This article first appeared on GuruFocus.

EBITDA: $305 million, in line with guidance for the half. Net Profit After Tax: $63 million. Interim Dividend: $0.028 per share, fully franked, representing a 50% payout ratio. Net Debt: $1.947 billion. Net Capital Expenditure: $225 million for the half, with a full-year target of around $500 million. Gearing Ratio: 1.66x term debt to trailing 12-month EBITDA. Commercial and Industrial EBITDA: $238 million, stable compared to the previous period. Refining EBITDA: $18 million, impacted by weak refining margins. Store Conversions: 15 new OTR stores opened year-to-date, with a target of 40 by year-end. Significant Impairment: $245 million non-cash impairment in the convenience and mobility business. Free Cash Flow: Impacted by significant investment and integration activity, slightly positive when adjusted for these items.

Warning! GuruFocus has detected 9 Warning Signs with ASX:VEA. Is ASX:VEA fairly valued? Test your thesis with our free DCF calculator.

Release Date: August 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Viva Energy Group Ltd (ASX:VEA) reported a solid safety and operational performance in the first half, with improved injury frequency rates and strong process safety performance. The Geelong Refinery recovered well from a site-wide outage in January, achieving 92% availability and a crude intake of nearly 19 million barrels. The company delivered an EBITDA of $305 million, aligning with guidance, and declared an interim dividend of $0.028 per share. Viva Energy Group Ltd (ASX:VEA) has made significant progress in integrating its retail businesses under a unified operating platform, setting the stage for future growth. The commercial and industrial segments delivered stable performance, with an EBITDA of $238 million, reflecting the business's resilience and diversity.

Negative Points

The retail segment faced challenges due to the continued loss of tobacco sales to illicit trade, impacting convenience sales and margins. A non-cash impairment of $245 million was recognized, primarily affecting the convenience and mobility business due to softer trading conditions and a decline in tobacco sales. Gearing was elevated at 1.66x, above the target range, reflecting a period of significant investment and weaker earnings. The company experienced a slower start to its retail conversion ramp-up, with only 9 conversions in the first half, raising concerns about meeting future growth targets. The convenience segment's gross margin percentage fell sharply year-on-year, attributed to delayed supplier cost pass-through and increased competition.

Story Continues

Q & A Highlights

Q: On the network conversion growth, how can Viva Energy ensure it meets the target of 100 conversions annually, given the challenges faced with delays from councils and planning departments? A: Jevan Bouzo, CEO of Convenience and Mobility, explained that significant work has been done to build the pipeline and ramp up capability. Many sites are already in the planning approval process, and the company expects to deliver around 25 conversions in a single quarter. This preparation will allow for a faster pace of conversions in 2026, with many sites already approved or in the process of approval.

Q: How confident is Viva Energy in achieving its target of growing convenience and mobility EBITDA to over $500 million by 2028, considering the slower start to the conversion ramp-up? A: Jevan Bouzo expressed confidence, noting that conversions are just one component of the growth strategy. The focus is also on underlying business performance, synergies, integration work, and new site acquisitions. The groundwork laid over the past 6 to 12 months is expected to support achieving the 2028 target.

Q: Can you discuss specific initiatives to improve the Express store performance, given the tough operating environment and competition from discount fuel and unmanned sites? A: Jevan Bouzo highlighted that the company has optimized fuel volume and margin across the network, leveraging the scale and range of offers. The Liberty brand will be used in markets where a discount fuel offer is more suitable, while the Shell brand will continue to grow its presence. Marketing and advertising efforts are also being increased to boost customer response.

Q: Regarding the second quarter EBITDA for Convenience and Mobility, what are the one-offs and transition costs included in the run rate? A: Jevan Bouzo noted that most negative impacts were in the first quarter, with improvements in fuel margin and convenience gross margin in the second quarter. The underlying performance is expected to be similar to Q2, with additional synergies and cost-out improvements anticipated in the second half.

Q: How is Viva Energy managing the compliance challenges related to illicit tobacco, and what measures are in place to prevent employee involvement in illicit trade? A: Jevan Bouzo emphasized strict compliance with the law and highlighted the company's focus on staff education and training regarding new regulations. While illicit tobacco remains a challenge, the company has not seen significant issues within its network and continues to engage employees on the importance of compliance.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

View Comments