2023 was a transformational year for our Company with the acquisition of Coles Express and OTR Group providing the platforms to establish Viva Energy as the leading convenience retailer in Australia. Together with the continued diversification of our Commercial & Industrial business and development of new energy opportunities in hydrogen, lower carbon fuels, and recycled waste, we are establishing foundations to maintain growth and successfully manage the energy transition. These strategies were shared with investors in November last year.
Following a record result in FY2022, Viva Energy delivered another strong performance despite continued volatility in energy markets and cost of living pressures. Our commercial business generated record earnings, leveraging its high touch customer focus, deep network positions and diversified specialty products suite. The retail business delivered a solid contribution despite demand impacts from rising cost of living.
Although our refining operations were set back by a delay to a major turnaround and damage to a unit caused by a contractor crane failure, regional margins remained elevated, and our team members responded well by maintaining steady supply to our markets. On the strategic front, Viva Energy took major steps to advance its Convenience & Mobility strategy. The Company acquired the Coles Express Convenience Retailing business and commenced integration, providing a platform for growth in the attractive convenience sector. The OTR Group acquisition was announced, with completion anticipated in the first half of 2024 . OTR is a world-class convenience retailer that unlocks a significant growth opportunity through its sophisticated offering, advanced systems and substantial synergies. Together, these acquisitions will establish Viva Energy as the leading convenience retailer in Australia, supported by more than 14,000 employees across the Group, which places Viva Energy as one of the top 20 private sector employers nationwide. Through OTR’s offering, our retail business is set to transform from a fuel retailer into a leading convenience retail destination, with more than 1,000 stores across an extensive national network1 . As outlined at our Investor Day in November, we aim to grow earnings in this business to more than $500 million over the next five years.
Viva Energy’s other businesses made steady progress in their strategic objectives. Commercial & Industrial acquired smaller businesses, expanding its regional presence and specialty products and services offering. We were proud to secure the Australian Defence Force contract to supply aviation, marine and ground fuel. The Geelong Refinery was critical to this contract, cementing Viva Energy’s role in providing energy security to Australia. During the year, we invested heavily in the Geelong Refinery to produce ultra-low sulphur gasoline from 2025. We announced our intention to build infrastructure to receive and process waste feedstocks, providing the opportunity to reduce the carbon intensity of our fuels. We also distributed sustainable aviation fuel (SAF) for the first time, collaborating with manufacturers and using our extensive supply network and operational expertise. In conclusion, 2023 was a transformational year for Viva Energy that sets it up for strong growth in the years ahead. We are focused on delivering the strategic objectives we laid out at our Investor Day, which we believe will add significant value to the Company.
2023 Performance
Group underlying EBITDA (RC) was $713 million in 2023, compared to the record $1.1 billion in 2022. Sales volumes grew to more than 5% above pre-pandemic (2019) levels, driven by a record performance in the Commercial & Industrial business with EBITDA (RC) increasing 33% to $448 million. Convenience & Mobility delivered EBITDA (RC) of $232 million, above its three-year average despite rising cost of living pressures. Energy & Infrastructure contributed EBITDA (RC) of $65 million. While regional refining margins were elevated throughout the year, performance was heavily impacted by the major maintenance turnaround and the damage caused by a contractor crane failure.
More than 700 additional workers joined the team at Geelong Refinery to carry out the major maintenance works during the second quarter, and approximately 6,000 employees joined the Convenience & Mobility business from 1 May 2023, following completion of the Coles Express acquisition. In the context of these significant changes and increase in operational activity, our safety performance was strong and we are well positioned to manage the new risks that come from the changes in our business activities as a result of the convenience acquisitions. The Company’s financial position is strong ahead of completing the OTR acquisition1 , with net debt of $380 million at the end of the period. We determined a full-year dividend of $109.6 million and bought back $17 million worth of shares, completing the program in the first half of the year. The Company maintains capacity to pursue further growth opportunities in line with our long-term strategy and prudent capital management framework.
Sustainability
Viva Energy continued to make good progress on the development of our sustainability agenda during 2023. The acquisitions in Convenience & Mobility will enable the Company to derive more than 50% of earnings2 in the segment from convenience sales, compared to approximately 30% today, reducing reliance on fuel income over time and creating a compelling offer to support the introduction of electric vehicle recharging facilities over the coming years. Deep and long-standing relationships with customers in our Commercial & Industrial business has created opportunities to trial lower carbon fuels for the first time and grow demand for our opt-in certified carbon neutral products, an important interim solution. The announcement of plans to enable the Geelong Refinery to receive and produce alternative feedstocks (including waste plastics), and provide the opportunity to reduce the carbon intensity of the fuels we produce, is a good example of how the Energy & Infrastructure business can play a key role in the energy transition and circular economy while continuing to support energy security. Viva Energy has a target to achieve net zero3 across our Convenience & Mobility and Commercial & Industrial businesses by 2030, and reduce Emissions Intensity at the Geelong Refinery by 10% over the same period (from a 2019 base year). We have developed plans to achieve these outcomes, with a focus on direct abatement within our operations wherever this is possible. Reforms to the Safeguard Mechanism, enacted in 2023, will progressively require further emissions reductions from the Geelong Refinery that aren’t immediately all possible through direct abatement, and are likely to require offsetting credits.
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