Viva Energy’s $195M Loss Highlights Risks in Retail and Refining Amid Market Pressures

Statutory Loss Driven by Retail Site Impairments

Viva Energy Group Limited reported a statutory net loss after tax of $195.4 million for the half-year ended 30 June 2025, a sharp reversal from the $80 million profit in the prior corresponding period. This loss was primarily driven by a $245.3 million impairment charge related to convenience retail sites, reflecting the challenging trading environment marked by cost-of-living pressures and the impact of illicit tobacco sales on convenience store revenues.

Underlying Profit Remains Positive on Replacement Cost Basis

Despite the statutory loss, Viva Energy’s underlying performance, measured on a replacement cost basis that excludes inventory timing effects and includes lease expenses, showed a net profit after tax of $62.6 million. This metric is considered by management to better reflect the operational performance independent of volatile oil price movements. Revenue for the period rose 4% to $14.96 billion, supported by stable fuel sales and the integration of recent acquisitions.

Segment Performance – Mixed Results Across Divisions

The Convenience & Mobility segment faced headwinds with a 10% decline in convenience sales, largely due to a 27% drop in tobacco sales following new packaging laws. However, fuel sales outperformed the market, and margin improvements in the second quarter helped stabilize earnings. The Commercial & Industrial segment maintained steady earnings, benefiting from expansion in aviation and marine fuel markets. The Energy & Infrastructure segment was challenged by weak refining margins and a one-off power outage, though ongoing projects like the Ultra-Low Sulphur Gasoline processing upgrade at the Geelong refinery are expected to enhance future margins.

Strategic Acquisitions and Capital Investment

During the half-year, Viva Energy completed the full acquisition of Liberty Oil Convenience (LOC), adding 88 active retail sites and 10 planned sites to its portfolio. This follows the prior acquisition of the On The Run (OTR) Group, with both integrations progressing as expected. Capital expenditure totaled $256.8 million, including significant investments in refinery upgrades and the Energy Hub at Geelong, supported by government grants. These investments align with the company’s strategy to enhance fuel security and support the energy transition.

Balance Sheet and Dividend Outlook

Net debt excluding lease liabilities increased to $1.95 billion, reflecting acquisition funding and working capital needs. The company maintains sufficient liquidity and undrawn borrowing facilities, with no breaches of financial covenants. The Board declared a fully franked interim dividend of 2.83 cents per share, payable on 30 September 2025, signaling ongoing confidence in the business despite near-term challenges.