Forsyth Barr broker Damian Foster said Z Energy's second quarter operating statistics indicated the group's retail volumes had held up against last year's, but with industry volumes continuing to increase, Z's market share had eroded further.
``In addition, margins appear under pressure,'' Mr Foster said.
In April this year, Z Energy received Commerce Commission clearance to buy 100% of Caltex New Zealand for $785million, of which $670million was debt and $150million cash.
At the time, Z had 213 branded service stations and Caltex 127 stations, but the commission required Z to divest itself of 19 stations in order to keep its market share at 49%.
Z Energy has identified an additional $10million to $15million of savings from the integration with the Caltex and the sale of an Auckland retail site for $23million will be used to repay debt.
The Wellington-based service station operator gave the updates as part of a presentation it hosted for institutional investors.
The additional synergy benefits bring the total to be achieved in the 2018 year to between $40million and $45million, it said.
Mr Foster said the market share for Z Energy had fallen again, from 46.1% in the second quarter last year, to 45.6% this year.
Z and Caltex' volumes increased 3.3% on a year ago, hence the fall in market share had been driven by industry volume growth, which is up 6.5% on a year ago; the eighth consecutive quarter of industry volume growth, Mr Foster said.
Craigs Investment Partners broker Peter McIntyre said Z Energy was entering a positive cash cycle as capital expenditure declined from its recent peak, which meant dividend growth was ``likely'' over the next three to four years, albeit earnings would be ``a little static''.
``It's notable that while margins appear high, they're significantly lower than before Challenge and Gull's entry on the market in 1998-99,'' he said.
In early August, Z Energy quit its supermarket docket relationship with Countdown and will go it alone with Fly Buys. Mr Foster said at the time the new offer was a clear move to regrow retail market share for the Z brand.
Yesterday, Mr Foster said it was notable that Z's retail volumes were flat against the same time last year, despite the loss of Progressive supermarket dockets.
``While Z fuel sales using supermarket dockets were above 10%, the fact there was no discernible loss in overall retail volumes highlights how ineffective the dockets had become,'' he said.
Mr Foster said Z had a ``soft finish'' to first half trading, as Ministry of Business, Innovation and Employment (MBIE) data showed margins plummeted during the last few weeks of the second quarter.
The MBIE importer margins were 25.6c per litre for petrol and 28.3c per litre for diesel, down more than 10% against the first quarter, and a year ago.
``An issue at the end of the first quarter has been the lift in crude oil prices and the fall in the New Zealand dollar against the US not being quickly passed through to customers.
``Hence the MBIE margins are being squeezed. While the short-term trend is negative, we expect margins to stabilise,'' Mr Foster said. - Additional reporting Business Desk
