"Our infrastructure capability is important
to our success, allowing us to access global markets and lowest-cost products to meet customers’ fuel requirements.
"Having completed strategically important infrastructure transactions, we now have greater control of key facilities to support future growth."
Andrew Owens, Chief Executive
Higher refinery utilisation rates combined with refinery expansion in Asia, North America and the Middle East resulted in a significant surplus of diesel globally. With our growing sales volumes and our deep-water import infrastructure, we were able to access this global over-supply by importing diesel on larger ships.
The over-supply resulted in contango market conditions for diesel, meaning that prompt prices were lower than forward prices. The level of contango made it advantageous to store diesel and expedited the development of Thames Oilport.
With petrol demand falling in the UK and elsewhere in Europe, competitively-priced products were available for our petrol blending operations.
In Canada and Brazil, the characteristics of the road fuel markets continue to present opportunities for us to expand as an independent fuel importer and supplier.
UK refinery production declined in 2015, continuing the trend of the last decade.
Rationalisation of UK refinery capacity has made the UK structurally reliant on imports to meet its fuel requirements. We are well positioned to meet this shortfall with supply through our import terminals.
Our strategy is to grow profits in our core UK Fuels business by continuing to invest in infrastructure to deliver cost and operating efficiencies, while using our UK experience and capabilities to grow in international markets with similar import dynamics.
Our UK sales volume continued to rise, up 13% in FY16. Additional volume came both from increased business with existing customers and from new sectors, including sales to the independent forecourt sector, with our strongest growth being in locations where we have made infrastructural investment and acquisition. As our sales volume grows, we are increasingly developing economies of scale, to optimise our purchasing, receive product on larger ships and drive down unit costs.
Further upgrades and capacity expansion at our biodiesel manufacturing facilities resulted in greater raw material flexibility, improved reliability and increased output.
Our Canadian business has established itself as a low-cost and reliable provider of fuels in the Ontario and Quebec regions, making its first positive contribution to consolidated EBITDA in only its second full year of operation.
We began supplying from a rail-to-road Cargoflo facility north of Toronto in Canada, a first-of-its kind distribution concept in a location that is convenient for customers. Sales from the facility reached capacity within nine months of commissioning, enabling us to commit to further expansion.
We made our first diesel imports for sale within Brazil, a market historically supplied predominantly from domestic production. We expect the Brazilian market to continue to open up to competition and will explore opportunities to increase our involvement going forward.
We significantly extended our ownership of fuel infrastructure in the UK this year, taking a majority shareholding in Thames Oilport and, through Navigator, purchasing Vopak’s UK storage facilities. These transactions give us greater influence over infrastructure that is important to our future success. We are now in a position to fund further infrastructure investment and acquisition, either directly as Greenergy or within Navigator, to support our continued growth.
Importantly, we agreed a route-map to progress the development of Thames Oilport in phases. The facility has now opened for diesel storage and we are moving on to road loading and storage for other products.
We have continued to expand our haulage capability within Greenergy Flexigrid to meet our growing supply requirements in the UK. We have recruited more drivers in order to improve efficiency and built strong foundations for further growth.
15 April 2014 - 14 April 2015