Refiner Viva Energy says profit in the first half of 2020 may be sharply lower after coronavirus-related lockdowns cut demand for its fuel products.
The company expects underlying net profit for the six months to June to be between $20 million and $50 million compared with $50.9 million a year ago.
Underlying group earnings are expected to be in the $257.5 million-$287.5 million range, down from $297.4 million in the first half last year.
Viva, which operates a 120,000-barrel-a-day refinery at Geelong in Victoria, says refining margins dropped sharply on the back of lower regional refining margins following poor jet and gasoline demand globally.
Refining margins have averaged $US3.10 a barrel so far in 2020, down 42 per cent from the same period last year.
On the marketing side, aviation fuel sales volumes were sharply lower, down as much as 73 per cent in May.
However, diesel and petrol sales have started recovering as road traffic returns after the easing of restrictions. Alliance sales in May were up 16 per cent compared with April levels.
Viva says it is responding reducing discretionary spending, and will defer projects to reduce capital costs this year. It also used the government’s JobKeeper wage subsidy scheme for about 1000 employees.
Capital expenditure is now expected to be in the $60 million-$80 million range compared with $140 million-$160 million earlier.
Major refining maintenance will also be reduced to $85 million-$100 million, down from $110 million-$140 million previously.
Viva is proceeding with the maintenance shut down of its residue catalytic cracking unit at a reduced cost and over an extended time frame.
Its smaller distillation unit is also shut but could be restarted as demand recovers.