Z Energy drops dividend and talks to banks

Z Energy has cancelled its final dividend, stopped non-essential capital spending and is in talks with its banks for more working capital flexibility as it negotiates the Covid-19 lockdown and volatile oil and foreign exchange markets.

New Zealand’s biggest fuel seller yesterday narrowed its profit guidance, putting operating earnings for the March year just ended in the bottom half of the reduced guidance the company provided in December.

It said earnings before interest, tax, depreciation, amortisation and changes in financial instruments will fall to between $355 million and $365m, compared with the $350m-$385m signalled on December 13. That guidance was a cut from the $390m$430m signalled in September.

The company paid a 16.5 cents per share interim dividend in December — $66m — and had then been expecting to pay out about 40c for the full year.

Chief executive Mike Bennetts said the firm recognised the consequences the final dividend cancellation would have for many shareholders and the decision was not taken lightly.

“Considering the potential consequences of Covid-19 to New Zealand, the Z board believes it is prudent to conserve this cash and take actions to reduce operating expenses. When the time comes, we can accelerate out of the current situation and help get New Zealand moving again.”

Bennetts said Z was in “constructive” talks with its banks to secure additional headroom to accommodate any further commodity price and exchange rate movements.