Third quarter listing mooted for Z Energy

Three years after taking over Shell New Zealand’s petrol refining, transport and retail operations, Infratil and the New Zealand Superannuation Fund are looking to float between 40 percent and 60 percent of Z Energy on the NZX in the third quarter of this year.

The announcement comes at the start of an Infratil investors’ day, and reflects in part the national pension fund manager’s desire to down-weight on Z, with its 50 percent of the company now representing 2.4 percent of the total fund.

Z is one of the “big two” of New Zealand transport fuel retailing, duking it out with BP New Zealand and accounting for around 30 percent of all sales in the local market.

At its last earnings report, for the half year to Sept. 30, Z reported a 42 percent drop in after-tax profit to $24.9 million, reflecting intense competition in the sector and a willingness to sacrifice total sales volumes to maintain margins.

Its chief executive, Mike Bennetts, has adopted a strategy from Z’s inception of arguing publicly that New Zealand needs fuel prices high enough to ensure adequate investment in its sometimes creaky distribution and storage network, and that profit margins in the business are wafer-thin.

The company has also undertaken vigorously promoted rebranding and quickly established Z as a top of mind brand for consumers, with an emphasis on the fact it is New Zealand-owned and contributing to future pensions.

Z also announced this morning it was dropping the price of 91 octane petrol 3 cents a litre and diesel by 2 cents a litre amid calls from the motoring lobby for local petrol providers to cut prices in response to recent falls in global crude oil prices.

“While no firm decisions have been made, and any listing will depend on market conditions at the time, we have asked Z Energy to work towards a possible listing of 40 percent to 60 percent of the company in the third quarter,” said Infratil and NZSF Aotea Ltd (for the superannuation fund).

The company’s early objectives had been met, it has “strong cashflows, a good dividend outlook and growth options which would suit a wider investor audience,” the pair said in a statement.

Speaking for the super fund, Matt Whineray said Z, at 2.4 percent of the fund’s total assets, was now a larger proportion of its portfolio than when it was first purchased in 2010 and “a partial listing appeals to us as a way of diversifying our investment portfolio.”

In the last financial year, to March 30, the company reported an 8.9 percent return on equity, up from 6.2 percent the previous year.

Z already has NZX presence through its issues of listed corporate bonds.