Caltex Australia full year 2002 profit
February 28, 2003
Caltex Australia Limited today announced a significantly improved
result with net full year profit after tax of $215.2 million, or
79.7 cents a share, for 2002, compared with a net loss after tax of
$186.1 million or -69 cents a share in 2001.
Caltex Chairman Dick Warburton said that even though rising crude
oil prices and improved refiner margins had contributed to
increased profits, the result was also driven by consistent
refinery reliability, higher sales, stable marketing margins and a
concerted effort across the business to manage costs, reduce debt
and enhance profits.
"In terms of capital structure, the Board's priorities are to
achieve an appropriate long term debt level for the company, to
ensure it is able to finance the investment necessary to meet the
government's clean fuels regulations and to pay consistent
dividends to shareholders. The 2002 results have set the company
well along this path but the Board has determined that it would be
premature to restore the dividend at this time," Mr Warburton
"The Board remains committed to its shareholders and will seek to
return to the payment of regular dividends as soon as
Caltex Managing Director Jeet Bindra said that these results were a
pleasing indication that the company had started to move towards
its goal of rebuilding its financial strength.
"The company needs to regain its BBB+ credit rating and to seek a
gearing of no more than 45% to withstand the volatile external
factors inherent in this industry," he said. "In line with this,
the company is committed to achieving a debt level of $900 million
by the end of 2003. The company's strong focus on debt reduction
enabled it to reduce its net debt to $954 million (48% gearing) at
31 December 2002, well below the stated year end target of $1,075
"In addition, the company successfully raised funds through a US
private placement to refinance debt and reduced its reliance on
short term funding. A US$200 million fundraising in July enabled
the company to replace short-term loans that expired in November
2002 with loans with maturities of five, seven and 10 years."
However, Mr Bindra said the company is facing a large capital
investment necessary to meet the 2006 clean fuel standards and is
concerned about the heightened uncertainty caused by potential
conflict in the Middle East, coupled with disruption of crude oil
supplies from Venezuela and premiums on regional crudes caused by
increased demand in Japan.
"Given these factors, we believe the long term interests of
shareholders would be better served by continuing to build the
financial strength of the organisation and therefore it would be
premature to pay a dividend at this stage," he said.
Mr Bindra said that excluding the $172.9 million (before tax) of
gains on crude oil inventory purchased, the underlying performance
of the company measured by the replacement cost of sales profit
after tax (excluding significant items) in 2002 was $106.1 million,
up from an after tax profit of $83.7 million in 2001 (excluding
The full year profit recognises that a payment of $12 million will
be made to Hanson Australia (formerly Pioneer International)
relating to the purchase of its 50% interest in Caltex Australia
Petroleum Pty Limited in 1997. This payment was subject to
performance targets for the full year and becomes payable due to
the profit result. This is the final year that a payment will be
Refining & Supply
"There were significant improvements in the reliability and
operational performance of Caltex's Kurnell and Lytton refineries,"
Mr Bindra said. "In 2002 the refineries operated at 95.6%
availability, 3% higher than the previous year.
"The business benefited from improved refiners' margins in the
first half of the year but the closing months of the year saw
weaker refiner margins and higher crude premiums due to increased
demand for regional sweet crudes.
"At the Lytton refinery there has been an improvement in power
supply reliability with a commitment from local suppliers ENERGEX
and Powerlink to upgrade the electricity network that services the
refinery. ENERGEX commenced the construction of a $19 million
distribution substation which is scheduled for commissioning in
April 2003. In addition, Powerlink commenced work on a new $16
million bulk supply substation to service the Trade Coast
"During the year Caltex took significant steps towards cleaner
fuels production to meet Commonwealth Government regulations due to
come into effect on 1 January 2006. This will require an estimated
investment of $250 million by Caltex to build new processing
facilities and upgrade existing plant at both refineries.
"The Caltex clean fuels project team is working on identifying the
plant and equipment needed to produce cleaner fuels and assessing
the technical and economic options. An engineering design,
procurement, and construction management contractor was appointed
on 5 February 2003. The project will be presented to the Board for
funding approval in the third quarter of 2003.
"The Kurnell refinery hydrotreating unit was upgraded in 2002 to
meet the requirement for diesel with less than 500 parts per
million (ppm) sulfur that came into effect on 31 December 2002. The
Lytton refinery has been meeting the 500 ppm sulfur specification
for some time."
Mr Bindra said marketing earnings were up from the previous year
due to substantially higher sales volumes and continuing stable
"There was an improved performance across all marketing channels,
with a strong contribution from retail petrol and diesel sales,
commercial diesel sales, specialties and the convenience store
network," he said.
"Caltex sales of total transport fuels grew by an impressive 6.6%
in a market with growth of less than 1%. Caltex retained market
leadership, increasing its market share to 28.9%, up from 27.5% the
"Commercial and industrial diesel sales volumes were 13% higher due
to strong demand from the mining sector and the distributor channel
recorded a 7.6% increase in sales despite a drop in rural demand
due to the drought conditions.
"Earnings improved in the highly competitive lubricants sector and
sales of key Caltex brands continued to grow, with a 23% increase
in volume sales for both the Havoline brand of motor oils and Delo
"Specialties also continued to perform well with increased bitumen
sales and strong demand for marine fuel and petrochemical
"Retail non-fuel income increased, with like for like average
monthly Star Mart store sales 6.4% higher and the smaller Star Shop
sales 8.9% higher than the previous year. There were excellent
results from Caltex's All Stars quality assurance program across
the retail network, with a strong focus on customer service."
Among the major policy issues Caltex focused on in 2002 were fuel
taxation, price transparency, the review of the Trade Practices
Act, ethanol standards and labelling, and post-2006 petrol and
diesel standards. In 2003, Caltex will continue to advocate for
favourable government decisions on many of these issues, including
implementation of the delayed incentive for ultra-low sulfur
diesel, equitable fuel tax measures (being considered by the Energy
Task Force), future standards for clean fuels, fiscal incentives
for early production of cleaner petrol and diesel and reform of
"Across the business there will continue to be a focus on
operational excellence with a number of improvement programs now in
place. Incident-free operations are expected to contribute
significantly to Caltex performance in the future," Mr Bindra
"Debt reduction and earnings growth remain the main financial
priority. These are essential for the company to achieve the level
of financial stability to invest to meet new cleaner fuel standards
and further develop its retail network.
"In 2003, refiner margins have strengthened significantly since
mid-January and are expected to remain volatile for the next three
months. However, the outlook is clouded from mid-year by
uncertainties surrounding the Iraq crisis. To protect
profitability, Caltex will be strongly focused on recovering the
best value for its products in the market and managing costs as
effectively as possible."
|Manager Corporate Affairs
||Manager Investor Relations
|Phone: 02 9250 5224
||Phone: 02 9250 5166
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