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 said.

"The Board remains committed to its shareholders and will seek to return to the payment of regular dividends as soon as practical."

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 million.

"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 significant items).

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 made.

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 area.

"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."

Marketing
Mr Bindra said marketing earnings were up from the previous year due to substantially higher sales volumes and continuing stable margins.

"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 previous year.

"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 engine oils.

"Specialties also continued to perform well with increased bitumen sales and strong demand for marine fuel and petrochemical products.

"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."

Industry issues
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 marketing regulation.

Outlook
"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 said.

"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."

Media contact:	Analyst contact:
Richard Beattie	Harvey Ward
Manager Corporate Affairs	Manager Investor Relations
Phone: 02 9250 5224	Phone: 02 9250 5166
Pager: 02 9214 1146	email: hward@caltex.com.au