Petrol retailer Caltex Australia has defended its franchise model, saying it allows franchisees to make a profit and pay staff wage rates that comply with the law, as it unveils a lift in full-year net profit.
Caltex’s net profit rose 17 per cent to $610 million in the year to December 31, with its retail business partly offsetting lower refinery margins from its Lytton plant in Brisbane.
But, its more closely watched replacement cost operating profit (RCOP), which strips out the impact of crude oil price fluctuations, dropped 17 per cent to $524 million with revenue down 10 per cent at $17.9 billion.
The group’s RCOP was modestly better than its guidance of $500 million to $520 million.
Caltex has also sought to reassure the market on its franchise model following recent allegations that some franchisees were severely underpaying staff.
The company says the findings of its review of its franchise model showed that it allows franchisees to “make a profit, draw a wage, and pay employees in accordance with lawful wage rates”.
“The review examined the profitability of the model for franchisees and included external legal advice supported by an assessment of franchise profitability by a leading, independent advisory firm.
“Wage underpayment or mistreatment of staff is unacceptable to Caltex, and we will continue to remove franchisees who do the wrong thing,” the company statement to the ASX said.
The company also reassured investors that it would continue to supply fuel to the 525 Woolworths-operated service stations until BP’s takeover gains regulatory approval and the transaction is completed.
Caltex, which controls 1,442 service stations across Australia and New Zealand, including 805 company owned and franchisee owned retailers, lost out to BP in its bid to takeover the Woolworths-run outlets.
“Whilst disappointed with the likely end of a successful long-term fuel alliance with Woolworths, Caltex will maintain its financial discipline, deliver on supply chain efficiency improvements and pursue profitable growth,” the company said.
“This includes securing new wholesale and retail volumes and investing in our supply chain, including our retail network and core transport fuels infrastructure.”
Caltex’s recent acquisitions of Milemaker service stations in Victoria and Gull New Zealand, expected to be completed in the 2017 financial year, are part of its plan to increase its retail business.
Shares in Caltex were up 61 cents, or 2.09 per cent, at $30.27 at 1102 AEDT.