Thank you for standing by and welcome to the Ampol Limited 1H2022 Results Conference Call. All participants are in a listen-only mode. There'll be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Matt Halliday, Managing Director and CEO. Please go ahead. Good morning, everyone. My name's Matt Halliday, I'm the Managing Director and CEO of Ampol Limited, and welcome to our half year 2022 results call. I'm joined by our CFO, Greg Barnes, who will discuss the financial results in more detail. Following the presentation, we'll take your questions. Today, we also have Brent Merrick, Andrew Brewer, Kate Thomson, and Mike Bennetts joining us on the call. During the presentation, we're going to refer to documents lodged earlier today on the ASX. As always, safety comes first at Ampol, and I'm gonna start with our safety performance on slide three. Personal safety remains a key focus for Ampol with F&I, Convenience Retail, and Z Energy maintaining a very strong performance. As our annual safety improvement plans, including a targeted focus on leadership time in the field, delivers good results. When it comes to process safety, we had no tier-one process incidents, a track record that we have now maintained since October 2018. Our comprehensive spill prevention program, which involved working closely with our carrier partners, has now been embedded into business as usual. Unfortunately, we didn't meet our expectations with the Kurnell terminal wastewater separator overflow in April. After several weeks of extreme rainfall, there was a very intense rainfall event during a very short period that led to a discharge of oily water from the site impacting the local community. Importantly, we have now completed the investigation and the cleanup work, and we continue to work with the New South Wales EPA, Kurnell community, and the local council to address the findings. Turning to the highlights of our performance now on slide four. Against the backdrop of increased volatility due to the global energy shock, COVID outbreaks, and extreme weather that we've seen, Ampol's delivered a record half year performance. I think this demonstrates the benefits of Ampol's integrated supply chain and the underlying resilience of our business. Looking at our financial performance first, ARCOP EBIT was a record at AUD 734 million, with ARCOP EBITDA AUD 927 million. This record was largely due to the unprecedented strength in the Lytton refiner margin after what has been a sustained period of low margins in recent years. Pleasingly, we also saw a substantial lift in trading and shipping profitability, and our shop performance was also strong in the face of headwinds in the retail fuel business as high prices hit consumers hard and our margins compressed as prices climbed rapidly. Total fuel sales increased to 11.5 billion liters, mainly due to jet fuel sales and, of course, the addition of Z. The acquisition of Z elevated debt borrowing levels to just under AUD 3 billion. Leverage was 2.6 times due to the timing of the acquisition of Z and the divestment of Gull, which settled in July. On a pro forma basis, leverage reduces to 2.2 times, which is well inside our targeted leverage range, and Greg can step you through that further in a moment. When we look at the strength of our financial performance, the strength of our balance sheet, and our view of the outlook, it's allowed the board to declare an interim dividend of AUD 1.20 per share. This represents a payout ratio of 61% of ARCOP NPAT, which is just above the middle of our dividend policy range. The dividend releases a further AUD 123 million of franking credits, and we have now returned about 60% of our franking balance since 2019. Turning now to our strategic priorities. We've continued to execute on our strategy to diversify and grow internationally by completing the Z acquisition. The Ampol rebrand is on track for completion before the end of the year, with the cohort of EG stores the bulk of the remaining program. Since launching our future energy and decarbonization strategies in May last year, we've continued to build capability and invest in future energy and decarbonization, and I'm going to talk in more detail about these programs shortly. Among the disruption and turmoil of the past few months, we've maintained our focus on creating value for all stakeholders. Our resilient supply chain has ensured fuel security for our customers despite the significant global disruption to crude and product flows. We've continued to invest to decarbonize our own operations, and we launched our second Reconciliation Action Plan. Recognizing the increasing cost of living pressure on consumers, the Ampol Foundation and Z Energy's Good in the Hood program have provided increased support to the communities where we operate. Turning now to slide five. The significant dislocation in global energy markets caused increased volatility and record high fuel prices. Local markets were further impacted by extreme weather and lower mobility due to COVID outbreaks. Ampol has undoubtedly been a net beneficiary of these impacts, largely due to the unprecedented refiner margin strength, as well as the attractive trading opportunities that volatility presents. Conversely, quality premiums, which reflect the cash price paid over MOPS to secure spot cargoes, rose very sharply and compressed margins, reducing earnings from fuel sales to contracted customers. In retail, the high fuel prices, flooding, and COVID all operated to reduce fuel volumes. Rapidly rising finished product prices rather also compressed retail fuel margins. The improved shop margin was unable to fully offset the fuel headwinds, resulting in lower overall convenience retail earnings. Looking at the detail behind the fuel volumes on slide six now. We observed different performance across our key markets, with group sales volumes up 4% after adding two months of Z sales of 603 million liters. Australian wholesale volumes grew 6.5% as jet fuel grew, with air travel recovering from the COVID lows. Conversely, convenience retail fuel sales fell 5.8% on a like-for-like basis, as the combined impacts of flooding, Omicron, and high prices took their toll on mobility. Taking both these markets into account, the combined Australian demands grew 2.1%, the first time since the pandemic that we have seen a half where our Australian sales volumes have grown. The supply-constrained market limited the available opportunity for spot trades, reducing international volumes sold. Very pleasingly, though, our enhanced international supply chain capability, which has been built over many years, allowed flexibility to respond to the supply chain disruption and volatility, and provided attractive trading opportunities to source, blend, and store cargoes. This helped to improve internationally generated earnings, despite the reduced volume sold. I'm now gonna hand over to Greg Barnes to take you through the details of the group and segment performance. Great. Thanks, Matt. Good morning, everyone. Look, as you can see, there's a fair bit going on in the results, so what I thought I'd do first is just step you through some of the major changes. We obviously completed the Z Energy transaction during the period. Our results include their May and June performance only. As you'd expect with any acquisition, we need to make acquisition adjustments or purchase price accounting adjustments. We're obliged to make some of the initial PPA adjustments on acquisition, which we have done, and we'll complete that process at year-end. We also modified our ARCOP methodology to align with Z Energy's, and we communicated this at the time of our Q1 release. For this reporting period, we've classified Gull as held for sale and reported it as a discontinued operation. We've since completed that sale, that is the sale of Gull in July. There's a reconciliation of these adjustments in the appendix to the ASX release and on slide 28 of the presentation to give you a hand to update your models. If we go to the results on slide eight, as Matt commented, this is a record result for Ampol and one that was delivered in very challenging market conditions of which we're undoubtedly a net beneficiary. The performance was driven primarily by Lytton, which benefited from a significant step up in refining margins, and we also saw a really strong performance from our F&I international business. Despite the headwinds of weather, Omicron, and record high fuel prices, convenience retail reported an encouraging result, particularly in the shop where our team continues to deliver. As I mentioned, we've reported just two months of Z, so it hasn't really had a big impact on the results for this period. I'll talk to it and each of the segments in a moment. Just on ARCOP NPAT, we reported AUD 471 million and a statutory result of AUD 696 million. The statutory result includes nearly AUD 290 million of inventory gains after tax, reflecting the rise in crude and product prices during the period. It also includes significant items of AUD 65 million after tax, the bulk of which relates to Ampol rebranding, transaction costs associated with the acquisition of Z and the sale of Gull, as well as our settlement with EG. If we go to slide nine, it shows the key contributions to the growth in group EBITDA and EBIT. It really does highlight just how important Lytton's second quarter performance was to the group half result. I'll talk to the other businesses on subsequent slides, but we'll note the uplift in corporate costs of AUD 7.6 million. This was largely due to increased accruals for short-term employee incentives consistent with results, as well as costs related to self-insurance, where we lifted premiums to cover flood damage at affected retail sites during the period. Slide 10 looks into the F&I result in more detail. Obviously the refinery is a standout. The Lytton refiner margin reached $32.96 US per barrel for the second quarter. That's compared with $10.59 per barrel in the first quarter in US dollars. The significant increase reflected a combination of global factors, including COVID demand recovery and low inventory levels, especially diesel. This was compounded by the supply shock caused by Russian sanctions and Chinese export quotas trending below historic levels. These factors drove refined product prices higher and increased landed crude premiums and product freight costs. At Lytton, production lifted in the second quarter, maximizing the benefit from the elevated refiner margin environment. Total production for the half was nearly 3 billion liters, in line with the same time last year. With this backdrop, Lytton EBIT was AUD 444 million, an increase of AUD 393 million over the same time last year. The performance from FNI International, excluding Gull, was another highlight. I'm gonna talk to that, in a subsequent slide. FNI Australia ex Lytton was largely in line with the same time last year, which is a great result given the quality premium headwinds that Matt spoke to earlier. As we outlined at the half year, we've increased our investment in future energy. That spend is largely focused on e-mobility and our retail electricity pilot, and the team is making great progress on both counts, and Matt's gonna come back and talk to that shortly. Now, slide 11 takes a bit of a deeper look into FNI Australia. We called out earlier that quality premiums for spot cargoes rose to unprecedented levels over MOPS daily pricing. This creates challenges for our business to pass these costs on to customers contracted at fixed premiums. Pleasingly, trading and shipping were able to benefit from the elevated market volatility through sourcing, storing, and blending physical products while managing the price risks through derivatives trading. The strong trading and shipping performance offset the impact of quality premiums in the period, with FNI Australia ex Lytton earnings rising by 2.6% in the half. Volumes are also up 2.1% on the back of improved jet volumes in particular. Australian jet volumes grew nearly 59% year-on-year. However, this volume remains about 30% below pre-COVID levels. The volume outcome is pretty pleasing, I would say, given more than half of Ampol's wholesale volumes go to convenience retail, EG, and other resellers. These channels were obviously impacted by the combination of high prices, flooding, and reduced mobility due to COVID outbreaks. They are equally well-placed to benefit from any recovery in mobility in the future as immigration levels normalize and fuel prices moderate. If I might go to slide 12, and you can see that our FNI international earnings, excluding Gull, almost tripled this half. I think it really underscores the capability that Ampol has built in international sourcing, shipping, and price risk management. While the extent of its contribution to group earnings will vary from period to period, it plays an important role in securing our supply chain, and we certainly expect it to grow over time. It is also a key foundation for Ampol as we transition to more energy-efficient solutions. During the period, the team were able to secure our supply chain and take advantage of market dislocations by sourcing, storing, and blending cargoes to service third-party international customers. While volume was down as a function of the supply shock, the elevated volatility created opportunities to capture greater margins. Gull also grew earnings in the period by around AUD 5 million. We've called out the current and prior year numbers here and in the reconciliation in the appendix to make it clearer for you to update your modeling going forward. Earnings from SEAOIL, from SEAOIL that is, also grew as demand improved post-COVID and their planned network growth continued. On slide 13, you can see the KPIs for the convenience retail business. Total retail fuel volumes were 1.9 billion liters, down 5.8% on a like-for-like basis for the reasons we discussed earlier. The high prices also impacted demand for premium petrol, particularly in the second quarter, where consumers traded down. Despite this, premium fuel sales penetration was quite resilient over the half, down 1.4 percentage points. The good progress in shop performance continued. Network's shop sales declined by just 1.6% in that environment on a like-for-like basis, but shop income increased as shop gross margin, post-waste and shrink, expanded to 33.3%. That's an increase of 2.3 percentage points from the same time last year. Improved promotional activity, labor efficiency, reduced waste and shrink, and the ability to pass through price increases all contributed to the improved performance. Our non-fuel EBIT uplift initiatives reached AUD 58.4 million by the thirtieth of June, and that's against a 2019 base. We're now tracking ahead of schedule to deliver against our target of AUD 85 million by 2024. On slide 14, you can see quite clearly the impact of the key drivers I've just mentioned. As you know, for most of the half, fuel costs continuously increased and rose particularly steeply in the second quarter. This takes time to pass through to retail prices, compressing fuel margins until they settle. As I mentioned, the strong shops performance saw its contribution increase by AUD 6 million. Progress in these areas means we are well positioned to benefit from improved trading conditions as they eventuate. Costs of doing business also reduced, and really there was just a focus on spend right across the board. We might turn to slide 15, and you'll to talk about Z Energy. As you know, the acquisition completed on the tenth of May, and we've got two months of trading included in the group results. As luck would have it, we completed the transaction in the thick of Omicron, as it swept through New Zealand and as it was transitioning to an import model. They had a tough couple of months. July was much stronger, and we're really encouraged by what we see in this business, and we're very pleased that Z is now part of Ampol. While it's early days, integration's progressing well, and we're confident of delivering the estimated benefits of NZD 60 million-NZD 80 million per annum. Z Energy's transition to a full import model is largely complete and was successfully executed, with Z Energy able to maintain supply to its customers with limited disruption. The result does include some one-off costs of around NZD 6.9 million associated with the transition, which are included in the results, and that's in New Zealand dollars. We're yet to complete the purchase price accounting adjustments, although we have made some initial adjustments, as we're required to do. We've provided the underlying performance of Z that reflects Z's previous reporting methodology, and you can see the impact of the preliminary PPA adjustments being an increase of half a million Australian dollars for the two months. Turning to our balance sheet and cash flow on slide 16. We obviously completed the acquisition of Z in May, which was fully debt-funded, and we didn't complete the sale of Gull until after balance date in July. This largely explains the movement in net debt over the period to just under AUD 3 billion at 30 June. A pro forma net debt position is also provided on the slides, reflecting the receipt of the proceeds relating to Gull in July. At the 30th of June, our leverage was 2.6 times on an absolute basis and 2.2 times on a pro forma basis. The pro forma calculation adjusts for the Gull proceeds, excludes Gull earnings for the last twelve months, and includes the last twelve months of Z earnings. The substantial movement in crude and product prices in the second quarter had a significant short-term impact on working capital. This, combined with some additional physical inventories to facilitate the trading and shipping opportunities I just spoke of, led to working capital increasing by over AUD 800 million during the period. We expect these earnings to convert to cash in the second half, and working capital to begin unwinding at current price levels. You can see we also received the proceeds from Ampol's second property trust for the sale of 49% interest in 21 properties to Charter Hall. Capital expenditure for the half was just over AUD 120 million, including rebranding. We expect full year spend to be around AUD 400 million, inclusive of Z. This is about AUD 50 million lower than previously guided, with some delays in obtaining development approvals at the Pheasant's Nest and M4 projects deferring spend into next year. While we paid AUD 98 million in dividends during the period, being the final dividend for FY 2021, we are declaring an interim dividend for FY 2022 of AUD 1.20 per share. That reflects both the strong earnings performance in the half and the underlying strength of our balance sheet. Thanks for that. I'll hand back to Matt and come back for questions. Great. Thanks very much, Greg. I'd now like to turn to an update on our strategy on slide 18. In February, we outlined our key strategic priorities for 2022, and halfway through the year, we've made some good progress. The Ampol rebrand has progressed at pace, with 1,285 sites rebranded at 30 June, with the remaining works pertaining mainly to EG. Where we sit right now is that we're approximately 90 sites into that part of the network, and getting the Ampol brand onto these sites should be a positive catalyst for our wholesale volumes. While there have been some delays, we continue to advance the redevelopment of the four large highway sites in New South Wales. Our expand pillar is focused on international growth and non-fuel earnings. We completed the Z acquisition in mid-May, and the Gull divestment was completed in July. This was a tremendous effort by a lot of people right across both Ampol and Z, and we welcome Z into the Ampol group with our early work only reinforcing the confidence we have about the benefits available. The non-fuel EBIT uplift strategy continues to gain traction, and I think you can see that evidenced in the shop result that we're presenting today. We remain very confident in the delivery of the AUD 85 million uplift opportunity, which does not rely heavily on format enhancements like MetroGo, which will continue to progress and be refined over time. I'll now move to slide 19 to explore the evolve pillar, which outlines our response to the range of possible energy transition scenarios. Our transition strategy is evolving as we learn more through our test and learn programs and engagement with customers, governments, OEMs, and other key stakeholders. With battery electric vehicles the likely solution for passenger and light commercial, we have now moved the rollout of the ARENA co-funded AmpCharge EV fast chargers to the scale-up phase. Meanwhile, we're investigating the economics of purpose-built EV charging hubs that incorporate multiple charge points in one location. That is also commencing the initial phase of its EV charging network rollout of 26 sites in partnership with the Energy Efficiency and Conservation Authority, and 11 sites are expected to be up and running in early 2023. As our customers' needs expand and the future of powering mobility becomes more complex, Ampol is very well placed to make it simpler for our customers. Ampol aims to power their journeys through a combined fuel offer with ongoing liquid fuels, which they will need for some time to come, as well as electricity at their home and on the go, so we can serve our customers at the start, during, and end of their journey. To support this goal, Ampol applied for and has received a retail energy authorization from the Australian Energy Regulator, and we will commence a trial for a small group of employees to now test Ampol's value proposition. We see hydrogen as a possible solution for long-haul heavy transport, although other technologies may emerge. The economics are difficult at present, but expected to improve over time, with testing and with some further scale. We're currently researching and undertaking commercial discussions to assess hydrogen production economics and domestic distribution opportunities. We have paused the Lytton Hydrogen pilot facility with our partner, Fusion Fuel Green. The geotechnical characteristics for the preferred site were unsuitable for the trial. I think this is evidence that we're going to remain disciplined in allocating capital and deploying our resources as we progress on our test and learn projects. Biofuels and synthetic fuels look to have an important role to play during the transition, particularly in hard to abate areas such as aviation and heavy industrial sectors like mining. These are important market segments for Ampol, and we are increasing our efforts to assess opportunities in renewable diesel and sustainable aviation fuels, including supply chain economics and the opportunity to repurpose our existing infrastructure. I'd now like to make some comments on the outlook. We're on slide 21. We've obviously seen a very significant disruption to the fuel supply chain in recent months, leading to volatile pricing for crude and refined products. As you can see, the fundamental physical product markets look quite tight, and to some extent will be influenced by the level of exports that are coming out of China. The graph shows refining crude distillation unit capacity net additions from 2019 through 2024. I think the first thing to note is the net closures during 2020 and 2021, as poor refinery economics drove several closures, including in Australia and New Zealand. While there are net additions forecast in 2022 through to 2024, these are primarily focused on China's domestic consumption, and the export-oriented additions are largely in the Middle East. Other factors that drove the extraordinary refiner margin environment that we saw during the second quarter, including low global inventories as the crisis began, and geopolitical factors relating to Russian sanctions and the reduced exports that we've seen out of China remain largely unchanged. European diesel stocks remain well below five-year averages, heading into what looms as a very challenging winter, and very high gas prices increase costs for European refineries looking to produce diesel. All of these supply side factors, of course, need to be weighed against the demand impacts as the global economy slows. According to Facts Global Energy, Asian demand ex-China is forecast to rise by 5.6 million barrels per day over the 2022-23 forecast period, compared with only 1 million barrels of net additions ex-China. I think this combination of factors suggests that the fundamentals of the global refining supply-demand balance are likely to remain tight, and the volatility that we've seen is likely to persist for a while yet. Turning now to the position in Australia and New Zealand, where demand remains below pre-COVID levels as the recovery in petrol and jet demand lags. Diesel demand has certainly been resilient and is tracking above pre-COVID levels across both markets. As the leading transport fuels provider in Australia and in New Zealand, Ampol is very well positioned to benefit from the ongoing recovery in fuel demand. I'd like to close today on slide 23 with a view of the current trading conditions. Ampol is well-positioned to address inflationary pressures, as I think is evidenced in this result. The underlying business and our sector has proven to be resilient. Our trading and shipping capability positions us well for ongoing volatility, as does the government underpin at Lytton, and we continue to focus on delivering underlying productivity benefits right across the business. Since the end of the half, global crude and product markets have continued to experience volatility, and the Lytton refiner margin eased through July as product cracks weakened. The LRM in July was $16.46 per barrel, so still well above historical averages. In FNI ex Lytton, quality premiums remain a watch point, but retail margins improved in July as refined product costs eased. As a result, convenience retail exited July in line with year-to-date last year, effectively making up the shortfall at the half, and we see the strong shop performance continuing in the business. Z Energy will contribute a full second half, and as Greg talked about, July trading saw a very strong improvement, with Z Energy well-placed to benefit from the ongoing recovery in fuel demand post-COVID. That ends our presentation of the half-year result. Now Greg and I will take your questions. Just a reminder that we also have Brent, Andrew, Kate, and Mike on the line, so I may also direct some questions to them. With that, we'll take our first question please, operator. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Dale Saunders from Barrenjoey. Please go ahead. Morning, team. Just firstly a question on, I guess, the cash flow result. Just trying to understand how much of the working capital build through the period would you say was from Z Energy or other volume recovery in the business, and how much was price-specific that we could sort of assume recovers in future periods? Hi, Dale. It's Greg. I'd look through Z Energy. Obviously, we acquired working capital with the business. I would say about 80% of the uplift that we spoke to, the AUD 800 million, about 80% of that is price-related. You see it coming through as essentially debtors, if you like, with inventory and payables largely netting off one another. What we have also seen, so what's the 20%? The 20% is call it 150 million liters of product that we are carrying in storage to support the international trading business. That, that's a portion of it, but the large majority of it is that flow through of pricing to sales to customers held as debtors at the end of the reporting period. I guess if we think forward into the second half, even if there's no unwind, it kind of indicates that the underlying cash flow from the business is about half a billion dollars in the first half. On a pro forma basis, you're already in the middle of your target settings. Is there any reason that we should not assume you're at or below target settings in discussing off-market buybacks in six months' time or less equal? If I think about working capital, and then obviously it will depend on your view of product pricing, crude pricing. You would naturally think as you build up your working capital and invest it in a rising price market, that your earnings will convert to cash. Prices have come off recently, and that should be favorable to cash flow and working capital. Look, our approach to the second part of your question, our approach to capital management, I think, has been quite clear and consistent. Our allocation framework stands, the board and management team are supportive of that. Of course, you know, when you look at the results we've had in Q2, you need to look through those a little bit to ascertain where you think sort of a sustainable leverage ratio position will be, and that's the sort of thing that'll guide our thinking around what do we do with our balance sheet going into 2023. Of course, we're weighing that up against you know, investments we need to make in Ampol to support its transition. I think, you know, your point's a valid one, and I just suggest we just wanna look through to a more normalized earnings basis. We assess leverage and capital management options. I guess that's the question on those. What are the competing forces for or competing options for capital within the business? Greg has said target of AUD 100 million spend on energy transition, which I assume is sort of EV and retail electricity, what you've been talking about today. Is there any other big spends we should be anticipating in the near term? Look, they're the two things we're focused on. You know, I guess I would describe eMobility as sort of moving beyond that test-and-learn process. Certainly by the end of this year, we'll be much more active in our first phase of a network rollout, if you like, under the ARENA grants, as you're aware of. That's sort of starting to move out of test and learn. Retail electricity as Matt described, we're just trialing with our employees. We're just about to launch that actually, the trial with our employees, and then we'll go from there. I would think at year-end, we'll have more to say on our plans around those two aspects of the business. You know, the other areas, as noted in the slide, biofuels or sustainable fuels, if you like, aviation and renewable diesel is an area we're certainly investigating and in that research phase of. The two main categories I would say at the moment are e-mobility and retail electricity. I think we'll be better placed to talk about what's next in those categories around the time of our full year results. Okay. Just final question, trying to understand how repeatable the FNI earnings are on a go-forward basis. How much of that AUD 43 million step up versus PCP was more what you consider sort of one-off good trading opportunities that we either in our models shouldn't be forecasting in next period? And on the flip side, you know, how much of the headwind has MOPS premiums presented to the Australian earnings that you'll get some of that back when things normalize? Thanks. Yeah. Do you want me to? Yeah, go for it. Have a crack first. Look on the trading and shipping piece, I sort of made a point in the results that, you know, the results for trading and shipping are gonna vary from time to time, but we've got really positive expectations out of that business over time. It does two things, right? It serves as a risk management capability and a sourcing capability for our Australian business, but it can also capitalize on markets like what we've just seen, where there's volatility and a bit of a dislocation in markets. You know, Matt commented on the sort of supply demand situation. I think we will see some volatility for a little while. Matt referenced the same thing. you know, really, it'll just turn on the specific opportunities in front of us. What I would be thinking about in our international business in particular is sort of looking through the swings and roundabouts period to period and sort of thinking about longer term growth of that business, 'cause we've been quite consistent in delivering growth through that business over time. QPs probably won't get into specifics on it, if you don't mind, just because it gets a bit sensitive as it relates to individual commercial contracts and things like that. what I would say is they certainly were very. They've moved with cracks, with refined product pricing, and in part are a function of sort of you know, markets rebalancing and longer shipping periods and time. The requirement to recover pricing and freight costs in a market that's in liquidation. To the extent those conditions stay, I think they'll move in line with crude and product prices, is probably the best way to describe it. With prices down in July, we've naturally seen QPs on spot cargoes softening a bit in line with that. Okay, thanks. Thanks. Thank you. Your next question comes from David Errington from Bank of America. Please go ahead. Morning, Matt. Morning, Greg. Following from that question, on the margins and all the rest of it. I apologize up front if this sounds a really dumb question, but coming from an ice cream analyst point of view, but Ampol is an integrated fuel provider, which means that you buy from the virgin source, you go through the whole source, and then you finish it, you know, sell the finished product. You call out these gains, and then you call out these headwinds. We sorta like, as Dale basically pointed out, question the sustainability of it, of what is, in inverted commas, a trading profit. But you guys call it a trading profit. I mean, when we, in this part of the world here of trading profit, we put a P/E of one on it. My question is, should we see this as a trading opportunity or just an automated part of your integrated supply chain, and it's a normal course of your business, so we should put a normal multiple on it because this is what you do? I don't know if that's. I mean, I'm pretty simplistic, but you guys call them out as special items, but are they really special? It's just part of your integrated and, you know, what might be a trading profit at this point, it's actually a burden to the refinery. If it unwinds, then the refinery makes more money. I'm just trying to get my head around it. Can you do it to us non-technical people? Is this just an ordinary part of your integrated business model, or is it actually a segmented part that's different? No, I think it's a sort of David, what I would say is, the result and the market volatility that we've seen highlights the value of the integrated value chain. I think it specifically highlights the capability that has been developed in the trading and shipping business. The hundred-odd people we've got in Singapore and the handful of people we now have in the US to find opportunities around the fact that we have the refinery, we have the physical short, if you like, or the backing, and we have exceptional storage capability both in Australia and now New Zealand, as well as international storage capability. It's that toolset that has enabled us to find opportunities around to trade around the supply chain, and volatility is supportive of that. I think as Greg said, you'll see it move around a little bit, but I feel very confident that what you are seeing is the demonstration of the value of the capability that we have built over a number of years and continue to build on. When we look at the trading and shipping business and the international P&L, we continue to see growth of earnings through that business and the ongoing capability that is occurring year in, year out in that business. Yeah. Well, this is what you were calling out when you made the Z acquisition, wasn't it, Matt? That this is the increased capability that you were hoping to gain, is what you were basically calling out as synergies, the improvement of the buying opportunity, the storage. Is that a fair call? Or, 'cause this just seems to be an ongoing It's a very fair call, David, because I think the Q2 result and the outperformance driven by trading and shipping underlines A, the capability that we've built, and B, why we think we're the best owner of that sort into New Zealand because it gives us even greater scale in region. The sorts of opportunities that we have found in the second quarter are exactly the sorts of opportunities that with even more scale in region we think we can drive profitability from. That's kind of what we're talking to with the NZD 60-NZD 80. Obviously we're gonna look to do better than that. Yeah, in a sustainable enhanced capability. Yeah. Second question, Matt. How's EG going? I mean, it's a part of the business. You called it out. It's been a real handbrake. Now, obviously COVID's hit, but the business has deteriorated significantly, the relationship's deteriorated. Can you give us a bit of numbers as to how much volume you did drop in that period? That sort of like gives us an idea as to what the potential upside could be in regaining it, because it looks like EG was a significant handbrake over the last two years in terms of volume in that wholesale part of the business. Yeah, I think, look, as I mentioned, David, it sort of—I think it is a positive catalyst for volume within our business because we are overweight in terms of retail linked wholesale volumes, and EG is a very big part of that. My view is that getting the Ampol brand, given the success of the Ampol rebrand, getting that brand on their sites and getting the full network rebranded is a positive catalyst for our wholesale volumes. Clearly there were some issues we needed to work through in terms of the dispute regarding the rebrand. We've found a pathway through that now. We're 90 sites into getting the Ampol brand on their site. We're obviously now sort of worked our way through COVID disruptions and the other disruptions that we've seen. I'd like to think we're well-placed. I can't give specific numbers on the EG business. What I can say is that getting the Ampol brand on those sites is a positive catalyst for our wholesale volumes. Okay. Thanks, Matt. Thanks, Greg. There's a lot of tailwinds coming in the second half, Matt, so I'm looking forward next February, seeing some really good numbers come through. Thanks very much. Thanks, David. Thank you. Your next question comes from Mark Wiseman from Macquarie. Please go ahead. Oh, g'day, Matt. G'day, Greg. Thanks for the update today and congrats on the results. First question I had was just on the shop results. In retail, it's pretty impressive the way you've expanded those gross margins. You've obviously been investing pretty heavily in your network. I was just wondering how sustainable that 33% is gonna be as the top line improves. Could you maybe just talk through how that result was achieved and how to anticipate those margins going forward? Yeah, let me start off, and then I might pass to Kate, who's on the phone. I think it is a very strong result. I think when you look back over the last number of periods, there's evidence of the progress that we're making continue to build, despite the headwinds around mobility and fuel volumes that we've talked to. In terms of the right offer for the right customer segment on the right site is very much where we've been focused. Greg talked to product mix, promotional activity, our ability to pass through inflation, and really getting that the labor model and the offer for the customer in the right place in each local area has been key to delivering on the result. We view it to be sustainable and, you know, we're making really good headway in terms of the progress we're making against the 85. It's all that kind of improvement that underpins that AUD 85 million. You know, obviously we're AUD 58 million or so through and looking now to comp a pretty soft half or Q3, when we were locked down last year. Yeah, we're confident in the ongoing delivery. I might pass to Kate to make some more comments on what underlies that improvement. Thanks. Building on what Matt's just said, I would call out consistency of shop offer across our company-operated network. We launched our Ampol Way proposition in line with the Ampol rebrand, and we're now seeing the benefits of consistency in operation across all our company-operated sites. Matt mentioned a focus on the right product in the right location, so that's been a result of tiering our product range across four tiers of site, which has driven margin improvements and enabled us to get our promotional mix right in the promotional campaign periods. On top of that, we've effectively managed our operational costs, be it labor, inventory, waste, to drive improvements, and that's in a period of high volatility. We see all of those operating cost improvements as maintainable. Okay, great. Thank you. I just had another question on the Z network. I think there had been some mention of another property trust transaction in respect of those EG-owned sites. How big could that opportunity be, and is that something that you're progressing at the moment? Hi, Mark, it's Greg. Yes. It is something we're progressing and certainly would expect to be saying something on that all going well this year and you know ideally before the quarter's out. The ballpark numbers you're looking at around let's call it NZD 130 million thereabout. There's a little bit of tax linked to it, but it's around NZD 130 million net from memory. Definitely something we're well progressed on at the moment. Okay. Thanks, Greg. Just a last question from me just on the hydrogen strategy. You've talked about Lytton not being suitable as a site for the electrolyzer. I wonder, are you considering Kurnell or other locations in the portfolio to create green hydrogen? Or are you taking a view that you can sort of wait and just see how the hydrogen production evolves over time? You know, Mark, we are considering different opportunities, but we're also being quite focused and realistic around the challenges around the economics of green hydrogen. It is going to come. It's going to take some time, in our view. We're going to be quite disciplined in terms of our priorities and how much we take on in the near term. We've got a mobility-led strategy, so you know, how can you get some sites on the highway? How can you start testing supply chain with customers? Acknowledging it's not going to be of or have material size and scale anytime soon. Sites like Kurnell, sites like Lytton are incredibly well positioned sites, large freehold lands, major hazard facilities as they're zoned today and very well connected to water, to wharf, and to domestic mobility supply chain. We'll be quite cautious in the way that we progress. Okay. Very clear. Thanks. Thank you. Your next question comes from Michael Simotas from Jefferies. Please go ahead. Good morning. First one from me is on the shop, and it was nice to see a good result there. How is the shop handling inflation? Have you seen a lot of inflation on the products you're selling? And to what extent are you being able to recover that? And also it'd just be great to get some comments on whether tobacco is still a drag for that business. Yes, Michael. You know, as we talked about, there are a range of areas where we're driving improvement through the shop and our ability to pass through price increases is certainly an element of that. We are seeing prices increase, but it's quite different across the different categories, I would say, is what we're seeing at the moment. But certainly, have seen a good ability to pass through where we are seeing inflation. I think you see that in the result. I might pass through to Kate to talk about tobacco, which does remain a drag in the numbers. Thanks, Matt. Yeah, we're seeing our tobacco volume continue to be impacted, but our tobacco volume impact is in line with industry performance. No outliers from that point of view, and we expect tobacco to continue to be a challenge moving forward. Okay, great. Thank you. Secondly, a couple of questions on the FNI business. Can you help us a little bit with the earnings swing factor on the potential for jet fuel to continue to recover? It looks like it's about 1 billion or so liters below where it was prior to COVID. To be fair, the volume that you've got so far I would think would be lower margin domestic volume, and then you've got international volume to come, which should be at a higher margin, particularly as the smaller carriers start to book capacity into the market. The other side we can't see is to what extent costs have already come back into the business and what the variable costs will be. Any sort of help you could give us on the swing factor, but it looks like it could be another AUD 20 billion or so over time for me. Over to you, Greg. Do you wanna take that one? Yeah. Look, I think your numbers sound about right, Michael, off the top of my head. I think you know, somewhere circa that volume is about the shortfall. We have seen some recovery in international, but as we quoted, it's still overall 30% down. You know, over the last couple of years, the team have really repositioned their customer base, if you like, and the mix of business they have that skews to more international, more out of Sydney and Brisbane and less out of Victoria, which should lend itself to margins. You know, it goes without saying that jet of all categories is a pretty skinny margin business, but international is slightly more favorable than domestic. You know, the sort of numbers you're talking about I don't think are a million miles off. Okay, great. Just the last one on the product premia. Now, I understand you don't wanna get specific, and that's fair enough. Obviously, the elevated crack spread's benefited refining and that money's in the bank for shareholders. Is there any ability to recover the product premia from your customers on a lagged basis, or do you need product premia to come back in to recover those earnings? Yeah, it really depends on the nature of the contract, Michael. As these things, it's a timing, you know, some of it that is more on a spot basis obviously flows through. Then as contracts renew, it gets factored in, of course. That's what we're seeing, and it recovers as that profile makes it sort of winds through the business. Okay. Wonderful. Thank you. Thank you. The next question comes from Joseph Wong from UBS. Please go ahead. Good morning, guys. Congratulations on the strong result today. Maybe firstly, just looking at the number of retail sites at 668, how many are considered core, and are you still looking to consolidate the sites? Kate, do you wanna take that one? Sure. In half one, you'll note that we consolidated 17 sites. In half two, we expect approximately the same number of site consolidations, with far less consolidation heading into 2023. We have had a modest NTI pipeline, with focus being on the highway sites that we've referenced earlier being the M5 and Seven Hills. They're key call-out. Well, just building on that, Joseph, it's part of you know the disciplined approach we've taken to the network to make sure we've got the sites where we can continue to grow earnings, deliver on the 85, and looking further forward, deliver on our strategy for the future. We're largely through that, as you can tell from Kate's numbers. We'll move through the final period of kind of consolidation through the second half of this year. We've significantly upweighted the quality, the average quality of our network, and we then have the network that we broadly look to take forward, including investing in the ultra premium highway tier one sites, again, to deliver further returns into the business. Got it. Thanks. I guess just sticking with the, I guess, retail business, you've called out, I guess an AUD 58 million EBIT uplift in non-fuel. I guess it's down versus PCP. I think it was at AUD 67 million you reported last year. I I just wanted to understand, are there some one-off costs or what had kind of driven that? No, it's really just sort of the comp period we're comping. We're about to comp a very soft Q3 where we were locked down last year. We would expect, you know, when you look into Q3 in the second half, we're set up for a pretty strong delivery in terms of our performance against the 85. Okay, thanks. Maybe if I ask on a longer-term strategy on your EV offering, I guess can you describe Ampol's competitive advantage to electricity retailers like Origin and AGL who are offering a subscription type model for electric vehicle recharging? I understand your current offer is around AUD 0.60 per kWh, and that compares to energy retailers that are charging at AUD 0.20-AUD 0.30 for household charging. Just want to understand your thoughts on that. Yeah. You know, you look at the network footprint that we have, and you look internationally at the important role that fast charging plays and the margin and returns that are available in fast charging. We think it's an important part of the proposition. A lot of charging will happen in the home, recognizing that, you know, sort of the whole energy generation transmission and then retail market is going to be fundamentally disrupted as we look forward and as we're seeing at the moment. Our forecourts in terms of a destination charging offer, together with other tier one locations, are gonna be an important part of building, you know, building out a quality network in the future to ensure that you're supporting the customer, as I said a bit earlier, at home and when they're out and about on the go. In our view and what we've seen in other markets is very much, destination charging is important. Our forecourts are very well positioned, we know that, given the role they play in fuels today. We see that, you know, that network strength, just as it underpins our fuel business today, is going to be important in underpinning, our competitive position in e-mobility in the future. We will have an offer that services the customer, you know, throughout their journey, including starting at home. We're commencing our test-and-learn project in that area as we referred earlier. You know, that's how we think about e-mobility. As we continue to roll out our sites, you know, when we get into next year, we'll have more to say. Great. Thanks. Just my last question is just on your guidance for Gull volumes. Just wanted to understand, I guess at 0.5 billion liters, is that the way we should think about the business given the first half was at 600 million liters for Gull? Yeah, you know, give or take, that's about the guidance we would have. Yep. Okay, thanks. Thank you. Your next question comes from Daniel Butcher from CLSA. Please go ahead. Hi, everybody. Got a couple on refining firstly. I'm just curious, your sort of middle distillate jet diesel slate sort of went down by a couple percentage points, this half as of 2021. Just sort of curious why that was given that diesel spreads is still about $10 higher, at least. How would you think about your slate going forward? I might have a first pass and then, obviously, if you want to get into more detail, Andrew's here. It's a function of a couple of things. One, you will see, so diesel down, jet lifted, but net middle distillates were down, in terms of production volume. That's in part production planning and, obviously prices rose fairly sharply in the second quarter and your plans got ahead of that. It's also a function of where you source crude from and the type of crude you've got. They're the main factors. We had a small unplanned shutdowns we've discussed earlier, which impacted diesel production as well. The main driver is crude and optimizing the crude you've got, over the refining slate, over the production slate. Andrew, is there anything you wanna add to that? No, I think that covers it good. Well, you know, should we expect diesel back up to previous half levels in the near future, given where the relative spreads are? It'll depend a little bit on the crude we can secure, right? The market is tight. We are taking more crude from markets like the US. I would say the slate you've seen for the first half is more indicative of what we're likely to do in the short term, just by nature of the crude we can take. What I would say, Dan, is we did see a period during the second quarter, and of course, we're backward-looking here, of pretty significant gasoline margins as well, including around high octane gasoline. As you look forward, obviously we have our own view on where the relative crack spreads are, and our sort of decisions around crude slate will be informed by that. Clearly, when you do look at the tightness, the potential for tightness in the diesel market going forward, you know, there will. That prioritization of middle distillates will flow through to our crude slate selections. Okay, great. Thanks. Just something on this MOPS premium issue. Can you maybe just elaborate a little bit about how we should think about that? Because I know you don't wanna give too many details about the margins, but what sort of quality grades and volumes out of your total FNI sales would that be affecting? It's mainly an issue that relates, of course, to our diesel and jet business. Obviously jet contracts, given the nature of the recovery there, are turning over quite frequently. It's been more a diesel issue. As I said before, you know, there's a significant part of that that is where there's immediate pass-through, and then there's the B2B contracts that will turn over on different time frames, and that profile will simply run its way through the business. Okay, great. Thank you. Just quickly, on the electricity retail side, can you maybe just give us some early thoughts as to what your plans might be beyond your employee base and how you might roll things out? Will you be competing just for EV business, or will you be trying to compete with AGL and Origin to get household electricity eventually at some point in the future? If you do that, how you get scale to compete with them? Yeah. There's a lot in that question, Dan. What we're doing at the moment is testing with just sort of with 50, 100 employees, and we'll just test our proposition. Ultimately, the connection through e-mobility is going to be an important one. You know, we will have more to say about how we see that connection working in due course, but we're just in the first instance, testing the value proposition that we have. Clearly, we have a very significant customer base in retail today, so around 3 million customers a week in Australia, around 1 million customers a week in New Zealand. That's an important and attractive channel. How that can be extended, essentially, into the home is something that we'll ultimately look to test further subject to how our test and learn processes play their way out. The link to e-mobility as the car battery effectively plays an increasingly more important role in the home energy ecosystem, if you like, will be important. You know, it's not something that we're going to rush into. Obviously, the energy markets are quite challenging at the moment, but building the capability and getting on with our test and learn process is where we're currently focused. Thank you. Due to time constraints, we'll now be restricting to two questions per questioner. You can rejoin the queue by pressing star one. Your next question comes from Gordon Ramsay from RBC. Please go ahead. Yeah, thanks for that. Let's talk about the cleaner fuel investment. You've got FIDs coming up in December. I think previously it was around AUD 250 million. The government's gonna pay roughly half. Are you seeing any kind of inflation or cost issues come through? If they do, is that solely at Ampol's expense? Yeah. Gordon, I think we'll get to FID later this year. You've seen Viva announce their number a few months ago from memory that indicated they had seen some inflation. Expectations on our number shouldn't be wildly different to that, I wouldn't say. You know, but obviously we're still working with the government as they're finalizing their review of fuel standards. That also has the potential to, you know, to impact scope around the edges. But you know, the number Viva put out is not wildly different to what you should expect. Okay. Just my last question. That energy, the working capital saving there is that, you know, from the closure of the Marsden Point refinery. Is that still kind of New Zealand, NZD 150 million, roughly? You think you scope to expand that? That's about the right number, Gordon. We likely won't see that until we go into calendar 2023, you know, as they finish sort of shutting down the plant and disposing of product and as we work through, you know, the relationships with coal and so on. That's still the right number, and we'll see a bit of it this year, but the majority, vast majority of it will flow through in 2023. Okay. Thank you very much. Thank you. Your next question comes from Mark Samter from MST. Please go ahead. Yeah, morning, everyone. First question, if I can just around the retail structure and I guess with the MetroGo sites, it's, there's been a few different iterations of the retail strategy and how it looks, and I guess it feels from the outside at the moment that we don't have a wholly clear picture of what it looks like in a few times. 50 MetroGo sites feels pretty subscale for either party. Can you explain what the decision process is after that first 50? Is there a sit down with and again, nothing, something we've never really been given an understanding of what the economics are on these MetroGo sites and how it's split? Is there anything you can confirm that? Is there a debate going on post this initial pilot about how the economics might look after that? Yeah, thanks, Mark. Look, you know, in simple terms, our strategy is and to ensure that we're operating the business really well. We've moved from a franchise model to a company operator model, which has been an enormous change for our business. Obviously, there were some earlier hiccups with that, but I think what you can see now is the benefits of that COCO operating model is delivering some real traction and growth into our earnings. As we've got the large highway sites and the ongoing delivery of kind of a consistent shop experience, if you like, the benefits of scale, we'll continue to look to grow earnings through the Convenience Retail business. As I mentioned, format enhancements, including MetroGo, are not a significant contributor to that AUD 85 million. We do have a very strong channel, we do have a strong network, and we do have latent capacity across a number of our sites. We're going to continue to work to refine the Woolworths offer. We, you know, we have regular sit downs and look at how we can continue to refine the offer so that it can deliver the level of returns that are acceptable for us. We're also testing other opportunities. You know, we're not sort of talking heavily about QSR and those types of opportunities, but we will be testing them and look to how we can refine the strategy to leverage the quality of our network and that latent capacity that we have over time. Thanks. Then just a second question. It's a bit of a short-term one, but obviously you spoke about the July refining margins in the release. Crack spreads obviously strengthening, diesel's back up above $40. Gasoline's recovered. Can you just confirm that there's nothing horrible that's happened incrementally? Crude premiums between August and July and April, we should be currently cycling higher refining margin to August. Yeah, you can see, you know, you can see the screen as you've just re-reported it, you know, cracks have strengthened. We expect to see ongoing volatility, but we're currently seeing a stronger crack environment playing through the business. Perfect. Nothing material in terms of crude premiums. Crude premiums will typically lag a little bit. They'll lag a couple of months through and, you know, you then see crude premiums in respect of, you know, the market dynamics continue to be volatile, but they've come down quite a bit. You'll see that you'll see a lag of a couple of months before that flow through. Thank you. Your next question comes from Scott Ryall from Rimor Equity Research. Please go ahead. Hi. Thank you. I was wondering if you could just talk to some. I think you alluded to it, but just last week, the new federal government started to talk about emission standards again. I was just wondering if you could talk to how you would think about the position of your business, what might be the impacts, were there to be emission standards coming in of the nature of, you know, averaging emissions like is done in offshore jurisdictions, please? Yeah. Hi, Scott. Look, the real focus of an emissions standard that the government's starting to talk about is how do we as a country get better access to a tight supply chain for electric vehicles. At the moment, obviously there are significant supply chain challenges around the world and you know, if you look at chips, EVs are more chip intensive than an ICE vehicle. You know, there's a lot of countries looking to get access to a limited range of EVs. Supply chain challenges will alleviate over time and I'm sure access will improve. You can see that coming through the pipeline. The fuel emissions standard is likely to be one of the mechanisms used to ensure that Australia is not being disadvantaged in terms of its access to EVs. What that will effectively mean is that, you know, there will be a higher price put on the existing fleet of ICE vehicles that are sold in the country. I don't think there's any direct impact in terms of our business, but I think, you know, we'll consult with the government as they work their way through it. I think it's gonna be an important policy, but it needs to be developed, I think, in the context of the supply chain challenges that exist. We can't sort of, you know. It's important not to consider that that's going to be the silver bullet solution, if I think if in terms of alleviating global supply chain challenges. Obviously there are cost of living challenges out there and, you know, how that policy would be introduced over what timeframe, recognizing it's gonna push up the cost of ICE vehicles before there is a significant fleet of lower-priced EVs in the market is all gonna be part of the mix that needs to be considered. Okay, great. Just also to follow up on your comments on MetroGo, I was hoping you could give a little bit more detail on, you know, whether you're seeing that brand as a positive for foot traffic as an example, whether it changes and yeah, I don't expect you to quantify any change, but whether it changes the economics of your deal with Woolworths when you use their brand. Just talk to the broader experiences of using MetroGo in some of the convenience locations, please. Yeah, sure. Look, what I would say is the message is very consistent with what we've delivered previously, which is we see some good sales uplifts. It has played a positive role in driving foot traffic. Having said that, there's a capital bill that goes with it, and there's an operating cost that goes with it. You know, the team's made really good progress in refining the capital cost, the labor, and the waste that goes with a model that has more fresh associated with it. The sales uplift is not at the level yet where we're comfortable that it gives us the right level of return, but we are also comping a pretty choppy period, as we've been talking about. You know, a lot of the stores have only been delivered in the recent half. You know, we need to take the time, with a larger cohort of sites, to look to continue to refine them so that we can get the performance in the right area, to then look at where we take it forward. We're not in a hurry to make sure we're investing the next tranche of capital without being quite disciplined about ensuring the returns are in the right space, and that's kind of part of the ongoing dialogue with Woolworths. Thank you. There are no further questions at this time. I'll now hand back to Mr. Halliday for closing remarks. Excellent. Well, thanks everyone for joining the half year results call. Obviously, it's a very strong result. I'd like to thank the Ampol team for its delivery. I think it really underlines both the quality and the resilience of Ampol's underlying business, and when we look forward, much as there are ongoing challenges, we're pretty positive about the outlook for the business when we look forward to the next six months and beyond. Look forward to talking to you all again shortly. Thank you.