Ampol Limited (ASX:ALD) shares experienced a boost following an upgrade from RBC Capital Markets, driven by anticipated gains from increased Singapore diesel crack spreads. The upgrade highlights both potential upside and existing challenges for the Australian fuel giant.
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Ampol Limited (ALD) Gets an Upgrade
Following the upgrade, Ampol shares saw positive movement, reflecting market optimism. While specific intraday price fluctuations require real-time market data, the upgrade to “Outperform” from “Sector Perform” typically correlates with increased buying pressure. RBC Capital set a price target of A$35.00, suggesting potential upside from previous levels.
The core of RBC Capital’s upgrade lies in the expectation that Ampol’s Lytton refinery will benefit from a 20% increase in Singapore diesel crack spreads during the September quarter. Analyst Gordon Ramsay noted this in a research note, emphasizing the direct link between these spreads and Ampol’s refining profitability. The company has also initiated a $50 million cost-saving program slated for 2025, further enhancing its financial outlook. However, Ampol’s recent performance has been mixed. In Q3 2024, the Lytton refinery margin plummeted to US$1.48 per barrel, a stark contrast to the US$20 per barrel recorded the previous year. Furthermore, the company reported a 78% decrease in statutory profit for the year ending December 2024, falling to $122.5 million due to disruptions at the Lytton refinery. More recently, Ampol’s Q1 2025 trading update revealed a 49% decline in the Lytton refining margin, dropping to US$6.07 per barrel, impacted by weak Singapore refined product cracks and Cyclone Alfred. Despite these challenges, Ampol reported mid-single-digit EBIT growth in its Convenience Retail and New Zealand segments for Q1 2025.
While no direct quotes were available from Ampol’s management regarding the RBC upgrade, the company’s previous statements underscore a focus on operational efficiency and strategic cost management.
The outlook for Ampol is complex. RBC Capital’s upgrade suggests potential for stronger refinery results compared to competitors, specifically mentioning Viva Energy’s ongoing refinery maintenance. However, the recent decline in refining margins and operational disruptions present a significant hurdle. Markets will likely remain sensitive to fluctuations in Singapore diesel crack spreads and the Lytton refinery’s performance.
Ampol Limited Analyst Summary
Bull Case
- Increased diesel crack spreads benefit Lytton refinery.
- A$50 million cost-saving program enhances efficiency.
- RBC Capital’s “Outperform” rating signals positive outlook.
Bear Case
- Q1 2025 refining margin declined 49%.
- Lytton refinery faces operational disruptions.
- Full-year 2024 profit decreased by 78%.
The RBC Capital upgrade provides a positive signal for Ampol, but the company must navigate ongoing operational challenges and market volatility to fully capitalize on the anticipated refining gains. The interplay between cost-saving initiatives and external market factors will ultimately determine the trajectory of Ampol shares.
