Ampol share price dips as profits reach historic highs

Today, investors are staring down record profits. However, management's commentary on current conditions is less rosy.

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Key points

  • The Ampol share price is down 0.85% to $33.85 in morning trade
  • Earnings reached record levels as Ampol cashed in on refined products demand
  • Management has announced an interim dividend of $1.20 per share

The Ampol Ltd (ASX: ALD) share price is moving to the downside on Monday after the company released its half-year results.

At the time of writing, shares in the transport fuels supplier are down 0.85% to $33.85.

Ampol share price falters despite dazzling results

  • Total revenue up 83% from the prior corresponding period to $11,333 million
  • Replacement cost operating profit (RCOP) EBIT up 120% to $693.1 million (continuing operations)
  • Sales volume increased 4% to 11.5 billion litres
  • Statutory net profit after tax (NPAT) up 114% to $695.9 million
  • Interim dividend up 131% to $1.20 per share
  • Completed Z Energy acquisition

The meteoric rise in oil prices lifted Ampol's half-year result to unprecedented levels. However, the effects were not felt as tailwinds for all of the company's divisions. Rather, refining benefitted while retail sales were impacted.

According to the report, the fuels and infrastructure division witnessed a major uptick in earnings. This was mostly attributable to a ninefold increase in Lytton refinery RCOP EBIT to $443.9 million. In turn, the Lytton refiner margin came in at US$22.35 per barrel.

However, on the convenience retail side, Ampol succumbed to headwinds including floods, Omicron, and reduced demand due to high fuel prices. As a result, the consumer-facing division experienced an earnings decline to $127.3 million.

What else happened in the half?

In addition to record results, the half involved significant acquisition and divestment activities. Namely, the completion of the company's Z Energy acquisition.

The process of integrating the New Zealand fuel retailer was officially completed on 10 May 2022. For reference, the Ampol share price has climbed 2.5% since then.

Furthermore, Ampol upped its investment in what it labels 'future energy'. Rising from $1.6 million to $13.2 million, the company poured millions into rolling out its electric vehicle charging brand AMPCharge.

What did management say?

Commenting on the result, Ampol managing director and CEO Matt Halliday said:

Against the backdrop of increased market volatility due to the global energy shock, COVID-19 outbreaks and extreme weather, Ampol has delivered the strongest half-year Replacement Cost Operating Profit in its history. This result demonstrates the benefits of Ampol's integrated supply chain.

The turnaround is particularly remarkable considering last year the federal government was depending on a 'fuel security package' to keep its head above water.

What's next?

Today, investors are staring down record profits. However, management's commentary on current conditions is less rosy. For July, the Lytton refiner margin has stooped to US$16.46 per barrel. Although, Ampol notes that inventory levels are low given this time of year.

In contrast, the convenience retail division strengthened in July. The company believes its retail strategy will continue to gain traction, supporting better income.

Ampol share price snapshot

The Ampol share price has largely been immune to the tattering of equity markets in 2022. Specifically, the company's shares have risen 14.13% in value, compared to a 5.34% fall in the S&P/ASX 200 Index (ASX: XJO).

At present, Ampol trades on a price-to-earnings (P/E) ratio of 14.5 times.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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