Caltex Australia Limited 2001 Full Year
February 22, 2002
Consistent with the forecast lodged with the Australian Stock
Exchange on 6 December 2001, Caltex Australia in 2001 recorded a
full year operating loss after tax of $186.1 million compared with
a profit of $36.1 million in 2000. The 2001 result included a
$147.5 million write-off of goodwill relating to the company's
purchase of Pioneer International Limited's 50% interest in Caltex
Australia Petroleum Pty Ltd in 1997, booking of a $16 million
profit on a transaction relating to a vessel chartered by Caltex,
and full provision for the $11.4 million ($8.0 million after tax)
debt owed to it by Ansett. Excluding the goodwill write-off, the
company made an after tax loss of $38.6 million.
If the impact of the fall in crude oil prices - a key external
factor - is excluded, the replacement cost of sales operating
profit (before abnormals, interest and tax) in 2001 was $200.9
million, up from $115.7 million in 2000. Inventory losses totalled
$186.1 million in 2001 (2000: $40.1 million gain).
(The replacement cost of sales operating profit excludes losses or
gains from inventory, which are calculated with reference to the
underlying US dollar crude oil costs. A fall in crude prices
results in a gap between what the company paid for its crude
inventory and the price refined products can be sold in the market
place. The impact is approximately $20 million less profit before
tax for every US$1 a barrel fall in crude price. The reverse
situation applies in a rising crude market.)
Caltex Australia Managing Director Tony Blevins said that, despite
the disappointing statutory profit result, 2001 had been a year
marked by a significant improvement in the company's underlying
"There has been marked improvement in refinery reliability and
safety performance and stronger marketing earnings through the
year," Mr Blevins said. "The focus on these issues will continue in
2002 and we are confident that the improvements achieved are
sustainable and further improvements can be made."
Working capital benefited from the fall in crude prices but this
was partially offset by the higher inventory volumes required to
accommodate the planned major maintenance shutdown at the company's
Lytton refinery in Brisbane in the final quarter. This was
reflected in the net debt of $1.26 billion at the end of 2001
($1.28 billion 30 June 2001).
The Board remains very conscious of its stated objective of paying
consistent dividends. However, taking into account the company's
level of earnings, available cash flows and taxation position - the
key factors upon which payment of a dividend is dependent - the
directors have determined that no final dividend will be declared
This decision reflects the poor result for the year and the need to
reduce debt levels and improve gearing. In focusing on improving
these factors, the company is working to position itself to better
withstand the impact of external factors beyond its control and
return to profit and cash flow levels which will support payment of
a consistent dividend.
Manufacturing And Supply
Caltex refineries recorded a strong improvement in reliability and
safety performance through the year. The Kurnell refinery in Sydney
returned to full operating capacity at the end of the first quarter
with the completion of a project to replace an exhaust stack that
developed a structural fault in November 2000.
Other improvements are attributable to early progress on
implementing recommendations covering technical actions and
management and people systems made by a team of independent experts
commissioned by the Board. In March 2001, the team reported its
findings on the causes of reliability incidents that caused
unscheduled production interruptions at the Kurnell and Lytton
refineries in 2000.
The division's operating profit was significantly lower than the
previous year due to losses on inventory. The price of regional
benchmark Tapis crude fell from US$27.38 a barrel in December 2000
to US$18.64 a barrel in December 2001, averaging US$24.99 for the
year (2000: US$29.45), reflecting a global downturn in
Regional oversupply of petrol led to sharp falls in refiners'
margins¹ to negative levels between May and August, falling as
low as -US$2.08 a barrel in July. Regional refineries had ramped up
production in response to what proved to be erroneous forecasts of
expected shortages of petrol supplies for the North American summer
driving season. The oversupply situation resulted in Singapore
margins averaging US$1.61 a barrel in 2001, down from US$3.05 a
barrel the previous year.
Caltex refinery production of petrol, diesel and jet fuels in 2001
was slightly higher than the previous year. Production of specialty
products increased by 4.5%, particularly LPG.
In the second half of the year, operations were significantly more
reliable than the first with the major event affecting refinery
production being the planned total plant shutdown at the Lytton
refinery in October/November. The shutdown program included
maintenance and capital improvements to the refinery's electrical,
steam, fuel gas and flare systems. These improvements make Lytton
more robust in dealing with the consequences of any external power
In 2001, Caltex increased its returns from fuels sales despite
intense market competition. This was achieved by margin
improvements particularly in retail petrol sales. Total retail
sales of petrol and diesel were 2% higher in volume than the
previous year, with premium unleaded petrol (including Vortex and
Ampol Gold) accounting for 7.4% of retail petrol sales in
Diesel and aviation fuel sales volumes were slightly down on last
year but margins recovered from the previous year with improved
recovery of freight costs. Despite a slowing of international
demand for aviation fuel following the terrorist attacks in the US
in September, Caltex sales recovered and were down by less than 1%
by the end of the year. Aviation earnings were also affected by
provision for the Ansett debt.
Specialty products recorded improved sales and margins with a
strengthening of marine, bitumen and LPG sales.
Regional supply disruptions and adverse weather conditions
affecting harvest areas had a negative impact on fuel sales to
distributors and independent resellers, with diesel and petrol
sales in these channels down from the previous year.
Finished lubricants margins improved although total volumes
suffered due to the downturn in some key industry sectors,
notwithstanding strong volume growth in sales of some products.
Sales of the flagship diesel engine oil Delo 400 more than doubled
from the previous year in response to successful promotion and
Crop spray oils also recorded continued strong growth, up 30% from
the previous year.
The convenience store program has contributed significantly to
non-fuel earnings income of $41.2 million in 2001, an increase of
10% on $37.5 million the previous year.
The national convenience store network continued to grow in size
and average store turnover. At the end of 2001, there were 405 Star
Marts and Star Shops (2000: 359). Average Star Mart store sales
grew 5% and sales from the smaller Star Shop were 6% higher than
the previous year.
Mr Blevins said that, in positioning itself for the future, Caltex
has improved refinery productivity, reliability, efficiency and
cost savings and developed more effective and better-targeted
"This enhanced underlying performance has been achieved in an
environment of refiners' margins that have fallen by 25% in the
four years since the 1997 Asian economic crisis and an increasingly
competitive domestic market," Mr Blevins said.
"Caltex's core business of refining and marketing petrol is sound
and the fundamentals of the company are strong. While maximising
returns from investment in real estate and its retail network, the
company continues to build up non-fuel revenue streams to improve
its consistency of earnings.
"The 2001 merger of Chevron Corporation and Texaco Inc. has begun
to generate a number of benefits for Caltex Australia and this will
increase in the future. These benefits will be in the areas of
strategic alignment and the sharing of best practices in both
manufacturing and marketing.
"Prior to 2006, Caltex and other Australian refiners will be
required to make changes to diesel and petrol processing units to
manufacture fuels to comply with new Commonwealth fuel
"Caltex has been conducting feasibility studies and reviewing
process design and technical options for both refineries to produce
fuels to meet the new standards for benzene in petrol and sulphur
in both petrol and diesel required in 2005 and 2006.
"The company's key objective is to maximise profit and cash flow to
improve gearing. Our primary focus will be on reducing debt while
maintaining capital expenditure."
Manager Corporate Affairs
Phone 02 9250 5224
Pager 02 9214 1146
Manager Investor Relations
Phone 02 9250 5595
¹ Refiners' margin is the difference between the price of the
Tapis crude oil feedstock and the quoted Singapore ex-refinery
price of petroleum products.