BP have offered stacking of discounts for several years. I wonder what their experience has been and whether they have been able to gauge the effect on profitability?
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BP have offered stacking of discounts for several years. I wonder what their experience has been and whether they have been able to gauge the effect on profitability?
They'll have several years of data so will be well aware of the effect. Bearing in mind this new program has only recently started for Z stores and people only redeem stacked discounts every second month I would think ZEL are very much in the discovery phase. How much they knew about this when they last released downgraded guidance, is the key question.
I think the cost of stacking discounts is being somewhat overstated. I assume the stacking is an additional 6c (or whatever super day rate is) each time? If the stacking is exponential not addition, then it is different. However, I could not anything saying otherwise on the t&cs.
So using an addition based stacking, If you use a fuel price of $2.30, and each time ‘fill’ of 17.5 litres at a cost of $40.25, combined with a stacking discount of 6c per fill…
You would need to ‘fill’ 38-39 times to get $2.30 discount for your ‘free’ 50lt.
You’d just have to spend almost $1,600 in less than two months to achieve this.
Put another way, would Z be justified in thinking that stacking hasn't adversely affected BP's profits over the years?
4 vehicles in the family. All wait for 10 cent off days to stack. 2 Kids fill up on average once a week over 8 weeks = 16 lots of 10 cents stacked = $1.60 stacked discounts.
Mum and Dad fill up twice a week, (double fill on 10 cent stacked days) = 2 x 2 x 8 weeks = 32 stacked 10 cent discounts.
Total family discounts for two months = 48 stacked 10 cent discounts = $4.80 off a 50 litre fill. If the system is worked to their maximum advantage its possible to get 100 litres of free fuel per 2 monthly period. More over summer when they're running their jetski and boat and travelling more over holidays.
The point I am making here is a simple one. Caltex have offered stacking before Z stations have not. ZEL will have a good idea of the effect from stacking from previous customer behaviour at Caltex but have never offered it at Z stations before so there will be some compression in margins. Whether these have already been factored into the previous lowered guidance issued some time back or not is the $64,000 question ? I think the risk is they haven't and the additional risk is that (because it can't be quantified at this stage), the effect if any of any possible program(s) the Govt may initiate as part of their fuel review have also not been factored into the previous forecast.
The risk appears to be to the downside and based on hard experience over many years, downgrades usually come in 3's.
For those that think ZEL are already on top of all the issues the present forecast yield at mid point of forecast of 49 cents in annual fully imputed dividends is sustainable = 49 / 0.72 = 68.05 cps gross / $5.52 = 12.3% gross yield, fill ya boots !
Using the 10c days will get you there quicker, agreed. A heavy use family as per example can certainly take advantage in the limited time frame. How many families can and will do this?
Even at max advantage you are buying 48 * 20l = 960l of undiscounted fuel to get those 2 X 50l freebees. So 1060l for the price of 960l - your discount is about 10% in reality.
Depending on how people choose, going to Z to take advantage could see an increase in market share which could well offset any change in margin.
On the regulatory side I believe the uncertainty is already priced in. If, as I suspect, there are no major changes post final report, this may show an effect in the opposite direction.
I do suspect in the short term the div yield may be affected but not in the medium-long term.
As a side note any discount above the current fuel cost will be cleared when the stacked discount is used.
So you may want to advise the example group to use the discount as soon as it hits the current price for maximum effect.... not wait until $4.80 is stacked.
Is there a limit to the discounts I can stack?
No, there's no limit! But if you do happen to accumulate more fuel discounts than the pump price per litre, you will lose the over-accumulated amount as your balance is cleared to zero every time you redeem. For example, if you accumulate a $2.10 per litre fuel discount but only pay $2.00 per litre at the service station, the extra 10 cents per litre discount will also be cleared from your card. Don't forget your discounts expire the month after you stack your discount.
In general, I agree. I usually don't pay any attention but in this case am invested in ZEL so seek to understand how they work and may/may not influence behaviour.
For me regarding fuel, I have a 10l tank which I fill once per week - so a few $0.06 here and there are not worth fussing over.
It is a maximum potential, rather than expected average, discount for the scheme. There is also the possibility of store purchases in those 48 visits every two months.
That being said, thinking of it as being up to 22cpl discount means it (total discounting) will be something to closely watch even for a believer like me.
Store sales up 10% year on year before this stacking business came into play so yes, I would definitely concede more frequent visiting to take maximum advantage of stacking could well have benefits to the company in that way. Watching this one very closely as the yield is tempting. Plenty of margin in fuel at the moment as its still hasn't returned to pre Saudi infrastructure attack level's despite Brent being below the point before the attack and the $Kiwi now being above the level.
Govt have a point. Prices rise like a rocket on the slightest hint of trouble and fall at the pace of a snail. Replacement cost fuel pricing when oil goes up and historical cost pricing when it comes down. Seems extremely "contrived" for the fuel companies benifet…
With the recent poll result shock, Labour will be exceptionally keen to make political capital out of the fuel study report leading into an election year. Their response could be quite interesting.
P.S. Devon selling down http://nzx-prod-s7fsd7f98s.s3-websit...962/310188.pdf
Devon selling from 5.01% to 4.95% of the company, or a net 250,000 shares is fairly minor in the scheme of things.
Agreed that price rises faster than it falls - though I wouldn't be surprised if this was true across many industries. Just easier to identify with fuel data access and more of a hot topic at present.
I think Labour will need to choose their battles very carefully next year. The final report is likely to be less govt friendly - even the AA is advising the tax portions are underestimated.
Maybe they should use this cool company, not sure how Snoopy and I missed this recent listing in the US https://www.datadoghq.com/
Just that they can keep selling with complete anonymity...
Z know what they doing around these schemes - robust modelling been done - trust me
Well my friend Peter keeps buying ice-creams there so maybe he's not the only one :)
Closed at $5.42, another multi week low. One could be forgiven for thinking the market is expecting another downgrade with the interim announcement on 31 October.
Although my initial buy was way too high, in the meantime, am starting to like the idea of accumulating a long term investment in ZEnergy. Next step, in case their result disappoints again, accumulate a second lot closer to 5 or lower. Committing to the final buy around 455.
I think its safer to wait until we hear what they have to say on 31 October. I'm interested in the mid $4 range too but am keeping my powder dry in the meantime.
Just try not to overcommit. At the end of the day is this just another retailer in a sunset industry without realistic growth expectations. Nothing clever or cutting edge about what they are doing ... and with the increase of the discounters they will need to compete more and more on price for a product which is absolutely identical to the fuel most other suppliers are delivering. Sure - all these confusing discount schemes might slow down the margin melt for another couple of years, but while you can confuse most consumers for some time, you can't confuse all consumers for ever - and neither have ZEL a monopoly on confusing customers with stupid loyalty schemes.
One day their current customers will wake up and realize that the emperor of complicated discount schemes offers no tangible benefits to their customers over the competition.
Yes sure. Lower crude prices will be good to increase margins with pump prices low, concerns about margins will dissipate. Then there is the EV (?revolution?) which I think will be beneficial for a company that has infrastructure already in place and just needs to add charging stations to the mix.
Agree with BP's sentiment expressed above. The danger of another downgrade is crystal clear to me. The chart also looks a bit ominous.
I see no reason to buy right at the minute. It needs to offer compelling value for me to get back on board. Fair value, I have no interest.
The expected cost of ‘discounts’ from loyalty schemes is built into the displayed pump price.
That does not make sense too me or is irrelevant or why did the company needed to downgrade based on discounts then. I think, as a customer, discounts to me are rather a put-off then an incentive. The earlier the company wakes up to this fact and starts to compete on price alone, Gull is my preferred station. Besides, I have no time to bother with discount schemes anyway.
Discount scheme's and incentives built into the psyche of most people, for example Air New Zealand has millions of airpoints members.
I understand some people can't be bothered with them but there's plenty of people who can and don't live near a Gull or one of the other minnows with no discount scheme.
...the 'NO GIMMICKS BONUS SCHEME': convenient location - overall presence - cheapest offer - saving time. That ensures my loyalty every time.
Question: are fuel retailers bound to display their best offer after discounts? This would be transparent reality competition.
Significant move down of 44 cents (nearly 8%), just in the last 2 weeks on quite large volume. Not a good omen for tomorrow's half year result announcement.
Perhaps...except the rumour doesn't finish until the Govt announces their response to the fuel study program sometime in December.
Nothing new in half year announcement
Pretty boring really except this bit — Z obviously don’t think fuel is a ‘consumer staple’ and sheltered from cyclical stuff .....or else they just say this sort of stuff to give the impression they are up to date with latest buzz words etc
“Z’s earnings are correlated to the overall level of economic activity in New Zealand and we see headwinds in the near term around business confidence, growth and the willingness of businesses and consumers to commit to investment or large expenditure. Despite the nature of our business we are not immune to this loss of confidence in economic activity.
http://nzx-prod-s7fsd7f98s.s3-websit...471/310875.pdf
Operating Cash Flow negative $31m v pcp of positive $111m
And losing market share by looks of it
Media in on the act - 80% drop in earnings not good
https://www.stuff.co.nz/business/117...lf-year-result
Very intense competitive environment isn't going to get any less intense going forward, probably even more intense as unmanned minnow stations with low overheads continue to eat into their market share and intensify retail margins even further. Loss of market share is quite significant.
Headwinds from:-
Possible regulatory response to fuel market study
Increasing competition from low cost operators
The gradual uptake of electric vehicles.
Half year results was less than half the EBITDAF forecast for the year. I remain of the view there is downside risk to their very low FY20 forecast.
Full year dividend forecast of 48-50 cps but they are only paying out 16.5 cps as an interim dividend is an interesting call and not one that would inspire me with confidence if I was a shareholder.
I would not be surprised in the slightest to see this test the $5 mark in the next few months especially if Cindy gets on her soapbox and tries to make political capital out of the fuel study due for final release (from memory), in very early December.
FY20 very low ERBITDAF forecast of $390-430m probably materially lower again in FY21 is how I see it. Dividend level under threat this year and could be materially lowered next year. Stock looks like an obvious value and dividend trap and unless they can stem the tide of rapidly losing market share the future looks quite challenging to me.
market pretty positive it seems with the share price up over 2%, I'm a bit confused why, these results look shocking to say the least
Agreed it was ugly. Early days, but so far I would say that the share price reaction is bizarre. Lets wait and see what happens when the Australian market opens. Doubt they'll think much of this result.
Yeah, flick was always going to be exactly that with shareholders money. Reckless. Just invest in more charging stations at your service stations and stick to your knitting for goodness sake.
Yes, it's a dilemma. A company in a sunset* industry needs to diversify its business by investing in, ideally, related directions. Not all these new investments will succeed but "sticking to the knitting", equally, will risk failure sooner or later.
* If we accept that the oil industry is a sunset industry?
Yes, it's a sunset industry but the sunset will take a good 30 to 40 years. Sticking to ones knitting for 40 years sounded pretty good to me. You could make beautiful big cardigans to wrap around adoring shareholders in that time frame.
Flick was a poor choice - I made the point as soon as they announced it many many ZEL thread pages a go.
They certainly can cuddle shareholders with lots of warm cardigans if they don't do anything silly and I agree its going to be a very long sunset. I haven't read into their store sales stat's but I would have thought its pretty obvious as the EV uptake grows ZEL have an opportunity to provide rapid charging stations so EV owners can charge up with power, coffee and snacks at the same time. For example, my local Mobil has a subway within the store and I have seen Caltex stores with subway's within so its not like ZEL are not aware of this already. Maybe an idea for ZEL to expand more of their site's this way ? Give EV travelers on the go somewhere to charge up and replenish their bodies at the same time, build it and they will come...
ICE engines not dead yet by any means and as soon as the Govt get their claws in with road user charges the economics of EV's are going to change quite dramatically.
[QUOTE=winner69;776585]Media in on the act - 80% drop in earnings not good
the falling NZD must have had quite an impact. Bought gold end of November 2018 at a USD/NZD level ~0.69, now trading just under 0.64. Buying crude getting expensive. Wonder how the government is dealing with this situation? Debt also becomes expensive....and I think, the currency race to the bottom is far from over yet...
Still have 40-45% of market share despite all the headwinds of the past 6 months.
$20 debt paid down
Interim dividend confirmed and reaffirmed guidance for end year (looking at Z history they are fairly consistent for guidance)
Flick seems... horrible.
Market study final due 5th December and I'm still of the opinion no major legislative impact will come out of it from this government.
Mixed bag HY more than completely negative... not surprised by anything stand out.
Interesting insight into the state of the economy. Maybe all those pessimistic ANZ reports were right ?
http://www.sharechat.co.nz/article/5...ing-sectorhtml
Extract for the time poor amongst us "Z Energy chief executive Mike Bennetts said the company is seeing a slowdown across the country"
and this... Bennetts said the economy was the weakest he had seen it in the past 10 years. Even jet fuel volumes, which had been growing at double-digit rates, were flat in the past six months..
So the economy is slow and their margins are under very intense pressure that's likely to increase as minnows expand more and we have the Govt about to release their fuel study report next month so there's regulatory risk as well. What a "compelling" investment proposition this one is ! (Sarcasm intended in case its not perfectly obvious to anyone )
He’s pretty miserable these days that Bennetts guy ...probably making a lot of it up to say it’s not all his fault
But a bit ominious when says -
A 5 cent-a-litre reduction in margins would have taken “hundreds of millions of profitability” out of the sector in the past six months, and that had to have an impact, he said.
Bennetts said Z has the balance sheet to see it through
Maybe he wants to be the last man standing or something
Recommendation impact (last updated: 31/10/2019)
Event analysis
No-Moat Z Energy Stumbles in Heavy First-Half Retail Competition. No Change to NZD 8.30 FVE.
Our NZD 8.30 fair value for no-moat Z Energy stands. Z shares are 40% below all time NZD 8.50 highs in 2016 and materially undervalued. Demonstrable stabilisation to both regional refiner and retail margins is the likely catalyst to a share price re-rate. The first plank might already be underway with September quarter refiner margin back above USD 7.00 per barrel from USD 5.00 in the June quarter.
We continue to see limited long-term implication in current weaker earnings, reflecting unsustainable Retail price competition and fuel discounting, exacerbated by cyclically low regional refiner margins. These are the same elements detracting from the current earnings of Australian counterparts. We think these metrics will favourably trend nearer to longer-term averages and Z's infrastructure advantage should see it weather the current storm as well as any.
The company reported a 29% decline in first-half fiscal 2020 adjusted replacement cost NPAT to NZD 44 million. Intense retail fuels competition adversely impacted trading. We exclude an NZD 35 million pretax impairment to the Flick Electric investment which lost customers due to high spot prices. Regardless, the overall result was below our expectations and we downgrade our fiscal 2020 adjusted replacement cost NPAT forecast by 20% to NZD 148 million. That said, a material portion of the downgrade reflects higher depreciation and interest after the new accounting standard bringing operating leases on balance sheet.
Despite a poor first half, Z reaffirmed full-year fiscal 2020 earnings guidance for EBITDAF of NZD 390-430 million with dividends to be in a range of NZD 48 to 50 cents per share. The company qualified the bottom of the range indicates no change in Retail margins from the August to October actuals, with the midpoint dependent on an improvement on recent months. We marginally reduce our fiscal 2020 EBITDA forecast to a guidance lower-end NZD 400 million from our prior NZD 410 million estimate.
Sept quarter recovery in margin is already included in their half year results. Who knows where refinery margins head but we do know they are very volatile and cyclical. NZR a pure cyclical. So we're basically right at the bottom of the guidance range already provided there's no further decline in retail margins. Hmmm...In other words, quite vulnerable to another downgrade and the dividend is also therefore quite vulnerable. How they get to $8.30 as fair value ??????...my goodness, that's anyone's guess and they're well and truly out on a limb up there as can be graphically seen here https://www.marketscreener.com/Z-ENE...098/consensus/
The commerce watchdog is waving the big stick on early December and I think the share price will declined further. Plus the minnows slowly taking the market shares
With their recent quite dramatic slide in the polls I predict Labour will be exceptionally keen to make political capital out of this fuel study in an election year and try and find some way to further intensify pressure on the retail margin, wholesale contracts or jet fuel supply contracts or all three.
The irony of them being highly likely to do this when margins and return on invested capital are probably at their lowest level in many years isn't lost on me.
Being a shareholder at present just looks too tough to me.
A stuffed economy and those horrible competitors undercutting them given the blame for not so good performance .......
......but you have to get a bit concerned with a 17% increase in employee costs and more rhan doubling of marketing costs.
"Guidance retained at $390-430m of RC EBITDAF and fully imputed dividend of 48-50 cents per share •If Retail margins do not change from the August to October actuals, then this would indicate the bottom of the range, with the mid point dependent on an improvement on recent months"
So they're right at the bottom of the range and say in their presentation that its " Very difficult to accurately assess the margin outlook for Retail" for the second half.
Retail margin compression responsible for 65% of the most recent downgrade and most of the rest was lack of volume :eek2:
Not a downgrade per se, but this is as close as I have ever seen a company go in terms of living within the previous forecast without actually issuing a downgrade. Quite obviously they are very clearly telegraphing the very real possibility of another profit downgrade.
The wages cost increase Winner because of bonus accrual's from last year. Just as well they are doing so well that they can afford such massive bonus's eh :confused:
That's a lot to lauch pumped isn't it ! They really must be desperate to try and stem the flow of losing market share !
Local Gull is $2.149, was put up 6 cents when the Saudi's oil infrastructure was attacked and has never come down despite the rise in the $Kiwi and fall in the oil price.
Local Caltex is $2.189 less 10 cents off on pumped days = $2.089 plus airpoints or fly buys and canny punters can stack the discounts to effectively get fuel for less.
Who's really ripping us off ? Gull owned by Caltex Australia...Hmmm
Filled up at Waitomo today at 207.9 .....Passed Z Newtown on way home 232.9
Hmmm
That's what is really interesting about fuel prices in Wellington at the moment. The Johnsonville major fuel retailers held off for a while when the new Waitomo opened up close by. A neighbour who works for one of them told me they would all shortly reduce their prices and he was right, but a few kms away in Tawa and Porirua there is the same price gap you refer to.
Will never go back to Z Use Waitomo all the time
Funnily enough I drove past a Waitomo today on my travels to Waiuku and a number of Gulls as well.
Waitomo $2.17.9, no discount of any kind, Gull's varied between $2.14.9 and $2.19.9, again no discounts.
My usual Caltex is $2.18.9 and I usually fill up on super pumped days for 10 cents off = $2.08.9.
I guess everyone will have a different anecdotal story but lets not pretend the minnows are always cheaper.
Waitomo need to collect your regional fuel tax in Auckland ---- Z and others collect the required amount from across the country (mainly Wellington they say) As long as JAcinda gets her 10 cents from whats sold in Auckland she doesn't really care where the cash comes from (like whose subsidising Aucklanders).
Around my way (in Auckland) prices are around 2.24-2.28, with Caltex usually the cheapest (and closest) before any discounts. Though filled up at Lunn avenue BP yesterday as had 11 cents off via AA smartfuel, they were 2 cents more than Caltex but only 6 cents off there (needed to fill up could not wait for another 10 cents off day)
BP got the monopoly on 98 octane, paid $2.44 with discount the other day, no competition in most places so they can keep the price cranked up.
Hope your new 800 horsepower Shelby Mustang runs of 95 Octane :) https://www.autocar.co.nz/autocar-ne...to-new-zealand
That 600kw one is you mate, go hard or go home :D
And now we have Share Tank...…...Pre-Buy your Z petrol.
That'll keep the kuzzies happy eh https://sharetank.co.nz/
This part is interesting for those who live in areas with high prices:
"Share everywhere, use anywhere. Fill your Sharetank in Tauranga. Share it with Gran in Timaru. Add pre-paid litres in Cambridge. Fill up in Christchurch."
Geographical arbitrage ...
http://help.sharetank.co.nz/en/artic...y-to-sharetank
So if the top-up location is within the Auckland fuel-tax area then presumably the tax is paid even if the fuel is redeemed elsewhere!Quote:
Fuel prices in NZ contain several taxes and levies. When you fill up at a Z station, these are included in the pump price. Because Sharetank searches for the lowest Z pump price within a 30km radius, fuel taxes and levies—where applicable—are included when you top-up. There’s no need to pay anything extra when you redeem your Sharetank litres.
... but does seem to be a way to avoid the tax by using the reverse strategy.
Petrol is pretty cheap here in Whanganui in a regular basis
Z here today $2.04
Not sure that it would be worth the hassle of sharktanking for mates even if they were in Auckland though?
We need to develop our own sharetrader/sharetanking app to make it easy :D
That Sharetank thing
We’ll be a starter as nearest / usual Z’s are always most expensive in town.
Today cheapest within 30km is 212.9 and local is 235.9 ....23 cent difference.
Makes you wonder if this fantastic scheme is a race to the bottom ..or something like that.
Already they are right at the bottom of their forecast range and this assumes the same level of competitive discounting for the rest of the year as experienced in the first half.
My sense here is this moves the discounting model even further. Shooting themselves in the foot ?
It probably will build loyalty towards Z though, even among some people who like to shop around for the lowest prices (I.e., they might stay with Z on sharetank rather than physically driving to a Gull in their area that is a few cents cheaper than the cheapest Z offer on sharetank.) It also is marketed at small businesses and families who can hedge their fuel bills - not so much to pick the fuel price but to help with monthly budgeting and so forth.
mmmh, this sharetank app is good as far as can make out so far. Z scans the cheapest available offer of 95, which is right now 2.359. Taking 10c discount off = 2.259. Cheapest Gull in my area is 2.30 for 98 (which I prefer; but maybe does not make much difference and is more psych stuff).
Looks promising and would make Z competitive, cheaper than Gull
...like trading fuel futures...that's a bit of exciting news in the petrol station world.
Probably pay to follow whatever octane rating the manufacturer recommends for your engine, so will make sharing a bit harder but yes the futures and location thing is interesting as you can buy up to 1000 litres at a time. I see Z are very careful not to market this as a way around the Auckland regional fuel tax but with the ability for motorists to buy up to 1,000 liters pre-paid from one region and use it anywhere...I think one of its advantages is plain for all Auckland motorists to see.
https://sharetank.co.nz/#buy-your-way
Probably a cunning plan and will gain them back a small amount of much needed market share.
How many Auckland motorists are suddenly going to find an excuse to visit Hamilton and husband and wife, (by some remarkable coincidence lol), decide to buy 1,000 litres of fuel prepaid each, while they are there ?
Totally correct. The 1000ltr option is a real winner (I mean someone shares paid storage for you???...something unheard of apart from 15 GB Google Drive storage), but would preferably only use the full fill potential in connection with a crude crash. Otherwise, 2 or 3 tank loads,while in Napier or anywhere else in country-NZ.
btw, I never have Z considered to fill up, but with this brilliant sharetank idea, I am now a good friend. Tomorrow, will buy another small share parcel..
The 1000ltr. option is exiting indeed not only in case of a crude crash. IF, you have the cash, invest it at 10% for 6 month, charge your gemvisa interest free for 6 month for the fuel and pocket the profit (Z-YUM)
This seems like a lot less interesting version of buying 3 beers for the price of 2 and 'parking' 1 or 2 of them for your next visit.
You wouldn't want to get Cat-O-Tonic eh :)
ZEL continues to plumb fresh multi year lows today, confounding analysts who on average think it should outperform. https://www.marketscreener.com/Z-ENE...098/consensus/
I see shareprice almost in the 4's
Go ex divie or something?
Yes it did.
Yes it sure is and as noted previously they face a number of headwinds. The Governments reaction to final recommendations of the fuel study to be released on 5 December will be very interesting. I wonder if Jacinda will get back on her "motorists are being fleeced hobbyhorse" given that according to ZEL's reporting their margins are under real pressure and return on capital invested is at a multi year low.
And she'll probably take credit for that.Quote:
I wonder if Jacinda will get back on her "motorists are being fleeced hobbyhorse" given that according to ZEL's reporting their margins are under real pressure and return on capital invested is at a multi year low.
;)
Yes, she'll take credit for anything that she thinks will build her political capital.
Meanwhile over at ZEL, the share price plums another multi year low closing today at just $5.03.
Buying on a confirmed downtrend is usually a very risky strategy.
I think this looks like a real value trap. Might find a bottom in the mid $4's but who knows...
Only a couple of weeks to go until we see what Punch and Judy show the Government will try and concoct over fuel margins...
This was one of her most recent rants https://www.tvnz.co.nz/one-news/new-...-being-fleeced
I think we all know who's really fleecing us ;)