Ampol reports strong retail margins amid fuel volume decline

Ampol Limited (ASX:ALD) expects first-half 2025 EBITDA of approximately $640 million, aligning with market expectations, and EBIT of about $400 million, which is 2% above consensus. Operational highlights include earnings growth in Convenience Retail driven by favorable premium fuel mix despite volume declines, and improved Lytton refinery margins reaching US$8.71 per barrel in Q2, making it profitable for the quarter, though first-half EBIT remained near breakeven. Jefferies maintained its Buy rating on Ampol, raising its price target to AUD31.50, implying a 13% upside from the current price.

Analysis

Ampol Limited's (ASX:ALD) trading update for the first half of 2025 points to operational resilience despite mixed volume trends across its segments. The company anticipates an EBITDA of approximately $640 million, which aligns with market consensus, and an EBIT of roughly $400 million, representing a 2% beat versus consensus estimates. A key positive is the performance of the Convenience Retail division, where earnings grew despite a 4.3% year-over-year fuel volume decline in the second quarter, driven by a favorable mix toward premium fuels. This performance helped offset flat shop income, which continues to face headwinds from tobacco sales. The Lytton refinery demonstrated a significant recovery, with its refiner margin increasing to US$8.71 per barrel in Q2 from US$6.07 in Q1, pushing the refinery to profitability for the quarter and signaling a positive trajectory after first-quarter cyclone impacts. However, other segments show signs of pressure: New Zealand's fuel volume growth decelerated sharply from 3.2% in Q1 to 0.5% in Q2, and Fuels and Infrastructure Australia saw earnings remain flat amid a 3.3% volume decline. The update is reinforced by Jefferies maintaining its Buy rating and raising its price target to AUD31.50, implying a 13% upside.

Key Decisions for Investors

• Investors should view this update as constructively positive, as the 2% EBIT beat and strong recovery in Lytton refinery margins demonstrate operational strength that is offsetting volume weaknesses.
• Consider the 13% upside to Jefferies' revised AUD31.50 price target, which suggests the stock may be favorably valued given the company's ability to drive retail earnings through a superior fuel mix.
• Key metrics to monitor include the sustainability of high-margin premium fuel sales, the trajectory of the Lytton Refiner Margin, and any further deceleration in New Zealand's fuel volumes, as these factors will be critical to achieving full-year guidance.