Transcript First Half Results for FY2012

Half Year Results for FY13
Momentum with financial performance, strategy
delivery and brand development continues despite a
significant increase in competition
Trading conditions have been bearish and strongly affected
by slower global and local economic recovery
Gross Refinery Margin (US$/bbl)
Industry Volumes (million litres)
12
800
10
700
8
600
6
500
4
400
2
0
300
-2
200
-4
1Q
2009
3Q
2009
1Q
2010
NZRC
•
3Q
2010
1Q
2011
3Q
2011
1Q
2012
Z
Singapore Marker
3Q
2012
Global margin deterioration in 1Q was
strongly recovered in 2Q
•
No clear trend for the future but declines
back to long run averages most likely
•
Data sourced from RNZ and IEA
100
1Q
2009
3Q
2009
1Q
2010
Premium
3Q
2010
Regular
1Q
2011
3Q
2011
1Q
2012
Diesel
3Q
2012
Jet
•
Crude prices range bound $90-125/bbl
•
Retail sales remain soft post recession
•
Commercial sales tracking GDP growth
•
Data sourced from LAFT returns
Z’s competitive position declined in 1H albeit our actions were
consistent with our goal to grow profits and returns
Petrol Volumes - all channels
•
For 1H FY13, YoY sales for the industry are
-0.9% for petrol and +1.3% for diesel
•
Slight volume growth when pump prices
fell below $2/litre but eroded when this
reduction reversed in July
•
Final rebranding of sites and continuing
store refits affecting petrol sales
•
All volume data indexed back to January
2010 and sourced from LAFT returns
104
102
100
98
96
94
92
Jan-10
Jul-10
Jan-11
Z
Jul-11
Jan-12
Jul-12
Industry (excl. Z)
Diesel Volumes - all channels
Average Daily Customer Count (000’s)
120
120
115
100
110
80
105
60
100
40
95
Jan-10
Jul-10
Jan-11
Z
Jul-11
Jan-12
Industry (excl. Z)
Jul-12
20
1Q 2009
4Q 2009
Fuel Only
3Q2010
2Q 2011
Shop Only
1Q 2012
Fuel & Shop
Whilst sales volumes have declined, these are more than offset
by unit margin growth despite the volatile markets
Total Volumes for all Products
(ml per half year)
Gross Margins excluding Store
($m per half year)
250
1,400
1,200
30
25
200
1,000
20
150
800
15
600
100
10
400
50
5
200
0
2005-2009
average
FY 2011
Refining
FY2012
Marketing
1H FY2013
0
2005-09
average
FY2011
FY2012
1H FY2013
Marketing
Other supply
GRM less processing fee & coastal distribution
Fuels cpl (RHS)
MED importer margin - petrol cpl (RHS)
MED importer margin - diesel cpl (RHS)
Earnings were above the mid point of guidance based on a
very strong 1Q which accounted for 68% of first half EBITDAF
Key Variables
Gross refinery margin (USD/bbl)
First Half Actual
Previous Guidance
for FY13
$7.39
$7.00
953
1,880
1,248
2,600
$134.3m
$260-270m
Operating EBITDAF (Current Cost)*
$96.8m
$185-200m
Capex
$38.9m
$70-90m
RNZ Processing Volume (ml)
Sales Volume (ml)
Operating Costs*
• Very poor refinery margins in 1Q were recovered through a very strong 2Q
• Sales volumes affected by increased competitor pricing activity in retail and a conscious
decision to highgrade the commercial portfolio away from loss making and marginal
accounts (after allowing for integrated value and balance sheet resources)
• Operating costs higher from increased marketing programs to mitigate competitor activity
and ongoing costs from a non core asset which was assumed for sale in 1Q
• Capex spend tracking to budget with benefits yet to flow to earnings
* A reconciliation between these numbers and the Statutory accounts is provided in the appendices
Double digit Operating EBITDAF (CC) growth despite slower
economic recovery and increasing price competition
Operating costs*
Operating EBITDAF (Current Cost)*
Cost Of Sales Adjustment
Associate Earnings
(134.3)
(126.4)
96.8
82.8
(42.5)
(12.4)
-6%
17%
-243%
3.6
6.1
-41%
57.9
76.5
-24%
Interest (Other)
(22.9)
(20.8)
-10%
Interest (Shareholder)
(13.5)
(13.9)
3%
Depreciation and Amortisation
(20.7)
(16.3)
-27%
EBITDAF (Historic Cost)
Hedge revaluations & other
4.4
6.6
33%
Tax
(1.3)
(9.1)
86%
Asset revaluations
(1.6)
(0.1)
-1500%
2.3
22.9
Net Surplus (per Statutory Accounts)
Comprehensive income from associates
Total comprehensive income
(0.2)
2.1
-90%
22.9
* A reconciliation between these numbers and the Statutory accounts is provided in the appendices.
-91%
There has been a material cost of sales adjustment between
current cost and historical cost earnings
$m
Operating EBITDAF (CC)*
Cost of Sales Adjustment
Associate Earnings
EBITDAF (Historic Cost)
Oil Price (NZD) - Low **
Oil Price (NZD) - High**
1H FY13
96.8
(42.5)
3.6
57.9
FY11
157.0
62.0
10.0
229.0
$113/bbl $119/bbl $99/bbl
$148/bbl $152/bbl $153/bbl
Dubai Crude
NZD/bbl
160
FY12
172.0
30.0
4.0
206.0
• Historical cost (as required by IFRS) calculates
cost on a first in, first out basis. So historic cost
earnings are subject to fluctuations in the value
of the stock held on the balance sheet due to
changes in the price of oil and exchange rates.
• To protect margins, purchases are hedged to
match equivalent sales which are priced on a
current cost basis, i.e. costs are aligned to the
revenue we receive from customers.
• Management and capital providers focus on
current cost earnings as these reflect the
underlying business model.
**
• Current cost is calculated by revaluing all stock
to its current value. The difference between
historic cost and current cost is called the cost
of sales adjustment (COSA).
140
120
100
1-Oct-10
1-Nov-10
1-Dec-10
1-Jan-11
1-Feb-11
1-Mar-11
1-Apr-11
1-May-11
1-Jun-11
1-Jul-11
1-Aug-11
1-Sep-11
1-Oct-11
1-Nov-11
1-Dec-11
1-Jan-12
1-Feb-12
1-Mar-12
1-Apr-12
1-May-12
1-Jun-12
1-Jul-12
1-Aug-12
1-Sep-12
80
NZD
FY12 Max
1H13 Min
2H10 Max
FY12 Min
2H10 Min
1H13 Max
• Over time historic cost and current cost
measures should deliver similar results but there
will be differences in any one accounting
period.
• Current cost is a non-IFRS number.
* A reconciliation between these numbers and the Statutory accounts is provided in the appendices.
** We have used Dubai pricing as an indicator crude
Impact on Infratil’s Results
Aotea Energy Equity Earnings ($m)
1H FY13
1H FY12
AEHL net surplus attributable to owners of the
company (per statutory accounts)
2.3
22.9
Infratil's share (50%)
Shareholder loan interest
Shareholder RPS interest
Share of AEHL's earnings attributable to Infratil
1.1
4.2
2.6
7.9
11.4
4.3
2.6
18.3
• AEHL’s earnings attributable to Infratil are included within Infratil’s share of earnings
and income of associate companies after tax. This is included within Infratil’s total
income.
• Ordinary dividends paid by AEHL to Infratil are included within the carrying value of
AEHL on Infratil’s balance sheet within the investments in associates.
FY13 is the second year of a three year program of Strategy
projects that grow underlying earnings $36m by end FY15
Delivered as expected in 1H
Progress on track for the full year
 Product procurement moved to north
•
Retail and truckstop POS upgrade
Asian refineries saving $5m per annum
•
5 new sites, 2 rebuilds and 13 car washes
 Rebranding completed on budget
•
FlyBuys offer development
 72 of 100 stores already refitted with
•
Commercial segmentation and offer
revenues +5.4% YoY
 Loss earning commercial accounts
development postponed from 1H
•
(progressively) repriced or removed from
portfolio
Preliminary engineering and consenting for
$40m of new tankage at Lyttelton and MTM
•
Further 9 secondary sites being marketed
 Scheduling system saving $1m per annum
 ERP upgraded plus new chart of accounts
 Third bond issue maturing 2019
 $82m (net) from sale and leaseback of 44
secondary sites (7.55% yield) settling 31
March 2013, expecting $27m gain on sale
At risk for the full year
 Crude supply and refining projects
 Capital recovery charges
The Brand is growing into its potential and continued favorable
results will steadily turn into increased loyalty and profits
Behavioural preferrer
(used in at least 3 of last 5 visits)
Availability
(conveniently located)
Consideration
(would strongly consider using)
Relevance
(no barriers to use)
Unprompted awareness
(spontaneous mention)
9%
As at September 2012
21%
10%
41%
26%
64%
50%
75%
60%
79%
63%
24%
50%
58%
61%
Spread to sector average
Behavioural preferrer
(used in at least 3 of last 5 visits)
Availability
(conveniently located)
+8
Unprompted awareness
(spontaneous mention)
Spread to sector average
+1
+15
Consideration
(would strongly consider using)
Relevance
(no barriers to use)
As at March 2012
+9
+20
+8
+22
+10
+26
Base: All respondents Sept -12 n=1,240.
+9
Base: All respondents Apr n=1,137.
We are forecasting recent trading conditions to continue with
earnings upside from strategy projects
Key Variables
FY13 Updated
FY13 Previous
Guidance
Guidance
FY 2012
Average crude price (USD/bbl)
$110
$120
$109
Average crude price (NZD/bbl)
$137
$156
$137
Gross refinery margin (USD/bbl)
$7.00
$7.00
$6.70
RNZ Processing Volume (ml)
1,900
1,880
1,930
Sales Volume (ml)
2,450
2,600
2,647
Operating Costs
$280 - 290m
$260 - 270m
$250m
Operating EBITDAF (Current Cost)
$185 - 200m
$185 - 200m
$172m
$80 - 90m
$70 - 90m
$74m
Capex
• Refinery margins assumed to revert from 2Q highs to long run average
• Volume loss will not be recovered as focus is on optimising retail margins, growing non fuel
income and highgrading the commercial portfolio – while not eroding integrated value
• Upside in an environment of crude prices less than $100/bbl and Kiwi dollar at ~0.78
Appendices
Reconciliations
Reconciliation from operating costs to total operating expenditure (per the statutory accounts)
Operating costs
Add depreciation and amortisation
Add impairments
Add gains / losses on sales on assets
Total operating expenditure (statutory accounts)
$m
134.3
20.5
0.2
1.6
156.5
Reconciliation from operating EBITDAF (CC) to operating surplus (per the statutory accounts)
Operating EBITDAF (CC)
Less depreciation and amortisation
Less impairments
Less asset revaluations
Less unrealised gains/losses
Less cost of sales adjustment
Add share of earnings of Associate Companies
Operating surplus before financing derivatives and realisations (statutory accounts)
$m
96.8
(20.5)
(0.2)
(1.6)
(8.8)
(42.5)
3.6
26.8
Reconciliation from fuels gross margin & other income to gross profit (per the statutory accounts)
Fuels Gross Margin
Other income
Income
Less cost of sales adjustment
Less unrealised gains / losses
Gross profit (statutory accounts)
$m
207.1
24.0
231.1
(42.5)
(8.8)
179.8