Ampol Limited

And welcome to the Ampoule Limited Full Year 2025 Results Briefing. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Matt Halliday, Managing Director and CEO. Please go ahead.

Thank you. Good morning. My name is Matt Halliday. I'm the Managing Director and CEO of Ampol Limited. Welcome to our 2025 full year results call. During the presentation, we'll be referring to the documents lodged with the ASX this morning. And before beginning, I draw your attention to the notice on slide two. I'm joined by our CFO, Greg Barnes, who will discuss the financial results in more detail. I'll start on slide four. In 2025, personal safety performance in convenience retail and ZED continued to trend at close to historical best levels. And as we said at the half, while we did have some incidents related to electrical safety in New Zealand, they did not result in injuries. In response, ZED conducted a stand down for safety and we initiated a contractor safety uplift program to reinforce safe work practices. In FNI, we have seen a small increase in incidents, which led us to initiate a safety reset to refresh our safety management processes. Our commitment remains unchanged, ensuring every team member goes home safely at the end of each workday. Turning to process safety, we had one Tier 1 and two Tier 2 incidents in FNI. The Tier 1 was a loss of crude oil from a tank due to damage during Cyclone Alfred, which was safely contained in the bund as designed. Repair work continues to replace the tank roof and there were no injuries. Our teams right across the business manage the preparations and aftermath of Cyclone Alfred with the professionalism that I believe is a trademark of the AMPOL team. Turning now to the performance overview on slide five. Looking at our financials first, and with all numbers quoted on an ARCOP basis, EBITDA was $1.4 billion, EBIT $947 million, and NPAT $429 million, excluding significant items. EBIT was up more than 30%, and NPAT more than 80% on prior year. Convenience retail continued its consistent growth trajectory, delivering EBIT of $374 million, which was up 4.8% on prior year. Over the past five years, the team has delivered an EBIT average annual growth rate in excess of 5%, demonstrating the strength of our retail model, our focus on premium fuels and our improving in-store execution. Premium fuels now represent 56.5% of retail fuel volumes, supporting higher fuel margins, while shop gross margin increased to 40% post waste and shrink. It's this track record which gives us confidence that we have the capability to drive value from the EG acquisition, which is currently going through the ACCC clearance process. In F&I, EBIT more than doubled to $406 million. Litton returned to profitability, delivering EBIT of $163 million, following reliability improvements implemented in late 24 and a stronger second half margin environment. These outcomes reflect deliberate decisions taken to improve operational performance and resilience. As part of the F&I result, our infrastructure-backed commercial business in Australia also grew EBIT by over 8%, benefiting from some repositioning of its portfolio and a sharpened focus on returns. The New Zealand business delivered EBIT of $234 million broadly in line with the prior year, despite a more challenging third quarter in a weak economy. Importantly, earnings recovered strongly in the fourth quarter to levels consistent with the first half quarterly run rate, demonstrating the underlying resilience of the business. From a balance sheet perspective, leverage has returned to within our target range at 2.3 times adjusted net debt to EBITDA. This positions us well to progress our strategic priorities, including the proposed acquisition of EG Australia, while continuing to deliver returns to shareholders. The board declared a final dividend of 60 cents per share fully franked, bringing total 2025 dividends to 100 cents per share fully franked, reflecting confidence in the sustainability of our earnings and balance sheet. This is an increase over the 65 cents per share paid last year. Thank you. I'll now hand over to Greg.

Thank you, Matt. Good morning, everyone. I'll turn to slide eight where you can see the detail behind total fuel sales volumes. All in all, we're pretty pleased with the underlying sales volumes during the year that reflect not only our focus on profits and returns, but also the resilient nature of our value chain. At a headline level, two factors need to be taken into account. Firstly, Australian wholesale volumes were down modestly once the movement in the very low margin industry buy-sell arrangements are taken into account. And secondly, as communicated throughout the year, rolling geopolitical uncertainties created significant volatility. This led to the AMPOL team focusing its efforts on risk and margin management to take a more targeted approach to discretionary activity and to prioritise securing barrels efficiently for the Australian and New Zealand system. In terms of each business, The Australian wholesale volumes of the X buy sell were down 2.6%. This was predominantly in our third party retail sales channels. Importantly, Australian wholesale volumes were up 3.2% in the fourth quarter compared to the prior corresponding period, giving us real momentum coming into 2026. Within Australian wholesale, our B2B volumes were in line with the prior year and were the source of the wholesale volume momentum in Q4 and into 2026. Australian convenience retail continued to focus on the premium end of the market. This strategy combined with continued improvements at the store level has seen profits grow consistently, but at the expense of largely base grade petrol volume. And while the UGO strategy is on track, with 19 of 46 Australian UGOs in market for the full 12 months, it had a modest impact on group volumes. And Matt's going to come back and talk more to that later. The segmented strategy in New Zealand is proving effective. Volumes for the year in New Zealand were flat, which is a great result in a tough economy for much of the year. If I turn to slide 8, you can see the group P&L in some detail. Sorry, slide 9. Looking at the full year result, the group delivered EBITDA of $1.44 billion, which was up 20%, and it delivered ARCOP EBIT of $947 million, up 32% year-on-year. We reported an ARCOP impact before significant items of $429 million, which was up 83%, and a statutory impact of $82 million. The statutory result includes $136 million of inventory losses after tax, reflecting the adjustment to bring cost of sales to the historical cost for statutory accounting purposes in a period where refined product prices trended down over the period. Significant items were $210 million after tax. I'm going to expand on two key contributors and I'll refer you to slide 44 for further detail later. Firstly, the simplification of energy solutions contributed to significant items where we incurred a one-off restructuring cost and unwound unrealised gains on electricity derivatives that had previously gone through significant items. In return, we received cash proceeds of $70 million for divestments of the Australian and New Zealand electricity businesses. Secondly, we recognised a non-cash impairment of our investment in sea oil. While the Philippines remains a growing market for fuel, the country has seen a substantial uplift in storage capacity and competition in recent years, particularly since the invasion of Ukraine. So while our outlook for the business is in line with current performance, we have tempered our view on the growth beyond current performance in terms of outlook for the foreseeable future. This has led to a non-cash impairment of $90 million. Importantly, this does not take into account the value of supply by Ampol into Sea Oil and the region more broadly, the value of which sits in other divisions within the group. Slide 10 just gives you an overview of the key movements in group EBITDA and EBIT. I'm going to dive into each of these in subsequent slides. As I said, the contribution to the group's earnings growth was quite broad-based, which is really pleasing. And to build on Matt's earlier comments, the consistent growth in convenience retail over several years and the successful acquisition of Z Energy and its subsequent performance has strengthened both the quality and rateability of Ampol's earnings base. Similarly, F&I Australia also performed well, and Lytton took advantage of stronger margins in the fourth quarter. Our trading and shipping capability in Singapore and Houston played an important role in the group in 2025, securing crude, sustaining supply during cyclone Alfred and leveraging the short into Australia and New Zealand while managing risk to ensure each business's competitiveness. The vast majority of the contribution to the group resides in those divisions. However, third-party volumes, which is what is reflected in F&I International, were down. Our expectations for this part of the business were well telegraphed and International finished down $15 million in EBIT terms for the year. And as we announced at the half year, we refocused our efforts in energy solutions to concentrate on EV charging. This is reflected in the $10 million improvement in 2025. We're expecting further benefits in 2026. as the full year effect of these decisions flows through to earnings. So if we look at each business, we'll start on sliders 11, which shows the continued growth in earnings for convenience retail. Convenience retailers delivered 5.4% annual EBIT growth since 2020, including almost 5% earnings growth this year. Ultimately, this consistency boils down to a few key drivers. The high grading of the Ampol Foodery branded network. We've also built significant capability in the organisation and we've repositioned our offer and lifted our in-store execution. And you can see this playing out in the metrics on slide 11 that drive our profitability. We've seen consistent increases in our mix of premium fuels. In 2025, the mix of premium fuel volumes increased by 1.1 percentage points to 56.5%, helping grow overall fuel margin year on year. The good progress in shop performance continued, with shop sales ex-tobacco up 2.8%. The strong store performance has come via growth in high margin categories like beverages, chilled perishables, bakery and general merchandise. On tobacco, sales fell over 20% during the year as the new public health rules and packaging came into force. That accelerated the move of this category into the illicit market. Having reduced our reliance on tobacco sales over the years, it now represents 16% of total store sales and 3% of total fuel and shop margin. As you can see, the contribution of these dynamics plays out in the average basket value and gross margin percentage. To maintain average basket value in line with last year given the tobacco decline is another terrific result. This has been driven by effective price and promotions management, including a deeper understanding of attachment in executing these activities. Similarly, the changing product mix through growth in high margin product categories and falling volumes in low margin tobacco has led to store margins growing 2.7 percentage points year on year. Slide 12 provides more colour on the key contributors to convenience retail growth. As we discussed, earnings growth year on year was driven by the continued focus on premium fuels and our consistent prioritisation of profitability over volume is continuing to pay off. Store income grew on non-tobacco performance and ongoing productivity initiatives in terms of labour and rostering, as well as the benefits of the UGO model on previously underperforming stores. Slide 13. shows the trends in New Zealand's key retail metrics over the past six years, including the time before Ampol acquired Zed. This slide is presented in New Zealand dollars. It was another very good year for New Zealand, given the backdrop and the challenges in that economy for much of the year. As we flagged in our third quarter trading update, we had a disrupted Q3 in terms of trading and competitive behaviour. While it's not entirely clear what led to this disruption, it did coincide with a step-up in unfuelled site conversions, or unstaffed fuel site conversions, I should say, including Yugo, combined with structural or transaction-related activity among competitors. Had it not been for this, New Zealand would have exhibited similar trends to our Australian convenience retail business in year-on-year terms. This was evident in Q4 and is continuing into the new year. Zed's store refresh strategy is working and is a contributor to growth in total shop revenue, notwithstanding the Yugo conversions. Sales growth was in non-tobacco categories, while tobacco sales remained flat year on year, which is obviously a very different experience to what we're seeing in Australia. That improved mix led to gross margin increasing to 33.7%. Average basket value on the bottom right graph peaked during the height of COVID but has been consistent over time. Zed, like the Australian retail business, is focused on higher margin on the go categories such as food and beverages. As I said earlier, fuel volumes were quite stable during the year and the benefit of segmentation strategy was evident with an uptick in the discount channel through the relationship with foodstuffs and our own launch of Yugo. On slide 14, you can see the waterfall for the New Zealand segment. This is inclusive of supply benefits for our trading team, which are incorporated into the integrated fuel margin. It's also presented in New Zealand dollars. Integrated fuel margins grew over the period. Given the lower penetration of premium fuels in New Zealand and a generally price sensitive consumer, this is a very good outcome. The sale of our interest in channel infrastructure completed in March 2025, and as a result, we did not receive the final dividend explaining the variance year on year in the waterfall. We did, however, receive a $3.4 million interim dividend prior to disposal. That will not repeat having our divested of that business. Okay, if we turn to slide 15, we'll take a further look at the Lytton result. You can see how the refinery benefited from the improvement in refiner margins throughout the second half. Improved reliability enabled the refinery to capture these benefits as well as the benefit from increased production compared to the prior year. Productivity improvements have also been a real focus for the team, and you can see the OPEC savings reflected in the waterfall net of inflation. So we're now on slide 16. Similar to New Zealand, F&I Australia is our Australian fuel supply chain downstream of the refinery and includes our commercial fuels and the benefits of trading and shipping into this market. It's pleasing to see the recovery in performance. The Australian supply chain was also a beneficiary of improved refinery reliability in terms of not needing to source more product domestically at short notice. As I mentioned earlier, adjusted for buy-sell movements, total sales volumes were 14.7 billion litres. With Australian wholesale, X of the net buy-sell was down 2.6%, largely in retail third-party channels. Slide 17 shows the F&I International result, and that business leverages Australia's and New Zealand's supply chain positions to create additional value in other markets. In 2025, due to the escalation of geopolitical tensions, tariffs and changing sanctions, we focused the team on supplying the Ampol Short in Australia and New Zealand with earnings from these activities flowing to their respective P&Ls. As the team's focus was mostly directed away from discretionary activity, third-party earnings were lower. As we've mentioned before, this part of the business consumes little capital, provides the potential for significant upside, and is ultimately part of a team that delivers significant value across the rest of the Australian and New Zealand supply chain. On slide 18, as the strapline says, we finished the year back within our targeted leverage range. This is a great outcome, and it obviously positions Ampol ahead of our anticipated completion of the EG acquisition in the middle of the year. That, of course, is subject to regulatory approval. We exited the year with net borrowings of just over $2.9 billion. Now this was inclusive of net capex of $563 million this year and that's a year where we saw capex investment peak given the activity at the refinery and major investments in convenience retail. We're able to partially mitigate the cash outflows through divestments which provided $175 million of cash inflows. primarily via the divestment of channel infrastructure and the sale of FLIC and the Australian energy businesses. I'll also note that the second phase of our minimum stock obligation or MSO obligations added about $100 million to working capital during the year. And finally, before I hand back to Matt, I just wanted to update on our funding platform, particularly as we look forward to the completion of EG Australia, subject to the Commission's approval. Firstly, I'd like to acknowledge the terrific job the Treasury team has done again this year. Their efforts and MPOL's consistent approach to capital allocation have been rewarded. A few highlights include Moody's support for the EG Australia transaction, which they've noted is credit positive. We've also entered a subordinated note arrangement in Q4 2025 that was both attractively priced and removed the equity conversion feature that existed in other previous notes. And finally, towards the end of the year, we also entered an additional subordinated note with similar terms to the other note I just referred to. And it also included a unique deferred drawdown mechanism. This means we have the flexibility of drawing this note down during 2026 without incurring the cost to carry while securing attractively priced terms now. Once an existing note matures in 2026, our maturity profile will extend from 4.1 years to 5.3 years. This will extend further in 2027. This is a great place to be. with over five years of maturity profile, average maturity profile, a more diversified counterparty list, and on more attractive terms. So with that, I'll hand back to Matt and come back for questions.