Key points:

• Replacement cost of sales profit $430 million, up 4%
• 
  
• Final 2006 dividend 48 cents per share - full year (80 cps) up by 74%
• 
  
• Record production and utilisation rates achieved by refineries
• 
  
• Increased sales volume of transport fuels
• 
  
• Clean fuels plants commissioned and running well
• 
  
• Achieved biofuels sales volume target
• 
  
• Capital expenditure of $382 million

Results summary	Full year ended 31 December
2006	2005
Replacement cost of sales operating profit (RCOP)1 result(excluding significant items in 2005):	$M	$M
- after tax	430	414
- before interest and tax	655	583
Historical cost result
(net profit after tax, including inventory gains and excluding significant items in 2005)	466	574

Caltex Australia Limited announced today an after tax profit of $430 million on a replacement cost of sales operating profit (RCOP) basis for the year to 31 December 2006. This compares with an RCOP result of $414 million (excluding significant items) for the full year 2005.

The profit equates to 2.2 cents per litre on average for all petroleum products sold. (Full year 2005: 2.2 cents per litre.)

The profit of $430 million was made on total sales in 2006 of $18.4 billion. Total excise and GST on these sales was $6.6 billion.

Caltex Managing Director Des King said the strong operational performance in the second half enabled Caltex to increase its year on year underlying profit.

"Earnings in the period benefited from record refinery utilisation and production that was underpinned by strong refiner margins driven by the continued regional growth in demand for transport fuels and tight supply," Mr King said.

"The Caltex refiner margin² in 2006 averaged US$10.13 a barrel, up from US$8.40 a barrel in 2005.

"Total fuel sales volumes increased in 2006 following a recovery in the second half after being constrained by higher petrol and diesel prices in the first half of the year. These higher prices at the pump were mainly as a result of the large increase in Singapore product prices which rose mainly as a result of higher crude oil prices. The regional benchmark crude oil (Tapis) price in 2006 averaged US$68 a barrel compared with US$57 a barrel in 2005.

"Sales recovered when local pump prices for petrol eased in the second half of the year in line with lower Singapore product prices. Singapore is the nearest alternative source of petroleum product supply for Australia, which now imports about 25% of its transport fuel requirements.

"The average price of all petroleum products sold by Caltex (including GST) was 12.8 cents per litre higher in 2006 compared with 2005³. Of this increase, 12 cents per litre (cpl) was oil prices and costs, and 0.8 cents per litre was higher taxes (including GST), while the Caltex profit (RCOP basis) remained unchanged at 2.2 cpl⁴. Caltex has no crude oil production interests.

"Full year Caltex earnings were affected by the impact of the delay in the completion of the Clean Fuels Project in the first half of the year which constrained Caltex refinery production and increased the requirement for imports of compliant products and exports of non-compliant products.

"The $500 million new facilities to produce cleaner fuels at both refineries were commissioned safely, smoothly and are operating well.

"There was very strong operational performance by the refineries in the second half of the year and a solid contribution from the marketing business which achieved stable sales volumes and margins in an intensely competitive environment."

Final 2006 dividend 48 cents per share - full year (80 cps) up by 74%

Caltex Chairman Richard Warburton said the Board had declared a final dividend of $129.6 million or 48 cents per share (fully franked) making total dividends declared of 80 cents per share after 32 cents per share paid in September 2006 (2005 total dividends declared: 46 cents per share).

"This payment reflects the company's stated dividend policy of lifting ordinary dividends to 40-60% of the RCOP (after tax excluding significant items) from 2006 once the high capital commitments of the Clean Fuels Project were completed," Mr Warburton said.

"The Caltex share price increased 18.7% in 2006, opening at $19.38 and closing at $23.00."

Refineries set new records

Mr King said production of all products by Caltex refineries in 2006 was a record 11.9 billion litres, up from 11.6 billion litres in 2005. This included increased production of high value transport fuels (petrol, diesel and jet fuel) to 10.2 billion litres up from 10.0 billion litres in 2005.

"The refineries set new utilisation and production records in the second half of the year," Mr King said. "Average utilisation for the refineries overall for 2006 increased to 78% (2005: 75%), and averaged 85% in the second half of the year following the start-up of the clean fuels plants and a maintenance shutdown at the Kurnell refinery.

"This improved performance reflected the ongoing benefits from the refining performance improvement program launched in 2004 to lift production of high octane petrol and diesel, improve throughput and yield and increase revenue.

"The cost of the total program is estimated at $350 million. To date, $63 million has been spent delivering ongoing benefits which are reflected in improved utilisation and higher production volumes.

"The program consists of dozens of smaller projects and several major projects, including a new diesel hydrotreater at the Lytton refinery, large crude oil and diesel storage tanks at Kurnell and octane optimisation projects.

"The projects are expected to increase production of transport fuels to around 12 billion litres a year in 2009, up from 10.2 billion in 2006.

Marketing sales increase

"Caltex sales of transport fuels increased to 13.4 billion litres in 2006, up from 13.2 billion litres in 2005.

"Caltex petrol sales grew 0.8% in a market which shrank by 1.6% in 2006. Sales volumes continued to be underpinned by the Caltex Woolworths venture network. Caltex diesel volumes grew by 3.6%, which was less than market growth, and jet fuel sales declined in 2006 compared with 2005 due to intense competition.

"Caltex strengthened its lead in Australian convenience store retailing increasing its share to over 32% in 2006. Average weekly same store shop sales were 5.9% higher than in 2005. Non fuel income continued to grow with higher returns from the retail and card businesses.

"There was good progress in the initial stages of a major terminal infrastructure expansion and upgrade program to meet the expanding need for imports, support regional market growth and ensure reliability of fuels supply. As part of this program Caltex invested $17 million in 2006 to improve safety, storage and shipping facilities at its terminals in Victoria and Queensland.

Biofuels network expands

"By the end of 2006 Caltex had Australia's largest network of sites selling biofuels blends. The company achieved its target commitment for 2006 under the Australian Government's Biofuels Action Plan and will continue to meet its annual target commitments through to 2010.

"Caltex's E10 Unleaded petrol, blended with 10% ethanol made from crops such as sugar cane or wheat, is now on sale at 137 service stations in regional and metropolitan locations in Queensland, NSW and the ACT.

"New Generation Diesel, launched by Caltex in October 2006, is diesel enhanced with 2% biodiesel made from vegetable oils and tallow. It is being distributed to over 160 NSW service stations from Caltex's Newcastle terminal.

Building a strong foundation

"2006 was another year of major capital investment by Caltex, where $382 million was spent (2005: $530 million) including $85 million on the Clean Fuels Project. This represents 89% of the 2006 $430 million profit on an RCOP basis.

"In 2007 we will continue to invest in strengthening Caltex refinery operations, supply chain and marketing network and building the capability of the workforce. The company will be focusing on continuing to improve safety, reliability, cost efficiency and capital stewardship.

"The outlook for refiner margins remains strong while diesel demand is expected to continue to grow by around 4% a year with continued strong demand from the resources and transport sectors. Petrol demand growth is likely to be flat."

Historical cost profit

On an historical cost profit basis (including inventory gains), Caltex recorded an after tax profit of $466 million for the full year 2006 compared with $574 million for the full year 2005. The profit includes crude oil and petroleum product inventory gains of $36 million (after tax) compared to inventory gains of $160 million (after tax excluding significant items) in the full year 2005.

Caltex debt was $539 million at 31 December 2006 (31 December 2005: $429 million) in line with expectations.

Contact:
Media contact
Richard Beattie
Group Manager Corporate Affairs
Phone 02 9250 5224
Pager 02 9214 1146

Analyst contact
Frank Boys
Manager Investor Relations
Phone 02 9250 5166
Email frboys@caltex.com.au

¹The replacement cost of sales operating profit (RCOP) excludes the impact of the fall or rise in oil prices (a key external factor) and presents a clearer picture of the company's underlying business performance. It is calculated by restating the cost of sales using the replacement cost of goods sold rather than the historical cost, including the effect of contract-based revenue lags.
²The Caltex Refiner Margin (CRM) represents the difference between the cost of importing a standard Caltex basket of products to Eastern Australia and the cost of importing the crude oil required to make that product basket. The CRM calculation represents: average Singapore refiner margin + product quality premium + crude discount/(premium) + product freight - crude freight - yield loss.
³This analysis reflects a restatement in 2005 of a portion of intercompany sales and cost of sales on consolidation. There was no net profit impact arising from this restatement.
⁴This calculation is based on RCOP NPAT ($430 million) divided by total Caltex sales including sales made to domestic refiners (19.2 billion litres).