Viva’s 1H26 trading update showed a continuation of near-term benefits from higher oil prices and refining. The strong earnings result has helped lower net debt by $400 million. There may be some residual benefits in 2H26e, but the outlook for retail fuel margins and gross margins in Convenience is negative. The company is also likely to see lower refining margins given the prevailing oil price.

Viva reported FY25 EBITDA down 6%, but 2H25 EBITDA up 33%. The turnaround in fortunes in Convenience is encouraging, albeit higher fuel margins in 2H25 may not be sustained. Cost savings from FY25 and improving shop gross margins help lift our FY26e Convenience EBITDA to $246 million. We can see a path to $336 million by FY28e, or 71% higher than FY25. However, executing on a supply chain transition and OTR store conversions will be necessary. We see asset sales of $150-200 million as sufficient to bring down leverage from 3.0x in FY25 to 2.0x in FY27e.

Viva’s 3Q25 trading update reveals challenges still exist in its Convenience segment with a decline in tobacco gross profit. However, elsewhere in the business conditions are turning the corner. Gross profit for non-tobacco sales has increased and refinery margins are higher. Elevated refinery margins should persist for a few more quarters at least. We have reduced our Convenience and Commercial segment earnings for Viva, but lifted refining profits.

We initiate coverage on Ampol at a time when convenience sites are executing well with upside from a better sales mix and more foodservice offerings. In the next two years the company should also experience a substantial lift in profitability in its fuels businesses as throughput recovers and capital projects are completed.