By Angela Macdonald-Smith, 09 July 2015

Strong margins in refining and increasing sales of premium petrol and diesel have helped Caltex Australia to a 45 per cent increase in benchmark profit for the first half, despite a drop in volumes of transport fuels sold.

The unaudited numbers given by Caltex, of net operating profit of $251 million for the June half, have set minds at rest in the market, which had been expecting earning guidance in late June as is usual for the company.

They come amid some speculation Caltex could see takeover interest given keen appetite for local infrastructure assets and after US oil major Chevron sold its long-held half-share in a record $4.73 billion block trade in March.

The benchmark profit figure, which is before significant items, compares with $173 million for the June half last year. It is within the range of analysts’ estimates, being higher than Credit Suisse’s $230 million estimate, but falling short of Citigroup’s.

Caltex shares dipped 1.1 per cent to $33.01 but are up from about $22 a year ago.


Caltex has overhauled its business structure in recent years, closing one of its two refineries and relying more on imported product through its Ampol Singapore operation to supply its customers in Australia. That has given it more flexibility to optimise supply through its importing, storage and distribution activities.

“Despite the competitive landscape in Australia continuing to be challenging, particularly in the business-to-businesss sector, the change in our business model is enabling us to capture opportunities as we optimise the integrated value chain,” Caltex said on Thursday.

Underlying earnings before interest and tax in supply and marketing were about $294 million in the first half, up from $276 million a year earlier. In refining, EBIT surged almost four-fold to $154 million, from $40 million, thanks to average refining margins of $US15.71 a barrel in the first four months of the year, compared with an average of $US9.20 in the first half of 2014.

Caltex’s sole remaining refinery, at Lytton near Brisbane, didn’t operate in May and June as it was closed for five-yearly maintenance work.

Total volumes of fuels sold were “modestly lower”, at 7.8 billion litres, Caltex reported. But sales of premium petrol and diesel were up, more than offsetting declines in unleaded petrol and E10 ethanol blend. Sales from Caltex’s own production were 2.4 billion litres, down from 2.8 billion a year earlier because of the shutdown.

Credit Suisse analyst Mark Samter​ said the first-half figures were higher than his estimate, but he remained cautious awaiting the formal first-half report in August.

“It’s a beat versus our numbers, but it’s hard to entirely decipher the quality of the beat until we get a bit more granularity on what costs are included in which division,” Mr Samter said.

He suggested to clients earlier this week that Caltex may get caught up in the infrastructure M&A trend sweeping Australia, noting that the company is now more an infrastructure-like play than either a retailing or refining play, with its extensive network of terminals, pipelines, depots and service stations.

Net profit on a historical cost basis, including one-time items, more than doubled in the first half to $375 million, from $163 million the same half last year, Caltex said.

This bottom-line figure, which is less closely watched by analysts, includes a $28 million gain on the sale of a property in Western Australia and a $95 million gain on the value of oil and fuel inventories.

Extracted in full from the Australian Financial Review.