Z Energy has sought to clarify expectations for its second-half dividend after the firm’s shares plunged to a three-year low last week.

It says full-year dividends will lie between 32 cents and 41 cents, in accordance with the firm’s September 2017 policy to pay-out more than 90 percent of underlying free cash flow and the reduced earnings guidance the firm provided last week.

“This additional announcement is intended to clarify the application of Z’s revised distribution policy in its first year, and to assure shareholders and other stakeholders that dividends will be consistent with the disclosed policy, and in line with the revised forecast earnings guidance.”

Z shares plunged on Thursday after the firm cut its full-year operating earnings guidance to $400 million to $435 million, reflecting high crude prices, the lower kiwi dollar and weaker consumer demand. The 12.5 cent interim dividend, while up 20 percent on the year before, was about 5 cents a share less than investors had been expecting.

The country’s biggest fuel retailer calculates its free cash flow as net cash from operations, less maintenance capex and debt repayments. Organic growth capital expenditure is funded from divestments.

The company reminded investors that is expecting to spend about $60 million on maintenance capex this year, $40 million on debt repayment, about $50 million on financing and about $120 million on cash tax payments.

Z uses replacement cost accounting – which removes the impact of variable oil prices from its earnings – but its tax obligations are based on historic cost accounting. The sharp jump in crude prices in the past year saw the firm report a 74 percent increase in historic cost net profit to $139 million, but a 31 percent decline in replacement cost net profit to $72 million.

Z says its $120 million tax bill reflects its historic cost earnings in the 2018 financial year and its estimated historic costs earnings for the current year.

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