Ampol’s share price (ASX: ALD) gapped down sharply today, opening almost 5% lower, and marking a new 52-week low of $27.68 in the early part of trading. The significant decline is a direct reaction from investors to the company’s latest third-quarter update that highlighted several areas of concern, yet the stock did rally through the day, at one touching yesterday’s close of $29.14 before tapering off and ending the day down 2.33% midway through the trading range. With a market capitalisation of around $6.8 billion, Ampol is a notable player on the ASX 200, and any substantial price movements are closely watched by the market.
In the third-quarter update, Ampol recorded a decrease in group total fuel sales volumes. This contraction was 1.7% quarter on quarter and more pronounced year on year at 5.7%. Sales volume slumps were evident across various market segments, including Australia, International markets, and New Zealand. When sales volumes dip this significantly, it can point to broader issues within the company or a declining industry trend, both of which are red flags for investors.
Another notable disclosure was the collapse of the Lytton Refiner Margin during the same period. This crucial profitability measure fell to US$1.48 per barrel, an 83% reduction from the previous quarter and even more dramatically by 92% compared to last year. This steep decline had a severe negative impact on the group’s RCOP earnings before interest and tax, emphasising the operational difficulties Ampol is currently facing.
Operational issues are further evidenced by the declining production at the Lytton refinery. Production for the quarter was down by 35% quarter on quarter, reaching only 916 ML. A particular challenge mentioned is the difficulties with the Fluidised Catalytic Cracking Unit (FCCU), which is critical for the refinery’s operations.
In an attempt to stabilise the situation, Ampol has announced plans to conduct repairs while taking advantage of the current global refining market conditions to reduce production deliberately. The strategy for November is to produce only about 350 million litres of high-value product (HVP), seemingly as a means to optimize the quality over quantity in a challenging environment.
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During these difficult times, Matt Halliday, the CEO of Ampol, has expressed optimism about the company’s resilience and future performance. Despite the hurdles faced at the Lytton refinery, he is confident in the ability to enhance operational performance by 2025. The strategy moving forward involves cost reductions and operational improvements to recuperate the lost earnings from this down period which will be welcome news to holders of the stock.
The current downward trend in Ampol shares, which has seen a decline of 22.28% through the year so far reflects market concerns over operational challenges, decreased production, and underwhelming financial metrics. The company’s near-term actions and recovery plan will be critical for restoring investor confidence and ultimately stabilising the stock into the years ahead.
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ing the stock’s performance on the ASX 200.
