Viva Energy Group Limited

Good morning, and thank you for joining us to discuss our 2026 first half results. With me on the call is Carolyn Pettich, our Chief Financial Officer, Denny Buvasperia, our EGM of Commercial, Jennifer Gray, our Chief Strategy Officer, and Teresa Rendo, our new Retail CEO. On the call, Carolyn and I will share the group results, while Jen and Teresa will provide more commentary on our retail convenience businesses, and then you'll be available to answer any questions around commercial. As foreshadowed in our quarterly trading update, we've delivered a record earnings this half, supported with strong performances in all of our business units. These results reflect a substantially improved refining margin environment driven by events in the Middle East, but also improving retail sales growth and continuing strength of our commercial businesses. The improvements in our underlying business are very encouraging and we expect to be able to continue building on this as we cycle through this extraordinary period. Despite significant volatility, I'm very pleased with the way we've managed the significant inventory and supply exposures and maintained capital discipline throughout the period. The resulting strong cash conversion has strengthened our balance sheet with net debt reducing from $2.1 billion at the end of 2025 to $1.7 billion at the end of June. In recognition of these results, the board has determined an interim fully franked dividend of 7.73 cents per share, representing a 70% payout of CNM and CNI NPAT on a replacement cost basis, which is, of course, at the top end of the company's dividend policy. In line with our policy, the contribution of the ENI business will be assessed at the conclusion of the financial year. That said, we expect the ENI business to continue performing well through the second half. Notwithstanding these excellent financial results and an improvement in our personal safety performance, it is important to acknowledge that we had a significant process safety incident in April, which resulted in a fire within the gasoline complex. We are fortunate that no one was seriously hurt and that the fire was safely contained by the professional actions of our response teams, but this is indeed a serious incident which we are determined to learn from. As we've previously confirmed, the refinery is expected to maintain operations at more than 90% of its normal operating capacity until the unit is repaired or replaced. We are assisting technology solutions and will work with our insurers to determine the best pathway forward over the coming months. Given this is a long-term investment decision, our approach will also be influenced by the government refining retention policy, which is currently under development and which I'll cover in a little bit more detail later in the presentation. The first half of this year was obviously shaped by the geopolitical events which have caused significant disruption across the global energy markets. While these events have severely tested traditional supply chains, we have worked closely with governments, customers and our suppliers to maintain production and supply throughout the period, leveraging Viva Energy's integrated supply chain capability. Our trading relationship with VITO coupled with our domestic refining capability provides important diversification of supply which reduces risk of supply disruption and provides critical earnings protection during periods of high volatility. A refining business benefited from higher regional refining margins and the term supply arrangements with retail insulated the company from the extremes of price escalations over the period. Underscoring the importance of domestic refining to the country's energy security framework the government updated the fuel security services payment scheme to provide more protection during periods of low regional refining margin and is engaging with us on a new program to retain refining through the next decade. As part of this program, we successfully completed commissioning of the ultra-low sulfur gasoline project at the beginning of the year. Yet again, our commercial business delivered an exceptional performance through a period of significant disruption and volatility. This reflects the diversity of our various businesses within commercial, the quality of our customer base, and the strength of our infrastructure and supply chains. Sales volumes lifted to 5.9 billion litres, driven by strong demand across the portfolio, lifting underlying EBITDA to around $250 million for the half. Both CNI and CNM benefited from advantage-term supply arrangements that were in place prior to the conflict in the Middle East, and which have insulated the business from elevated and volatile prices across the period, After allocating these benefits and other initiatives to manage costs and margin, CNI earnings lifted to $305 million for the half. Notwithstanding the effects of the fire at Geelong Refinery, our E&I business delivered an EBITDA of $354 million for the period, underpinned by exceptionally strong regional refining margins. GRM for the half averaged over $21 per barrel, which is in line with the GRM recorded for July and is expected to remain strong for the remainder of the year. Operating costs were elevated during the half due to measures taken to stabilize operations and recover from the loss of the oculation unit. However, we expect these costs to moderate as we adapt to a new operating setup. Before I hand over to Jen and Teresa, let me just touch on the fuel security measures recently announced by the federal government. Collectively, these represent a significant investment in critical energy infrastructure to improve fuel security and support domestic refining and together offer opportunities for Beaver Energy to further strengthen its infrastructure positions. Right now, we are heavily engaged with government on policy development to provide long-term investment certainty for the refining sector, which we expect to provide more certain returns than provided under the current FSSP framework. Together with the development of government-funded storage, we anticipate these programs can strengthen our refining operations and accelerate the development of our energy hub at Geelong. We expect consultation and engagement to materially progress through the remainder of this year. Let me now hand over to Jen to talk about our convenience business.

Thanks, Scott. I'll start with our trading performance on slide 11. The first half result shows a material improvement in the convenience and mobility with an increase of $139 million from $74 million compared to the prior corresponding period. The first part of the bridge normalises the benefits from fire period acquisitions, including Liberty Oil convenience and the transition to owned fuel supply in South Australia, as well as an adjustment that recognises core industry trading conditions in 2025. The second part sets out the underlying trading performance with improvements supported by higher fuel sales, stronger retail fuel margins and an allocation of supply benefits achieved during this period. Total retail fuel volumes increased by around 2% with diesel the primary driver of this growth. Margins were partially offset by a one-off excise reduction that was passed through to the market in full immediately. Inconvenience, local sales were lower, reflecting the continued year-on-year decline in tobacco, but importantly tobacco sales remained stable over a 12-month period. and sales excluding tobacco increased by 1.3% supported by increased customer visits and a more coordinated promotional activity. These benefits were partially offset by inflationary pressures including wages and rent together with other costs such as the year-on-year impact of legacy electricity contracts that expired mid-2025. Overall, the results show that the earning space is improving. The next phase is to build on the momentum through better retail execution, great control of the supply chain and disciplined investment in the network. During the half, we make progress against the five priorities through which we are building a stronger and more scalable retail operating platform. Together, these priorities are designed to improve the customer proposition, strengthen execution and establish a platform for sustainable earnings growth. First, under team and customer obsessed, we passed through the full excise reduction promptly, providing customers with relief during a period of elevated fuel prices. We also rolled out flybys across OTR, aligning loyalty and customer data across the OTR and Ready Express networks, and addressing a specific pain point for customers at our converted locations. Under retail excellence, we appointed a new retail CEO and have continued to strengthen the broader leadership capability of the business. We also maintain strong retail fuel supply through a period of significant market disruption and demand uncertainty. Our efficient supply chain is progressing to plan. Distribution capability has now been established across the eastern seaboard and we are on track to exit from the Coles product supply agreement by the end of November. We've also focused on the curation of our offer, starting with a review of the product range, simplification of our offer and improving its relevance to customers. We've sourced the first private label products ahead of launch in the second half, initially focused on everyday categories such as milk and water, addressing a key gap in our offer. Finally, under the right network and format, we've adapted the full year 26 development program to focus capital on highest return opportunities, which I'll cover in more detail on the following slide. Our network strategy is focused on having the right format in the right location, supported by disciplined returns led capital allocation. We have adapted the full year 26 development program in response to evolving market conditions. The program continues to be led by opening new OTR stores paired with conversions where the economics are compelling. For full year 26, we expect to deliver 20 to 25 new OTR stores supported by a smaller number of conversions to both OTR and Liberty formats. We're also progressing the conversion of 25 to 30 stores to an unattended self-service format. These are predominantly locations where the shop sales do not support continued investment in a fully attended store, but where the fuel site itself remains attractive. We're trialling an unattended format that retains a customer proposition through features such as a small kiosk, vending and collection capability, while materially lowering the operating costs of the site. Customer acceptance across the three trial locations has been encouraging with improved fuel sales and site performance with payback periods aligned with industry norms. We will apply the learnings from these trials as we progress the 2026 conversion program. Establishing an independent supply chain is a critical enabler for our next phase of convenience growth. Distribution capability is now operational across South Australia, the Northern Territory, Victoria, Tasmania, Queensland and New South Wales. Western Australia remains on track for November which will allow us to complete the national rollout and exit of the Coles product supply agreement by the end of November 2026. Our integrated supply chain gives us great control over ranging, promotions, forecasting and inventory Thanks, Janice.

Our efforts over recent periods have really remained focused on both organising and stabilising our end-to-end convenience and mobility business, including bringing it to self-sufficiency from transitional arrangements. As we look forward, we have a structured roadmap to unlock earnings growth across retail. In half two, our sequencing of near-term execution is broadly focused on progressing initiatives that have already commenced and are in trial, ahead of medium-term scale benefits that include supply, range, buying and network through FY27. If we look at our work streams and starting with our team and customer obsessed, we are well progressed in how we organise our team as one Viva Energy retail team, removing duplication and working consistently with further unlock to be realised in half two. Further to this, we have a clear plan to deepen customer engagement through data-led personalisation and unlocking those customers that are active within our database, starting with flybys. Retail excellence is our second pillar, and we are centred on strengthening leadership, systems and processes to lift execution, efficiency and consistency. My initial observations after four weeks is that the uplift that exists in this space and the efficiency gains are both real and measurable. The efficiency of our supply chain is key. As Jen has already shared, our immediate focus is to have a supply chain that we can fully scale from December 2026 and into 2027, where we will unlock synergy from being just in case on our stock to just in time. Through embedding a new operating model, we will progress increased control of our end-to-end supply and focus that to match demand so that we carry less safety stock in our stores. Curation of our offer is another key unlock. We are buoyed by our recent quick win trials that advance our product range review disciplines, better segment our ranges, expand our private label penetration and grow where we under index in category. This will improve productivity per square metre, basket penetration and overall health of inventory. Lastly is the right network and format. It includes continuing our pipeline of network expansion and format optimisation that Jen has shared, but more so ensuring that we better embed the learnings in this space to drive down capex and improve performance. So if I was to summarise on where we've been and where we're going, the clear message is that F26 is about completing the retail foundation platform, while F27 will convert that platform into better execution, improved customer outcomes and sustained growth. We recognise that much of this work is still in delivery. Our focus is on disciplined execution and clear measurement of all benefits underpinned with a robust retail scorecard. I will now hand over to Carolyn to discuss our financial performance. All right, thanks, Teresa.

I'll start on slide 17. So Group EBITDA on a replacement cost basis was $774 million, and that compares to $305 million in the prior corresponding period, with all three business segments delivering strong earnings growth. NPAT on a replacement cost basis increased to $371 million, despite higher depreciation associated with the commissioning of the ultra-low sulfur gasoline unit and other recently completed investments. Importantly, the strong earnings performance also drove underlying free cash flow of $449 million, reducing net debt to $1.7 billion at 30 June. On slide 18, you can see that operating free cash flow was $604 million. This strong cash conversion was an important contributor to the significant reduction in net debt during the half. And given we report on a pre-AAFB16 basis, EBITDA continues to remain a good proxy for underlying operating cash generation, with underlying operating free cash flow closely tracking EBITDA. Now, net capex was $123 million in the first half, Most FY26 CapEx is weighted towards the second half and relates to new retail stores, store conversions and other scheduled project activity across the business. While expenditure is weighted towards the second half, our approach remains disciplined and focused on attracting returns. And today we reaffirm FY26 CapEx guidance of $350 million to $400 million, which remains materially below FY25. As you can see on the next slide, net debt closed the first half at $1.7 billion, down more than $350 million during the period. This contributed to gearing a 1.5 times total net debt to EBITDA, and that compares with approximately three times at FY25. Elevated first half earnings have supported this outcome, and our focus remains firmly on managing leverage at around two times through the cycle. At CityJune, we have had a really strong liquidity position supported by substantial undrawn committed facilities and cash on hand, providing significant financial flexibility. And moving to slide 21, this sets out our capital management framework, which remains unchanged. It also sets out the priorities we communicated in the FY25 results. The first half saw disciplined investment and strong cash generation, supported by a material improvement in the balance sheet. Against that backdrop, the board determined an interim dividend at the top of the policy. On slide 22, this shows our progress against those capital management priorities we set out, and those were set out in February. The FY26 CAPEX guidance remains $350 million to $400 million, again, materially below FY25. We improved convenience inventory management in retail, and we reduced inventory levels by approximately $300 million during the half. In retail, the supply chain rollout remains on track and we have reworked the network development plan to focus on capital on the highest return opportunities. Discussions with the federal government on FSSP phase two to address the refinery's earnings profile are progressing. Our surplus land review continues with previously identified sales opportunities being considered alongside the federal government's recent fuel security announcements, including the proposed minimum stockholding obligations and sovereign fuel reserve initiatives. And finally, gearing has significantly improved as it has benefited from very strong first half earnings and favourable cash flow. And our focus again remains on maintaining a bridge at approximately two times through the Now on slide 23, we can see that the board has determined an interim fully franked dividend of 7.73 cents per share. This represents a 70% payout ratio of replacement costs from the convenience and mobility and commercial and industrial segments and is at the top end of the company's dividend policy range of 50 to 70%. And consistent with our dividend policy, the energy and infrastructure segment is assessed on a full year basis. So the dividend outcome reflects a strong performance in the first half and the material improvement in the balance sheet. The dividend will be paid on the 30th of September, 2026 to shareholders on the register at the 7th of September, 2026. Our dividend reinvestment plan remains active and is not underwritten. Eligible shareholders can reinvest their dividends into shares at a 1.5% discount. I'll hand back to Scott to provide an update on the outcome.

Thanks, Carolyn. Let me close the presentation by just making a few comments about the outlook for the business through the remainder of the year. As mentioned earlier, we enter the second half of a stronger balance sheet and a clear focus on disciplined execution. While international markets remain volatile, we expect this to benefit our refining and commercial businesses with continued strength in regional refining margins and our fuel supply arrangements. We are setting ourselves up to optimise production and work around the alkylation unit while we assess long-term options to replace this capability. In the interim, we expect to be able to maintain production above 90% of animal capacity and maximise the opportunity of the strong refining environment that we see. Our commercial business continues to perform well and typically excels in the volatile market conditions that currently persist. The team are very focused on achieving our long-term aspirations to organically grow this business and have made further progress on this agenda despite the current environment. The retail business has delivered a strong online performance and I'm pleased with the progress we're making to restore growth after a challenging couple of years. It's really exciting to have Theresa join us and she's already making a very positive impact after a short time in the role. I expect us to move quickly from here to build momentum now that we have largely completed the integration of our various retail businesses. We will of course have much more to share at our Invest Today in Sydney on the 9th of November where we will provide a deeper update on strategy and medium-term priorities. But for now, let me open up to your questions.

Thank you. If you wish to ask a question, please press the star key followed by the number one on your telephone keypad. If you wish to cancel your request, please press star two. And if you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Mark Wiseman from Macquarie Group. Please go ahead.

G'day Scott and team, thanks for the update here. Obviously we've seen, you know, a strong set of results but quite a large divergence between Ampol's and Viva's and part of that goes back to the supply chain models that you each run. You understand Vitol, you know, created the entity and brings a lot of value to the relationship in terms of sourcing and Securities Supply, but I just wonder if you could talk us through as you come up to this renewal with Vitol in 2028, what levers are available to you to reduce the dependence on Vitol and start to stand up your own supply chain and enjoy some of those benefits over time and how long could that take?

Yeah, thanks, Mark. I mean, obviously the relationship with Vitol has been in place for what will be 10 years in 20, It is the model that was set up at the creation of Fever Energy. And look, it has performed well over that time. And I think, look, even in the half that we've just had, you can see it has delivered significant value. If you look at the contribution from our term supply agreements in the first half across, which has been allocated to both retail and commercial, it's about $110 million of value. that's been created over that time. And that's obviously without us running our own trading operations in Singapore. So it does provide important support, which is mostly particularly valuable during periods of high volatility like we've just been through. And that was the case during the early days of the Ukraine crisis as well. But as you point out, the agreement comes up for renewal in 2028. It's an option that that VTOL have, but it's an option that we'll sit down and formally review with them ahead of that time. It has been in place for a long time and has continued to evolve over that time in terms of how we work together as well. So we'll see to the opportunity to explore how Renewal might look and what we would want from that with them over the next year. So that's a bit in front of us, Mark, but certainly certainly a rush in our mind, but it comes from a point of view of, you know, it's been a good, very strong, good relationship that we've had. And as I've just said, you know, delivered important value during critical periods.

Okay. Thanks, Scott. Cheers.

Thank you. Your next question comes from Tom Allen from UBS. Please go ahead.

Hi, Tom.

Pardon me, Tom, your line is now live.

Good morning, Scott, Carolyn and the broader team. Apologies about that. I'd just like to understand if I can just more on the economics that you're targeting on the unattended offer. I think, Jen, your comments on the call were that the payback periods are aligned with industry norms. So are we right to assume about $300,000 in CapEx and $350,000 in incremental EBITDA per site in the way that we apply our modelling for this opportunity going forward?

I think that would be a fair assumption, yes.

Easy, play on. Okay. In CNI, we've seen some growth in petrol and diesel on PCP. Should we expect more growth here, just as large fuel users who may have historically sought to save a few cents per litre on fuel costs by accessing regional and spot markets now potentially look to lock away a more reliable source of long-term supply with a fuel supplier like Viva? I just ask because CNI has been a real strength for the business. I'd like to understand if there's more growth that could come through here.

Thanks, Tom. And that's Danny. Yeah, that might well be the case, obviously, you know, as you do always see some very different behaviors from one segment to the other. Certainly, there will be some more growth available, in particular in aviation, where business has been significantly disrupted in the first half. How people are going to play and what kind of contracting arrangement that we look for in the future. It's a bit of a question mark at the moment. The market is stabilized. It's not very clear who is going to play how in the near future. But overall, the business is still growing and the fundamentals of our business definitely look very, very strong. And certainly this period of volatile environment is benefiting us and encourages a number of people who would normally transact a bit more transactionally to look at their business from a more strategic lens and certainly prefer to deal with us in those circumstances. And that's probably the reason why Scott was mentioning a higher cost environment is usually beneficial to commercial because not encouraging people to play transactionally. Does that answer your question?

It does, it does. Thank you. And if I could just sneak one more. Scott, you've shared some colour in the release today on the opportunities for Viva arising from the government's $14.8 billion fuel security reforms. Just on refining retention, how should we frame the scope of outcomes here? Is it more likely that we see another adjustment to the FSSP support level, or perhaps is it more likely a a Commonwealth subsidy on the growth investment like we saw for the ultra-low sulfur gasoline project? And similarly, how should we scope the funding requirements for VEVA to support building or supporting the Australian fuel reserve and meeting the new MSL obligations?

Yeah, thanks, Tom. There's a few questions in that one. Look, I mean, the FSSB, the current scheme has obviously, I mean, it's been... a milestone program, really, I think, back in 2021. It was set up to provide the support that was necessary for us to continue refining, and as we've covered before, it unfortunately hasn't kept up with the cost of doing business in Australia, and there's been periods where it hasn't provided the level of support that we really needed to maintain positive cash in that part of the business. It was particularly pleasing to see the federal government update that at the beginning of this year, and I think that helps set us up to navigate the next few years until the end of that agreement in 2030. So a new arrangement, which we're currently in discussions with, takes us well beyond 2030 into the next decade, potentially through to the end of the decade. It's a very long, it's a way in the future, it goes for a considerable period of time. So I don't think the current FSSP really provides a framework that's going to be robust enough over that period and provide a necessary return on capital through what will be a pretty uncertain time for refining. So I think it will have to be a variation on FSSP that also provides a component that delivers that capital return to allow us to make that sort of commitment, move forward with confidence stand-up relative to other investment opportunities that we have across the rest of the business because those are the choices that we have. So that's kind of at a high level of the broad framework that we would be looking for. And this is how we're engaging with government at this point in time. Obviously, now we've got also government fuel storage being likely to be built and then lifting in MSOs. Now, I mean, they're two different programs. The government storage... program will obviously be a program that's funded by government and the way the consultation paper's been framed it will be looking for industry to provide services to both build storage and store product on behalf of government over a long-term commitment so I think that's potentially attractive for us particularly around our refining business to further to strengthen that business, provide additional storage, does provide economic benefits to the refinery, but potentially, and with government funding, I think a potentially attractive investment proposition. MSOs is ultimately a cost on industry to fund, reflective of, obviously reflects the size of the business that we have. That's a little bit more challenging to fund to navigate in the sense that it is an additional cost. We would need to see good commercial benefits from building that storage to support the business that we have and a pathway to recovering that cost from the market. I think that's a bit to work through and better understand and look at the opportunities that we have around the country where we can actually make good use of any funding that might be available to support the development of storage to meet the MSO obligations. that I think will be something that will come out of the consultation process, which has been kicked off, which we'll obviously participate in and watch closely.

Thanks, Scott. I appreciate that detail.

Thank you. Your next question comes from Adam Martin from E&P. Please go ahead.

Good morning, Scott, Jen, Teresa, Caroline, Dennis. First question just on sort of retail fuel margins in July, August. They're quite low, getting some industry feedback that, you know, Viva's sort of trialing different things around pricing. Can you talk through that? Does that relate to that allocated supply benefit as well in C&M, please?

Yeah, I think the interesting thing when you look across July and August fuel margins is to remember that we actually had an excise revaluation across both July and August. And if you're comparing AIP data, to retail board prices, that that won't be reflected in that data. I think it would also be fair to say that we saw, after a period of quite constrained demand through March and April, certainly plenty of product in the market. And that naturally played out across retail forecourts. From our perspective, we continue to offer a competitive price for our customers. and we continue to do that, thinking about the segments we're operating in. So we're very fortunate to have a low-cost channel to market through our Liberty Oil convenience offer and a best-in-class loyalty and docket redemption offer through our Shell OTR Ready Express offer. And that's how we think about our pricing strategies for fuel across the network we operate.

Okay, thanks. That's good, Carla. Just on refining, Scott, just thinking about costs and insurance and that post, are there any costs that we should think about next 12 months that are outside insurance or any differences in the way you're going to run the refinery? Just trying to think about OPEX or maintenance capex, that sort of stuff, please.

No, not really. I think, look, obviously in the aftermath of the incident and the managing this lower production through that period. As we brought production back online, we did incur additional costs both in terms of managing the incident and managing a pretty inefficient production period through that first half. So that's been reflected in the higher OPEX in the first half. We have done a lot of work to stabilise operations and get comfortable running the plant in a different mode than what we would traditionally do. And we obviously need to do that for the long term as we work through the replacement of the unit. So there's still a little bit more to do to really settle that down, but we're well advanced and I expect to get to pretty optimal production mode through the course of the next month or two. I think the main impact to refining is really what we've called out and the way I think about it is that production will be somewhat less than 100%. And if you work on that sort of guidance, that sort of covers all of the factors that go into running in the mode that we'll be running in for an extended period of time.

Okay, thank you. That's all for me.

Thank you. Your next question comes from Rob Coe from MS. Please go ahead.

yes good morning can I ask about the refinery if you could give us any steer on how we should be thinking about insurance recovery looking at the financials looks like the impairments and disposals is around 20 25 mil is that the right number we should be thinking

Yeah, thanks, Rob. So the number that you're looking at, that's just a historical written down value of the assets that were damaged in the fire. So that's not instructive when thinking about a replacement of a unit, which Scott shared where we're working through the details on. So that should be viewed quite separately.

Yeah, yeah, okay. And then thinking about eventual replacement of alkylation units and the other government policies, Can you talk to any ability to increase capacity or increase production of diesel or even incorporation of renewable diesel into the mix?

Yeah, I mean, we're certainly, Rob, certainly looking at what's the right technology solution to move forward with the replacement of the alkylation capability that we had. Certainly an opportunity to look at new technologies and and also with a mindset of what's the right production that will serve us well into the next decade when obviously demands are going to be reshaped, particularly probably a decline in gasoline demand over that period. So it's been work in progress, but certainly very much on our mind about the selection of the technology. We have, as you probably know, we've been working on projects to process biogent feedstocks and produce lower carbon fuels through refinery Geelong. Those projects remain really very interesting to us and I think with the right policy settings around particularly to landside policies for lower carbon fuels, they're projects that I think can be commercially sensible for us to progress. That is quite independent from the work we need to do around the alkylation unit, but I think I think if we're going to run the refinery for another, through the end of 2040, having capacity to produce lower carbon fuels is a sensible and attractive set of projects for us to be looking at.

Okay, great. Thank you very much.

Thank you. Your next question comes from Gordon Ramsey from RBC Capital Markets. Please go ahead.

Thank you for delivering a solid result today. Scott, just following up on your comment on guidance on the refinery production volumes, I'm just trying to get my head around why you're not at 100%, assuming just the alkylation unit was damaged and you can import, alkylate, and blend.

Am I missing something? No, I think it's a proxy, Gordon, for a range of impacts from losing alkylation. I think the main impact is that we... I mean the alkylation unit processes gas and particularly LPG and turns that into alkylate which is used in high octane fuels such as premium fuels and gas. We therefore have a surplus of LPG at the current time that we need to manage and that does have knock-on impacts to optimal production across the plant. There's projects that we're working on at the moment to allow us to manage that gas balance better than we Otherwise, we'll be set us up to be able to do that over the long term. So I think we get closer and closer to 100% as we get that capacity installed. But obviously, we lose the margin associated with produce that we gain from producing high-octane fuels. Now, that's not a production impact necessarily per se, but the guidance we're given is a proxy for all the different effects that come from running the refinery without the oculation unit. So it's a simple measure, Gordon, and one that we'll reassess as we get clearer on the long-term impairments to what extent that there are any, and then if we need to update guidance because we've got a clear review, we will. But for now, that's the best guidance we can give.

Okay, thanks, Scott. And then just moving on to the portfolio review, you said you were evaluating surplus land sale opportunities. is that mainly retail sites or does it include other assets?

No, the retail sites are all leaseholds. So we certainly manage that portfolio of assets, but more as a leasehold decision. As leases come up, do we want to renew and how do we develop those sites? So that's less of a divestment opportunity. But so it's mostly land associated with our operating facilities around terminals and refining, the refining business, the surface land that we are unlikely to use. Now, as Carolyn said, we're just reevaluating that at the current time to understand what land we might need for any storage opportunities that we wish to pursue. So that's, I think that's obviously a new consideration that we just need to take into account. But otherwise, yeah, there is certainly surplus land around our major facilities particularly that is highly valuable and not necessary to support our long-term business.

Can you feel for the value of that in round figures? Is it material?

It's material, but we haven't discussed, we haven't, when we see any days we're still working through how we would, you know, what we would look to sell over what time frame and what value. So I think that's one for a, Another update, Gordon.

Okay, and just lastly, I'm just following the question on the Vittorio Supply Arrangement expiring in 2028. Where do you sit at the moment with the Shell naming rights? Is there a timeframe on that? And can you just explain the mechanics? Is it the option on their side or yours or both?

Sorry, so the Shell Brands License Agreement is due to expire in 2029. And that optionality, it would be for a mutual agreement.

Got it. Okay, thank you.

Thank you. Your next question comes from Ewan Minogue from Baron Joey. Please go ahead.

Morning, Tim. Congratulations on the result. Can you just talk us through what refining margins you've been seeing through August so far and whether you've seen any reduction in crude premiers and hence an improvement in margins?

Yeah, I think obviously the July result reflects market, also reflects the performance of the site through that period of the oculation unit, and also reflects the crude premiums that were in place through that time. And you might recall that we've previously talked about experiencing higher crude premiums in quarter three as we started purchasing for those, which was sort of early part of quarter two. So crude premiums were certainly elevated through the course of the early part of quarter three. And that's obviously reflected in those results as well. And it's all moderated quite a bit since that point in time. So the pressure on crude premiums has reduced. and we're getting, obviously, better at optimising and running the plant around the population here as well. Some of those effects will reduce as you go forward.

Great. Thanks, guys.

Thank you. Your next question comes from Michael Simotas from Jefferies. Please go ahead.

Good morning, everyone. Thanks for taking my question. First one from me is I just want to understand the convenience retail earnings bridge that you've outlined on slide 11. and two questions I've got on that. The first one is that fuel margin normalisation bucket of 31 million to normalise the first half 25 number. Can you just talk us through that? And then I just want to understand the allocated supply benefits and whether the result would have been effectively $56 million worse if not for that VTOL agreement giving you a fortuitous position on your term supply. Because if we adjust for that, the first half underlying performance would have been down quite significantly on the second half of 25.

Yeah, sure, Michael. Maybe I can just try and address that. So the The first part of that bridge which you touched on is to recognise that the first half last year was obviously a disappointing period of time from a performance point of view, particularly around the returns that we were generating from fuels during that period in the first quarter. So we've normalised that to give it more apples for apples comparison, but also brought back the impact, the volume that would have been so the margin that we would have generated had we owned Liberty Business throughout that particular period and also the margin uplift associated with the transition from BP Supply to Levis Supply over that period again just to build a like an Atlas Raffles starting point for first half so that's what's in the 31 there's two you're right there's obviously a benefit that's been allocated to both the commercial business and the retail business from the supply benefits that we've captured from the term supply arrangements. We don't have a business unit that covers supply, so we typically allocate that to the business units, which is what we've done in this case. So roughly half has gone to retail and half to commercial. That was obviously material during the first half, given that the term agreement had been struck prior to the Middle East. I think there's and so on one level that is unlikely to repeat going forward. That said, we still have term supply arrangements in place. We're still operating in a period of high volatility and we expect that term agreement to still provide some benefit moving forward. The other one often there, which I would call out, which is not repeated, which won't repeat, is the excise reduction that occurred. We passed that on in full. So that's obviously a significant reduction costs to the business, which obviously as it went off, it doesn't repeat. So if you want to look at those two things as being unlikely to repeat, you need to add them both together. So does that make sense?

Yeah, or we could add the $53 million of fuel margin and the fuel excise together because first quarter margins were very strong in the market, right?

Yeah, I hear that too. And obviously July and August has been softer, although we obviously had some reverse benefit from excise going back up, given the revaluation of stock that we would have been holding at that time as well. And we're heading to a seasonally stronger period in the back end of the year in retail. And typically that's been our strongest period for retail fuel margins as well. So I wouldn't give up on that yet. I think that's... I would more look at the supply benefits and the excises being elements of that bridge that are less likely to repeat going forward.

Okay. So sort of all told with that, I guess when we saw the quarterly update a couple of weeks ago, the market was quite pleased with convenience retail outcomes because it looked like you'd bounced off the bottom. Probably neither. has the convenience retail business bottom now and we should expect it to grow from here or is there still work to do?

Yeah, I think it's definitely a turning point, Michael. I think a lot we've done the last two years has been very heavily focused on integrating the business to standing up ERPs and supply chains and a very distracting time for the business during a period that was also, from a macro perspective, heavily impacted by cost of living pressures and tobacco sales declined. So it hasn't been the easiest environment to operate a retail business, particularly for us, given the transitions we're going through. Now, we're at a point where really that is now largely all behind us. So EIPs in place and stabilised, supply chain restored. WA to get done, but we're pretty much done on that. Tobacco, we've certainly reached the bottom, and we sort of start to cycle out of that now in July, so should see, therefore, convenience sales in aggregate, both including tobacco, you know, moving forward from here and starting to deliver year-on-year growth. And I think a lot of momentum that's been built, you know, I think focus has been built by Jen and her time in the role, and now with Teresa coming on board, I think we're genuinely got time and capacity now to focus on the things that impact customers and drive sales growth going forward. So I genuinely believe it's a turning point where we are, and I think there's still a lot to do, no doubt about it, but the lot to do is all driven by opportunities and significant value that we can see that we can add to the retail business.

I think you summed that up really well Scott but what I would say Michael is you know it has been a period from what I can see of absolute standardization ownership about end-to-end retail business and there is certainly a lot of unlock that exists in just being good retailers and which is all about discipline and retail scorecards. And we can see that down to site level. And we certainly have a number of initiatives that are now kicked off and well underway that should deliver to the bottom line and should deliver growth.

All of that makes sense. And can I just ask one quickly on refining as well, just following on from Gordon's question, you know, being pretty clear on volume and utilisation. looks like in July you've left some margin on the table as well. Can you work towards sort of adjusting product slates to get margins to where they would have otherwise been and just have the volume impact? Or is there likely to be an ongoing margin drag as well?

No, there's always a danger of printing one month's refining numbers anyway, as you know. And, you know, I think and the comparison with ampoles will always be different. Different refineries can operate different crude sets and different premiums through a period. So there's a bit of a, and as you can see, our history of that moves around quite a bit. So Anastasia Poirier acknowledged that, you know, we've got a period where crude premiums were elevated, you know, operating wasn't perfect. We're getting better at that and that will definitely improve going forward. And, you know, the refining margin environment remains very strong. So, I think my view is that that's going to be with us for quite some time. There's a long tail to the situation in the Middle East and the region. Finding merchants will benefit from that. And Geelong, I think, despite the challenge we've had with the alkylation unit, is a good place to really make good benefit from that environment and deliver another really strong result. in the second half. So I think that's still a very exciting business to be in at this point in time. And we're not, you know, I think we've got the ability to still generate good returns.

Yeah, I agree. Thank you.

Thank you. Your next question comes from Craig Wolford from MSD Marquis. Please go ahead.

Good morning, Scott, Caroline and team. So I just wanted to first question on the convenience business. Just trying to understand, there was a comment on one of the slides about reducing the capex for the OTR conversions. What elements have been reduced and is there any update on the performance of the converted OTR sites?

So I think maybe if I can talk to the reduction of capital, I think we have become much cleverer at understanding which pieces of the OTR offer resonate and how we can achieve that in conversion of a Coles Express. and where the sites we originally did, we've turned every site into the most perfect OTR it could be. There are some aspects of those conversions that are costly and probably not hugely value accretive. An excellent example of that would be the inclusion of an internal toilet is very important. The location of that internal toilet is probably less important So thinking about how we can be really disciplined in how we convert a ready into an OTR has been something we've put a lot of focus on this year. So making sure that we can deliver the same OTR look, feel and offer to our customers, but in a very cost effective way. So a lot of time and effort's gone into that. I think when we think about the performance of the conversions, We've learned a lot over the sort of 12 to 18 months that those conversions have been operating and we understand really now where that offer resonates and I think it might be a good opportunity, Teresa's been with us before, to let her talk about how she's viewing that offer.

I'm just a simple retailer and shopkeeper by the way but When I look at the results of these conversions, they are quite mixed and to Jen's point, we have put in very quickly a process that is a more robust framework that matches brand to site and the communities we serve. In the very simplest of terms though, as we look at their performance, there is a real opportunity for segmentation of our portfolio, which is that match piece. But there's also a lot of work that we can do in better consideration of how we serve within the box. And what's really pleasing is for even the sites that aren't quite to where we expect them, the issue is not with the site, it's with the range and the service. So if I'm to use an example, OTR has twice as many SKUs as Reddit. So in a metro location where we might have majors around us, it means that we have a lot of unproductive SKUs. We've done one very quick trial in a site locally to us that we can visit quite often where we have reduced over 800 SKUs in that site and it has increased sales by double digit early days, let me say. So what is really pleasing you should be quite buoyed from is the opportunity sits in the box, not in its structure. And there are some real quick wins to be gathered up and to be rolled out in our learnings across what we have converted to date, but more broadly to our entire network. So I think I'm very encouraged by what I see in the opportunities that sit before us.

Yeah, definitely looking forward to hearing more in November. Just one other question. If I'm looking at the slide that's got the breakdown on the refinery business and the performance, the operating costs increase quite significantly from 1H25 to 1H26. Just trying to get a sense of how much of that is true cost increases and how much relates to the fire.

So this is the pension at the back, isn't it, on refining?

Yeah, so the operating costs excluding energy costs went from $1.45.5 to... $10 per barrel. Yeah, I mean, yeah, that's right. Obviously, production was up a bit and up about 10%, 12% in costs per barrel.

Yeah, I mean, I think, no, I think, look... Yeah, I mean, as I've called out, we've acknowledged there's definitely some elevated... costs in the first half driven by the impact of the fire. But outside of that, apart from just production, which was still pretty solid through the period, you know, our cost has been pretty in line. We've had, so I think, yes, just really, to see there's a cost increase there, it's really just the fire related, which I said before, which would normalise going forward. Yeah.

Perfect. Thanks, Scott.

Thank you. Your next question comes from Scott Ryle from Rimmer Equity Research. Please go ahead.

Hi, thank you very much.

Hey, Scott, you've given a good amount of detail on the refining process already. Can you just clarify for me, and apologies if I missed it earlier, what's the timing that you're expecting in terms of the next wave of refining into the next decade, the agreement with government?

Oh, look, I mean, our expectation is a limited will be seeing the refining retention program materially progressed before the end of the year. And whilst that's not that far away now, that would be still our objective and certainly the pace at which we're working at with government. It wasn't my expectation that it would be finalized or put into legislation by the end of the year. That will always carry through to next year, but I expect to have a pretty clear view about where it's heading with some certainty. But then it's important that we do because we've obviously got decisions to make around the replacement of the alkylation unit. That's going to be a multi-year program to replace. We can't really move forward with that decision without the knowledge about what happens beyond the end of the decade because we'll obviously kick off the replacement of the oculation unit next year. We'll be getting pretty close to the end of this decade before it's finished. And obviously, you want to have a runway to get a return on that decision. So it kind of all comes together for us over the next six months. It's an important period to land. And unfortunately, I think it's a very important decision for government as well. I think we're aligned on the need and the benefit of retaining refining capacity both for the country and for our business. It's really the basis on what's the economic basis on which that outcome can be achieved.

Okay, great. And then my second one is just for Denise, if that's all right. I just wonder in the last six months with all the different impacts and challenges that you've no doubt faced in running your business, has there been any volumes or products that you have not been able to 100% fulfill for customers. And connected to that, do you see any opportunity to step into perhaps some adjacent supply chains that you might not have played in but for the disruption that we've seen in global supply chains in some of these petrochemical products? Can you talk to kind of how you're seeing the environment for opportunity going forward as well?

Maybe this is the first part of your question. We take a lot of pride on how we have demonstrated the robustness of our supply chain and no customers had to suffer from any shortage of products during the crisis. There was certainly a lot of tension because the crisis happened at the beginning of the seeding season. It has been quite long in Australia, but at the end, we have demonstrated again the robustness of our supply chain. Whether there would be opportunity, and that comes back to the question earlier about the quality of the relation, the value of our relation with Vittal, a number of mitigation plans have been put in place at any point in time to make sure our customers receive the product they needed. we had weekly or bi-weekly communication with our top customers. I actually want to take that opportunity to thank one of our customers for their outstanding collaboration during that crisis. Do we need further sources of supply for the future or are there any other opportunities? related to the crisis? I don't think so. Nevertheless, we are still looking at any opportunity for connected segments. You mentioned petrochemicals. We continue to develop our strategies for our specialties. and any opportunity computers would certainly consider that. Whether there would be a massive change because of this crisis, I don't think so. We have said for a number of years, we have built our business and we have built our decisions through diversification and we will continue to operate that way.

Okay, great. Thank you. That's all I had.

Thank you. There are no further questions at this time. I'll now hand back to Scott Wyatt for any closing remarks.

Yeah, look, thanks again for joining us this morning to discuss our first half results. As I mentioned earlier, I am very proud of the way we've responded to the Middle East crisis to maintain supply through what's been a very uncertain period and at the same time deliver an exceptional set of results. We do enter the second half with a stronger balance sheet and some good momentum in all parts of our business. I expect commercial and refining to continue to perform well and for our retail business to return to growth as we embed the foundational work that we've now completed. And Teresa brings a sharp retail focus to the business. We'll have a lot more to share with you in November at our investor day and look forward to seeing you all there. Thanks again.