Momentum continues in another year of
August 26, 2005
- Continued strong underlying financial performance
- Increased sales volumes and margins across all Marketing
- High refinery production rates outside planned maintenance
- Refiner margins remain strong, offset by market pricing lags
and stronger A$
- Market conditions and outlook remain favourable
||Half year ended 30 June
|Replacement cost of sales operating profit
(RCOP)¹ result (excluding significant items):
|- after tax
|- before interest and tax
|Historical cost result
|(net profit after tax, including inventory gains and excluding
*2004 comparatives have been adjusted for the transition to
Australian equivalents of International Financial Reporting
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
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
"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
"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."
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)."
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
Australian equivalents of International Financial Reporting
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.
"The company's balance sheet remains strong, with core debt
remaining within the gearing target of 20-25%," Mr Reeves
"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.
"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
"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.
Group Manager Corporate Affairs
Phone 02 9250 5224
Pager 02 9214 1146
Manager Investor Relations
Phone 02 9250 5166