Strong fuel-refining margins assisted Z Energy to boost its profit by 47% to $56million for its half-year result, in the face of increasing competition, which contributed to a 20% decline in revenue.
Z chief executive Mike Bennetts said the level of competition across both retail and commercial markets had continued to be very strong, for the six months to September.
''Z has benefited from strong refining margins averaging $13 per barrel, up from $5 per barrel in the prior corresponding period,'' he said.
He predicted further structural improvements in refining performance when the $365million Te Mahi Hou project at Refining New Zealand, at Marsden Point, was commissioned in November; replacing the ageing petrol manufacturing unit.
Z is awaiting regulatory approval to acquire Chevron's Caltex and Challenge stations, for $863million, which would give it a 49% stake in New Zealand's retail market.
Revenue declined 20% from $1.64billion to $1.31billion.
Z's volume of petrol sales fell 2% against an industry increase of 2%, while diesel sales declined 6% in a flat market.
Z's replacement cost operating earnings before interest, tax, depreciation, amortisation and fair value adjustments rose 15% from $92million to $105million, while replacement cost net profit after tax rose 47%, from $38million to $56million.
''Z has continued to exercise discipline in its approach to optimising the balance between margin and volume and has been able to improve its bottom line performance, while maintaining the company's economies of scale,'' he said.
During the six-month period, Mr Bennetts said there was continued retail discounting, with up to 60% of Z's total network discounted at any point in time.
Z's shares had gained 72% in value during the past year, up from $2.79, and yesterday traded slightly down to $6.70, following the announcement.
Forsyth Barr broker Suzanne Kinnaird said it was ''overall a very positive result'' and Z had produced a stronger-than-expected result.
The main driver was lower operating costs, which were down $3million on a year ago, as opposed to a more-than-$5million increase forecast by Forsyth Barr.
''A further strong factor was the gross fuels margin, which increased from 18.6c per litre in the first half 2015 to 20.7c per litre, more than 1.2c per litre better than we had forecast,'' she said.
Craigs Investment Partners broker Peter McIntyre said it was a good underlying result and ahead of expectations.
The fuel margin was up strongly, on the back of an increased importer margin.
Z had indicated the planned $185million equity raise, to balance the Caltex acquisition, was now likely to be smaller due to the better-than-anticipated savings from the purchase of Caltex.
''The lower capital raise should give the share price some positive momentum,'' Mr McIntyre said.
Ms Kinnaird said some other key points were the contribution from refining, up from $9million a year ago to $24million, while operating costs at $135million were $3million lower than a year ago.
Z affirmed guidance for annual earnings to be within $245million and $265million, which included a one-off $24million charge from additional Customs duties and penalties and the timing of the Chevron takeover date.
