that crude into marketable products or directly sourcing imported refined product, and then transporting refined products for sale to retail and commercial customers. Refined products are mostly used in the transport sector, including commercial and private motoring, aviation, marine, and other transport demand. The Australian market equates to about 60 billion liters of product, with road use the largest segment at over 50%, followed by aviation at 14% and industry at 12%.

Viva Energy Group, along with Ampol, BP, and Mobil, is in a rare breed of vertically integrated Australian refined fuel supplier. The Australian downstream petroleum industry runs from sourcing, transporting and storing crude oil, refining that crude into marketable products or directly sourcing imported refined product, and then transporting refined products for sale to retail and commercial customers. Refined products are mostly used in the transport sector, including commercial and private motoring, aviation, marine, and other transport demand. The Australian market equates to about 60 billion liters of product, with road use the largest segment at over 50%, followed by aviation at 14% and industry at 12%.

No-moat Viva reported a robust first half 2024, with group sales volumes up 5% on the previous corresponding period to 8.3 billion liters, largely as expected. The PCP volumes are adjusted to include pro forma Coles Express and OTR group contributions—strong growth in commercial and industrial offset sectorwide softness in retail.

Viva reported a strong first-quarter 2024 operating performance, with group sales volumes up 7.5% on the previous corresponding period to 4.1 billion liters, largely as expected.

Viva Energy Group, along with Ampol, BP, and Mobil, is in a rare breed of vertically integrated Australian refined fuel supplier. The Australian downstream petroleum industry runs from sourcing, transporting and storing crude oil, refining that crude into marketable products or directly sourcing imported refined product, and then transporting refined products for sale to retail and commercial customers. Refined products are mostly used in the transport sector, including commercial and private motoring, aviation, marine, and other transport demand. The Australian market equates to about 60 billion liters of product, with road use the largest segment at over 50%, followed by aviation at 14% and industry at 12%.

Viva Energy Group, along with Ampol, BP, and Mobil, is in a rare breed of vertically integrated Australian refined fuel supplier. The Australian downstream petroleum industry runs from sourcing, transporting and storing crude oil, refining that crude into marketable products or directly sourcing imported refined product, and then transporting refined products for sale to retail and commercial customers. Refined products are mostly used in the transport sector, including commercial and private motoring, aviation, marine, and other transport demand. The Australian market equates to about 60 billion liters of product, with road use the largest segment at over 50%, followed by aviation at 14% and industry at 12%.

Nonrefining businesses shone in no-moat Viva’s 2023 result with EBITDA up about 16% to AUD 680 million. This includes a 9% increase in group sales volumes to 15.5 billion liters, led by 13% growth in the commercial and industrial segment to 11.0 billion liters. Elevated fuel prices weighed on convenience and mobility fuel volumes, relatively flat at 4.5 billion liters. Group 2023 sales volumes are more than 5% above prepandemic levels, with jet volumes yet to fully recover.

Viva Energy Group, along with Ampol, BP, and Mobil, is in a rare breed of vertically integrated Australian refined fuel supplier. The Australian downstream petroleum industry runs from sourcing, transporting and storing crude oil, refining that crude into marketable products or directly sourcing imported refined product, and then transporting refined products for sale to retail and commercial customers. Refined products are mostly used in the transport sector, including commercial and private motoring, aviation, marine, and other transport demand. The Australian market equates to about 60 billion liters of product, with road use the largest segment at over 50%, followed by aviation at 14% and industry at 12%.

Our AUD 3.35 fair value estimate for no-moat Viva Energy stands. Australia’s second-largest retailer of refined fuel reported unaudited 2023 group EBITDA down 34% to AUD 710 million, in line with our expectations. This is a creditable outcome given the strength in the oil price and generally softer economic conditions. Viva shares are up 24% from AUD 2.70 October 2023 lows and at AUD 3.35 are fairly valued, in mid-3-star territory.

Our AUD 3.35 fair value for no-moat Viva Energy stands. Australia’s second-largest retailer of refined fuel reported relatively strong third-quarter 2023 fuel sales, up 4.7% over the previous corresponding period, and in line with the June 2023 quarter. This is a creditable outcome given strength in the oil price and generally softer seasonal and economic conditions.

Viva Energy Group, along with Ampol, BP, and Mobil, is in a rare breed of vertically integrated Australian refined fuel supplier. The Australian downstream petroleum industry runs from sourcing, transporting and storing crude oil, refining that crude into marketable products or directly sourcing imported refined product, and then transporting refined products for sale to retail and commercial customers. Refined products are mostly used in the transport sector, including commercial and private motoring, aviation, marine, and other transport demand. The Australian market equates to about 60 billion liters of product, with road use the largest segment at over 50%, followed by aviation at 14% and industry at 12%.

Australia’s second-largest refined fuel retailer Viva Energy will acquire Coles Express for AUD 300 million, bringing the convenience retail network in-house. We think this makes sense, and accelerates Viva's strategy of transitioning to a fully integrated fuel and convenience retailing model. It could also unlock synergies from the integration of network and store development. Despite this, we retain our AUD 3.20 fair value estimate for no-moat Viva. We think the price fair rather than materially needle-moving. The transaction is expected to complete in the first half of 2023, subject to Australian Competition & Consumer Commission approval, which we expect will be forthcoming.

Viva, along with Ampol, BP and Mobil, is in a rare breed of vertically integrated Australian refined fuel supplier. The Australian downstream petroleum industry runs from sourcing, transporting and storing crude oil, refining that crude into marketable products or directly sourcing imported refined product, and then transporting refined products for sale to retail and commercial customers. Refined products are mostly used in the transport sector, including commercial and private motoring, aviation, marine, and other transport demand. The Australian market equates to approximately 60 billion litres of product, with road use the largest segment at over 50%, followed by aviation at 14% and industry at 12%.

Viva, along with Ampol, BP and Mobil, is in a rare breed of vertically integrated Australian refined fuel supplier. The Australian downstream petroleum industry runs from sourcing, transporting and storing crude oil, refining that crude into marketable products or directly sourcing imported refined product, and then transporting refined products for sale to retail and commercial customers. Refined products are mostly used in the transport sector, including commercial and private motoring, aviation, marine, and other transport demand. The Australian market equates to approximately 60 billion litres of product, with road use the largest segment at over 50%, followed by aviation at 14% and industry at 12%.

Viva, along with Ampol, BP and Mobil, is in a rare breed of vertically integrated Australian refined fuel supplier. The Australian downstream petroleum industry runs from sourcing, transporting and storing crude oil, refining that crude into marketable products or directly sourcing imported refined product, and then transporting refined products for sale to retail and commercial customers. Refined products are mostly used in the transport sector, including commercial and private motoring, aviation, marine, and other transport demand. The Australian market equates to approximately 60 billion litres of product, with road use the largest segment at over 50%, followed by aviation at 14% and industry at 12%.

Viva, along with Caltex, BP and Mobil, is in a rare breed of vertically integrated Australian refined fuel suppliers. The Australian downstream petroleum industry runs from sourcing, transporting and storing crude oil, refining that crude into marketable products or directly sourcing imported refined product, and then transporting refined products for sale to retail and commercial customers. Refined products are mostly used in the transport sector, including commercial and private motoring, aviation, marine, and other transport demand. The Australian market equated to approximately 59.6 billion litres of product in 2017, with road use the largest segment at over 50%, followed by aviation at 14% and industry at 12%.

Viva, along with Caltex, BP and Mobil, is in a rare breed of vertically integrated Australian refined fuel suppliers. The Australian downstream petroleum industry runs from sourcing, transporting and storing crude oil, refining that crude into marketable products or directly sourcing imported refined product, and then transporting refined products for sale to retail and commercial customers. Refined products are mostly used in the transport sector, including commercial and private motoring, aviation, marine, and other transport demand. The Australian market equated to approximately 59.6 billion litres of product in 2017, with road use the largest segment at over 50%, followed by aviation at 14% and industry at 12%.

Viva, along with Caltex, BP and Mobil, is in a rare breed of vertically integrated Australian refined fuel suppliers. The Australian downstream petroleum industry runs from sourcing, transporting and storing crude oil, refining that crude into marketable products or directly sourcing imported refined product, and then transporting refined products for sale to retail and commercial customers. Refined products are mostly used in the transport sector, including commercial and private motoring, aviation, marine, and other transport demand. The Australian market equated to approximately 59.6 billion litres of product in 2017, with road use the largest segment at over 50%, followed by aviation at 14% and industry at 12%.

Viva, along with Caltex, BP and Mobil, is in a rare breed of vertically integrated Australian refined fuel suppliers. The Australian downstream petroleum industry runs from sourcing, transporting and storing crude oil, refining that crude into marketable products or directly sourcing imported refined product, and then transporting refined products for sale to retail and commercial customers. Refined products are mostly used in the transport sector, including commercial and private motoring, aviation, marine, and other transport demand. The Australian market equated to approximately 59.6 billion litres of product in 2017, with road use the largest segment at over 50%, followed by aviation at 14% and industry at 12%.