Z Energy hit as motorists cut spending
New Zealand’s largest fuel retailer has reported a sharp fall in profits as record high petrol prices see motorists cutting back on driving.
Yesterday Z Energy reported a
31 per cent fall in profits on a replacement cost basis to $72 million for the six months ended on September 30.
Z Energy chief executive Mike Bennetts said that, during the period, crude oil prices rose by
25 per cent in US dollars, while the New Zealand dollar fell 9 per cent against the US dollar and fuel taxes increased, including the introduction of the Auckland regional fuel tax.
‘‘Combined, these factors have led to record high prices at the pump. These sustained high prices have resulted in a decrease in retail demand,’’ Bennetts said in a statement.
The results – while not necessarily a surprise to financial markets – could reignite debate about the fuel market, after Prime Minister Jacinda Ardern warned motorists were being ‘‘fleeced’’ by the fuel companies in October.
At the time the price of petrol came close to $2.50 a litre in many places, although the retail price has dropped by more than
10 cents a litre since.
Z Energy’s results are always complicated by the fact that the company reports on both a replacement cost basis and a historic cost basis.
On a historic cost basis, the profits were up. However, the industry says the measure is volatile and moves with oil prices, and the replacement cost reflects the performance of its businesses.
Since Ardern made the comments, Z Energy’s shares have been hammered, partly due to the threat of regulation but also on the back of quarterly trading figures, which show the company was losing market share. The combination saw Z’s market value drop more than $500m at one point, though its share price has been rising in recent days.
Z said competition had intensified in both the North and South islands, ‘‘particularly on price, as customers seek out bargains in the high price environment’’.
Bennetts said that, in a rising price environment, margins came under pressure, with price rises lagging crude oil increases.
‘‘Customers are sensitive to new, higher price points.’’
The company cut its forecasts for its full-year profit on the back of the results.
Ardern’s comments about fuel prices came as she announced the Government would rush through changes to the Commerce Act, to give the competition watchdog added powers to investigate sectors where it had concerns.
Z Energy said: ‘‘We welcome a Commerce Commission market study as we believe that it is the most sensible and transparent way to give customers the assurance they need.’’