Z Energy shares boosted by Caltex savings

Shares in petrol retailer Z Energy shot to an all time high yesterday after it said taking over Caltex owner Chevron would cost millions less and more could be saved than it expected.

Z, part owned by the NZ Superannuation Fund, also said its own performance was substantially better than it signalled in May, enough to offset a major hit from a dispute with Customs over excise payments.

The competition watchdog is currently taking submissions on Z Energy’s proposed $785 million acquisition of Chevron New Zealand, which would create a company controlling around half of the New Zealand travel fuels market.

In a statement to the NZX, where Z’s shares are traded, chief executive Mike Bennetts said that the acquisition was on track, and was costing less than expected.

Although a team of up to 100 people were engaged in planning for the transition, Bennetts said that the cost of the transition, previously expected to be $64 million, was now expected to be $55m.

Meanwhile, a look inside Caltex meant Z now believed the synergies from the deal would be higher than expected. ‘‘Z had previously estimated synergies in the range of $15 to $25 million on an annualised basis. Z now expects synergies to be in the range of $25 to $30 million, based primarily on additional cost synergies excluding people costs,’’ Bennetts said.

Meanwhile Z suggested that its performance had improved markedly, maintaining its earnings forecasts despite now facing a oneoff hit to its accounts of $24m from added Customs duties and penalties.

Shares in Z Energy jumped 20 cents or 3.3 per cent to $6.33, topping the previous high of $6.20 reached when the company announced it was planning to buy Chevron’s New Zealand business back in June.

AA PetrolWatch spokesman Mark Stockdale said that one of the reasons fuel companies were confident about their financial performance could be the boost in margins which followed falls in commodity prices.

A number of parties, including Z’s competitors, have raised concerns about the impact of it being allowed to buy Caltex, but the regulator is being lobbied to impose requirements to sell parts of the group, rather than reject the deal outright.

Z has said that it is ‘‘confident the transaction will not substantially lessen competition’’ however it has said its agreement with Chevron includes provisions to cope with the regulator ordering it to sell parts of the business.

The Commerce Commission has signalled that it intends to make a decision on whether to allow the deal by December 18.