Z Energy's looking to put more gas in the tank via a $350 million capital raising after slumping to a full-year after-tax loss of $88 million.
Z is the latest company to go to the market looking for more money after being affected by the pandemic. Auckland Airport and Kathmandu are two companies for example that have already raised hefty amounts of money from investors.
About $180 million of the money raised by Z will go towards repaying debt.
Z says it will raise $290 million through a fully underwritten placement and up to $60 million through a share purchase plan (SPP).
"The equity raising has been sized with the intention of delivering a robust capital structure that allows Z to navigate the current market conditions while favourably positioning the business to take advantage of opportunities as the New Zealand economy begins to recover from the effects of Covid-19," the company said.
Z is not offering any guidance on expected profit for the forthcoming year. It has cancelled the final dividend for the year just gone. And it has obtained some 'covenant relief' from some of its lenders.
Chief Executive Mike Bennetts said: "The full year result highlights the competitive intensity of the retail fuel market in New Zealand and the severity of the low refining margins we saw in the last quarter.
"The Covid-19 global pandemic is presenting numerous operational challenges, not least a material decline in demand for product. Z continues to respond well to these challenges and has acted swiftly to reduce operating costs, increase cash flow and provide flexibility to the balance sheet that will position Z well for the expected improvement in post-Covid trading conditions."
The company gave the following highlights:
▪ Full year FY20 operating result in line with latest guidance; earnings impacted by competitive retail market and low refining margins. GAAP Net Profit after Tax reflects impairment of intangibles
▪ FY21 likely to be significantly impacted by the effects of Covid-19. No FY21 guidance provided and dividends will not be paid until after 30 September 2021
▪ Rigorous focus on cash flow generation – Z initiates operating cost reductions of between $74 million and $96 million expected to be realised in FY21
▪ Equity capital raising of up to $350 million via an equity placement + share purchase plan to address Covid-19 business impact and to support a resilient capital structure
▪ Z maintains focus on safe and reliable operations while positioning the business for expected improved trading conditions
See here for more details on the equity raising.
56 Comments
I have no sympathy whatsoever , Z HAS BEEN SELLING FUEL BACK INTO WORLD MARKETS AT A LOSS !!!!!!!!!!!!
WTF ?
Why not sell it at a loss to their own country's citizens and businesses ?
Z energy CEO , Mike Bennets confirmed three weeks ago on 21 April that oil was resolf at a loss
Why did they not sell it to New Zealanders at lower prices ?
Its good that the market has punished its arrogance , intransigence and hubris, when it was patently clear that prices would fall off a cliff , they kept prices at disgracefully high levels
If they thought they could treat us in the appalling way they did during the lockdown , then they deserve to lose money .............in fact it would serve them right if they went bust
We shut our businesses , lost our income ( and in some cases our jobs) , took lower salaries and dropped the prices of our products .
Some Kiwis are in dire financial straits , and the economic benefits of lower fuel prices feeds into everything in our daily lives , including food delivery costs for example
All of us were in this together .................all, except the fuel companies who thought they could screw us relentlessly with their pricing , when oil prices collapsed to 12 cents a litre wholesale in the US and 20 cents a litre in Singapore
They kept petrol at over $2.00 a litre , and we boycotted them , well at least I did
Now they are in trouble .........I hope Z goes bust the thieving arrogant sods .
when oil prices collapsed to 12 cents a litre wholesale in the US and 20 cents a litre in Singapore
Yes, for one morning, for land-locked crude oil in the central US states where there was 0 storage tanks available but the contracts were coming to term and the crude HAD to be collected.
If you want to put some crude oil in your car that you've sourced from central USA and transported to New Zealand, go ahead.
Meanwhile, stop spouting rubbish that is completely irrelevant to the refined fuels market in New Zealand.
He obviously thinks fuel has a high price elasticity of demand during a 'lockdown'.
If only they had dropped the price of petrol to $1, everyone would have spent their 4 weeks of lockdown driving backwards and forwards in their driveway.
But don't worry, he "fully understand(s) the dynamics of the fuel price."
Well it irrelevant whether you are talkng about fuel , strawberries or the price of a tin of baked beans .
When there is an over-supply in a free-market , prices drop so that businesses can sell the product and move on .
Holding fuel at the retail outlets without doing everything to get rid of it is just plain stupid .
Fixed costs dont go away in a business with declining sales , and if you are not selling your stock you need to drop the price and get rid of it, at a price that enables you to pay your fixed costs and taxes .
Z and BP did not do this , who knows what they were thinking , but it was either arrogance , incompetence or hubris
It does make a difference what the product is. If fruit goes cheap, sure I'll buy it because I can eat more, process it, preserve it. If I got a really good price I'd buy 10kg of strawberries and make wine. Baked beans, sure, I can stick 50 tins in my cupboard if I want to. Get a really good price I could stash another 100 in the roof if I wanted to. Petrol - nah, if it was half price tomorrow we'd only fill up the tank. We can't buy more and wouldn't do unnecessary driving just because petrol is cheap, especially when unnecessary driving is essentially illegal.
Why drop the prices dramatically if it won't encourage significantly more purchasing?
Dont be utterly ridiculous .............The economic benefits of lower fuel prices are good for the entire country , it reduces distribution costs for food from the farm to the kitchen via the factory , the warehouse and the supermarket .
Everyone benefits from a proper functioning competitive fuel market
My comment wasn't about the economic benefits of lower fuel prices. Neither was yours. Your original post was about how the fuel retailers should be having fire sales (bad choice of words perhaps) to clear stock. My argument is that doesn't work for a product that can't be stored easily, and one which is currently difficult to use much of without breaking coronavirus restrictions. Makes much more sense for Z to sell X litres at Y dollars than X+20% litres at 0.5Y dollars.
Except they were NOT selling the fuel ...............and their fixed costs remained there , rolling up each day 24/7.
Had the price dropped , I might have filled up both our diesel cars and the one takes 90 litres , so I am sure many people would have done the same .
I can afford to hold out for a very long time before filling up right now , and I will
We usually spend $400 to $500 a month in Diesel , and my 2 sons about another $200 each .
I am waiting for prices to come down , and I can wait
Its irrelevant where they buy their refined product from , the fact remains , they have fixed costs , sunk costs , and taxes to pay , and they should have reduced the price of the stock in the tanks and got rid of the expensive stock at cost .
Had they done this they could be re-stocking now at very low prices .
They did not do it , and are facing the consequences, and again I have NO SYMPATHY
No. It is especially relevant.
Because...Marsden is responsible for probably 95% of their refined/retail supply.
Their forwarding arrangements means that they deal in very little purchasing at spot prices of any kind of fuels.
So, their costs have essentially not changed over this past month. This is not to say their future costs may not decrease.
About half the cost of fuel is tax. Z makes a few cents profit a litre. There are retailer margins transport costs etc. https://z.co.nz/motorists/fuel-pricing/
Is that tax proportional to the cost of the fuel? I understand in Auckland we have an 11c per litre levy which is applied regardless of the cost of fuel, but I would imagine most of the rest of the tax is proportionate. An article like that implies that the taxes are fixed which I doubt is the case.
You imagine wrong, apart from Gst, the rest of the levies and taxes are fixed.
https://www.mbie.govt.nz/building-and-energy/energy-and-natural-resourc…
Re fuel taxes .........Half the costs of fuel is a % not and absolute number , ( only the Auckland levy is fixed ) so if the price dropped to 99Cents a litre , as it did in Australia , then the Government would only get its % , the rest would go to the fuel co .
Either way you look at it , Z and the rest of them have been arrogant and unfair on us , and are getting just what they deserve
The AA states there are other taxes that are fixed per litre irrespective of the price.
https://www.aa.co.nz/cars/owning-a-car/fuel-prices-and-types/petrol/
And who exactly would they be selling the excess to during lockdown? You realize the reason for selling back to the market was storage because no demand. In a lockdown situation dropping the price wouldn't lift demand unless people wish to fill their swimming pools with it.
The difference between private ownership (Infratil) good turnaround, rebrand, high levels of investment into new showrooms and forecourts etc but management highly accountable to owners...screw up and your head is in the basket. Two or three years post IPO...management utterly unaccountable and run the business onto the rocks. I feel sorry for the shareholders...NZInc... destroying shareholder wealth since forever!
Kate , I suspect there is more to this than meets the eye ................its called BANKING COVENANTS .
Their debt levels would normally have to be within a range or % of the market cap of the business , in terms of their funding agreements.
In a spectacular destruction of shareholder value , the share price has dropped from $8 to $9 all the way down to $3 so the 2/3rds of the value of Z Energy has been wiped out , and maybe the bankers are wanting their umbrella back ?
Its appalling mismanagement thats done most of the damage, Z got nailed last year by the independants that have really eaten into their customer base, but that has been a looming threat for sometime and they just ignored it. The covid outbreak has simply rammed the issue home in rather dramatic fashion. I suspect the price of a crumby pie at a Z station will become even more expensive in an effort to claw back some profits....
poor planning overpriced purchases poor management, solution let dip into shareholders pockets. its becoming the really solution for more and more listed companies. nz needs managers who can find life giving profitability which means painful cost cutting. the nz economy is resized to something in the past and costs need to going back
to match what the incomes were then. Greece had to cut its wage structure and nz particularly govt and councils need to do the same or we will all die under our society's $600 billion dollar debt burden
Some of the 'fuel only' distributors are using technology that completely undercuts Z's big highcost forecourt layout. It makes it far easier to set up a fuelstop but means less buyers going into Z's showroom for the complusive purchase of a cellphone cover, magazine and cheap sunglasses....thats the meat in their sandwhich...
How does Z lose $88 million after 11 months of normal trading followed by 1 month of reduced turnover during lockdown. Their real-estate still exists, their fuel stocks are still in the tanks. And they need to raise $350 million??. Does not make sense. Maybe they are dumping (writing down) goodwill
@ farmer ,................oil companies are thugs , plain and simple , there is no way you could just up the price of Milk or fruit or whatever you produce , you would be stuffed , and you have no say in price fixing.
Its called market asymmetry , some have more power than others ..........but covid has turned it upside down for the first time ever
And thats a good thing
Not too sure why people are surprised/gloating that a company has lost money in this environment. Only the beginning. If people believe consumers will be rushing back to spend money at Level 2 they're dreaming. Watch the building sector collapse, even the giants are in trouble..hello GJ.
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