Z sees more savings from buy
Z Energy says it has identified $10 million to $15m of additional savings from the integration of the Caltex and Z businesses, while the sale of an Auckland retail site for $23m will be used to repay debt.
The Wellington-based service station operator gave the updates as part of a presentation it hosted for institutional investors. The additional synergy benefits bring the total to be achieved in the 2018 year to between $40m and $45m, it said.
The company bought Chevron’s Caltex and Challenge brands for $785m this year, making it the country’s biggest petrol retailer, but the regulator approval required it to sell 20 sites. The deal gave Z about 49 per cent of the retail transport fuels market.
Z shares, which listed in August 2010, have soared in the past five years, closing up 25c yesterday at $8.03.
The company is scheduled to release its first-half results on November 10 and said it will update its guidance for the full year at the same time.
Z has committed purchasers of 19 of the sites it is required to sell and has disposed of one by surrendering its lease commitment. The impact of the divestment is estimated to be about 68m litres of fuel, or about $15m a year, it said.
The company has no plans to divest its $250m of property assets, either by sale and leaseback or an initial public offering. It said the 59 retail sites and 18 truck stops were typically high-volume sites in the nation’s biggest cities. The property amounts to about 8 per cent of Z’s market capitalisation of about $3.1 billion and would be “sub-scale for an IPO”, it said.
Z affirmed its expectation that net debt would peak at 44 per cent of total assets in the 2017 year before retreating to 39 per cent in 2018 and 34 per cent in 2019.
“We are option rich,” the company said in its presentation slides. “In a world of uncertainty and volatility allowing ourselves time to realise value and reduce debt will provide greater optionality and resilience as we orientate ourselves to an increasingly dynamic energy market post-2020.”
Z says global mass adoption of electric vehicles “is inevitable” although the timing is difficult to predict given uncertainties about how technology will develop and the scope of regulatory intervention. “Z is monitoring the two main signposts to watch for as tipping points for exponential EV uptake — regulatory intervention and battery development,” it said. “Z is also maintaining a watching brief on speculative technology that could see a more aggressive reduction in demand for fossil fuels over the long-term horizon — autonomous vehicles and electric powertrain adoption in the heavy vehicle task.”