Caltex Australia profit jumps on gains in refining, marketing

Angela Macdonald-Smith
August 24, 2015
The Age
Caltex Australia has boosted its first-half dividend as profit jumped on improved earnings in marketing and refining, and advised it would likely buy back shares unless it can find “material” growth opportunities.
The oil refiner and fuels retailer declared a fully franked dividend of 47c per share for the first half, more than double the 20c declared for the same period last year.
The boost in the payment to shareholders was in line with its return to a payout ratio of 40-60 per cent after the completion of its major project to close down its Kurnell refinery and convert it into an import terminal. It came as Caltex reported a more than doubling in first-half net income, while core profit jumped 45 per cent to $251 million, as it had already foreshadowed last month.
The historical cost net income of $375 million, which includes a gain of $95 million on inventories, had also been pre-released by Caltex.
Caltex’s former long-time shareholder Chevron sold out of the company earlier this year and chief executive Julian Segal has been voicing keenness to make larger acquisitions to bring new growth into the business and capitalise on a significant improvement in cash flows.
It said on Monday that management was “actively considering options” to grow the business and had a formal process under way.
“Those improved cash flows will provide greater flexibility to invest in growth opportunities and/or to return additional capital to our shareholders while maintaining the company’s target BBB+ credit rating,” Caltex said.
“In the absence of material growth opportunities, the preferred form of additional capital return is an off-market share buy-back.”
Earnings before interest and tax by Caltex’s supply and marketing business were $264 million in the first half, while the company’s sole remaining refinery, in Brisbane, had EBIT of $154 million thanks to stronger Asian refining margins.
Caltex described the competitive climate as “challenging”, highlighting in particular the business-to-business sector, but said its focus on improving its supply chain for transport fuels was allowing it to maintain its position in the market.
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