DCC to buy Esso’s filling stations in Norway for €273.5m

FTSE 100 company says third-quarter operating profit strongly ahead of the prior year

DCC, the Irish-based fuel distribution-to-technology sales conglomerate, led share risers on the FTSE 100 in London on Tuesday after it agreed to buy Esso's retail petrol station network in Norway for £235 million (€273.5 million), marking its second-largest deal.

The network is Norway’s third largest and accounts for about a fifth of retail volumes in the country. The business comprises a network of 142 company operated sites and has contracts to supply 108 Esso-branded dealer-owned stations. It sells about 600 million litres of fuel a year.

The acquisition is in line with this strategy and DCC Energy’s ambition to build a substantial European retail petrol station business. On completion of the acquisition, DCC Energy will operate about 1,000 retail petrol stations in the United Kingdom, France, Sweden, Ireland, Denmark and Norway and supply approximately 2,000 dealer-owned stations.

“To put this in perspective, we estimate that the six largest integrated oil players have networks in western Europe of circa 4,000 to 6,500 sites each,” said Davy analyst Allan Smylie in a note.


Financial headroom

“Today’s announcement also supports our view that DCC Energy is positioned as preferred acquirer of retail assets from the oil majors in Europe, and we think there is potentially plenty of more to come.”

Goldman Sachs analysts estimated last week that DCC would have “financial headroom” to spend close to £1 billion (€1.16 billion) on mergers and acquisitions through a combination of debt and equity funding.

Irish-based FTSE 100 component DCC, which has a market value of £5.66 billion (€6.6 billion), also issued a trading statement for its financial third quarter to the end of December, saying group operating profit was “strongly ahead” of the prior year and in line with expectations.

Shares in DCC soared as much as 6.9 per cent to £68.15 (€79.50) in in London, making it the best-performing stock on the blue-chips FTSE 100 index.

The largest division, DCC Energy, saw its earnings driven by a “very strong” increase in organic sales volumes of liquefied petroleum gas (LPG) and “good organic volume growth” in both retail and fuelcard and oil sales.

Colder conditions

Heating-related volumes were in line with expectations, with milder UK weather offset by colder conditions elsewhere in Europe.

DCC Healthcare’s health and beauty solutions, one of Europe’s leading outsourced contract manufacturing service providers for vitamins and health supplements as well as skin and hair care products, turned in a strong performance in the reporting quarter.

However, within that division, DCC Vital, which sells and distributes a broad range of own- and third-party branded pharmaceuticals and medical devices to hospitals and pharmacies in Britain and Ireland was impacted by sterling weakness.

Operating profit in DCC Technology was “strongly ahead of the prior year”, helped by an acquisition and organic growth in the UK and Ireland.

“DCC continues to expect that both operating profit and adjusted earnings per share will be significantly ahead of the prior year and in line with current market consensus,” the group, headed by chief executive Tommy Breen, said.

DCC plans to announce full-year results on May 16th.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times