Viva shares slump after earnings forecast falls
JUST months after joining the share market in a $2.7 billion float, fuel retailer and oil refinery owner Viva Energy has cut its earnings forecasts.
Shares in Viva, which supplies Coles Express petrol stations, tumbled yesterday after it warned higher oil prices last month were among factors eroding its profitability.
The company, which owns a refinery in Geelong, said in a statement it now expected its profit this year to clock in at about $280 million on a replacement-cost basis — a measure of underlying profit.
That compares with a forecast in its prospectus of $324.1 million.
Earnings before interest, tax, depreciation and amortisation were now expected to be about $543 million, the group said, compared with a forecast of $605.1 million.
Viva shares plunged almost 20 per cent in early trade yesterday to a low of $1.66. They recovered some of that in later trad
ing, but still ended the session down 25 cents, or 12.2 per cent, at $1.80.
Viva shares have now fallen 28 per cent since they were sold at $2.50 each in an initial public offering ahead of the group’s listing on July 13.
The company has a long- term retail supply deal with Coles, which has previously reported earnings from its fuel division of $133 million for the year to last June. That compares with $190 million the previous year and comes amid concern at Coles that Viva is charging excessive wholesale prices for petrol.
The earnings hole for Coles is a disappointment for the grocery heavyweight as it prepares to starts life tomorrow as an independently listed company, spun out of Wesfarmers.
Coles is likely hoping the financial pain suffered by Viva may prompt a renegotiation of supply terms, but Viva chief Scott Wyatt has previously ruled out any change in the terms.
Viva yesterday said refining margins and lost production due to electricity supply disruptions had also affected earnings. It noted an expected boost in retail fuel sales “has not materialised”.
Separately yesterday, the Supreme Court of Western Australia approved the scheme of arrangement for Coles’ demerger from Wesfarmers.