Viva Energy (ASX:VEA) share price in crosshairs at opening bell after this announcement

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The Viva Energy Group Ltd (ASX: VEA) share price will in the crosshairs when the ASX opens this morning, after it announced a weak, unaudited full year guidance for FY20.

The Viva Energy share price closed yesterday at $2.01.

Why the Viva Energy share price could move today

The Viva Energy share price will be on watch this morning after the company reported its full year underlying earnings before interest, tax, depreciation, and ammortisation (EBITDA) is expected to come in around $494 million to $524 million, down 21% from FY19.

This is expected to result in a net loss after tax for the company of between $17 million to $47 million, compared with a net profit of $135 million in FY19.

The weak numbers are a result of weak sales volumes in FY20, down 16% compared to FY19.

The company said its non-refining earnings are expected to perform strongly for the full year, up approximately 14% from FY19. 

Its refining earnings, however, been heavily impacted by weak regional refining margins, reduced production in response to lower Victorian market demand, and periods of higher crude premiums earlier in the year. 

The company’s refining earnings losses are expected to come in at between $83 million and $93 million, compared to positive earnings of $117 million in FY19.

Viva Energy also says that capital management has been a key focus, with $591.6 million returned to shareholders through a mix of capital return, dividends, and on market buybacks in FY20. 

Capital expenditure has also been closely managed and is expected to be approximately $70 million lower than the original guidance given at the beginning of the year. 

The company says it is committed to returning the remaining $100 million from the divestment of its stake in Viva Energy REIT (real estate investment trust) during FY21.

Viva Energy CEO Scott Wyatt remains upbeat, saying: 

The response to the COVID-19 pandemic has naturally had a significant impact on our business and our customers.

Overall, the company has performed well during 2020 given the difficult trading conditions. The Non- Refining businesses have delivered significant growth over the prior year, and while Group results have been impacted heavily by the global weakness in the refining sector.

More about Viva

Viva Energy was a recent recipient of the federal government’s subsidy for refiners. This will result in the company receiving a minimum of 1 cent per litre for the production of primary fuels at its Geelong refinery between 1 January and 1 July 2021.

The subsidy is part of Australia’s fuel security strategy, and is designed to protect the country’s refiners by improving the viability of the refining sector over the next ten years.

Viva Energy estimates the payment will contribute approximately $30 million to its underlying refining EBITDA for the six-month period.

About the Viva Energy share price

The Viva Energy share price has gained around 6% in value since the beginning of the year. 

Viva shares dropped by almost 40% in April, at the height of the pandemic before rebounding to today’s level.

The company commands a market capitalisation of $3.23 billion.

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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Viva Energy (ASX:VEA) share price in crosshairs at opening bell after this announcement appeared first on The Motley Fool Australia.

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