PETROL SALES FALL UP TO 50PC, AS CALTEX CONSIDERS ASSET SALE

·         PERRY WILLIAMS

• APRIL 6, 2020
•  The aus 

CALTEX SAYS PETROL SALES HAVE FALLEN BY UP TO HALF AS COVID-19 RESTRICTIONS SLOW TRAFFIC USE ON AUSTRALIAN ROADS, AS THE FUELS REFINER ALSO BRINGING FORWARD THE CLOSURE OF ITS LYTTON REFINERY TO ADDRESS CASH FLOW ISSUES AND CONSIDERING A TRADE SALE OF ITS RETAIL SITES.

PETROL SALES HAVE FALLEN BETWEEN 30 PER CENT TO 50 PER CENT ON 2019 VOLUMES SINCE STAGE TWO AND THREE CORONAVIRUS RESTRICTIONS WERE IMPLEMENTED IN LATE MARCH, WHILE DIESEL IS DOWN 10 PER CENT TO 30 PER CENT.

STILL, FAVOURABLE RETAIL FUEL MARGINS OFFSET VOLUME DECLINES IN THE FIRST QUARTER OF 2020 WHILE SHOP SALES ARE FLAT ON THE SAME PERIOD IN 2019 WITH THE HIGHER VALUE OF SALES OFFSETTING LOWER TRANSACTIONS.

CALTEX IN NOVEMBER ANNOUNCED A PLAN TO EMBARK ON A $1BN PROPERTY SHAREMARKET FLOAT CONTAINING A HALF STAKE IN 250 OF ITS RETAIL SITES AS IT SEEKS TO TAP INVESTORS CHASING YIELD AMID A BACKDROP OF LOW GLOBAL INTEREST RATES.

IT SAID ON MONDAY WHILE IPO TRANSACTION DOCUMENTS ARE STILL BEING PREPARED, IT’S ALSO LOOKING AT A POTENTIAL TRADE SALE ALTERNATIVE, SIGNALLING A DUAL TRACK PROCESS IS NOW UNDERWAY.

“SUBJECT TO MARKET CONDITIONS, AND ANY OUTCOME FROM CHANGE OF CONTROL DISCUSSIONS, CALTEX IS WELL PLACED TO IMPLEMENT IN THE SECOND HALF OF 2020: SALE OF A 49 PER CENT MINORITY INTEREST IN CALTEX’S CORE FREEHOLD RETAIL SITES, DIVESTMENT OF THE SECOND TRANCHE OF HIGHER AND BETTER USE SITES, AND THE ISSUANCE OF HYBRID CAPITAL SECURITIES,” THE COMPANY SAID.

“SPECIFICALLY, IN RELATION TO THE PLANNED REAL ESTATE TRANSACTION, KEY IPO TRANSACTION DOCUMENTS HAVE BEEN PREPARED, BUT TO PROVIDE ADDITIONAL EXECUTION FLEXIBILITY CALTEX WILL ALSO EVALUATE TRADE SALE ALTERNATIVES.”

THE LYTTON REFINERY WILL BE SHUT FROM MAY COMPARED WITH ITS ORIGINAL PLAN TO GO OFFLINE IN JULY, WITH STEEP FALLS IN GLOBAL FUEL DEMAND IMPACTING REFINING CONDITIONS AS THE CORONAVIRUS TAKES HOLD.

WEAK REFINER MARGINS HAVE CREATED OPERATING CASH FLOW CHALLENGES AT LYTTON, CALTEX SAID.

“HAVING THE REFINERY OFFLINE FOR THIS PERIOD WILL REDUCE THE COSTS RELATED TO THE NORMAL OPERATIONS OF THE REFINERY. THIS APPROACH WILL DELIVER A MORE CAPITAL EFFICIENT TURNAROUND AND INSPECTION AND ENABLE A REDUCTION IN THE COST OF THE SHUTDOWN, AS WELL AS FURTHER OPTIMISATION OF THE SUPPLY CHAIN, INCLUDING A REDUCTION IN WORKING CAPITAL,” THE COMPANY SAID.

GROUP CAPITAL EXPENDITURE IN 2020 WILL BE LOWERED TO $250M FROM A PRIOR $300M TARGET FOLLOWING A REVIEW OF ITS AVIATION BUSINESS AND DEFERRAL OF CAPITAL INVESTMENTS.

“THE CAPACITY EXISTS IN OUR OPERATIONS TO REDUCE COSTS THAT ARE VARIABLE OR STAGED DURING THIS PERIOD OF DEMAND WEAKNESS. BEYOND THIS, A REVIEW OF FIXED COSTS IS UNDERWAY ACROSS ALL AREAS INCLUDING CORPORATE OVERHEADS, TO DELIVER A LOWER COST BASE. ACTIONS FROM THESE REVIEWS WILL BE IN ADDITION TO DELIVERY OF THE PREVIOUSLY ANNOUNCED $40M COST-OUT PROGRAM FOR 2020,” THE COMPANY SAID.

CALTEX HAD ALREADY FLAGGED A 80 PER CENT TO 90 PER CENT FUEL IN DEMAND FOR JET FUEL AS AIRLINES SHUT MOST OF THEIR CAPACITY DUE TO TRAVEL RESTRICTIONS.

THE COMPANY HAS $2.7BN OF DEBT AND $1.5BN OF UNDRAWN FACILITIES AND CASH ON HAND.

“CALTEX HAS NO DEBT FACILITIES WHICH MATURE IN 2020 AND HAS SIGNIFICANT HEADROOM TO ITS DEBT COVENANT. THE DECLINE IN THE CRUDE OIL PRICE IS ALSO EXPECTED TO MEANINGFULLY FURTHER REDUCE THE GROUP’S WORKING CAPITAL REQUIREMENTS,” THE COMPANY NOTED.