Ampol shares sink on Q2 result but analysts remain bullish
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More news: Ampol shares dropped on the ASX after the fuel refiner and retailer flagged weaker first-half earnings due to lower sales volumes and refinery production in the June quarter.
Shares were down 2% to $32.45 by 1:15pm AEST.
However, E&P Capital upgraded Ampol to 'positive' following the result. E&P analyst Adam Martin noted that while earnings missed expectations, the result was driven by the "cyclical" parts of the business. The company's valuation is now at "attractive levels", and with refining margins improving in July, "now feels like an opportune time to buy the stock", Martin said.
Likewise, RBC Capital Markets retained its 'outperform' rating on Ampol despite labelling it as a disappointing trading update.
RBC analyst Gordon Ramsay said that despite the "weak result" and resulting downward revision to RBC's forecasts, "we continue to see potential for Ampol to deliver above guidance 2024 year-end capital return".
Ampol flags weaker half-year earnings
The news: Fuel refiner and retailer Ampol expects half-year earnings to dip on lower sales volumes and refinery production in the June quarter.
The numbers: The company said first-half earnings are expected to be in the range of $735 million to $745 million, down from the $798 million reported a year ago.
Second quarter margins at its Lytton refinery averaged USD8.81 ($13.39) a barrel, while refinery volumes were lower at 1,420 million litres. Fuel sales volumes in Australia were lower in the half year due to a 4.8% drop in volumes at convenience retail stations, while international sales volumes tumbled 16% to 3,927 million litres.
The context: Ampol attributed the decline in refining margins to lower product cracks during the quarter and the short-term lag between crude pricing and consumption.
The refinery returned to normal operations in early April after months of outage. International fuel sales volumes finished down in the half largely due to the market being well supplied, particularly in the second quarter, reducing short-term physical sales opportunities and margins.
Ampol said its convenience retail business delivered higher earnings despite lower volumes thanks to a favourable mix of premium fuels.
The sources: ASX announcement, E&P research, RBC Capital Markets research
