Insights

Why the Viva (ASX:VEA) share price is 5% higher

A large increase in earnings, compared to 2019 and 2020, are seeing investors rush to the company’s stocks.
The post Why the Viva (ASX:VEA) share price is 5% higher appeared first on The Motley Fool Australia. –

The Viva Energy Group Ltd (ASX: VEA) share price is jumping today. At the time of writing, shares in the energy producer are selling for $2.07 – up 5.08%. Earlier in the day, shares were up even higher before retreating back to the current price.

The massive price rise comes after the company released a large increase in earnings.

Let’s take a closer look at today’s news.

The Viva share price is rising

In a statement to the ASX, Viva Energy revealed its unaudited earnings before interest, taxes, depreciation, and amortisation (EBITDA) of somewhere between $390 million and $410 million for the six months ending 30 June 2021. That represents an increase of 34% on H1 2019. 2019’s results were better for Viva than 2020 due to the shock of COVID-19.

This large increase in earnings comes despite drops in output across petrol, diesel, and a 60% fall in jet fuels production. The company says retail sale volumes were affected by sporadic lockdowns, with an average fall of roughly 58 million litres per week. 30% of all petrol sales are from premium fuels.

The margin of its Geelong refinery has improved from $5.10 per barrel in 2019 and $2.90 per barrel in 2020 to $6.60 per barrel for this reporting period. This is a 29% improvement on the 2019 figure.

Due to the introduction of federal government’s fuel security package (FSP), Viva says it can now proceed with “major maintenance activity” (and associated expenditures) at the plant.

Investors are enjoying today’s news, judging by the rise in the Viva share price.

Management commentary

Viva CEO and Managing Director, Scott Wyatt, said

Viva Energy has delivered very strong first half performance driven by strong sales growth in our non-aviation businesses, supportive margins, and an improved refining performance since returning to full production in late 2020.

While retail fuel sales continue to be impacted by periodic lockdowns, and aviation by ongoing border closures, overall growth across all retail and commercial channels has been very encouraging with total Petrol and Diesel sales volumes up 4% and 16% respectively on 1H2019, as a comparison to pre-COVID demand.

Refining remains challenging, but supported by strong production levels, receipt of the short-term production payment grant, and the long-term fuel security package commencing 1 July 2021 that minimises the downside volatility of refining margins. Our recovery program remains on track, and I am very pleased with the performance of the business.

Viva share price snapshot

Over the past 12 months, the Viva share price has increased by 1.29%. Since hitting its 52-week high of $2.27 a share – Viva’s value has dropped approximately 10%.

Viva Energy has a market capitalisation of approximately $3.4 billion.

The post Why the Viva (ASX:VEA) share price is 5% higher appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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