Results summary	Full Year ended 31 December
2003	2002
Replacement cost of sales (RCOP)1 result	$M	$M
Operating profit (RCOP) (excluding significant items) after tax	199.7	106.1
RCOP earnings before interest and tax	339.8	215.2
Historical cost result
Net profit after tax (including inventory gains/losses and significant items)	197.5	215.2

• Replacement cost of sales operating profit after tax (and excluding significant items) $199.7 million, up 88%
• Final dividend payment of 8 cents per share + a special dividend of 6 cps bringing total dividends for 2003 to 18 cps fully franked
• Debt down $329.8 million, a 35% reduction to $624.4 million
• Clean fuels investment under way

Caltex Australia Limited achieved higher profits on a replacement cost basis in 2003 than the previous year. The full year profit after tax of $199.7 million on a replacement cost of sales operating profit (RCOP) basis, was up 88% from $106.1 million in 2002. This result excludes the impact of international oil price movements and provides a picture of how well the company is performing in areas of its operations not affected by this external factor.

Caltex Chairman Dick Warburton said the result was mainly due to stronger refiner margins and continued robust marketing margins.

Mr Warburton said the results had enabled the company to achieve significant debt reduction with net debt down to $624.4 million at 31 December 2003 (31 December 2002: $954.2 million).

"This is well ahead of target and represents a 51% reduction in the company's debt since 31 December 2001," Mr Warburton said. "The Board's priority is to stabilise debt at current levels in the medium term with further reductions following completion of the Clean Fuels Project. In the meantime, operating cash flows will fund new plant for cleaner fuels production and ongoing capital improvements to the marketing retail network and distribution infrastructure.

"The Board recognises the RCOP figure as a primary measure in establishing the level of dividend. The excellent result for the year led the Board to declare a final dividend of $21.6 million or 8 cents a share. In addition, in recognition of the debt reduction and significant improvement in the financial strength of the company, the Board has declared a special dividend of $16.2 million or 6 cents per share, bringing the total dividends for 2003 to 18 cents a share. The dividends have an attached franking credit of 100%.

"The Board's objective is to pay dividends commensurate with Caltex's need to fund new investment. This will be done at the same time as achieving a long term capital structure that will allow the company to withstand the volatility of oil prices and margins that characterise the industry.

"On an historical cost basis, Caltex made an after tax profit of $197.5 million for the 2003 full year compared to $215.2 million for 2002. This included inventory gains of $13.0 million (before tax) compared to inventory gains of $172.9 million (before tax) in 2002.

"A Directors' valuation at 30 June 2003, which is primarily based on an independent valuation done every three years, determined Caltex's land and buildings' value was $411 million above its net book value. However, certain land, buildings and related plant and equipment had recoverable amounts less than their net book value, and in accordance with accounting standards a write down of $12.5 million before tax ($11.3 million after tax) was made. (2002 significant item: $12 million before an after tax payment to Hanson Australia.)"

Earnings strength due to higher refiner margins, record transport fuel sales

Caltex Managing Director and CEO Dave Reeves said the improved earnings were due primarily to stronger refiner margins in the Asian region, particularly those for petrol, and record transport fuels sales volumes.

"Margins strengthened significantly in 2003 due to higher demand in China and the United States," Mr Reeves said.

"The Singapore petrol refiner margin averaged US$4.32 a barrel, up from US$2.26 in 2002.

"This drove up Caltex refiner margins - which include the cost of freight, premiums paid on published Tapis crude oil prices and product yield from the average barrel of crude. The Caltex refiner margin averaged US$3.68 a barrel in 2003 (2002: US$1.82). The Australian dollar rise dampened the impact of the US dollar rise in Singapore product prices.

"Average regional Tapis crude oil prices in 2003 were US$29.64 a barrel, up from US$24.89 a barrel in 2002.

"In marketing, Caltex benefited from healthy margins, record transport fuel sales and solid performance in its lubricants and specialties business. There was strong growth in non-fuel income, with average same store sales increasing by 5.4% for the Star Mart network and 6.4% for the network of smaller Star Shop stores.

"Borrowing costs were reduced by approximately $14 million in 2003 (before tax) compared with 2002, primarily due to the continued reduction in debt.

"2003 was a year in which Caltex focused on its future with significant developments in both refining and marketing.

"Caltex announced on 25 February 2004 it will upgrade its Kurnell and Lytton refineries to meet fuel standards for cleaner petrol and diesel that are regulated to take effect from 2006. The scope of the project has been expanded to meet future fuel standards that are expected to take effect late this decade.

"Caltex will invest about $250 million over the next two years in the refinery upgrades. The estimated total project cost (2002-2005) will be $295 million +/-10%, which includes $43 million expenditure to date on the review of alternatives, engineering designs and project planning. The cost of the project will be met from operating cash flows.

"Existing hydrotreating facilities at both refineries will be revamped to reduce diesel sulfur content, and benzene saturation plants will be constructed to reduce benzene in petrol.

"The investment will maintain Caltex's position as Australia's leading fuels refiner and marketer and provide us with a strategically sound and competitive position within the Australian fuels market.

"During 2003, Caltex made a significant move to increase retail fuel sales and our presence in a tough and constantly evolving market with a proposed retail venture with Woolworths.

"The venture is planned to create a national network of up to 450 Caltex and Woolworths co-branded service stations offering quality discount fuel.

"Negotiations of the terms of the proposed final arrangements between Caltex and Woolworths are continuing and any final arrangements are subject to regulatory review and execution of transaction documentation.

"Caltex will continue to compete and extend its market leadership through high standards of service and products in its network of 1,625 Caltex and Ampol branded sites. Of these, more than 500 are operated by 330 franchisees whose commitment, professionalism and entrepreneurial skills are fundamental to Caltex's success. We place a high value on our ongoing partnership with them.

Outlook

"Regional and domestic market dynamics have been changing in favour of Caltex and other Australian refiners and marketers. Rising demand is catching up with refining capacity and is having a positive effect on refiner margins.

"The outlook for crude oil prices remains high relative to the average for the past five years of US$25.52 a barrel. Refiner margins since the latter part of 2003 and the start of 2004 have been strong. The average year to date Singapore refiner margin in 2004 is around US$7.50 a barrel. This higher margin is expected to ease. However, we expect the average margin will continue higher than it has been over the past five years. Caltex anticipates there is likely to be a higher level of volatility in Singapore refiner margins in 2004 than in recent years because of the tightening of petroleum product supply and demand conditions in Asia.

"There will be ongoing opportunities to capture more value from the changing marketplace. To ensure we meet this challenge during the next few years there will be a focused drive across the company to achieve operational excellence in safety, environment, efficiency and reliability.

"The focus will remain on cash flow and achieving a strong long term capital structure. The priorities will be to continue to reduce unit operating expenses, improve supply reliability, implement new marketing strategies and complete the Clean Fuels Project on time and on budget."

¹ The replacement cost of sales excludes the impact of the fall or rise in oil prices (a key external factor) and presents a clear 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 revenue lags.

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

Analyst contact:
Harvey Ward
Manager Investor Relations
Phone 02 9250 5166
email: hward@caltex.com.au