Premium fuel sales fatten Caltex bottom line

Brian Robins 
FEBRUARY 21, 2017
The Age

Oil importer, refiner and marketer Caltex has benefited from the continued swing towards premium fuel purchases, which has helped offset a decline in refiner margins and adverse currency swings over the past 12 months.

It earned a net profit of $610 million in 2016, up from $522 million a year earlier, with earnings a share rising to 232¢ from 193¢.

On a replacement cost basis, which is the company’s preferred measure, the net profit fell to $524 million from $628 million, resulting in earnings a share of 199¢ down from 233¢ in 2015.

The final dividend was trimmed to 52¢ a share, giving an annual payout of 102¢, down from 117¢ a year earlier. The lower dividend is in light of spending on recent acquisitions, with two deals worth a cumulative $420 million yet to be paid.

Sales volumes of transport fuels were flat at 16 billion litres. This masks a 3 per cent rise in sales of higher-margin premium fuels, which continue to offset the long-term decline in petrol sales, which slipped another 2 per cent. 

But the lower refiner margin slashed the contribution from the Lytton refinery, which fell to $205 million, pretax, from $406 million in 2015. 

In mid-December, it forecast a net profit of $560 million to $580 million, well ahead of the $493 million earned in 2015, as it benefits from the sales boost and the higher oil price, which raised the value of its inventory of oil products.

The company has been the subject of intense scrutiny in recent months, first over the disclosure of the underpayment of some petrol station employees and the decision by BP to acquire the Woolworths petrol stations, which threatens to cut 3.5 billion litres of volume sales by Caltex, which supplies the retailer’s outlets at present.

The underpayment by franchisees has triggered concerns Caltex may face a class action.

The BP deal is subject to review by the competition watchdog, the Australian Competition and Consumer Commission (ACCC), which has indicated will take much of this year to complete. 

There is the prospect the ACCC may force BP to sell some outlets, which could open the door for Caltex to buy some.

Additionally, Caltex has got the chequebook out, buying some assets such as a petrol station operator in New Zealand, Gull, for $NZ340 million, which has triggered speculation it may seek to acquire additional assets to boost its market share there.