Improved operating performance lifts Caltex
profit despite stronger Australian dollar
February 22, 2008
- Replacement cost of sales profit increased to $444 million
- Solid financial performance despite declining refiner
- Record refinery production
- Strong marketing earnings driven by higher sales volumes
- Total dividend 80 cents per share (2006: 80 cents per
- Volume of biofuels sold trebled
- Improved safety performance
||Full year ended 31 December
|Replacement cost of sales operating profit
(RCOP)1 result (excluding significant items):
|- after tax
|- before interest and tax
|Historical cost result
|(net profit after tax, including inventory gains and excluding
Caltex Australia Limited announced today an after tax profit of
$444 million on a replacement cost of sales operating profit (RCOP)
basis for the year to 31 December 2007. This compares with an RCOP
result of $430 million for the full year 2006.
Caltex Managing Director Des King said Caltex operates in a highly
competitive market and the $444 million 2007 RCOP profit after tax
equates to an average of 2.2 cents per litre for all petroleum
. (Full year 2006: 2.2 cents per
"In the case of petrol alone, Caltex's profit after tax was around
1.5 cents a litre (cpl) compared to the Australian Government's tax
at the bowser of approximately 50 cents a litre3
"Caltex recorded a solid financial performance despite a worsening
external environment. Record refinery production helped offset
declining refiner margins and there was a stronger contribution
from the marketing business with higher transport fuel sales,
particularly diesel, along with increased non-fuel income.
Marketing contributed approximately half of Caltex's earnings in
"The company had its best safety performance to date in 2007 and
also managed to keep its unit operating expenses in line with
inflation despite strong cost pressures for materials and skilled
"By growing sales volumes, increasing production and good operating
cost control we have been able to offset the negative impact of
external factors of currency movements and declining refiner
"There was a 17% drop in the Caltex refiner margin
in Australian cents per litre terms compared to
2006. The higher Australian dollar in 2007 had the net effect of
lowering after tax profit by approximately $40 million relative to
the previous year.
"The CRM averaged A7.0 cents per litre (US$9.26 a barrel) in 2007
compared with A8.44 cents per litre (US$10.13 a barrel) in 2006.
This margin excludes operating costs."
Caltex Chairman Elizabeth Bryan said the Board had declared a final
dividend of $89.1 million or 33 cents per share fully franked. This
makes the total dividend declared for 2007 80 cents per share fully
franked after 47 cents per share paid in September 2007 (2006 total
dividends: 80 cents per share).
The company is facing increasing cash demands as a result of rising
capital costs and higher working capital requirements due to the
significant rise in the cost of crude oil. The level of dividend
has been set taking into consideration future cash flow
requirements and the need to maintain a prudent debt level in an
environment of declining refiner margins.
Record refinery production
Mr King said there had been a strong operating performance in
refining with a record 12.1 billion litres production of all
products for the year (2006: 11.9 billion litres), including 10.9
billion litres of high value transport fuels (petrol, diesel and
jet fuel), up from 10.2 billion litres in 2006.
"New throughput records were set during the year with average
utilisation for the fuels refineries increasing to 84% (2006:78%)
although production was slightly lower than anticipated due to
unscheduled unit shutdowns for essential repair and maintenance
work at both the Kurnell (Sydney) and Lytton (Brisbane) refineries
in November and December," Mr King said.
"Significant progress was made during the year on major capital
projects including a second diesel hydrotreater unit (DHTU) at the
Lytton refinery and new crude oil and diesel storage tanks at the
"The DHTU construction is on track for completion in the first
quarter of 2009 with the final construction contracts still to be
awarded. Globally, capital costs continue to rise due to the tight
availability of skilled labour and materials cost increases.
Independent data shows capital costs in the refining industry
generally have risen by more than 60% over the last three years.
Caltex is experiencing similar cost pressures for the Lytton DHTU
with final costs currently anticipated to be around $320 million.
This compares with the initial estimate for the project of
approximately $250 million. When commissioned the unit will
increase Caltex's overall capacity to produce extra low sulfur
diesel (maximum 10 parts per million sulfur) by 40%.
Growing contribution from Marketing
"There was an increased contribution from the marketing business
which maintained its market leadership in fuels sales and
convenience store retailing. There were higher transport fuel sales
of 13.8 billion litres in 2007, compared with 13.4 billion litres
in the same period in 2006. The strongest growth was in diesel
sales with Caltex volumes up by 11.5% from the prior year compared
with market growth of 6.4%. Diesel sales increased across all
"Retail petrol sales remained flat in an extremely competitive
market with less than 1% growth in sales volume in line with market
growth. Premium (higher octane) fuel sales volumes were up 11.5%
which was higher than market growth of 9.9% with sales increased
following the launch of Vortex 98 petrol in Western
"Earnings from both jet fuel and finished lubricants were higher in
2007 as unprofitable business was rationalised.
"Non-fuel income was higher in 2007 with an 7.2% growth in weekly
same shop sales and a strong contribution from the card business
through StarCard and StarCash.
"Consumers in 2007 benefited from the stronger Australian dollar
which resulted in the price of petrol at times being approximately
14 cents per litre lower than if the $A had remained at 2006
"During the year Caltex made substantial contributions to the
Australian Competition and Consumer Commission's 2007 inquiry into
unleaded petrol prices in Australia. Caltex welcomed the ACCC
report issued in December which found no reason to regulate petrol
pricing and no evidence of price fixing or collusion in the
Mr King said Caltex more than met its commitment under the
Australian Government's Biofuels Action Plan exceeding the 2007
target by 50%.
"The company trebled the volume of ethanol and biodiesel sold in
biofuel blends in 2007. The number of service stations selling Bio
E10 Unleaded and/or New Generation Diesel with 2% biodiesel
increased from 237 to 306," he said.
"Bio E10 Unleaded, which contains 10% ethanol blended with regular
unleaded petrol is now offered at 207 sites in New South Wales,
Queensland and the ACT. The network continues to expand and the
proportion of Bio E10 Unleaded in petrol sales at these sites is
"The company will continue to experience high cash demands as a
result of rising capital costs and working capital requirements due
to the significant rise in crude oil costs.
"The strong balance sheet and sound operating performance in 2007
have positioned the company to weather the outlook for tightening
economic conditions and declining refiner margins.
"Caltex had an improved safety performance in 2007 achieving the
lowest lost time injury frequency rate to date and a substantial
decrease in the number of motor vehicle and tanker truck
"Safety and reliability performance is a priority at Caltex and a
number of projects were launched in 2007 which will bring ongoing
"In 2007 the company invested $319 million in programs to
strengthen its supply chain network and improve performance in its
refining and marketing operations. In addition, we plan to invest
over $1 billion over 2008-10 on strengthening our core operations
across the business.
"Refiner margins are expected to be lower in 2008, worsened by a
strong Australian dollar. Planned shutdowns in 2008 will reduce
refinery production in the first half of the year with full year
production of high value transport fuels expected to be similar to
that of 2007. 2008 earnings will also be impacted by supply issues
resulting from the unplanned refinery shutdowns in late 2007 and
"Caltex will continue to grow earnings from its marketing business,
where margins are less volatile than in the refining sector. Strong
marketing earnings help buffer Caltex against any cyclical
weakening of refining margins. Profitable fuel sales volume growth
is being targeted with a focus on diesel, and initiatives are
continuing in convenience retailing, premium fuels and
"Transport fuels sales volumes have remained strong to date in 2008
and are expected to continue with further robust growth in diesel
"The company will continue to invest in strengthening its core
operations but is mindful of the significant increase in capital
costs and will constantly review its portfolio of capital projects
to ensure a strong balance sheet is maintained and debt kept to
Historical cost profit
On a historical cost profit basis (including inventory gains),
Caltex recorded an after tax profit of $646 million for 2007 (2006:
$466 million). The profit includes crude oil inventory gains of
$202 million after tax compared with $36 million inventory gains in
Debt at 31 December 2007 was $582 million (31 December 2006: $539
million). Debt increased towards the end of the year as the company
built inventory in preparation for major refinery maintenance in
the first quarter of 2008.
1The replacement cost of sales
operating profit (RCOP) excludes the impact of the fall or rise in
oil prices in Australian dollar terms (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.
2This calculation is based on the 2007 $444 million RCOP
NPAT, which includes non-fuel income, divided by the total Caltex
sales of petrol, diesel and jet fuel including sales to domestic
refiners, lubricants and specialty products (19.9 billion
3This calculation is based on a bowser price of around
$1.35 a litre (excise 38.14cpl + GST 12.27cpl).
4The 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.
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