The Viva Energy Group Ltd (ASX: VEA) share price is on the move today, rising 5.12% at the time of writing to $1.74 a share.
The catalyst for this healthy bump is Viva’s earnings report for the 2020 calendar year that was released this morning.
Viva is an energy company (as you might have gathered) that operates a fuel refinery in Geelong, Victoria. This refinery is one of only four in Australia and supplies more than 10% of Australia’s fuel needs.
The company is the exclusive supplier of fuels and oils to the Shell chain of service stations around the country. Viva also manufactures other petroleum products such as bitumen, paint, adhesives and industrial chemicals.
What did Viva Energy report this morning?
It was a mixed bag from Viva this morning. The company reported sales volumes of 12.34 billion litres, down 16% from 2019’s 14.7 billion litres.
That lead to group earnings before interest, tax, depreciation and amortisation (EBITDA) of $519.4 million, down 19.4% on 2019’s $644.5 million. Most of that fall came from Viva’s refining business, which saw earnings drop from $117 million in 2019 to a loss of $95.1 million.
Non-refining EBITDA (as the group was happy to point out) grew 16.5% from 2019’s $527.9 million to $614.5 million in 2020. Retail earnings delivered the bulk of that growth, rising 18.9% to $670.8 million.
Overall, Viva delivered a net profit after tax (NPAT) loss of $35.9 million, down from the profit of $135.8 million that it delivered in 2019.
The company highlighted that its divestment of a 35.5% stake in Waypoint REIT Ltd (ASX: WPR) earned a “significant one-off gain” of $179.23 million.
Viva also announced that the company would not pay a dividend for the 6 months to 31 December 2020. That is consistent with Viva’s dividend policy, seeing as the company posted a net loss for the year. Even so, Viva points out that it still returned $595 million to shareholders over the year. This included the interim dividend, special dividend, capital return and share buyback program.
Viva CEO Scott Wyatt has this to say on the company’s results and its future plans:
While the refining business was impacted by the substantial decline in both domestic and global oil demand, the actions taken to maintain production and bring forward major maintenance helped to mitigate losses… the refining outlook remains challenging given the longer-term impact to global oil demand from the pandemic.
Overall, the group has performed well during 2020 given the difficult trading conditions. The non-refining businesses have delivered significant growth over the prior year, and while the group results have been impacted heavily by the global weakness in the refining sector, we took steps to minimise the cash impacts from this event and worked closely with Government to improve the longer-term outlook.
The group has returned the bulk of proceeds from the divestment in Viva Energy REIT to shareholders and retains a strong balance sheet and underlying fundamentals to recover from the direct impacts of COVID-19 and pursue growth as it begins to return in 2021.
Going off the Viva Energy share price performance today, investors seem to be on board.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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