• Continued strong underlying financial performance
  
  
• Increased sales volumes and margins across all Marketing channels
  
  
• High refinery production rates outside planned maintenance shutdowns
  
  
• Refiner margins remain strong, offset by market pricing lags and stronger A$
  
  
• Market conditions and outlook remain favourable

Results summary	Half year ended 30 June
2005	2004*
Replacement cost of sales operating profit (RCOP)¹ result (excluding significant items):	$M	$M
- after tax	149.6	176.1
- before interest and tax	226.4	275.1
Historical cost result
(net profit after tax, including inventory gains and excluding significant items)	231.8	222.9

*2004 comparatives have been adjusted for the transition to Australian equivalents of International Financial Reporting Standards

Caltex Australia Limited today announced a profit after tax (excluding significant items) on a replacement cost of sales operating profit (RCOP)¹ basis of $149.6 million for the first half of 2005, compared with $176.1 million for the first half of 2004.

Caltex recorded significant gains in market sales volume and marketing margins compared with the first half of 2004. Petrol sales increased 5%, benefiting from the rollout of the Caltex Woolworths jointly branded network, and diesel and jet sales rose by almost 7%. Non-fuel income increased by 10%. The results were achieved despite the negative pressure of a stronger Australian dollar and the effect of time lags in recovering significantly higher crude prices from the market.

Caltex Managing Director Dave Reeves said the Caltex first half 2005 result reflected a strong operational performance across the business, with marketing strategies and refining improvement programs delivering further benefits.

"These results reflect the continued strong underlying financial performance of the business. We have increased sales volumes and margins across all marketing channels. We have achieved high refinery production rates outside planned maintenance shutdowns. And our refiner margins remain strong, offset by market pricing lags and a stronger Australian dollar," Mr Reeves said.

"In Refining, utilisation rates continued to increase, enabling production to be maintained in a year of significant planned shutdowns for both normal maintenance as well as for the Clean Fuels Project. During the first half of 2005, Lytton refinery successfully executed a total refinery shutdown of seven weeks, while Kurnell refinery undertook a 26-day maintenance shutdown of one of its two crude units. Despite the shutdowns, Caltex's production of transport fuels for the first half of 2005 was marginally lower at 4.8 billion litres (1H04: 4.9 billion litres). The financial impact of the lower production was approximately A$7 million before tax.

"On a US dollar basis, the Caltex Refiner Margin (CRM)² was in line with the first half of 2004 at approximately US$7.28 per barrel (versus US$7.33 in 1H04). However, margins were negatively affected in the period by timing lags between a US$15 a barrel (or 39%) rise in the Tapis crude oil price during the six months ended June 2005 and the prices for refined product in the Australian market. The reverse effect occurs when crude oil and therefore product prices fall. The financial impact during the period of these pricing lags was about US$1.15 per barrel, which equates to approximately A$45 million before tax. In addition to the pricing lags, the Caltex Refiner Margin was impacted by the stronger Australian dollar in 2005 versus 2004, an impact of approximately A$16 million before tax.

"Petrol refining margins were lower, offset by record diesel refining margins as a result of stronger global demand. Singapore diesel refining margins were almost double those of the same period last year, averaging US$10.76 per barrel in the first half of 2005 (1H04: US$5.85).

"On an historical cost basis (including inventory gains, but excluding significant items), Caltex recorded an after tax profit of $231.8 million for the first half of 2005 compared with $222.9 million for the first half of 2004. This included inventory gains of $82.2 million after tax, compared with inventory gains of $46.8 million after tax in the first half of 2004."

Strengthened market leadership
Mr Reeves said Caltex is seeing excellent results from strategies launched last year to enhance its market leadership position by improved performance across all business segments.

"Total transport fuels sales volume continued to expand and was 5.8% higher in the first half of 2005 compared with the first half of 2004," he said. "This was partly driven by the rollout of the Caltex Woolworths jointly branded network which marked its first anniversary on 1 May. It currently stands at 458 sites, 118 contributed by Caltex, with a potential further seven Caltex sites to be converted by the end of the year. There has been an average 80% increase in fuel sales at Caltex contributed sites.

"Diesel sales volume grew by 6.8% in the first half of 2005, compared with the same period for the previous year. Jet fuel sales increased by 6%. Premium fuel sales increased by 34.4% compared with the first half of 2004 boosted by the NSW rollout of Caltex's new high octane premium unleaded petrol Vortex 98.

"There was also growth in base oils sales volumes, which were 4.7% higher in the first six months of 2005 compared with the first half of 2004. Non-fuel income increased by almost 10% compared with the same period last year. Caltex is now the number one convenience retailer in Australia with a 31% market share and shop sales that continue to grow."

Significant year for refining business
Mr Reeves said 2005 is a significant year for the company's refining operations, with a high level of planned shutdown activity for routine maintenance and preparation for clean fuels. Improved operational efficiencies substantially offset the impact of the shutdowns on production levels.

"Our previously announced investment to expand production of high value products is yielding good results," he said. "We have been able to re-rate our crude unit capacity by demonstrating record levels of throughput at both refineries which has previously been a major constraint. In addition to operating improvements, project planning for the previously announced capital investments is progressing.

"One of the two crude units at the company's Kurnell refinery was shut down for 26 days in February for planned maintenance and the Lytton refinery successfully completed a 50-day full refinery shutdown in May/June, the first in four years.

"The diesel hydrotreating units at both refineries will undergo major rebuilds during the second half of 2005 in preparation for the transition to cleaner fuels.

"As announced on 12 August 2005, the company has applied to the Australian Government for a short-term variation to the clean fuels standards deadline of 1 January 2006, as part of a contingency plan to ensure certainty of supply to customers. Caltex currently has the most significant clean fuels investment in the Australian industry, with four major processing units either being significantly modified or newly constructed."

Dividend
Caltex Chairman Dick Warburton AO said the Board declared an interim fully franked dividend of $40.5 million, or 15 cents a share. The record date is 9 September 2005 with the dividend payable on 30 September 2005.

"This is in line with our stated policy of declaring ordinary dividends of 20% to 30% of the RCOP after tax excluding significant items in 2005 while the company meets the high capital commitments of the Clean Fuels Project," Mr Warburton said. "After 2005, the company intends to increase the payout ratio to a range of 40% to 60% of the RCOP after tax excluding significant items.

"The company's share price continued to perform well, increasing 46% in the first six months of 2005. Caltex's share price performance was recognised in May by its inclusion in the Morgan Stanley Capital International's (MSCI) global share index for Asia Pacific (excluding Japan)."

Significant item
Dave Reeves said as a result of tax consolidation legislation passed in 2005, Caltex recognised a significant one-off tax credit of $20.9 million, with a corresponding reduction in deferred tax liabilities. The initial legislation, passed in 2004, resulted in a one-off tax credit of $113.5 million in the first half of 2004.

Australian equivalents of International Financial Reporting Standards
The results to 30 June 2004 and 30 June 2005 have been reported in compliance with A-IFRS and, as such, are comparable. The impact of the adoption of A-IFRS on the results to 30 June 2004 and 30 June 2005 is not material.

Debt
"The company's balance sheet remains strong, with core debt remaining within the gearing target of 20-25%," Mr Reeves said.

"Net debt at 30 June 2005 was $533 million, up from $447 million at 31 December 2004. The increase was due to higher working capital requirements driven by crude oil price increases and funding requirements for the Clean Fuels Project. It had been anticipated that net debt would temporarily exceed $500 million during 2005, returning to target levels in 2006.

Looking ahead
"In 2005, we are focused on further progress in strengthening the company's refining capabilities and market position. Confidence in market conditions is underscored by the level of capital investment, which this year will total more than the previous four years combined.

"Caltex has made progress in lifting its safety performance with improvements in the key area of total treatment injury frequency rate for employees compared with the first half of 2004. There is a strong focus on improving risk management processes through a number of activities, including the company-wide Loss Prevention System and safe driving programs for employees.

"The coming months will see critical developments with the completion of the Clean Fuels Project and progress with improvement projects linked to higher refinery utilisation and a reliable crude oil and fuel supply chain. The company has confidence that these will be managed successfully and develop capabilities to capitalise on favourable markets.

"The outlook for refiner margins for the remainder of 2005 is positive as global refining capacity remains tight."


¹ The replacement cost of sales operating profit (RCOP) excludes the impact of the fall or rise in oil prices (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 revenue lags. The RCOP result is recognised as a primary measure in establishing the level of dividend.

² The 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.


Media contact
Richard Beattie
Group 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