Caltex Australia boss Julian Segal says he is confident the company will plug the earnings hole expected from the end of its fuel alliance with Woolworths.

Fuel refiner and retailer Caltex Australia says recent acquisitions of petrol stations in Melbourne and New Zealand will help fill the earnings gap left by the end of its fuel alliance with Woolworths.

Caltex’s takeover bid for Woolworths petrol stations failed after oil and gas multinational BP struck a $1.79 billion deal with the supermarket giant in December.

The fuel alliance that has been running for 13 years is expected to end early next year, when BP plans to complete an acquisition that is still subject to regulatory approval.

In the meantime, Caltex will continue to supply fuel to the 525 Woolworths-operated service stations.

Caltex chief executive Julian Segal said the company, which controls 1,442 service stations across Australia, will have no problems plugging the $52 million to $142 million earnings gap that the Woolworths alliance is expected to leave.

He said the group’s soon-to-be completed acquisitions of Victorian service station network Milemakers and Kiwi sites Gull New Zealand will help plug some of that shortfall.

“I feel confident that by the end of 2017 we will be making up for the shortfall,” Mr Segal said.

He said Caltex decided against buying Woolworths’ fuel business because it was not “going to deliver” due to declining supermarket redemption volumes, restrictive commercial terms to continue fuel discounts and the fact the sites were leased rather than owned by Woolworths.

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.

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 said 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”.

“Wage underpayment or mistreatment of staff is unacceptable to Caltex, and we will continue to remove franchisees who do the wrong thing,” Mr Segal said.

Caltex launched earlier this month its pilot service station and convenience store rebadged The Foodary, which offers fresh food on the go, offers barista-made coffee, and includes laundry and parcel pick-up services.

It has also formed partnerships with Boost Juice, Sumo Salad and Guzman Y Gomez that have outlets inside the store in Sydney’s inner west suburb of Concord.

Shares in Caltex were up 33 cents, or 1.11 per cent, to $29.98 at 1418 AEDT.

Extracted from SBS.