Z Energy may review its interim distribution policy after reducing debt levels ahead of schedule following its acquisition of Chevron New Zealand's Caltex and Challenge! brands.
The company expects to be close to its target range of 2 times net debt to replacement cost operating earnings before interest, tax, depreciation, amortisation and fair value adjustments (ebitdaf) by the end of the 2018 financial year with anticipated deleveraging in FY18 from operating earnings and divestment proceeds, it said in a statement.
"This is three to four quarters earlier than was originally anticipated at the time of announcing the acquisition," Z Energy said in a quarterly update to the NZX.
The transport fuel company bought the Chevron assets for $785 million last year, making it the country's biggest petrol retailer, with about 49 per cent of the retail transport fuels market. Bank debt was reduced by $25m in the second quarter of 2017 and $45m in the third quarter with proceeds from the sale of some gas stations used to pay down debt.
The faster debt reduction provides it with the flexibility in the second half of 2018 to review its current interim distribution policy (currently 10 per cent annual growth in DPS) and/or support investment in growth options beyond the core, Z Energy said today.
It also reiterated it is on track to deliver $40m-to-$45m of savings in FY18 and outlined some measures to generate further savings.
