CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Ampol share price down: acquisition news, H1 results in focus

We look at the highlights from Ampol’s recent interim results release.

It’s all in the earnings.

Despite posting solid earnings growth for the first-half of FY21, the Ampol (ASX: ALD) share price fell on Monday, finishing out the session down 4.76% to $26.22 per share.

The company also took the interim results as a chance to reveal its proposed acquisition of Z Energy (NZX: ZEL) – a New Zealand based and listed fuel distributor.

Below we look at the highlights from Ampol’s interim results as well as the details from the proposed acquisition of Z Energy.

Interim results in focus

At a group level, Ampol reported replacement cost operating profit (RCOP) earnings (EBIT) of $340 million up from $221 million in the prior corresponding period.

Broken down by segment, that result was driven primarily by Ampol's fuels & infrastructure segment, which booked $208 million in earnings (EBIT) in the period, while convenience retail brought in $149 million in EBIT, and Corporate had negative EBIT of $18 million.

That fuels & infrastructure profit performance was itself driven by a swing in Ampol’s Lytton refinery earnings – which went from negative $59 million in H1FY20 to positive $49 million in H1FY21.

From a capital management perspective, the company made two important points:

One, Ampol management declared an interim dividend of 52 cents per share (fully franked), equivalent to a 61% payout ratio. Two, the company reported that it had completed a $300 million off market share buy-back program during the half.

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The Z deal

As part of an adjacent announcement, Ampol revealed that it had made a NZ$3.78 per share, all cash acquisition bid for Z Energy – in a deal which values the New Zealand-based company at ~NZD$2 billion.

That deal represents an approximate 35% premium to where the stock traded at before the takeover announcement was made.

RBC analysts, who have a sector perform rating and $28.00 price target on Ampol, commented positively on the deal, saying:

‘Ampol knows the New Zealand market well and we think this is all about applying the Ampol model to Z Energy and expanding Ampol’s existing experience and presence in New Zealand through the Gull network.’

‘Our preliminary view is the Z Energy bid fits well into Ampol’s business model and through Ampol’s experience in Australia this has potential to add value, particularly to Ampol’s F&I International and Trading and Shipping business,’ RBC added.

As present, Ampol’s management team is currently undertaking further due diligence on the potential deal.

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