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.

Great. Thanks very much, Greg. Turning now to our strategic priorities on slide 21. Our strategy remains clear and consistent, built around three pillars. Enhancing the core business, expanding a rejuvenated fuels and convenience platform and evolving our offer in line with customer needs. Under the enhanced pillar, we are focused on maximising the value of our existing assets. At Lytton, the priority has been reliability and disciplined execution. The actions taken in late 24 and through 25 have delivered tangible results, with the refinery returning to profitability and operating more consistently. Looking ahead, the commissioning of the ultra-low sulphur fuels project in 2026 will further strengthen the resilience and long-term relevance of the asset. We also remain focused on productivity across the group. In 2025, we delivered our $50 million nominal cost reduction target, helping to offset inflationary pressures. After adjusting for the impact of bonuses, the productivity steps we took more than offset the impact of inflation in 2025. Under the expand pillar, our priority is growing earnings from our fuels and convenience platform. In Australia, we continue to execute our segmentation strategy across the retail network. The performance of our UGO sites and the sustained earnings growth in convenience retail demonstrate that this strategy is working and scalable. The proposed acquisition of EG Australia is a natural extension of that strategy. While the transaction remains subject to regulatory approval, our focus has been on preparation. With leverage back in our target range, we are well positioned to progress the acquisition and following approval to commence integration in a controlled and value-focused manner. In New Zealand, we are continuing to refine our segmentation strategy, supported by the rollout of UGO sites, premium store refreshes and the continued development of the Z Rewards loyalty program. These initiatives are aimed at strengthening customer engagement and supporting earnings growth comparable to our Australian convenience business over time. Under the Evolve pillar, we are taking a pragmatic and disciplined approach to the energy transition. We have simplified the energy solutions business to focus on areas where we see the clearest pathway to value creation. Our public EV charging networks in Australia and New Zealand continue to grow and we will adjust the pace of investment in line with customer uptake. We are also progressing opportunities in lower carbon liquid fuels for the hard to abate heavy transport sectors and developing a view of available returns which will ultimately depend heavily on the policy settings that are in place. Now on slide 22. We remain excited about the delivery of UGO. Sites in Australia are delivering more than 50% fuel volume uplift, average EBITDA improvements greater than $350,000 per site, and payback periods of around one year, with CapEx around $280,000 per conversion. Our observation is the sites take roughly six months to ramp up to maturity. And we view Yugo as a scalable model that supports continued segmentation and high returning earnings growth, as well as creates an important source of value for EG. Moving now to slide 23. We strongly believe in the potential for the proposed EG acquisition to accelerate our network segmentation, including scaling of both Yugo and premium formats. The identified $65 to $80 million of synergies are predominantly cost-related, with further upside potential when you benchmark that network to our own comparable site performance. The strong performance of our own retail business gives us the confidence in the integration to deliver on this potential. The completion of the acquisition is on track for mid-26. We are currently in phase two of the new merger regime with an announcement of the notice of competition concerns due shortly. Critically, the test at the end of phase two relative to phase one is whether the transaction would, rather than could, give rise to a substantial lessening of competition. Ampol remains confident in its position and is working constructively with the Commission during this phase. On slide 24, we show that transport fuel demand in Australia and New Zealand remains near all time highs, with growth driven by diesel and jet offsetting the gradual decline in gasoline. The demand profile supports the long term relevance of Ampol's integrated supply chain, especially when transition options look to be pushing out as the complexity and cost of this challenge becomes clearer. I'll now talk to our key priorities for 2026 on slide 25. We are focused on delivering the EG Australia acquisition and commencing delivery of the targeted synergies. At Lytton, we expect to commence commissioning of the ultra-low sulphur fuels project in Q2 this year. We are also focused on closing out phase one of the FSSP review and then engaging with government on a broader review of the industry in phase two to determine the longer term settings required to enable ongoing investment. We remain focused on productivity and will build further on our track record of continuous improvement to deliver a further $50 million of nominal cost reductions across 2026 and 2027. In 2026, our aim is to again offset the majority of inflation and more than offset it at Lytton. We will continue to build momentum in executing our retail strategy and segmentation in Australia and New Zealand, building on our track record of growing earnings. We will also continue to advance our EV charging business and explore lower carbon liquid fuels in both cases at a disciplined pace, aligned to demand and with a commitment to appropriate returns. I'd like to close out today with a view of the current trading conditions on slide 26. We have started the year very strongly, particularly in convenience retail in Australia and in New Zealand. reflecting higher retail margins and continued strength in shop performance. F&I ex-Lytton has also experienced a strong start. At Lytton, January LRM has weakened relative to a strong Q4 in 2025. We remain mindful of the normal seasonal dynamics in global refining markets, particularly for gasoline, and continue to expect volatility in global oil markets driven by geopolitical uncertainty. It remains the case that the integrated nature of our supply chain provides flexibility and resilience in managing these conditions. Current margins also reinforce the importance of the FSSP to reduce downside volatility, and we expect phase one of the review with government to be finalised in the first quarter. For 2026, we expect net capex of around $600 million, reflecting continued investment in safety and reliability, growth opportunities in retail, and the scheduled refinery turnaround and finalisation of the low-sulfur fuel upgrade. I'm now on slide 28, and I'll finish with why we believe Ampol represents a compelling investment. First, we have built a higher quality and more resilient earning space. Over the past five years, we have deliberately grown our fuel and convenience earnings in Australia and New Zealand, supported by strong retail execution and the acquisition of Zed. Convenience retail has delivered an EBIT CAGR of more than 5% over that period, and fuel and convenience earnings are now a core pillar of the group, representing around two-thirds of earnings on an EG pro forma basis. Second, fuel demand fundamentals remain supportive. Transport fuel demand in both Australia and New Zealand is at or near all-time highs, led by diesel and jet growth. These products represent the majority of our volumes underpinned by the critical and hard to abate sectors such as freight, aviation and mining. Third, we own and operate an integrated fuels value chain backed by high quality strategic infrastructure that underpins the efficient and reliable delivery of fuel into highly rateable demand from our retail and commercial customers. The value of this infrastructure in underpinning resilient and secure fuel supply in an increasingly challenging geopolitical environment should not be underestimated. Fourth, we have a clear and disciplined growth pathway. Our segmentation strategy in retail is working in Australia and New Zealand, as demonstrated by the performance of Yugo and our premium offer. The proposed acquisition of EG Australia extends that strategy, enhancing scale and accelerating value creation. Fifth, we are approaching the energy transition pragmatically. We are investing where we see clear customer demand and returns, while maintaining the flexibility to adjust the pace as markets and policy evolve. And finally, we are disciplined in capital management. Leverages back within our target range, we maintain a strong investment grade balance sheet and we have a proven track record of returning capital to shareholders while investing for growth. In short, Ampol combines resilient fuel demand, improving earnings quality, strategic infrastructure and disciplined capital allocation. We believe that positions the company well to deliver growing higher quality earnings and shareholder returns over time. That ends our presentation. Now Greg and I will take your questions, and we also have Brent, Kate, Lindus and Michelle online, and I may direct questions over to them. With that, we'll take our first question, please.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset to ask your question. We do ask that you limit yourself to two questions and you may re-queue if you have additional questions. Today's first question comes from Michael Simonis with Jefferies. Please go ahead.

Morning, everyone. Can we start with you, Hugo, please? It looks like a pretty pleasing outcome so far. It's not often in this space that you get more earnings upside than you expect with less investment. But can you just give us a little bit more colour on how you're measuring that $350,000 earnings uplift on presumably the 19 sites that you had in place for the full year and maybe just a little bit more direction around what happens with retail fuel margin. You've given us some detail on volume so anything else you can do to help us understand the upside there please?

Thanks Michael. It's Greg here. Maybe I'll take it at a first cut. So as you say, we're really pleased with it. We are seeing it's taking a few months, about six months for the local market to settle when we convert to that operating model, but we're really pleased with the success we're seeing once it takes hold. The way we're comparing it is we're comparing sites, the exact site pre and post the conversion and obviously the first layer of benefits is the removal of store labour net of store margin foregone and then fuel, the value of fuel margin at a sharper price across the 50% or higher uplift in volume we're seeing. In terms of pricing I think was the other part of your question. I won't get too specific on it but its objective is really to compete in that second tier typically franchise operator end of the market. So it's proving effective there in terms of the volume we're seeing and also in terms of its product mix which which skews towards base-grade petrol volume, which is obviously, when you look at our headline volumes, is where we've leaked a little bit of volume, but we've done it at the expense of site profitability. So I think the thesis is playing out well, and our Ampol Foodery network is continuing to go from strength to strength, so we're very confident we've got the... the balance right and it lends itself nicely to EG once we get through the regulator there. So hopefully that answers your questions.

It does. Just one question it does raise though. The $350,000 uplift, does that include some ramp up for some of the sites or have you adjusted that number for that?

So the $350,000 is basically an annualised number once you're through that ramp-up period. Got it.

Yep. Okay. That helps. Thank you. And then second question on the debt. Your debt came in quite a bit higher than what consensus was expecting. Now, there's a lot of moving parts in that and oil price, et cetera. You've talked about $100 million investment for the second stage of MSO. Is there anything else that's sort of a temporary factor pushing debt up or anything else we need to think about in terms of more working capital investments going forward?

So there's nothing that's coming up. I think what's been a feature in the industry over the last few years, it's not unique to this year, has just been that supply chains have lengthened. So it's The product isn't all coming out of the region. It's coming from further afield. That's both an advantage to Ampol from a margin perspective in terms of leveraging our infrastructure and our ability to bring LR or larger ships into the country and unload on a lower per unit cost landing. But it does mean at times you've got longer, you own the product on the water, perhaps when previously you didn't. So you do have longer supply chains. That's been a feature for a while. But this is sort of the second lift in MSO. So, you know, that's been a feature over the last couple of years. I don't think we've made any secret that we're going through a period of step up in capex. I think that's been well telegraphed. But other than that, they're the two primary drivers. And probably the third is after a period of very limited tax payments, the company has been back in a tax payable situation in recent years as well. They're probably the big drivers if you look through the last couple of years. Thank you.

And our next question today comes from David Arrington at Bank of America. Please go ahead.

Morning Matt, morning Greg. I don't know who this Matt or Greg, you've lost me a little bit on the fuel volumes. When I look at slide 24, it looks to me as if the Australian and the New Zealand markets are growing. Yet when you look at your slide on slide 8, you're taking quite a big hit in particularly Australia, in Australian wholesale. Greg, you lost me a little bit on this buy-sell stuff, and your wholesale's down 2.5%, because what worries me is that you are leaking a lot of volumes. I know that's base-grade petrol, and I know you've got a strategy, and it looks like a winning strategy with Yugo, but that does concern me how much volume you are leaking in generally all markets, whether it be diesel, whether it be petrol, whatever. Can you just go through your volume strategy? please because to me what worries me with a very high fixed cost base is that leakage in volume and even when you take into account buy sell which I don't understand, you're still down 2.5%. So can you go through that whole volume equation, how it relates to margin and how it fits in with the whole strategy because you are leaking market share by the looks of your own statistics that you've provided in the pack.

I'll start and Greg can build. David, yeah, look, if you set aside the buy-sell, which I think is a temporary factor around Perth in particular in the second half of last year, Yes, our volumes were down as we repositioned the portfolio. There are some particular drivers to that, but critically, and as we called out in our trading update and Greg called out in his notes, we saw growth in Q4. So B2B volumes were up around 3.2% in Q4 and we're seeing strong momentum there. Yes, there is a drag certainly in the retail linked channels and EG has been part of that. That won't surprise you. When we look at Yugo, when we look at the strategy and the proposed acquisition of EG and the momentum that we have within the business to exit the year and start this year, we're pretty confident in the volume trajectory that we have in the underlying business.

And so, look, you're expecting that to turn around in 26. We should start seeing volumes growing. Would that be a fair call, or do you think you're still... You've got a bit of leakage there elsewhere.

No, that's what we expect to see. We exited or Q4 showed for our B2B volumes 3.2%. We continue to see growth flowing through the start to this year and that helps support the commentary we've made in the outlook statement. So I think we're well positioned when you look at the strategic steps we're taking with Yugo and obviously EG's an important response to that. and the wholesale business is demonstrating good momentum to exit the year and start this year.

Okay, okay good. Second question I've got is around the CapEx and particularly when I look at this relating to the depreciation. Now I'm not asking this question from a negative angle, I'm actually asking it from a positive angle. Hopefully you take it that way but you look at your capex to depreciation ratio and when I look at your annual report, your actual depreciable assets are less than $300 million. I mean you've got right of use assets there but I'm assuming that's probably rent. So you're running capex well above two times depreciable assets. Now can you give us a bit of an outlook as to how much of that is growth capex? that we can expect in the next FY26, 27, 28 where we can expect cost deficiencies coming through. We can expect growth coming through. So can you give us a bit of an outlook? I don't know if this is your domain. How much of that capex, which is another $600 million in 26, which is a high number, how much can we expect that to be leveraging into future growth as opposed to just stay in business Because that two times depreciation is a big number and I'd like to see growth really picking up in the near future from that number. I don't know if you can elaborate on that. That's probably more of a statement than a question. But if you could elaborate on that, it is an issue that some investors are raising that high capex number.

So look, maybe I'll have the first crack and there's lots of threads to that question. So we run the risk of going down a... a deep burrow quickly, but the short answer as I would put it is I would expect this business in a normal year to be doing something in the order of $450 million of capital expenditure. So the delta over and above that, now that will always have an element of year on year growth capex in it like the rollout of EV charging and things like that. $450 million is about where this business would operate in a normal year. The Delta is a combination of highway sites that we've invested in, so the M1s, Pheasants Nest in New South Wales and most recently the Eastern Creek or M4 sites. and the required upgrade to the refinery for the low sulphur fuels project, which has been the bigger single contributor to that. And that project comes to an end in 2026, as Matt outlined. So they're the big drivers. We have all the usual investment hurdles you would expect on growth capex. And as we telegraphed previously, we expect low sulphur fuels will add value to the earnings line. But the key thing is we expect that capex uh to return to something in the order of 450 million dollars once with uh through the project in the middle of 2026. thank you and our next question today comes from adam martin at emp please go ahead yeah morning i'm matt greg in the team i'm just back on you go i'd be interested sort of what distribution of sort of performance you're seeing it was

It was interesting visiting in Yugo the other day. It looked like the competitors had all sort of dropped down to, you know, the same sort of pricing that Yugo was running and sort of thinking here about T1 type operators. So I'm just wondering whether you are pulling down fuel margins across the industry. But, yeah, just lots of distribution in your scene, please.

Yeah, look, it varies, but what is consistent is an improvement in performance. That's the first thing I would say. And you always get the benefit of any sort of labour savings over the store margin. That's your first hurdle. It's very difficult to get specific, but it does vary. So what I'm presenting is an average, but they are all performing above their benchmark performance, i.e. pre-conversion. That's the first step. There is nothing about what we're doing that is, for want of a better term, pulling prices down. What we do is we participate. based on the quality of the site and given a local competitive dynamic. But it's typically pegged in line with what you would call some of those sort of second tier players. And it looks to compete there with a differentiated offer, i.e. unstaffed, but on what is typically higher quality dirt strength and a consistent experience. And that's what the Ampol brand presents. fuel, a consistent, simple experience and good site quality and access, which is why it's doing very well. I think the other data point I would say is our ampoule fuel margins. And we're in a competitive segment if you call the Tier 1 end of the market a separate segment, that's competitive and what you're seeing are strong consistent fuel margins playing out there in part by virtue of our increase in premium fuel mix and then we're mopping up some of that discounted base grade unleaded through Yugo, but of course we only had about 19 sites in market for the full 12 months. But we're really encouraged by it and not concerned about the impact on the market.

The only thing I'd add, Adam, to Greg's answer is Yugo does have a fundamental cost advantage in the market and the inflationary pressures are flowing through the rest of the market. So while Kate and the team have managed their cost base very well, so offsetting almost all inflation during the year, and Yugo is an important part of that, but not all of that, The rest of the market is incurring significant cost inflation. When we look at the retail fuel margin environment, that's fundamentally what's driving it.

Okay, thank you. And then just second question, just international trading, it's obviously a difficult one to model. It felt like the message coming from the company last year or second half of the year that things were sort of improving a bit. You know, you've previously talked about sort of higher refining, better trading, all that sort of stuff. I mean, what can we expect in the 26th? Should we just expect pretty much what you did last half or are things going to start to improve there, please?

I'm happy to take it in the first instance. It is difficult to telegraph outcomes for a business that is largely opportunistic in terms of capturing opportunities and arbitrage opportunities when they arise. So we are being cautious in what we've said. I think what I would call out is second half on the same period the prior year was up. But in a market that is really the hallmark of the market is at the moment that the volatility is being driven by short term news cycle events. not by just your typical sort of deviation from fundamentals that open up those arbitrage opportunities. And when you're a business that's managing within tight risk settings, you tend to want to take a more targeted view in your approach. And you're seeing that play out in volume and you're seeing that play out in profit, notwithstanding the fact that that one trading and shipping team is adding significant value elsewhere. So I think over time you'll see that business recover, but I'm not one for telegraphing what's going to happen with geopolitical events and pronouncements week to week because it is varying a lot at the moment. So we'll stay cautious and take opportunities where we see them within our risk settings. If there's anything you want to build.

That's a good summary.

Thank you. And our next question comes from Dale Cohn. Please go ahead.

Morning, Matt, Greg and team. Just wondering about the sea oil impairment. You know, why was that done now? What's the outlook for the rest of the business and sort of what is the profit level that it's kind of making at the moment?

Yeah, okay. I'll kick off again, Matt. You pick up anything you want to add. We're actually, you know, businesses performing our view of outlook really doesn't deviate from the sort of performance we're seeing today and what we've seen over the last couple of years. It isn't quoted publicly and I hasten to add we're a 20% shareholder in this business. It wouldn't be appropriate for us to talk in a lot of detail about the performance of that business. Suffice to say, our view on outlook doesn't really differ from where it is today. What has changed is a combination of both capacity in terms of storage and the attractiveness of this market to traders as fuel volumes rebalanced around the region and the globe post the Russia invasion of Ukraine. They're the key drivers. Our carrying value invariably and in original investment case had more optimistic assumptions in terms of outlook and after a couple of years where those assumptions aren't being realised, even though it continues to trade consistently, you're just not seeing the uplift you may have forecasted internally. Really the accounting standards don't leave you much scope and that is you need to mark the business back to what you are seeing and hence we took a non-cash impairment. I would not take that as a view on its performance deteriorating from where it is today. That is not our view. And just to give you a guide, its revised value would be something in the order of our share of six turns or less of EBITDA for that business. So invariably, once you're called on to do this, you take a reasonably conservative view of that business. The only other build is we supply into cereal oil and specifically but also more broadly into the region on the back of that volume. That value sits in our trading and shipping business and remains there and that is not being taken into account when we've impaired the asset.

Okay, thanks. And then just secondly, Greg, you've made the comment around sort of Australian wholesale fuel volumes down 2.6% per family retail reseller levels, which I assume is EG, and that sort of share of volume then implies EG volumes could be down in the order of 5% to 10%. How are you thinking about the earnings, which is for the business in Australia that you've quoted at a 2024 level but not revisited? Is there a risk that that people are disappearing on you?

Again, we don't own the business and so I've got to tread carefully. What I would say is our expectations for that business under our ownership have not changed and nor has our view of either earnings or cash flow accretion relative to what we said at the time of the announcement. Having gone back to triple check that last night, we stand behind the direction we gave at the time of that acquisition. You probably have noticed that the sector more broadly has seen some margin expansion and you would imagine that that business has been a beneficiary of that and we haven't seen any real shift in their underlying earnings performance. I'll probably just leave it at that.

Everything we've seen Dale I would say relative to when the deal was announced has only reinforced our conviction in the value we can deliver from that acquisition.

Thank you. And our next question today comes from Tom Allen at UBS. Please go ahead.

Good morning, Matt, Greg, and the board of team. I might just follow up a couple of earlier questions on the balance sheet. So 2.3 times, I should say, just admit that I copied it. and then guiding higher net capex for 26 and what the market expected. Just on your current outlook for refining and noting that you've still got your hands full, obviously, with the ultra-low sulfur fuels project and UGO conversions, can you just provide some colour on the top three levers that could accelerate your V leveraging over the years?

Yeah, so, I mean, there's a couple of things at work. I mean, this business is typically quite a high-cash generator, and we had a question earlier on capex versus depreciation. As we come to the end of this cycle of, you know, having both upgraded and secured new highway sites and invested in the low-sulfur fuels program, as well as 2026 is a period of major maintenance for the refinery, those three drivers... are all largely coming to an end during 2026. We'll, of course, invest in convenience retail where we see value and opportunity, but those big programs are coming to an end. So I think I talked earlier to CapEx starting to cycle back towards $450 million absent, you know, another growth opportunity that would shift that. So that in itself will start to contribute positively to cash flow. We do expect and we are seeing with low sulphur fuels, which we're producing now, We are seeing that product spec is scarce in market. That is going to be supportive of refining margins. I think that's a real positive for the business. And the continued improvement you're seeing on a very broad-based form across convenience in Australia, the New Zealand business underlying, particularly if you look through Q3. But also a strong, consistent performance coming out of our F&I Australia businesses. I think we're all very supportive and we are in discussions as you know in review of the FSSP which you know we would expect some sort of decision on that or update towards the end of this quarter and hope to have more to say on that prior to updating on Q1 results in April.

The only other couple of things I'd point to is we continue to remain very focused on productivity to offset more than inflation in our cost base in 25, I think is a strong result. And we continue to remain absolutely focused on that through 26. And EG itself is a highly, highly cash accretive acquisition. So we talked in the order of, you know, not far off 20% sort of cash accretion. metrics when we announce the deal, so EG and getting that deal done is also a big contributor.

Thanks both for that. Just following up your comment on the FSSP Phase 1, so can you comment perhaps, without pre-empting the outcome of that review, about what percentage change you think you've seen in structurally higher refining costs over the last two to three years? and how we might interpret that change in cost into a new margin marker or break-even threshold but written correctionally.

Yeah, I think you can track costs over time in our results, Tom. All I would say is there's an acknowledgement that costs have escalated, both in terms of operating costs and capital costs, as far as the refineries are concerned. That's acknowledged and we're in the process and we're expecting that phase one of that process to be finalised in the first quarter.

Thank you. And our next question today comes from Henry Meyer at Goldman Sachs. Please go ahead.

Morning, all. Thanks for the update. I guess CapEx, excluding the divestment proceeds for 2025, is coming a bit above guidance. Could you step through what's driving that? I'm assuming it's to complete the list and upgrades and potential impacts from maybe not having it online in time, Greg, though you said it is currently producing...

Yeah, so we are producing low sulphur fuel, just not at full rates and as we said, we're commissioning in the first half of 2026. So in terms of your question, just remind me.

The capex. Oh, the capex, yeah.

I actually would hold the view that our guidance on CapEx during the year, we did lift it at the start of the year slightly, but we guided to sort of something in the low 600s this year. That was net of the channel infrastructure investment. What is new news in our 563 number is the cash proceeds on FLIC. Capex came in at a gross level around where our expectations were, and I believe were communicated to the market reasonably clearly, notwithstanding we did provide an update earlier in the year. And the 600 reflects both the T&I that we're undertaking on the cracker in 2026, as well as the completion of that project. Full stop, I think. Is there anything you want to add to that?

No. And when we say we're producing low-sulfur fuels, not from the new plant, which we expect to start commissioning in Q2, but the plant can produce some low-sulfur fuels in its current configuration. That's what we're referring to.

OK. Thanks, both. And sticking on refining, it's been a pretty eventful start to the year for geopolitics and oil markets. Motions have come down a bit. Over the last few months, could you just share any perspectives on how you're thinking the potential for more heavy oil grades from Venezuela or Iran could impact crude spreads, broader complex refinery margins and the flow into simpler refineries like Lism?

Yeah, I might start briefly and then I'll hand to... And to Brent, what I would say is that in terms of the start of the year, and I made this remark in my comments, that gasoline in particular has started the year softly. The global system has effectively run strongly, and we're out of turnaround season, but coming into it now, and then the Northern Hemisphere comes. driving season commences after that. So we're kind of in the cyclical phase of gasoline weakness I would say at the moment and middle distillate margins have actually or cracks have actually remained pretty strong. That tends to be a fairly typical part of the cycle but I'll pass over to Brent to build on that.

Yeah, thanks, Matt. Yeah, so areas like Venezuela, we don't see as too dramatic an impact in the overall availability globally. It's going to take a capital investment in that market to grow production. We do see its destination changing as... The US, as an example, would likely take more versus what China has in the past. Over the last, say, six months, we have seen a change in the sweet sour spread for reasons outside of Venezuela and Iran. Things like impact on exporting of things like CPC blend, which is linked to Ukrainian attacks on loading facilities. There's been outages in the North Sea. there's been impact on US production as well. So there has been a move between sweet and sour spreads over the last few months. But going forward, we don't see Venezuela really driving the spreads and the performance for our refinery. And obviously, the whole world's watching carefully on what unfolds in the Middle East at the moment. So we're clearly watching that carefully.

And our next question comes from Craig Wolford at MST Marquis. Please go ahead.

Good morning, Matt and Greg. My question relates to the metrics on your convenience business, so slide 11, which are all tracking really well. It's been a great journey, as you highlighted. With that increase in basket value outside of tobacco, can you just talk through some of the categories that have contributed significantly in that part? Do you still see further upside in the shop gross margin if we were to strip out the tobacco impact?

Yeah, so I think I'll pass to Kate to give some more colour, but I think it's been a pretty consistent growth in the food service categories, beverages, snacks. It's been fairly broad-based and consistent, which I think when you do look at that average basket value growth ex-tobacco, it's... CAGR over that five year period is nearly 6% pretty consistently and I think it reflects growth in those high margin categories but I'll pass to Kate to give some more colour on that

Thanks, Matt. So average basket movement is primarily driven by beverages, fresh, confectionery, and some food service. And our QSR business is also performing well. In terms of margin growth, it's a split between mix and rate. So some of it has been tobacco mix, but also growth in those categories that I talked that are driving ABV. And then we've got rate improvements through Metcash, which hasn't had the full year come through yet, and also rate on things like beverages and confectionery.

Great. Thank you. Second question is just on the outlook for net interest costs. You know, mindful, not sure how to interpret the change of that disclosure on the merchant fees. and how should we think about capitalized interest impacts in 2026.

So you'll have your own forecast of debt as you can imagine capex will given our commentary on low sulfur fuels capex should skew more first half than second half and you'll capitalise that interest until that product is commissioned and then it will drop back to the P&L and the capitalised portion will play through in depreciation of that asset post-commissioning. I'm not really in a position to sort of guide on debt specifically, but obviously we're back in the range We're coming into the acquisition of EG, one hopes, in June, and we have telegraphed previously. We expect it to be back in the range within two years of that transaction.

Thank you. And our next question today comes from Rob Coe at MS.

Please go ahead. Yeah, good morning. So I think you've given us great detail on the non-tobacco convenience performance and congrats on that. I wonder if you could also maybe give us some colour on what is happening in tobacco. If I measure your charts and then look at your slide 11, it looks like tobacco sales were down half on half quite significantly. Any light at the end of the tunnel?

I think I said in my commentary earlier, volumes and sales were down 20% year on year. Now its margin and contribution at the site level to store and fuel margin is now 3%. So over the last few years, through a combination of factors, it's now not a particularly material contributor to our profitability. It really accelerated when the fuel packaging and regulations and regime took hold in the lead up to that for 1 July or 30 June it took hold, really in that build. And there were sort of two tranches to it. One on sourcing a product. It was the first leg into April and then the second leg was the sale of the previous packaged product in the second quarter. I wouldn't say it has eased. What you have seen, it's probably eased from its peaks, but we're still seeing volumes down year on year. What you are seeing in markets where there's been real active... uplift in police activity to crack down on illicit trades in Queensland would be the standout is the decline has eased substantially. And that's probably all we can really say on that. The rest is really a matter for policy and the police.

And I would say, just building on that, you've had... There's a lot of conversation around this. I think it's getting a lot more attention. You're seeing different regulations put in place or laws put in place across the different states, but I'd call out Queensland, as Greg just mentioned, as the one where we've seen enforcement be quite effective. We haven't yet seen a material impact flow through anywhere else.

Yeah, OK, thank you. Really appreciate the colour. The next question I wanted to ask is in relation to your emissions targets and also maybe link that into the FSSP. I'm reading here that you're going to re-sculpt your emissions intensity targets for Lytton to align with the safeguard mechanism and appreciate decarbonisation there is never going to be a straight line. I wonder if you could just give us some more colour on what's the change in target going to imply there and then if the safeguard costs also factor into FSSP please.

Yeah, so with the safeguard mechanism in place, you've essentially got a functioning market mechanism that drives our approach and incentivises an approach, if you like, around decarbonisation. I think to have something that then overlays that becomes problematic. So that's really what underlies that change. We see opportunities to decarbonise operations there around the edges. At the end of the day it is about reliable and efficient operations. They're the biggest contributor when you're looking to limit your intensity, which is a per unit of production measure. and then ultimately when we're doing things like assessing carrying values and what have you, we are linking the life of the asset to our commitments for 2040. There's probably not a lot to say beyond that, but with safeguard in place, I think that's a natural point. Maybe two small builds. We do have a trade-exposed relief for the refinery for the next three years, he says, looking at Fran, it is three years, which reduces the safeguard-related costs. And, you know, given their intention, the appropriate offsets are things we would contemplate in the equation when assessing decarbonisation opportunities versus the purchase of offsets. It makes sense. to take a rational economic view and approach to that?

I think from an FSSP point of view, we talk about Phase 1 needing to acknowledge, in our view at least, higher costs. This is one of those higher costs, and so we would expect it's part of that consideration set, and certainly as we move into Phase 2 equally. I think in terms of the targets and the differences, just simplifying it to move to the safeguard mechanism, it doesn't otherwise trigger any material change.

Thank you. And our next question comes from Mark Wiseman at Macquarie. Please go ahead.

Oh, g'day, Matt, Greg. Thanks for the update today. A couple of questions. Firstly, on the ultra-low sulphur gasoline project at the refinery, Are you in a position to talk about what the total CapEx of that project has been end-to-end? It seems like it's gone quite a bit over budget and with the market focusing on your capital intensity, whilst that's a true compliance CapEx cost that you've incurred and should be taken into account with any government initiatives, it is sort of one-off in nature. When we think about the capital intensity moving forward, it would be good to be able to strip that out.

Yeah, I think we haven't called out the cost of the investment specifically. It has escalated certainly above where we thought CapEx was going to be originally when we approved the project. I think the key point Greg made earlier is we expect CapEx for this business to move back to somewhere around $450 million. This year we've got the FCC turnaround at Lytton and we've got just the tail end of that upgrade spend. But I think the key piece is when you look through the higher CapEx, as over the last couple of years we've been in the in the heat of our turnaround cycle and we've had the one-off project with low sulphur fuels, we then get back to a number of around $450 million on a normalised basis.

Okay, great. Thanks. And second question, just on convenience retail. I've been thinking about that 5% CAGR in earnings since 2020. Congratulations. It's a great achievement. Back then our forecast for this year was $320 million and you're printing $374. It's definitely been better than the market expected back then. I guess looking forward over the next five years, you've got EG Group coming into the portfolio, which is a big investment, but we're facing difficult tobacco and fuel volume declines and more competition at the bottom end. Do you have any comments on how to think about that 5% CAGR on a forward basis from now to 2030?

Look, I think from our point of view, and Kate gave some colour earlier, and I might ask her to comment or to build on my comments, but when we look at the underlying consistency of delivery in the business in terms of, offer for the right local market. At the lower end, the results of Yugo. At the upper end, we're seeing some really encouraging results from the premium segmentation and our highways. And when we look at our pipeline of activities that the team has entrained, we're really encouraged by that sort of performance not being simply the turnaround of the business over the last five years, but a really strong platform from which to do something similar going forward, setting aside EG, where we've been clear on sort of the metrics we anticipate there. So we're really encouraged when we look at our plans that we can continue to see strong growth in this business over the next five years. Kate, do you want to build on that?

Yeah, sure. So we have a strong and stable team that's demonstrated that we've got the ability to grow with discipline. We're really pleased with the results we're seeing across the whole segmentation strategy. So as an example, across our premium segments, we're seeing double-digit growth in things like coffee, bakery, chilled perishables, healthy snacking. Our QSR business continues to grow, albeit that we're very disciplined with how we're selecting sites and making sure that we're ready to grow before taking next steps. But our M4 sites saw us add an additional six QSRs to our network just across those sites last year. We've got a pipeline for 40 further sites to be upgraded across our segmentation strategy this year, and we're confident we've got plans to grow beyond that.

I think the only other thing I would say touching on your higher cap competitive intensity comment at the lower end is that I think the execution strength and the strength of the team and the focus on productivity is an important part of the strength of our performance in addition to the comments that we're making in terms of the offer and the sites because the rest of the market we would observe is feeling cost pressure and I think Kate and the team are doing an excellent job at focusing on productivity and keeping costs under control. In nominal terms, our convenience retail costs were up just over half a percentage point in 2025. I think that's great going.

Thank you. And our next question today comes from Brian Raymond at J.P. Morgan. Please go ahead.

Morning. My first question is just on the shop gross margin reaching 40%. Obviously, there's a bit of a tobacco tailwind in that. But on my maths, it looks like there was some healthy underlying gross margin expansions. I'm estimating 50 to 100 basis points. I'm not sure if that's about right. In FY25, I'd just like to understand the drives of that a bit better and the sustainability, or if there's more to come from a gross margin perspective, ex-tobacco, please.

Yeah, that's about right and you can see, we talked about the average basket value growth on the bottom right hand side of page 11 shows you the strength in basket which is at least partially margin related on the categories that Kate referenced earlier. But Kate, do you want to build on that?

Yes, sure. So it's roughly 50% through mix, which is tobacco decline, but also performance shifting to higher volume, higher margin, sorry, categories such as beverages. We're also seeing improvements in margin driven by our QSR business, which, given we've got such high-performing highway sites, is material across the portfolio. We're also seeing rate improvements across categories such as hot kitchens where that's through negotiation and we have further improvements that we expect will come across some of the categories I've mentioned into this year.

And just as a follow-up, there was the Metcash contract in for the full year as well. I think you've called that out in the past as a bit of a positive. In terms of margin?

Commenced in April 25, so we haven't got the full year benefit through yet.

Right, and that's still all on track and continuing? Is that a tailwind as well for gross margin, or is that not as meaningful?

The contract is meaningful. It's certainly not our only contract that we have running through the business. We have others that we have the ability to negotiate it as well, but all on track, fully implemented, and we should see the full year run rate this year.

Right. And just my second one is just around the Yugo uplifts you're seeing, you know, up from $300,000 previously to $350,000 and how that plays out from the EG acquisition, given a quarter of the sites are planned to be converted there. Given that meaningful kind of uplift that you're seeing, should that translate into higher synergies, higher accretion? when you get to the EG conversions as well, or is there something else that we need to be considering? And also, what have you factored into the synergies in terms of uplift? Would it have been consistent with $300,000? thousand that you called out previously.

So it would have been just consistent with those base numbers that we quoted previously. I think what I would say is you know it's the 65 to 80 but as I commented actually we see a lot of potential when we benchmark and the performance of Kate's network against comparable sites we see a fair bit of potential. out of that business. So Yugo and doing more on Yugo offers us great flexibility but it's not the only lever we can pull and we see it is great to have that flexibility but there is also a lot of value we see that we can extract. out of the store on a number of those stores if we look at comp performance against our own network. So flexibility there. We're not going to change our numbers on synergy expectations at this stage, but it is a really important point to reinforce.

Thank you. And our next question today comes from Gordon Ramsey with RBC Capital Markets. Please go ahead.

Thank you very much and great results today. Now I got a question about the EEG phase two clearance assessment with the ACCC and I know on slide 23 you're highlighting that it's a would decision versus a could decision in phase one. The feedback I've picked up is that the ACCC is mentioning the divestment of potentially 115 sites You went into this transaction looking at divesting 19 sites. I just want to know how you're going to get closer to that 19 site number in the second phase of the assessment. Can you comment on that, please?

Yeah. So, look, there is some basic parameters around concentration in terms of the number of branded banners in a local market and overall concentration that go into the original sort of formula. When you're in terms of isolating the number of potential sites and then you've got to go a bit deeper in terms of looking at what's happening market by market to make a true competitive assessment, what are the geographic boundaries, etc. When you're in the first phase, what is evident, remember the Commission is, we're one of the first transactions in this new regime. What's evident is it was a relatively conservative approach and hence we've used the language under the regulations around whether it could are likely substantially less in competition. They're taking a broader threshold than what would be past practice and would have supported past decision-making. As you move into phase two, the sort of three competitors or less and 40% is typically the benchmarks that are provided or applied in a local geographic market, and then you look at some of these other unique conditions as it relates to those markets. So we're not going to speculate on sites. We are confident in our view and our view is that we will end up with a result that is closer to our original estimate than the sort of numbers you just telegraphed then and were perhaps mentioned by the Commission previously. That's just part of the process. We had always estimated a completion in Q2 of this year, and the timing of this Phase 2 review is consistent with that. So we're not surprised that a transaction of this complexity has gone to Phase 2, and we continue to work constructively with the Commission.

Thank you. Second question relates around net operating cash flow. The market and ourselves were expecting a much higher number. I know that's a working capital issue there as well, but I think you mentioned MSO and inventory loss contributing to it. Were there other factors that make up the difference between where the market was, let's say like $1.1 billion versus kind of $795 million reported?

Well, I think that if we're talking – you must be quoting that number off our operating cash – The two drivers in there that would be a difference from reported EBITDA are movements in working capital, cash payments of significant items and then lease payments because obviously our EBITDA is on a... post AASB 16 or apply the lease standard so lease payments don't wash through EBITDA. When we report operating cash we have to subtract those lease payments. I think if you take those three data points you'll get very, very close to the number that's in that bar chart on our cash flow slide. Our cash generation generally is very good, and really between the restructures we've talked about and what's pending in terms of completion of the low sulfur fuels project, you will see our cash flow return quite quickly. Thank you.

And our next question comes from Scott Ryle at Rework Equity Research. Please go ahead.

Hi, thanks very much. Matt, probably for you, the first question is around Lytton. When you're talking with government, and I understand there's a lot of detail to come, but when you're talking with government, is there much focus on looking back at the five years since the FSSP was introduced and the fact that there was a big spike in 22 and through the cycle it's looked okay, or is it more the fact that going forward there's been a structural change in cost as you've referred to. I guess as part of that, does the decision on the FSSP impact at all on your assessment of low carbon liquid fuels as you've indicated is a potential and we all know what you're doing in that space as well. Does that come into the discussion?

So look I think Scott there is an acknowledgement in terms of the structural cost increases that we've seen at Lytton and in refining and I would say that's you know right at the crux of the review that's underway and that we expect will be completed in Q1. We then get into which is a broader review around kind of where is the industry heading in Australia? What do we see happening to costs and what do we see as necessary settings to enable the ongoing investment in the refinery? From our point of view, lower carbon liquid fuels is a separate topic and there's a significant amount of policy work that is going to be required to get to a level that would be appropriate and enable further investment. So they are largely unrelated. Obviously it certainly helps to have an operating refinery and capability if the country is to move down a path of producing domestically lower carbon liquid fuels in the future, acknowledging that's some time away.

okay but as you stand at the moment when you look forward the um basically the returns so this is just for the fssp um the returns at mitten are not sufficient to justify ongoing you know the medium to long-term uh operations as is is that a fair enough comment

I think the intent is to, when margins are low, so during a quarter when margins are low, we need the support to kick in. That hasn't consistently been the case and the main reason that hasn't been the case is because costs have escalated significantly and I think that's acknowledged. So I think that concludes the call. Thank you for your attention. I think it's a really strong result that is broad-based and right across the business and look forward to engaging with you over the coming days to discuss it in more detail. Thank you.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.