Viva Energy Group Limited (VEA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to Viva Energy's 2020 Annual General Meeting. I'm Robert Hill, and I'm honored to serve as the Chairman of Viva Energy. It is now just after 11 a.m. Australian Eastern Standard Time. We have a quorum present, and I declare the Annual General Meeting of Viva Energy Group Limited open. Thank you for joining us today from various locations across the country and the rest of the world. We are holding our Annual General Meeting today as a virtual meeting conducted entirely online. We're also holding this meeting later in the year than we would ordinarily do. We made a decision to hold the meeting in this way due to the restrictions on gatherings and travel as a result of the COVID-19 crisis. We consider that it is in the best interest of our shareholders, other stakeholders and the community for us to do so. We're disappointed that we cannot meet you in person, and we look forward to being able to do so next year. I'd like to begin by acknowledging the traditional custodians of the country throughout Australia, and I pay my respects to their elders, past and present. Viva Energy has long supported programs which connect our employees and business activities with indigenous communities throughout the country. Last year, this indigenous participation program was formalized in our inaugural reconciliation action plan, which was endorsed by Reconciliation Australia. The plan celebrates indigenous cultures, promotes reconciliation, builds respect and raises cultural awareness. The treatment of indigenous cultures has attracted much attention in recent times, and we remain committed to encouraging a more accepting, understanding and inclusive society in the future. Before we begin, I will take a few minutes to run through procedural matters. If we experience technical issues today that result in a number of members being unable to reasonably participate, the meeting will be adjourned and will reconvene at 3:00 p.m. Australian Eastern Standard Time today. If the technical issues are isolated to my Adelaide location, then I nominate Jane McAloon, who is present at the Melbourne office, to assume the Chair and adjourn the meeting. In the event that we take steps to adjourn the meeting, we will make an announcement to the ASX with all necessary details. Voting on all items of business today will be carried out by way of a poll. Shareholders had the option of casting their vote before the meeting or appointing a proxy to do so on their behalf. If you haven't done so, you can vote at today's meeting online. You can do so at any time during the meeting starting from now as the polls are now open for voting. Voting will close shortly after the end of the meeting. We received some questions in the lead up to the AGM. We will address these questions during the formal items of business. If you would like to ask a question at today's meeting, you can do so by typing and submitting your question online. You do not need to wait until we get to the formal items of business to submit your questions. There may be a slight delay in transmission of up to 20 seconds, so I encourage you to start submitting your questions now, and we will endeavor to address as many of these as we can during the course of today's meeting. As I mentioned earlier, I am coming to you from Adelaide. Joining us from our Melbourne Officer are 2 of your directors: Scott Wyatt, Chief Executive Officer and Managing Director; and Jane McAloon, an Independent Non-Executive Director and Chairman of our Sustainability Committee. And you'll hear you from both Scott and Jane today. Joining us from the Sunshine Coast is Sarah Ryan, Independent Non-Executive Director and Chair of our Audit and Risk Committee. Sarah joins us by telephone today. And we have joining us from Singapore, our 3 Singapore-based directors: Arnoud De Meyer, Independent Non-Executive Director and Chair of the Investment Committee; Hui Meng Kho, Non-Executive Director. Hui Meng is the President and CEO of Vitol Asia. And Dat Duong, Non-Executive Director. Dat is Head of Investments at Vitol in the Asia Pacific. Jevan Bouzo, our Chief Financial Officer; and Julia Kagan, our Company Secretary, join us from our Melbourne office today. And joining us by telephone are Chris Dodd, Lead Engagement Partner; and Niamh Hussey, Partner, representing our auditor, PricewaterhouseCoopers. Chris and Niamh will be available to answer questions on the auditor's report later in the meeting. I'll now move to my remarks on the business environment. There is no doubt that we are living through a remarkable set of circumstances, which are challenging us all. Over the summer, our country experienced some of the most devastating bushfires we've seen, with loss of life and widespread damage to our communities and the economy. During that time, our people at Viva worked tirelessly to support fuel deliveries into impacted areas, supported the defense response and provided direct support to our customers that experienced difficulties as a result of the disaster. We also supported 2 regional charities in their work to assist farmers and rebuild affected communities. Many of our rural customers were directly impacted by the fires, and we consider this is an area where we could help contribute to the rebuilding effort. Since that time, the emergence and escalation of COVID-19 to a global pandemic has brought a different set of challenges to all of our communities. It remains an unpredictable and unprecedented event in modern times, and the far-reaching impacts of the crisis have yet to be fully understood. As the crisis unfolded, your executive team, led by Scott, has worked closely with the Board to identify the key risks to people and our business. We took appropriate steps to navigate through the disruption and ensure we maintain supply of essential services to our customers and the broader community. The Board commends the efforts of the Viva team. Our immediate focus as the Viva -- as the COVID-19 crisis unfolded was the health and safety of our people. We quickly took steps to implement measures to maintain workplace distancing in our operational facilities and have had more than half of our 1,200 employees working productively from home. Our refining and supply chain facilities continued to operate safely and reliably throughout this time, and we have successfully kept COVID-19 from our workplaces. As you would expect, the restrictions put in place by governments to manage the spread of COVID-19 significantly affected demand for fuel. Sales of jet fuel fell by 73% as international and domestic border restrictions were put in place, and sales of our -- in our retail Alliance business declined by between 30% to 40% at the height of the crisis in April. While the aviation sector remains heavily impacted, retail sales have begun to recover as restrictions have been relaxed and domestic flight schedules are beginning to return. As a result of this lower demand, we took appropriate steps to reduce production at our refinery in Victoria and shut down a number of surplus processing units at the end of April. Despite the challenging refining conditions, we've maintained refining operations in order to provide continued fuel supply to our customers and maintain continuous employment for our employees and contractors. We believe that this is also the best financial outcome for the company. I'm particularly pleased with the way the company has taken steps to reduce operating cost and capital expenditure without impacting our safety and integrity programs. This has helped preserve cash, and Scott will talk further about the decisions we have announced regarding our major maintenance turnaround at Geelong when he addresses you a little later. I will now turn to our achievements and performance in 2019. Last year, we took important steps to consolidate our key strategic relationships and reposition the business for future growth. The renegotiation and extension of our long-term partnership with Coles was a particularly important step in strengthening our fuels and convenience business. I'm pleased with the progress we have since made to restore sales growth and begin to recover our leadership position. We've also extended our license of the Shell brand until 2029, continuing our long association with one of the world's most recognizable brands. In late 2019, we acquired the remaining share of the Liberty Wholesale business and established a new joint venture with our long-term partners, which will expand our regional network of Liberty-branded fuel and convenience stores. We currently have just under 60 Liberty-branded stores in operation, and we're excited about the potential for this network to help us reach a new segment of customers. We believe that the retail business will continue to evolve over the next decade as new energies are adopted and the convenience needs of customers become more important. With the changes made in 2019, our Coles Express, Liberty and owner-operated retail platforms are now well placed to succeed in this changing landscape. In our commercial businesses, we have continued to strengthen our relationships with major customers and expand operations with key partners such as Rio Tinto and the Australian Defence Force. We have a diverse range of commercial businesses and a proud history of servicing many of Australia's largest companies. We thank all our customers for their continued support. Despite a challenging refining margin environment, our refining operations performed extremely well with high levels of availability and record levels of production achieved during 2019. A new 25-megaliter gasoline tank was commissioned to address key infrastructure opportunities, and we also successfully developed a new very low sulfur fuel oil for use in the marine segment, following the global transition to new fuel standards. Notwithstanding these achievements, the general business environment was particularly challenging for refining during 2019. Refining margins were impacted by changes in crude flows and lower regional demand growth, and we experienced periods of intense competition which impacted both retail and commercial margins. We saw improvements in market conditions towards the end of the year, but overall, group underlying EBITDA for financial year 2019 finished down 17% on the prior year at $664.5 million (sic) [ $644.5 million ]. This was a disappointing result, but we remain confident of the changes we've made and the potential for the business in the future. Scott will talk to you in more detail about our performance and the outlook for this year. Early this year, we took the strategic decision to divest our stake in Viva Energy REIT, now renamed Waypoint REIT. Our investment in the REIT began with the decision in 2016 to divest our freehold service station networks and list the vehicle on the ASX. It's been a great journey and a significant transaction from start to finish. We wish the best to the Waypoint management team and expect to continue our close relationship as their key tenant. As we announced in February this year, we intend to return the proceeds of that REIT divestment to our shareholders. The commencement of the buyback program to return the proceeds was delayed by the rapidly evolving COVID crisis but has subsequently commenced in June this year with an initial tranche of the on-market buyback targeting up to $50 million return. Our strong balance sheet and relatively strong performance through the initial period of COVID-19 gives us confidence to begin returning the proceeds to our shareholders, but we will continue to monitor this environment. Turning to dividends. The Board determined and paid a fully franked dividend of $0.026 per share for the 6 months ended 31 December 2019, taking total dividend for the year to $0.047 per share. This represents a dividend payout ratio of 60% of distributable net profit after tax, in line with our target payout ratio. I'd now like to talk about our Geelong Refinery and our vision for that part of the business. Although COVID-19 has had a significant impact on global demand for oil products and the regional refining margins, we've made important changes to our operations and maintenance programs, which we believe will minimize the immediate and short-term impacts to earnings in this part of the business. We're also encouraged by the commitment from federal and state governments to work with the refining sector to help maintain refining operations in Australia and continue to see Geelong playing an important role in this regard. Our refinery at Geelong produces more than 50% of Victoria's liquid fuel requirements and is the only manufacturer of bitumen, hydrocarbon solvents and Avgas in Australia. We're well located in one of the fastest-growing parts of the country and believe that we have an opportunity to play a broader role in improving energy security and participating in the transition to a lower-carbon energy future. We announced in June this year our vision to develop an energy hub at Geelong. This would potentially see the development of an LNG regasification facility to increase the supply of natural gas in Victoria and the construction of additional crude and fuel storage to support the government's objective to establish a national strategic oil reserve. These initiatives would help to reduce the operating costs of the refinery and provide a platform for other energy projects such as solar generation and battery storage, hydrogen manufacture and gas-powered electricity generation. Collectively, these projects can also support the transition to a lower carbon energy future and provide potentially valuable new business opportunities for the company. Just before I hand over to Scott, I'd like to say a few words on the changes to our executive leadership team. Last year, Megan Foster joined us to lead our retail business and Amanda Fleming joined the team as our Chief People and Technology Officer. Daniel Ridgway left the company at the end of May 2020, after more than 22 years in the business. Dan is a high-caliber executive, and the Board extends their appreciation to Dan for his significant contributions during his time with the company and in his senior executive roles since the beginnings of Viva Energy. Thys Heyns, who has capably run the Geelong Refinery for almost 6 years, has succeeded Dan in the role of Chief Operating Officer. And most recently, we welcomed Dale Cooper, who has joined us from Canada, to replace Thys as the Refinery Manager. These changes maintain a good balance of leadership continuity and refreshment, and the Board welcomes these new executives to the company. I'll now ask Scott to take us through his presentation.

Thank you, Robert. Before I speak to our financial performance, I would like to talk about our commitment to safety and the environment. Preventing harm to our people and the environment remains a fundamental priority for our business, and it's the foremost consideration in everything that we do. During 2019, we progressed several new programs to help us drive and sustain a strong safety culture across our refining and supply chain operations. These have delivered an approximately 20% reduction in our recordable injury rate from 2018 to 2019, and we continue to maintain a strong performance in managing process safety risks across our operations. With -- while these improvements are encouraging, we are, of course, always striving to do better. This year, we have maintained a strong health and safety performance despite the challenges presented by COVID-19 and the bush fires and hurricane season prior to that. Periods of such significant change and disruption can often have an impact on personal safety outcomes, so I am pleased that we are delivering further improvements throughout the period and in May achieved 0 recordable incidents across our business. This is a remarkable achievement, which goes to the commitment of our employees and contractors to Goal Zero. During this challenging time, we've also taken the opportunity to broaden our focus on mental health and well-being in our workplace, improved our domestic and family violence policies and generally maintained high levels of leadership engagement and communication with all of our employees. I am very pleased with the way our people have adapted to our circumstances and continued to drive strong safety and business results. Turning now to our business performance, which is presented on a replacement cost basis, consistent with our normal practice. At a group level, we delivered strong top line growth in 2019 with a total volume of 14.7 billion liters, up 5 -- up 4.6% on 2018. Our underlying EBITDA for the group was $644.5 million, which was lower than 2018 primarily as a result of weaker refining margins and periods of intense competition, which impacted retail and commercial margins. In 2020, we estimate that the underlying group EBITDA for the first 6 months will be between $257.5 million and $287.5 million. This is a particularly strong result in the current crisis, which also compares favorably to the first half of 2019. In 2019, our retail business delivered an underlying EBITDA of $564.3 million. As Robert mentioned earlier, our priority last year was restoring growth to the Alliance network following the renegotiation of the Alliance agreement with Coles Express. We improved the competitiveness of our fuel offer and invested in promotional and marketing campaigns to recover and gain new customers. Sales subsequently climbed to an average of approximately 65 million liters per week in the second half of 2019, up from 59.5 million liters per week in the first half. This sales growth continued in the early part of this year, with several weeks above 70 million liters per week and sales for the first quarter 2020 up 5.1% over the same period last year. Retail margins have also substantially improved since 2019. Of course, the restrictions in place to manage the spread of COVID-19 materially impacted sales from late March 2020, falling to below 40 million liters per week in April but since reverting to 45 million liters per week in May and showing further improvements in June. Our commercial business delivered an underlying EBITDA of $296.5 million in 2019. Despite periods of increased competition, we successfully renewed and extended many of our commercial contracts and strengthened our relationships with key customers. Overall commercial sales increased by 2% over 2018, and we maintained strong market positions in resources, aviation and marine sectors in particular. The introduction of very low sulfur fuel oil has ensured we maintain a leadership position in the marine sector, and we are particularly proud to secure the services contract for HMAS Cairns with the Australian Defence Force. COVID-19 has obviously heavily impacted our sales in the aviation sector this year, which are down about 73% but expect it to slowly recover as domestic flights are increased in the second half of this year. Other sectors remain relatively unaffected at this stage, and diesel sales have been particularly robust throughout the period. In refining, we delivered an underlying EBITDA of $117 million in 2019. The business achieved several operational records during the year with white barrel production averaging 105,000 barrels per day and refinery intake of 42 million barrels, each of which represents significant production records for the business. Regional refining margins were generally weak in 2019 due to lower regional demand growth and rising crude premiums as the industry transitioned to lower sulfur marine fuels. The Geelong Refinery margin averaged USD 6.60 per barrel in 2019, down from USD 7.40 per barrel for the year prior. A weaker refining margin environment has continued in 2020 as a result of higher crude premiums followed by the global impacts from COVID-19. In response to lower demands, we slowed units and shut down our cat cracking unit and smaller crude distillation unit at the end of April. As a consequence, monthly crude intake has now been reduced to approximately 2.5 million barrels. This year, we plan to complete the major maintenance of the cat cracking unit and the hydrofluoric acid alkylation unit over 55 days from August through to October 2020. The original plan would have resulted in over 700 additional contractors working on site, which would have made it difficult to manage the COVID-19 risks and restrictions. After exploring several alternatives, it was determined that the best option was to defer the maintenance of the alkylation unit and undertake the major maintenance of the cat cracking unit over a longer period, commencing in July 2020. This revised scope and timing has allowed us to further reduce capital spend this year and keep the refinery operational to maximize future optionality. It also allowed us to significantly reduce the number of additional contractors required and to deploy a largely local workforce rather than rely on workers from interstate. On this revised plan, all units will be available for operation by November this year. As Robert mentioned earlier, together with the decision to approve the major maintenance expenditure, we announced our vision and plan to establish Geelong as a significant energy hub. The hub would support the broader energy needs of Victoria and Southeast Australia and create an exciting range of opportunities for the business, which also supports our commitment to contribute lower carbon energy future over time. At the center of the energy hub is a proposed LNG import terminal. This would provide a cost-effective method to bring additional gas to the south east coast markets and meet an expected supply shortfall from 2023. The Geelong Refinery is an existing industrial facility with excellent access to port and jetty infrastructure to support a floating storage and regasification vessel. Given the nature of the project, there will be limited additional infrastructure necessary, with close connection to the gas transmission network. It also provides behind-the-meter supply, which would benefit the refining operations. Natural gas is a key transition fuel, which can provide important baseload power as coal generation declines as well as important firming capacity to support renewables as they come online. We have made significant progress on the pre-FEED assessment of this project, and we have launched initial expression of interest process, inviting potential partners to participate. Geelong is also a natural location to support additional crude and product storage in response to the federal government's recent request for information to build and create strategic storage -- sorry, additional strategic oil reserves in Australia. We have significant room for expansion not only at Geelong but also across our infrastructure and terminal network throughout Australia, and we consider that we can most efficiently address the government's goals while also supporting our existing operations. Beyond the LNG project and strategic reserves, there are other opportunities for Geelong to participate in the broader energy transition. Vacant land that forms the buffer to our refinery is an ideal location for a solar farm, which has enough capacity to meet a large proportion of the electricity needs of the refinery and potentially hydrogen production. As we assess these opportunities, our focus will be working with the communities and with key regulatory bodies to ensure that the development meets the wider requirements of our community. Let me finish by acknowledging the support of our employees. It has been a particularly challenging year, but I am proud of the way our people have responded and the results that they have delivered. We have an engaged workforce, which is committed to the success of our company, and together with our Board, I am confident that we can continue to perform well in the months ahead and emerge stronger as the economy recovers. We thank you all for your continued support. I'll now hand over to Robert to take us through the formal business of the meeting.

Thank you, Scott. We invited shareholders to submit questions in advance of our AGM. We value the feedback we have received from shareholders through this process. And I remind you that you can also submit written questions during the course of this meeting via our online platform. I'll now proceed with the formal business of the meeting. The notice of meeting sets out the following matters for consideration by shareholders today: one, to consider the financial statements and reports; two, to adopt the remuneration report; three, to reelect Jane McAloon and Arnoud De Meyer as directors of the company; and four, to grant performance rights to Scott Wyatt under the company's long-term incentive plan. During the meeting, we will display the proxy votes and the direct votes received in advance of the meeting. Where I, as Chairman of the meeting, have been nominated as a shareholder's proxy, I intend to vote all undirected and available proxies in favor of each resolution. There are also voting restrictions for some resolutions, as outlined in the notice of meeting, which apply to those who have an interest in the resolutions and certain of their related parties or associates. I remind you that the polls are now open for voting. The outcome of today's meeting, including the final vote numbers, will be released on the ASX after the conclusion of today's meeting. I'll turn to the first item of business, consideration of the financial statements and reports. The Corporations Act requires the directors to lay before the Annual General Meeting the financial report, the directors' report and the auditor's report for the financial year. There is no formal resolution put to shareholders on this item, but there will be an opportunity to ask questions on the matters contained in the reports. Turning now to questions. Viva Energy has not received any written questions for the auditor prior to the AGM. We have received some questions submitted before the meeting addressed to me, and I will read them now and respond.

We've received 2 questions from [ Mr. Abdulraman Bin Ali Bin Carry ]. I'll read both of the questions now. Question one, "In general, will importing product directly increase or reduce net profit margin in a lower sales environment due to COVID-19?" And two, "With the collapse in jet fuel crisis, does Viva blend its excess jet fuel into diesel? What's happened to excess jet fuel inventory? I think it would be most appropriate if Scott answered those questions, so I would invite him to do so.

Thank you for the question. In terms of Viva Energy, it's important to remember that we already import about 60% of the fuel that we sell. And for the fuel that our refinery at Geelong produces, we transfer price that to our marketing business at the same prices as what it would cost us to import fuel into the country. So whether we import it or make it locally, the impact on our retail and commercial business is negligible. And so those businesses are purely based on an import parity basis. Obviously, for Geelong, we've seen a reduction in demand on Geelong and had to cut back production initially through slowing down units and then subsequently from shutting down units. And now our crude intake is now down to 2.5 million barrels per month. We have -- having said, despite those changes, we've done extremely well to minimize our exposure to jet production. We've managed to reduce that to negligible levels, and that demonstrates the flexibility of our refinery at Geelong. And we've been able to divert that into diesel and petrol production. And so apart from the crude intake reductions, we've managed the operational impacts extremely well. Hand back to you, Robert.

Thanks, Scott. We've received one other question from [ Mr. Martin Roberts ]. Mr. Roberts asks, "How have you, as a company, failed so measurably to increase the value of the company since the float?" I will respond to that. We've sought Mr. Roberts to, in fact, answer that question during the course of our presentation today. The company hasn't achieved the profitability level that we held at the time of listing, and that's obviously disappointing to the Board and to the executives. We indicated the principal reasons why. Just repeating briefly, the lower refining margins in our first year of operation as an independent company and continuing since, a business relationship on our retail side with Coles that wasn't delivering optimal value; and thirdly, obviously, beginning of this year, first half of this year, the consequences of the pandemic. I think what's important from an investor's perspective, if I might say, with respect -- as the company responds to these challenges. In relation to the Coles relationship, as you know, we move to restructure that relationship and put in place an arrangement, which we think is a significant net benefit to the company. And last year, having taken on the responsibility for setting retail prices, we were starting to see the benefit of that in return of volume that we had lost and also late in the year in the recovery of margins. We think that, that is well placed as we -- our relationship is well placed as we go into the future. And I think that the results, the unaudited results for the first half of this year, despite the pandemic, should give shareholders confidence that these were good, sensible steps to take on behalf of the company and put the company in a stronger position in relation to the retail market for the future. In relation to the refining margins, as you've heard from both myself and Scott, we have moved to build resilience into the refining business and in support of our Geelong assets more generally. We believe this also will put the company into a stronger position going forward, where we become less reliant upon margins that are primarily out of our control. And the encouragement that we're now receiving from government, which is realized the importance of that sector in Australia is strategic interest and their engagement with us on such projects as investing in strategic fuel storage gives us further reason for confidence. And in relation to the third major setback, COVID, we've responded to that today, and I think it's a great credit to the executives of the company that the unaudited first year -- first half results for this year are actually much stronger than what many would have expected. So we do understand, Mr. Roberts, the sentiments of your question. We respect the interest of shareholders and investors, and we are working in a positive way, not just relying on the traditional strengths of the company, but in a way in which we can restructure major business relationships in order that we can be more profitable in the future. I'll now turn to any online questions received from you during the course of today's meeting, and I'll ask our company Secretary, Julia Kagan, to read out the questions we received under this item of business. Julia, do you have any questions?

Thank you, Chairman. We have received several questions today. The first one is more of a comment from John Whittington from Australian Shareholders' Association, and he says, "Mr. Chairman, I would first like to congratulate the company for maintaining the high quality of your operating and financial review. It is comprehensive and understandable and gives a good sense for the business, its strengths and weaknesses. It also seems fairly well balanced. We would also like to thank Viva employees and management for the work that helped to achieve the TSR of 10.5% for 2019 and their subsequent efforts in challenging times impacted by both COVID and OPEC."

So thank you for that question. I think we can move the second question.

And Chairman, we've got a question now from [ Kevin Charles Daly ].

Yes, Julia. Can you read it out?

Apologies for that, Chairman. We've got a question from John Whittington again from ASA. "Mr. Chairman, given that Viva is operating in a highly competitive market with many highly experienced competitors in an industry which is static to declining in the long term, what is or could be Viva Energy's sustainable competitive advantage? What is the company doing to enhance or create that advantage?"

So again, we have sought -- in fact, sought to answer that question in the course of our presentations today. In relation to our traditional business, it is true in relation to light vehicle fuels. That segment is relatively static and has even declined slightly, although Australians seem to be very reluctant to transfer from the traditional choice in motor vehicle to another option. In fact, the lowest take up, I think, of electric vehicles among the developed world. But diesel has remained strong and growing, and that's because of the nature of the Australian geography and the nature of our economy. And of course, until the COVID, aviation was booming. So the company's view is that our traditional business will remain strong for a long period to come in Australia. And there is still a lot of opportunity for us to win business in that sector, and we will seek to do so. I'll just reflect briefly on the last year. The growth of our business in the cruise ship market was fantastic in Sydney Harbour. Unfortunately, I'm not so confident about next year's cruise market. But we were able to take advantage of our facilities located on the harbor in Sydney and in effect, build a new business successfully. And the growth of our business with the Australian Defence Force in the last year has also been particularly encouraging. So there are many opportunities still out there that we will seek to exploit and benefit to the benefit of the company. But beyond that, we do recognize that there are new business opportunities within the broader energy spectrum, which is part of the reason that we made the strategic decision to build upon our base at Geelong with a broader suite of energy options. And we think that this will become an ever more important part of the company's business profile as we go forward. So what we're seeking to do is to take full advantage of our traditional markets while, at the same time, building within a time of transition to new and alternative business. We have the next one, Julia?

Thank you, Mr. Chairman. We've got another one from John Whittington. "Mr. Chairman, after the COVID-19 hit, what was the success of your retail strategy to lift retail volumes up to previous shale volume levels? And since COVID-19, has Viva increased or decreased retail market share?"

Well, I'll pass that to Scott. Scott's happy to take it. I could, but I think he might like to answer it.

Thanks, Robert, and thanks very much for the question. Yes, I think we have -- we're very happy with our -- our strategy has progressed in retail since the rearrangement of the relationship with Coles. And it's a very strong partnership that's been in place since 2013, so one of the probably longer-standing relationships in our business. And as part of that renewal last year, we -- renegotiation last year, we also extended the arrangements through to 2029. So we expect to continue to work closely with them and -- with Coles and see them as a very important partner for us in the retail business in the years ahead. The first step in that strategy was really to improve the competitiveness of our pricing, which we executed last year. That saw volumes lift from below sort of 60 million liters per week to 65 million liters per week in the second half. And as I mentioned in my address, we've seen -- we saw weeks of over 70 million liters a week during the first quarter of this year. So up until, obviously, the impacts of COVID-19, we're really happy with how that's progressed. And to be honest, even through the impacts of COVID-19 despite the reductions that we've seen, which obviously everyone in the market has seen as well, have been very happy with how that business is performing, and we're starting to see, obviously, volumes through the retail network recover. How that translates into market share remains to be seen. And the reports on market share tend to lag our actual results, so we'll have more to say on that when we talk to our first half results in August. But I expect that we have continued to improve on our position in market throughout this period of time despite the challenges that we have all seen.

Thank you, Scott. Julia, another question?

Thank you, Mr. Chairman. Another one from John Whittington. "Mr. Chairman, a question for Scott with his long experience in the oil business. Viva and its main competitor seem to have been hit hard by the declining crude oil price. What do you believe to be the average crude oil price across the cycle? And how do the current crude prices relate to that average? For example, 10% from the bottom, 25% from the top."

Tough question, Scott.

Tough question, maybe easy answer. And that is we really obviously don't take positions on where we think oil price is going to move. And the reason for that is it really has -- it doesn't have a significant impact on our business. Changes in oil prices are passed on very quickly to our customers. We change our wholesale prices in our retail market 2 or 3 times a week, and most of our commercial customers are on a formula price where the changes in oil price and exchange rate and other dimensions in the build price buildup are passed on a regular basis through to those customers. So the main exposure to us from changes in oil price is just in the value of our inventory, and that obviously goes up and down, but the level of stock that we hold in our system remains relatively consistent throughout a long period of time. So we're quite resilient to the changes in oil prices that you've seen, which have obviously been substantial. I guess at a lower oil price, it obviously tends to -- does result in lower inventories and obviously benefits consumers, and that obviously helps stimulate some growth. So that's -- if we had to operate in any environment, we'd probably rather operate in a lower -- a low oil price environment. The impacts that you've seen through COVID-19 have really just been largely around sales declines, which we've seen in both our aviation sector and in our retail business and pressure on refining margins because, obviously, globally, oil products demands have been heavily hit in the short term from COVID-19. We've seen declines through periods of up to 20% to 30% globally. That puts -- has put a lot of pressure on the refining systems, not just in Australia, but right through the region and the rest of the world; and obviously, from an operational point of view, in terms of having to respond to that lower demand, but also financially in terms of the impact on refining margins. So that's less related to oil price, more related to the refining margin environment that we're in at the moment. I'll hand back to you, Robert.

Thanks, Scott. Julia?

Thank you, Chairman. Another question from John Whittington. "Mr. Chairman, we're disappointed that after raising it last year, the annual report still does not disclose how long both the audit organization and audit partner have been in place as well as the date of the last audit tender and when the next one is planned. Given you haven't made the disclosure in the annual report, would you please disclose these details to the meeting?"

The auditors -- we've only been in existence for 2 years as a public company, and the auditors have been with us for that period. They were with the previous private company, the Viva company, for the few years that it ran the business after acquiring the downstream business of Shell, and Pricewaterhouse, as I recall what we'd show prior to that. So they've been associated with this business for quite a long time. In accordance with best practice after Viva acquired the business, and I think it was in '19 -- in 2017, they went and tested the market in relation to an auditor. The outcome of that process was to stay with Pricewaterhouse. And after we became public, they were the auditor at the time of the IPO and have been with us for the last 2 years. And so our attitude is that we have adopted best practice through the action of Viva prior to the IPO going to market. We've been very pleased with the auditor's performance in the 2 years that we've existed as a public company, and we'll continue to take into account the capital that we received from ASA on this issue. Julia?

Thank you, Mr. Chairman. This question is from [ Kevin Charles Daly ], and he asks, "Item 1 on the agenda, the operations and financial review in the annual report was excellent in detailing your results. What struck me as odd, though, was that CapEx at Geelong Refinery of $88.5 million when EBITDA was only $117 million. I understand that CapEx might be lumpy, but."

So Scott, do you want to talk about the CapEx at Geelong?

Yes, sure. So last year was a difficult year for refining. Refining margins were under pressure last year, particularly as we -- at the back end of the year as we entered the global change to low-sulfur fuel in marine sector and the adjustments that needed to be made globally to meet that change and the impacts that had on refining. So as a result, EBITDA for refining was lower at $117 million. And obviously, as you point out, that a large proportion of that EBITDA was consumed and the capital that was needed to be spent at Geelong. Now Geelong typically spends between $50 million and $60 million a year on general maintenance capital that's required to continue to run operations. And then in every 4 years, we have a major maintenance turnaround as we have this year, whereas a larger amount of money also needs to be spent. So that is a typical sort of run rate to take into account. And obviously, last year, fortunately, despite the lower environment, we still -- we have managed to be cash positive, given the investment that would be made. This year will be more challenging because obviously, the refining margin has been quite significantly impacted by COVID-19, and we have our major maintenance event. But that's typically the way you need to think about refining. It's a long-term investment. You need to look at investment over a longer period of time. You'll have some years where it's -- it might be cash -- may not be cash positive or maybe cash negative, but you'll have a year where it's extremely cash positive because you've got a lower capital spend in a particular year. So we typically look over -- look at the refinery over a 4- or 5-year cycle. And back to you, Robert.

Thank you, Scott. Julia?

Thank you, Chairman. And we have 2 questions from [ Kevin Charles Daly ] on the sustainability report. And he says, "The disconnect between the Chairman's remarks on sustainability and the content of the sustainability report were profound. Was the sustainability done in-house or put out to sustainability specialists?" And the follow-on question is, "Have you read all the 23 pages of the sustainability report? If not, why not?"

Well, having been in the Australia's environment for 6 years, I have particular interest in sustainability and not only read every word of those pages but contributed a little to it. The -- and I don't -- I must say I don't really understand the question, the disconnect between my remarks and the report feedback that we've received, otherwise, on the sustainability report has been positive. This is, of course, only our second sustainability report. We think it's advanced significantly from the first, and we think that you'll find next year's even more useful, which is the real purpose of it. And when I look at the report, our areas of focus, health and safety, environment, climate change and energy, products and aviation, our people, our community, ethical conduct and transparency and economic contribution, we can overall make a very positive case, and I'm pleased that the report does evidence the commitment of the company to the broader sustainability expectations of the community. There are some areas of -- obviously, climate change is one that are particularly challenging to a company that's in the business of hydrocarbons. But even there, we point to the changes and improvements that we've been able to implement and are implementing. In detail, yes, we have a group within the company that works on the issue of sustainability, and they do bring in for support from time to time outside experts as well. So it is an area that we take seriously, and I'd be quite happy to have a talk with the questioner off-line. It's a question I would like that to sort of try and better understand exactly the point that he's seeking to make. Julia?

Thank you, Chairman. And we have another question from [ Kevin Charles Daly ]. "The federal government recently released a road map for future energy policy. It canvassed proposals for research into aspects of the hydrogen economy and put a lot of cash on the table. Did Viva submit any such proposals?"

So we, not surprisingly, have been in close contact with the federal government as it's been seeking to revisit its energy policies, pressing the opportunity for Viva to assist the government and some of the government's recent announcements, not just in the Minister's technology road map, which I think is -- what this question is referring to, but more generally, some of these areas the Minister's addressing are subjects that we -- where we have a particular opportunity to assist them. We've mentioned a couple of them today such as the supporting strategic storage. Geelong -- not just in Geelong, but Geelong is ideally placed being able to hold crude to produce a whole range of different products and to be so closely located with a major path of the Australian economy. So we'll be hopeful we'll be able to support the federal government in that regard, and we'll continue to support them in other ways as well. So -- and hydrogen is one area that we've been involved in the development of hydrogen policy in Australia now for a long time. I think the -- it's still unclear in our sector of transport how the industry will develop. There are some who think that it's -- hydrogen has got a pretty big future in the heavy transport sector and can see changes that have already occurred, for example, in the United States in that regard. So I don't know, Scott, whether you want to add anything to what I've just said. But the -- I'm pleased with the engagement, not just with the federal government, but with the state governments as well. And I'm particularly pleased that they are now seeing us as a partner in what is a strategically important part of the Australian economy. Is there anything you wanted to add, Scott?

Yes. I think the only thing I'd add, Robert, is obviously the announcement we made a few weeks ago about the Geelong energy hub is very much positioning that part of our business to be -- to play and contribute in a broader range of energies and our traditional oil products. The focus for now is obviously on the initial project, and our key focus is on creating a -- the LNG regasification facility to bring new natural gas sources into the state. That's largely to help meet a shortfall that we see emerging in 2023. But with that project then comes a foundation to move further into other forms of energy as well, maybe gas to power generation or potentially gas and renewable power to hydrogen as well. So it's sort of part of our longer-term strategy. We have some -- obviously, some very tangible projects we want to get on with initially, but we certainly see the same opportunity.

Yes. Thank you. Yes, it's a good point because the government has clearly nominated natural gas as an important contributor to the transition from, in particular, coal in the future. Any other questions, Julia?

Yes, thank you, Chairman. Just a couple more. This is a question from [ Kevin Charles Daly ]. "To what extent is the Australian bitumen market supplied by imports?"

Scott, what's the answer to that?

Yes. So...

I said in my presentation that we're the only manufacturer in Australia.

Yes. I don't know the exact proportion that's imported into the country, but we're certainly, obviously, the only manufacturer of domestic bitumen. And it's -- that forms a significant component of bitumen that's used in Victoria and South Australia. We have a project which we're nearing completion to build an export line to allow us to send more Australian-made bitumen outside of Victoria, potentially into New South Wales and further north as well, that will allow us to increase production at Geelong. We have a lot of spare capacity to produce more bitumen at Geelong, and obviously, by creating an export facility, we're able to do that. And hopefully, if we're successful, displace some of the imports that are currently coming into the country.

Julia?

Thank you, Chairman. And the next question is from [ Harry Steilin ]. "The local retail market has changed significantly with the emergence of new players such as Euro Garages and the refresh of the Ampol brand. Is it time to pivot and establish a Viva brand in Australia similar to what Z Energy did when they moved from the Shell brand in New Zealand?"

So as I said in my presentation, the Shell brand is one of the most recognizable brands in the world and highly respected. But Scott -- and so we see a competitive advantage through our relationship with Shell. Scott, did you want to add anything on this?

Yes. Look, I think it is something we obviously have contemplated, but we -- on balance of arguments, we obviously made the decision last year to extend the brand license agreement through until 2029. It's been a huge part of our heritage. We've been operating in Australia under Shell ownership initially and now -- then private and now public for over 110 years. It has a huge heritage in the country, extremely well recognized, not just in Australia, but globally as well. Constantly, Coles is one of the most recognizable and positive brands that were associated with fuel in Australia. And for those reasons, we decided to continue with the license agreement with Shell. Again, it's a long-term partnership that we have in place. The Viva brand is important to us, obviously, as well, and that's certainly a brand that we promote and use in our commercial channels and our commercial businesses. And obviously, you see it on our websites and our prospectus as well, and that will continue to grow over time. But we're quite comfortable with a multi-brand strategy, having Viva in one part of the market and now our association with Shell very much in the retail market as well. Of course, through the acquisition of the Liberty business and our ongoing partnership with the -- with our partners in that part of the business, the Liberty brand is also an important brand in the retail market. We are growing our network of Liberty-branded sites through that arrangement and a particular focus in regional Australia. So that will grow over time as well, and again, we'll sort of support the whole brand families that we have as part of being Viva Energy.

Julia?