Caltex Australia has flagged a steep fall in full-year profit following an unplanned outage at its refinery and as high fuel prices prompt motorists to shop around.
Shares in Caltex fell to their lowest level in four years on Tuesday after it issued a bleak profit forecast — which comes at its rolls out a major restructure of its petrol station convenience retail offering.
The latest fall adds to a painful year for the fuel heavyweight. Its share price is down 30 per cent since February in a rout that has wiped $2.7 billion from the group’s market value.
Caltex expects its replacement cost operating profit — its preferred profit measure — to come in between $533 million and $553 million for this calendar year. That will be as much as 16.5 per cent lower than the $638 million profit it posted last year.
The profit measure strips out the impact of oil price fluctuations and does not include one-offs such as asset writedowns or sales.
Earnings in its fuels division are expected to drop as much as 16 per cent to between $560 million and $580 million.
The hit follows an unplanned outage at the Lytton refinery in Queensland earlier this year and a lower regional refining margin.
Earnings at its convenience division are expected to range between $295 million and $305 million — down by as much as 11.7 per cent.
Caltex is rolling out a deep restructure of its retail offering as it moves to reinvent the nation’s $20 billion convenience store sector.
It is buying out its franchise network and has launched a new retail offering focused on fresh food, coffee, baked goods, ready-made meals and parcel pick-up.
The focus on convenience — which includes its own The Foodary brand and an extended partnership with Woolworths — comes as more fuel-efficient cars, electric vehicles and car-sharing services weighs on the growth outlook for fuel sales.
“(This) was a year in which we established solid foundations for sustainable growth in both our fuels and infrastructure, and convenience retail businesses,” chief executive Julian Segal said on Tuesday.
Morgan Stanley analyst Adam Martin said investors were asking whether the headwinds weighing on Caltex’s bottom line were structural or cyclical.
“Key for 2019 will be whether trends in retail fuel continue and whether lower refinery margins persist,” he said in a report for investors.
Mr Martin said the volume of fuel sold by Caltex had fallen by about 5 per cent this year as high prices prompted motorists to shop around.
“Lower-priced independents appear to be winning market share,” he said.
“Is this theme structural or cyclical and how will the earnings profile of this division look in five years time?”
Shares in Caltex closed 5.5 per cent lower at $25.57 on Tuesday.
Extracted from Daily Telegraph