Viva Energy Group (ASX:VEA) executives struck an upbeat tone on the company’s FY2025 results call, pointing to a stronger second half after what management described as a “challenging first half.” The company highlighted improving operating momentum across refining, commercial fuels, and convenience retail, while also detailing significant non-cash accounting items that weighed on statutory results.
Second-half rebound and operational focus
Management said group sales were in line with the prior year, with commercial delivering “another record year” supported by aviation growth. Retail fuel volumes were described as “relatively strong” after accounting for store closures linked to conversions, while convenience sales remained impacted by illicit tobacco. Convenience gross margin increased slightly to 39% for the year.
On profitability, the company reported second-half EBITDA of $396 million, up 33% versus the same period last year, contributing to full-year group EBITDA of $701 million. Executives emphasized capital discipline, noting CapEx was in line with guidance and that actions are underway to reduce gearing now that the major Geelong investment program is complete.
Convenience & Mobility: integration, conversions, and supply chain work
CEO of Convenience and Mobility Jen Gray outlined a strategy centered on extending the OTR convenience offer across the Reddy Express network, which she said has been underinvested and is operating below potential. She said the company rebranded its network to standard brands, implemented systems to end transitional arrangements with Coles, fully acquired the Liberty Oil Convenience business, and opened 35 new OTR stores during FY2025 (including 25 conversions from Reddy Express).
Trading conditions improved through the year, according to Gray, citing lower oil prices supporting fuel volumes and better fuel margins. She said tobacco sales have stabilized, with early signs of growth emerging in non-tobacco convenience categories.
Convenience & Mobility EBITDA improved materially in the second half: AUD 123 million versus AUD 74 million in the first half. Management said the company is seeing this underlying strength continue into 2026, subject to typical seasonal variation.
In discussing converted store performance, management cited early January indicators: ex-tobacco sales were said to be up 10% year-over-year across converted sites, with the top 10 stores up more than 30%, and fuel volumes “lifting significantly.” Executives attributed much of the uplift to forecourt works and an improved customer offer rather than pricing alone.
However, management also outlined impediments affecting the conversion program, including supply chain challenges outside South Australia, the removal of machine coffee, and the lack of Flybuys in converted sites. The company said it has paused conversions to address these issues, with conversions expected to resume “in earnest” in the second half of the year. For FY2026, Viva expects to open 40–60 OTR stores.
Executives provided additional detail on the supply chain transition away from Coles, including rollout of a new order fulfillment module (Blue Yonder) across the Reddy network, range alignment work, and the establishment of four third-party distribution centers scheduled to come online progressively (Victoria first, then Queensland, New South Wales, and Western Australia). They also noted an agreed six-month extension with Coles to provide more time for the transition.
Commercial and refining performance
Commercial delivered record sales of 11.8 billion liters, driven by continued aviation growth and strong performances across other business units. Earnings were described as largely in line with the prior year, with sales growth offset by a lower margin mix, increased supply costs from entering new markets, and general cost inflation.
Refining performance was mixed, with management citing site-wide power outages and planned maintenance impacts earlier in the year, followed by a fourth-quarter margin rebound. The ULSG project was completed and commissioned in October, with production starting in November, and management said the refinery enters 2026 “unconstrained by project activity.”
On near-term margins, executives said January started below breakeven from a refining margin perspective, with some improvement into February. Management noted the ULSG unit’s benefit has not yet been fully realized, while market pricing for low sulfur gasoline was cited as roughly US$1–US$1.50 per barrel.
Significant items, impairment, cash flow, and balance sheet
CFO Carolyn Pedic said FY2025 underlying net profit after tax (replacement cost basis) was AUD 184 million, reflecting EBITDA as well as higher depreciation and finance costs following the Liberty Convenience acquisition, a full-year contribution from OTR, and higher average debt levels.
Pedic detailed AUD 664 million pre-tax of significant items, “the large majority of which was non-cash.” The largest was a non-cash impairment of AUD 556 million relating to retail sites, which she said primarily reflected reductions in lease right-of-use assets for certain sites during softer trading conditions. Pedic emphasized there was no impairment at the Convenience & Mobility business level, and that accounting standards required the impairment modeling to exclude future improvements or management initiatives discussed on the call.
Other significant items included $97.5 million of transition, integration, and restructuring costs (including IT system implementation and corporate function rationalization), and $29 million of prior-period OTR impacts after the company identified inventory costs that had been capitalized historically when they should have been expensed.
Viva reported operating free cash flow of AUD 542 million, which included AUD 105 million of one-off costs tied largely to transition and integration activity. Pedic said 2025 was a peak CapEx year due to the Geelong turnaround and ULSG commissioning, and guided to AUD 350–400 million of total CapEx in 2026 depending on conversion pace.
Net debt ended the year at AUD 2.1 billion, with total net debt to EBITDA gearing at 3x. Management reiterated a target to move gearing toward 2x by the end of FY2027. Liquidity was cited at approximately AUD 0.9 billion, and management flagged initiatives including working capital improvement (especially inventory) and a review of opportunities to divest surplus land to reduce debt without impacting operations.
Dividend and outlook priorities
The board declared a final fully franked dividend of AUD 0.0394 per share, representing a 60% payout of NPAT (replacement cost basis) from the Convenience & Mobility and Commercial & Industrial segments in the second half. The final dividend is scheduled to be paid on 31 March 2026 to shareholders on the register on 13 March 2026. The dividend reinvestment plan remains active with a 1.5% discount and is not underwritten.
Looking to FY2026, executives highlighted four overarching priorities:
- Maximizing refinery cash generation with major maintenance and upgrades completed, while noting the importance of ongoing negotiations with government regarding the FSSP review.
- Building momentum in retail, including completing the move to independent convenience supply chains and exiting the Coles wholesale/product supply arrangements.
- Continuing commercial growth through organic investments and extending capability in markets such as aviation and marine.
- Reducing CapEx and strengthening the balance sheet after the completion of the Geelong investment cycle.
Management said the company entered 2026 with improved momentum, but acknowledged key execution work remains—particularly around supply chain transition and retail conversion pacing—before the full benefits of the strategy can be realized.
About Viva Energy Group (ASX:VEA)
Viva Energy Group Limited operates as an energy company in Australia, Singapore, and Papua New Guinea. It operates through three segments: Convenience & Mobility, Commercial & Industrial, and Energy & Infrastructure. The Convenience & Mobility segment operates as an integrated convenience and fuel network under the Shell and Coles Express brands; and supplies fuels and lubricants through the Shell, Liberty, and Westside branded retail service stations. The Commercial & Industrial segment supplies fuel, lubricants, polypropylene, and specialty hydrocarbon products to commercial customers in the aviation, marine, transport, resources, construction, agriculture, and manufacturing industries, as well as wholesalers.
