Z feels the heat from Gull
Unprecedented competition in the retail fuel market has seen Z Energy report an 80 per cent drop in half-year profit, the retailer said yesterday.
Z’s results on the NZX showed it booked profit of $28 million compared with $129m in the prior corresponding period.
Z chief executive Mike Bennetts said competition was ‘‘unprecedented and highlighted the build out of new to industry sites in recent years’’.
‘‘New Zealand has a very competitive market for retail fuels. In the past three years we have seen an average of around 20 new sites coming to market each year. This has had the effect of increasing industry capacity against a backdrop of flat to negative total industry demand.’’
He said the new petrol stations had used service and discounts to grow market share. ‘‘In the first six months of our financial year we have seen intense retail fuel competition . . . We now see significant discounting occurring in urban areas of the South Island and the lower North Island. ‘‘
Discount fuel retailer Gull opened a South Island site in Oamaru this month and had plans for Wellington. Waitomo opened a Wellington station earlier this year.
The company said the result was also driven by a reduction in global commodity prices, lower retail fuel margins and a weaker
New Zealand dollar. Z’s exit from the AA Smartfuel loyalty program and extending its own ‘‘Pumped’’ discount scheme to take in the Caltex network ‘‘elicited an aggressive competitive response’’.
‘‘Our competitors viewed Caltex’s exit from the Smartfuel program as an opportunity to increase market share. The competitor response was to offer greater levels of discount or marketing promotion.’’
This had impacted Z Energy’s market share and margin ‘‘but we think that Pumped is a very compelling offer that customers are now turning to,’’ Bennetts said.
Z will pay shareholders a fully imputed interim dividend of 16.5 cents per share which will be paid on December 10.