Viva Energy Posts $310M EBITDA, Convenience Sales Fall 10% on Tobacco Laws
Viva Energy has reported a stronger-than-expected first half EBITDA, buoyed by operational efficiencies and refinery margins, even as convenience sales face headwinds from tobacco regulation.
- 1H2025 EBITDA (replacement cost) around $310 million, exceeding guidance midpoint
- Convenience sales down 10%, mainly due to tobacco packaging laws and illicit trade
- Geelong Refinery margin at US$8.2 per barrel despite unplanned outage and higher costs
- Nine new OTR stores opened in 2Q2025, with 11 more underway
- Commercial & Industrial sales show quarterly growth after weather-impacted 1Q
Strong EBITDA Performance Surpasses Expectations
Viva Energy Group Limited has delivered a robust trading update for the first half of 2025, with unaudited EBITDA on a replacement cost basis expected to reach approximately $310 million across its Convenience & Mobility and Commercial & Industrial segments. This figure comfortably exceeds the midpoint of the company's previously announced guidance range, signaling operational resilience amid a challenging retail environment.
Group EBITDA is anticipated to be around $300 million after factoring in contributions from the Energy & Infrastructure division and offsetting corporate costs. The positive earnings momentum reflects a combination of strategic cost reductions and improved refinery margins, despite some setbacks.
Convenience Sales Impacted by Regulatory Changes
While fuel sales dipped marginally by 0.5% year-on-year, the convenience segment experienced a more pronounced 10% decline in sales. This downturn is largely attributed to a 27% drop in tobacco sales, driven by the introduction of new tobacco packaging laws and the persistent growth of illicit tobacco trade. However, Viva Energy managed to partially offset these declines through a higher gross margin, which rose to 39.2% in the second quarter due to adjustments in product mix and supplier initiatives.
Excluding tobacco, convenience sales were down a modest 2%, with the second quarter showing stability compared to the same period last year. This suggests that the core convenience business is holding steady despite regulatory headwinds.
Operational Progress and Network Expansion
The company has made significant strides in its cost synergy program announced earlier this year, successfully concluding its Transitional Services Agreement with Coles Group. This milestone enabled the unification of retail operations under the stand-alone OTR enterprise systems, enhancing operational efficiency.
Viva Energy also expanded its retail footprint by opening nine new OTR stores in the second quarter, including new builds and conversions from the Reddy Express brand. An additional 11 stores remain under construction or conversion, signaling ongoing growth in the convenience network.
Refinery Margins and Commercial Sales Trends
The Geelong Refinery posted a refining margin of US$8.2 per barrel on an intake of 18.8 million barrels for the half-year. Although the margin environment improved as the period progressed, earnings were dampened by an unplanned outage in January, minor turnaround activities, and elevated energy costs.
Commercial & Industrial fuel sales declined 2% year-on-year but showed encouraging signs of recovery with a 2% increase in the second quarter compared to the prior year and a 6% rise over the first quarter. The initial quarter was adversely affected by weather conditions and softer wholesale demand, making the subsequent growth a positive indicator.
Bottom Line?
Viva Energy’s ability to exceed EBITDA guidance amid regulatory and operational challenges sets the stage for a cautiously optimistic second half.
Questions in the middle?
- How will ongoing tobacco regulation and illicit trade continue to affect convenience sales?
- What are the prospects for refinery margins given recent outages and energy cost pressures?
- Can Viva Energy sustain commercial fuel sales growth amid fluctuating market demand?
