Z Energy profit jumps to $263m
The country’s largest fuel retailer has revealed a rise in profits and increased its dividends to shareholders, as it defended the nature of the market.
Wellington-headquartered Z Energy reported a historic net profit after tax of $263 million for the 12 months ended March 31, an increase of $20m over the previous financial year. The NZXlisted company said its final dividend was 10 per cent up on 2017.
The petrol industry has been under intense scrutiny in recent days in the wake of the publication by Stuff of an internal BP email outlining the company’s pricing plan, to raise prices across a region to protect sales at a particular site.
In its results presentation, Z Energy said it was likely that the petrol industry would be the subject of a Commerce Commission study when the competition regulator is given the power to selfinitiate general market studies.
‘‘In our view a market review is likely to find a competitive market dynamic working effectively as demonstrated by the tension between volume and margin for existing participants, multiple new entrants investing capital due to the low barriers to entry, and customers have a wide range of choices for price and non-price based offers.’’
Z Energy said about 70 per cent of its fuel was sold at a discount to the main port price, otherwise known as the ‘‘national price’’, typically charged in Wellington and the South Island.
However, it indicated that discounting was dropping.
‘‘The weighted average [cents per litre] discount declined in [the second half of the financial year] driven by a reduction in the price spread, contrary to previous experience where spreads have expanded in a rising crude price environment,’’ Z said in a presentation accompanying its results.
‘‘Most intense discount areas have shifted out of high population trading areas in line with an increase in new sites from regional distributors.’’
In 2017, an inquiry overseen by the Ministry of Business, Innovation and Employment said there were characteristics in the petrol industry that cast doubt on whether it was a competitive market.
Z Energy chief executive Mike Bennetts shared a terse exchange with former Energy Minister Judith Collins about the inquiry. A decision by the United States to not exclude New Zealand from US steel and aluminium tariffs is ‘‘a kick in the guts’’ that could result in job losses, the industry says.
The US has decided to make some of its allies, such as Australia, exempt from an import tax on steel and aluminium. But New Zealand missed the cut along with other traditional US allies South Africa and Japan.
Employers and Manufacturers Association (EMA) chief executive Kim Campbell said while the decision was not surprising, it was still ‘‘a kick in the guts’’.
‘‘What we have trouble trying to figure out is the rather random nature of the countries that have been made exempt,’’ he said.
US President Donald Trump also postponed introducing tariffs on steel and aluminium imports from some ‘‘allies’’, including the European Union, Canada and Mexico, for 30 days.
The decision to not exclude New Zealand appeared to fly in the face of an historically close strategic relationship with the US, Campbell said.
‘‘It seems our closest allies are fair-weather friends.’’
Imposing steel and aluminium tariffs on Kiwi exporters would make other markets more difficult to access because there would be greater competition, he said.
It was not clear what impact the tariff would have on New Zealand industries but it could result in some job losses in the steel and aluminum sector, he said.
New Zealand steel mills would have been anticipating the tariff, he said. ‘‘Trump signalled what he was going to do and he followed through on it.’’
Trade Minister David Parker said he was ‘‘disappointed’’ with the decision and he and Prime Minister Jacinda Ardern had written to their ‘‘US counterparts’’, and directed officials to engage at all levels.