Brand, strategy provide growth platform for Z Energy

15 May 2012
Brand, strategy provide growth platform for Z Energy

One year after choosing to switch to a local identity from one of the world’s biggest brands, Z Energy’s commitment to a new brand and strategy are combining to generate competitive advantage for the country’s largest fuel retailer.

The Z brand was launched in a pilot programme on 11 May 2011. The company committed to the full roll-out of the Z brand in November 2011 and the full rebrand of the company’s commercial and retail networks will be complete in June.

Z Chief Executive Mike Bennetts said the first full year of Z Energy – coinciding with the company’s financial year – had been one of maintaining performance while building a foundation for growth.

“The 12 months to 31 March 2012 were all about building a new brand and implementing the company’s strategy. These two elements in partnership are the cornerstone of being a local company and have already enabled us to post a strong result in very competitive market conditions.”

Z has posted Earnings Before Interest, Depreciation, Amortisation and Financial Instruments of $177 million for the full year, up from $167 million for the previous corresponding period. Net profit after tax was $77 million, down from $203 million for the 2011 financial year (although that included the effect of a $121 million revaluation of the company’s assets).

“The full year result is at the lower end of our guidance but our performance highlights the resilience and momentum we have in the business to manage volatility. In the last quarter refining margins were the lowest they have been since we bought the business and there has been significant price discounting across the Retail fuels market.

“In a low margin, highly competitive market, having the right strategy and a trusted brand becomes all the more important. Already our strategy projects are delivering improved performance and enabling future growth opportunities, while we have been very pleased with the way the Z brand is landing with our customers,” said Mike Bennetts.

“Our brand tracking shows Z is already a strong preference for Kiwis, with respondents more likely to recommend Z than any competitor. Our commitment to bringing service back to forecourts, being locally owned, and contributing back to local neighbourhoods is resonating well with customers, despite the fact that the brand roll-out is only two thirds complete.

“We have areas to improve, such as better promoting our new food and coffee offer but customers are giving Z a chance, are expressing a clear preference for local ownership and what Z stands for and we’re committed to continuing to earn their loyalty,” he said.

Mike Bennetts said Z would continue to promote and lead change in the downstream fuels industry.

“As we’ve seen with the split industry vote around the Refining New Zealand upgrade, the New Zealand fuels industry is continuing to fragment. For decades the industry has promoted a low capital investment model which is no longer meeting New Zealand’s requirements for a secure and resilient fuel supply chain.

“Z is committed to moving the industry onto a much more commercial basis and revisiting the industry arrangements which are now acting as a constraint to much needed investment.”

Mike Bennetts said with 91 octane fuel consistently above $2 per litre, ongoing public scrutiny on fuel prices was to be expected.

“We are very aware of the impact of our prices on consumers and business so we’re committed to being straight up and as transparent as possible on prices and margins.

“When you boil it down, if you take all of the money we made – including our shop sales – and divide that by the total litres of fuel sold, we made a bottom line profit of about 2.1 cents per litre; that’s a return on capital employed of 9.6 per cent. For the purposes of transparency and consistency, Z buys, sells and prices fuel products – and reports results - on a ‘current cost’ accounting basis.

“While there has been some recovery in fuel margins over April and May, this remains a highly competitive, low margin industry. We are getting to the point where returns are only now providing the confidence we need to commit to the major infrastructure investment that we have been expressing concerns about for the past year or so.”
ends

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